S-1

As filed with the Securities and Exchange Commission on August 17, 2007

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Insys Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	2834	01-0749410
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

10220 South 51st Street, Suite 2

Phoenix, AZ 85044-5231

(602) 910-2617

(Address, Including Zip Code, and Telephone Number,

Including Area Code, of Registrant’s Principal Executive Offices)

Jon W. McGarity

President and Chief Executive Officer

Insys Therapeutics, Inc.

10220 South 51st Street, Suite 2

Phoenix, AZ 85044-5231

(602) 910-2617

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Frederick T. Muto, Esq. Matthew T. Browne, Esq. Charles S. Kim, Esq. Cooley Godward Kronish LLP 4401 Eastgate Mall San Diego, CA 92121 (858) 550-6000 Curtis L. Mo, Esq. Peter S. Buckland, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 1117 California Avenue Palo Alto, CA 94304 (650) 858-6000

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 to be 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, check the following box and list the Securities Act registration statement 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 statement 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)(2)	Amount of registration fee
Common Stock, $0.001 par value per share	$86,250,000	$2,648

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

(2) Includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any.

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 that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, 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 preliminary prospectus is not complete and may be changed. We may not sell or accept an offer to buy the securities under this preliminary prospectus 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 an offer to buy these securities in any state where such offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED AUGUST 17, 2007

Prospectus

                     Shares

Insys Therapeutics, Inc.

Common Stock

Insys Therapeutics, Inc. is offering              shares of 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. After the offering, the market price for our shares may be outside this range.

We have applied to list our common stock on the Nasdaq Global Market under the symbol “INRX.”

Investing in our common stock involves a high degree of risk. See “ Risk Factors” beginning on page 8.

	Per Share	Total
Offering price	$	$
Discounts and commissions to underwriters	$	$
Offering proceeds to Insys Therapeutics, Inc., before expenses	$	$

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

We have granted to the underwriters an option to purchase up to              additional shares of common stock on the same terms and conditions as set forth above if the underwriters sell more than              shares of common stock in this offering. The underwriters can exercise this right at any time and from time to time, in whole or in part, within 30 days after the offering. The underwriters expect to deliver the shares of common stock to investors on or about                     , 2007.

Banc of America Securities LLC UBS Investment Bank

JMP Securities Natixis Bleichroeder Inc.

                    , 2007

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information. We are not making an offer of these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate as of the date on the front of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

TABLE OF CONTENTS

	Page
Summary	1
Risk Factors	8
Forward-Looking Statements	44
Use of Proceeds	46
Dividend Policy	46
Capitalization	47
Dilution	48
Selected Financial Data	50
Management’s Discussion and Analysis of Financial Condition and Results of Operations	51
Business	59
Management	81
Executive Compensation	87
Related-Person Transactions	102
Principal Stockholders	105
Description of Capital Stock	107
Shares Eligible for Future Sale	110
Material U.S. Federal Income Tax Consequences to Non-U.S. Holders	112
Underwriting	114
Legal Matters	120
Experts	120
Where You Can Find More Information	120
Index to Financial Statements	F-1

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SUMMARY

This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially “Risk Factors” and our financial statements and the notes to these financial statements, before deciding to buy shares of our common stock.

Our Business

Overview

We are a biopharmaceutical company focused on discovering, developing and commercializing innovative products to address chemotherapy-induced nausea and vomiting, or CINV, pain management and other central nervous system disorders. We seek to apply new proprietary formulations and delivery methods to existing pharmaceutical compounds in order to achieve enhanced efficacy, faster onset of action, reduced side effects, convenient delivery and increased patient compliance. We are basing our drug development programs on existing compounds with known safety, efficacy and commercialization histories, which we believe will increase the likelihood of success of our drug development and commercialization efforts. Our goal is to leverage our expertise in the expanding synthetic cannabinoid derivatives and specialized opioid markets to build a portfolio of proprietary products that address the limitations of existing therapies.

Our initial product candidate is a dronabinol hard gelatin, or Dronabinol HG, capsule. This product candidate is designed to provide us with near-term revenues to help fund the development of our other product candidates, and to help us establish a market presence. We have filed an Abbreviated New Drug Application, or ANDA, for Dronabinol HG capsule, and if our ANDA is approved by the U.S. Food and Drug Administration, or FDA, Dronabinol HG capsules could be the first generic version of the branded CINV drug Marinol^®. The approval of our Dronabinol HG capsule is an important first step in the development of our additional proprietary dronabinol formulations, such as formulations suitable for room temperature storage.

Our other most advanced product candidates focus on new proprietary formulations and delivery methods for dronabinol, the active ingredient in Marinol, and fentanyl, the active ingredient in the pain management drugs Actiq^® and Fentora^®. We believe these markets are underserved due to limitations of existing therapies, and that our product candidates have the potential to provide a number of advantages over currently marketed products. We intend to build an internal sales force and marketing infrastructure to market our proprietary product candidates, if they receive regulatory approvals. We anticipate filing New Drug Applications, or NDAs, using the drug approval process under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or Section 505(b)(2), which we expect will reduce the time and cost of development and commercialization.

Our Product Candidates

Dronabinol Product Candidates

Dronabinol HG capsule. We are seeking regulatory approval by the FDA for our Dronabinol HG capsule, our most advanced product candidate. We have filed an ANDA for our Dronabinol HG capsule that, if approved, will be a generic version of Marinol, and will be indicated for the treatment of CINV in patients who have failed to respond adequately to conventional treatments. According to IMS Health, U.S. sales for all types of drugs used in treating CINV totaled approximately $2.7 billion in 2006. Sales of Marinol totaled approximately $133 million in 2006, an increase of 27% over 2005. We anticipate using revenue from this product candidate to help fund development of our other product candidates and to establish a presence in the market.

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Dronabinol RT capsule. If we receive FDA approval of our Dronabinol HG capsule, we anticipate submitting a supplement to our ANDA for a product label change for our proprietary room temperature capsule formulation of dronabinol, or Dronabinol RT capsule. Since Marinol and our Dronabinol HG capsules require cool storage (meaning storage at 8°-15°C) or storage in a refrigerator, we believe that a formulation of dronabinol that may be stored at room temperature will make this treatment option more convenient for patients and physicians, and will reduce costs and storage burdens for pharmacies and distributors. We also believe this more convenient formulation will potentially expand the medical use of dronabinol.

Dronabinol RT syrup. Our proprietary dronabinol room temperature syrup formulation is an alternative delivery option that we believe will provide a number of key advantages over existing synthetic cannabinoid products. This product candidate contains inactive ingredients which we believe may enhance and sustain absorption as well as provide flavor and color. Because it is a syrup formulation as opposed to a capsule, we believe that this product candidate may provide increased flexibility in dosing, more convenient delivery and improved absorption profile in patients. We believe these attributes will ultimately increase patient compliance because of better efficacy and fewer side effects, which we believe will permit us to further penetrate and expand the medical use of dronabinol. We intend to submit an NDA under Section 505(b)(2) with the FDA for Dronabinol RT syrup.

Dronabinol RT nebulizer. We plan to offer a unique, rapid-onset nebulizer device that converts our proprietary room temperature dronabinol solution into a fine mist for inhalation. Since it is inhaled instead of being ingested, we believe that this product candidate may be more readily absorbed into the bloodstream and may alleviate symptoms more quickly than currently available treatments. Further, dronabinol taken through an inhaled delivery system will bypass metabolism in a patient’s liver, which we believe may increase the drug’s availability to the patient and possibly support more consistent dosing, improving efficacy and enhancing patient compliance. We expect that this Dronabinol RT nebulizer, if approved, will enable us to continue to further penetrate and potentially expand the dronabinol market by offering patients another choice for taking dronabinol. We intend to submit an NDA under Section 505(b)(2) with the FDA for Dronabinol RT nebulizer.

Fentanyl Product Candidate

Fentanyl SL spray. We have completed a Phase 1 clinical trial for fentanyl sublingual spray, or Fentanyl SL spray, our proprietary opioid product candidate for the treatment of breakthrough cancer pain in opioid-tolerant patients. Our Fentanyl SL spray product candidate is administered through sublingual delivery, or delivery under the tongue. We believe that this delivery method represents an improvement over currently marketed fentanyl formulations and will increase patient compliance through faster onset of action, improved dosing convenience, and improved level of efficacy. According to IMS Health, U.S. sales for breakthrough cancer pain management drugs totaled approximately $740 million in 2006. Like our dronabinol line extensions, we believe that our Fentanyl SL spray product candidate has the potential to offer improved performance over currently available pain management alternatives and will therefore be an attractive therapy option for patients and prescribing physicians.

Our delivery system is a small handheld device that is easy and convenient to use for patients. The device is used to simply spray our fentanyl formulation under the tongue, which allows for administration in a matter of seconds, rather than the 15 minutes or more required for currently marketed lozenge or buccal tablet formulations to completely dissolve. In addition, since the area under the tongue has a high density of blood vessels, we believe that sublingual delivery may result in rapid absorption of the drug and a faster onset of action compared to alternatives in which a portion of, or the entire drug, is ingested. Assuming this product candidate is approved by the FDA, patients using our Fentanyl SL spray may be able to experience rapid onset of action, unlike current therapies which require 15 minutes or more to take effect.

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Other Product Candidates

Our internal development pipeline also includes fentanyl and dronabinol line extensions, and other pain management and central nervous system product candidates. We intend to focus on continuing to develop these early stage product candidates, and any other products and product candidates that we acquire or in-license, with the goal of building a broad product portfolio, pursuing additional indications and expanding our market opportunities in our core areas of focus.

Our Strategy

Our goal is to become a leading biopharmaceutical company focused on CINV, pain management and other central nervous system disorders, with specific expertise in the expanding synthetic cannabinoid derivatives and specialized opioid markets. Key aspects of our strategy to achieve this goal include:

• securing regulatory approval for and commercializing our Dronabinol HG capsule;

• utilizing our proprietary formulations and delivery systems to develop additional differentiated dronabinol products, including room temperature storage;

• conducting pivotal Phase 3 clinical trials and seeking regulatory approval for our sublingual Fentanyl SL spray;

• implementing strategies to mitigate risks and reduce the costs and time associated with the development and commercialization of products;

• advancing our early stage pipeline opportunities and acquiring or in-licensing products and product candidates that fall within our core areas of focus; and

• internally developing sales and marketing capabilities.

Risk Factors

We are subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this prospectus immediately following the prospectus summary. We have a limited operating history and have not yet commercialized any products. We have incurred substantial operating losses in each year since inception. Our net loss applicable to common stockholders was approximately $5.8 million for the six months ended June 30, 2007 and approximately $7.0 million for the year ended December 31, 2006. Through June 30, 2007, we had an accumulated deficit of approximately $17.6 million. It is uncertain whether any of our product candidates under development will receive FDA approval and the DEA scheduling we seek, or become effective treatments. Accordingly we may never receive any product sales revenues or achieve profitability. We are highly dependent on the success of our dronabinol and Fentanyl SL spray product candidates. All of our product candidates are undergoing clinical trials or are in earlier stages of development, and failure is common and can occur at any stage of development. We may need substantial additional funding in the future and may be unable to raise capital when needed.

Corporate Information

We were incorporated in Delaware in October 2002. Our principal executive offices are located at 10220 South 51st Street, Suite 2, Phoenix, AZ 85044-5231 and our telephone number is (602) 910-2617. Our corporate website address is www.insystherapeutics.com. We do not incorporate the information contained on, or accessible through, our website into this prospectus, and you should not consider it part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

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For convenience in this prospectus, “Insys,” “we,” “us,” and “our” refer to Insys Therapeutics, Inc., unless otherwise noted. We have applied for registration of the trademark “Insys Therapeutics, Inc.” and our Insys logo with the United States Patent and Trademark Office. This prospectus also contains trademarks and tradenames of other companies (including Actiq^®, Cesamet^®, Fentora^® and Marinol^®), and those trademarks and tradenames are the property of their respective owners.

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The Offering

Common stock offered              shares

Common stock to be outstanding after this offering              shares

Option to purchase additional shares We granted the underwriters an option for a period of 30 days to purchase up to              additional shares of our common stock.

Use of proceeds from this offering We intend to use the net proceeds to us from this offering to fund the commercial production and sale of Dronabinol HG capsules, if approved, to fund the clinical and pre-clinical development of our other product candidates, and for general corporate purposes. See “Use of Proceeds.”

Proposed Nasdaq Global Market symbol INRX

The number of shares of our common stock that will be outstanding after this offering is based on 24,194,237 shares outstanding as of July 31, 2007, and excludes:

• 299,188 shares of non-voting common stock subject to outstanding options under our stock option and equity incentive plans, with a weighted average exercise price of $0.08 per share; and

•              shares of common stock reserved for future issuance under our 2007 equity incentive plan, 2007 non-employee directors’ stock option plan and 2007 employee stock purchase plan, each of which will become effective upon the signing of the underwriting agreement for this offering.

Unless otherwise stated, all information contained in this prospectus assumes:

• a 1-for-             reverse stock split of our common stock to be effected prior to the closing of this offering;

• the conversion all of our outstanding non-voting common stock into an aggregate of 1,051,062 shares of common stock immediately prior to the closing of this offering;

• the issuance of              shares of our common stock upon the completion of this offering upon the conversion of $         million in aggregate principal amount of notes and accrued interest thereon owed to a trust controlled by our chairman, assuming an initial public offering price of $             per share (the mid-point of the price range set forth on the front cover of this prospectus), immediately prior to the closing of this offering;

• the filing of our amended and restated certificate of incorporation and adoption of our amended and restated bylaws, which will occur upon the closing of this offering; and

• no exercise of the underwriters’ option to purchase additional shares.

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SUMMARY FINANCIAL DATA

The following tables set forth summary financial data. The summary financial data for the years ended December 31, 2004, 2005 and 2006 are derived from our audited financial statements included in this prospectus. The summary financial data for the six months ended and as of June 30, 2007 are derived from our unaudited interim condensed financial statements included in this prospectus. The as adjusted balance sheet data as of June 30, 2007 gives effect to (i) our receipt of the estimated net proceeds from 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 underwriting discounts and commissions and estimated offering expenses payable by us, (ii) the conversion of all of our outstanding non-voting common stock into              shares of common stock, which will occur automatically immediately prior to the closing of this offering and (iii) the issuance of              shares of our common stock upon the completion of this offering upon the conversion of $         million in aggregate principal amount of notes and accrued interest thereon owed to a trust controlled by our chairman, assuming an initial public offering price of $             per share (the mid-point of the price range set forth on the front cover of this prospectus), immediately prior to the closing of this offering.

You should read this summary financial data in conjunction with the financial statements and related notes and the information under “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. The historical results set forth below are not necessarily indicative of our future results.

	Years Ended December 31,									Six Months Ended June 30, 2007
	2004			2005			2006
										(Unaudited)
	(In thousands, except per share data)
Statement of operations data:
Operating expenses:
Research and Development	$	888		$	2,260		$	5,707		$	4,409
General and administrative		163			356			571			681
Loss from operations		(1,051	)		(2,616	)		(6,278	)		(5,090	)
Interest expense, net		(60	)		(210	)		(727	)		(702	)
Net loss	$	(1,111	)	$	(2,826	)	$	(7,005	)	$	(5,792	)
Basic and diluted net loss per share(1)	$	(0.06	)	$	(0.15	)	$	(0.36	)	$	(0.28	)
Shares used to compute basic and diluted net loss per share(1)		18,593,750			18,756,498			19,673,174			20,842,154

(1) Please see Note 2 to our audited financial statements and Note 3 to our unaudited financial statements for an explanation of the method used to calculate net loss per share and the number of shares used in the computation of the per share amounts.

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	As of June 30, 2007
	Actual			As Adjusted(1)
	(In thousands)
Balance Sheet Data (Unaudited):
Cash, cash equivalents and short-term investments	$	95		$
Total current assets		151
Total assets		6,427
Total current liabilities		(5,997	)
Total liabilities	$	23,671
Total stockholders’ deficit	$	(17,244	)	$

(1) A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase (decrease) each of cash, cash equivalents and short-term investments, total assets and total current assets by approximately                  million and decrease (increase) total stockholders’ deficit by approximately $             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 table immediately above does not give effect to the conversion of $         million in aggregate principal amount of notes and accrued interest thereon, assuming an initial public offering price of $             per share (the mid-point of the price range set forth on the front cover of this prospectus), immediately prior to the closing of this offering.

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RISK FACTORS

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this prospectus, before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

We have a limited operation history and have not generated any revenues from our product candidates and may never become profitable.

We are a development-stage company with a limited operating history. We have incurred substantial net operating losses since our inception. We have financed our operations through loans from a trust controlled by our chairman, John N. Kapoor, and have incurred losses in each year since our inception in October 2002. For the six months ended June 30, 2007 and the year ended December 31, 2006, we had net losses of approximately $5.8 million and $7.0 million, respectively. As of June 30, 2007, we had an accumulated deficit of approximately $17.6 million. These losses, combined with expected future losses, have had and will continue to have a material and adverse effect on our stockholders’ equity and working capital. Our ability to become profitable depends upon our ability to generate significant continuing revenues. To obtain significant continuing revenues, we must succeed, either alone or with others, in developing, obtaining regulatory approval for and manufacturing, selling and marketing, our Dronabinol HG capsule and other dronabinol product candidates, our Fentanyl SL spray product candidate and our other product candidates. We expect to continue to incur significant operating expenses for the next few years as we pursue the pre-clinical and clinical development, regulatory approval and potential market launch of our dronabinol product candidates, build an internal sales force and marketing infrastructure to market and sell our products, and increase general and administrative expenses to comply with public company reporting requirements.

To date, our product candidates have not generated any revenues, and we do not know when, or if, we will generate any revenue. Our ability to generate revenue depends on a number of factors, including, but not limited to:

• achievement of regulatory approval and acceptable U.S. Drug Enforcement Administration, or DEA, classification for Dronabinol HG capsule and Dronabinol RT capsule and any other product candidates we advance into clinical trials;

• successful completion of pre-clinical studies and clinical trials for Dronabinol RT syrup, Dronabinol RT nebulizer, Fentanyl SL spray and any other product candidates we advance into clinical trials;

• manufacturing commercial quantities of our product candidates at acceptable cost levels if regulatory approvals are obtained; and

• successful sales, distribution and marketing of our future products, if any.

Because of the numerous risks and uncertainties associated with our development efforts and other factors, we are unable to predict when we will generate revenues become profitable, if ever. Even if we do achieve profitability, we may not be able to sustain or increase profitability on an ongoing basis.

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If our competitors develop treatments for pain management or nausea and vomiting, especially other synthetic cannabinoid derivatives or specialized opioid delivery systems, that are approved more quickly, marketed more effectively or demonstrated to be safer or more effective than our product candidates, our commercial opportunities will be reduced or eliminated.

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face competition from many different sources, including pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions, many of which have significantly greater financial and other resources than us. In addition, the generic pharmaceutical industry in which we operate is competitive in part because the products that are sold do not benefit from patent protection. If any of our product candidates receive the requisite regulatory approval and classification and are marketed, the competition which we will encounter will have an effect on our product prices, market share, revenues and profitability. We may not be able to differentiate any products that we are able to market from those of our competitors, successfully develop or introduce new products that are less costly or offer better performance than those of our competitors, or offer purchasers of our products payment and other commercial terms as favorable as those offered by our competitors.

The indications for which we are developing products have a number of established therapies and products already commercially available as well as a number under development by other companies with which our product candidates will compete. In the treatment of nausea and vomiting associated with cancer chemotherapy, physicians typically offer a conventional antinausea agent prior to initiating chemotherapy, such as substance P antagonists, fenatonin receptor antagonists, corticosteriods and phenothiazines. If we receive regulatory approvals for our dronabinol product candidates, they will compete against these agents, as well as Solvay Pharmaceutical, Inc.’s Marinol and Valeant Pharmaceutical Inc.’s Cesamet. In addition, although there are no generic versions of Marinol which have been approved by the U.S. Food and Drug Administration, or FDA, to date, we believe that other companies, which likely have significantly more resources than us, are pursuing regulatory approval for generic dronabinol products, and we cannot give any assurance that any such other companies will not obtain regulatory approval or commercialize their generic dronabinol products on a more rapid timeline or more comprehensively or successfully than us. Moreover, as generic versions of drug products enter the market, the price for such drugs declines rapidly and substantially. Even if we are the first to obtain FDA approval of a generic dronabinol product, approval of subsequent generics will immediately and adversely affect the price we are able to charge and the profitability of our product will decline. Moreover, we will compete with non-synthetic cannabinoid drugs and therapies such as GW Pharmaceuticals plc’s Sativex^®, especially in many countries outside of the United States where non-synthetic cannabinoids are legal. We also cannot assess the extent to which patients utilize natural cannabis (marijuana) to alleviate cancer chemotherapy nausea and vomiting, instead of using prescribed therapies such as our dronabinol products. The label we are seeking for Dronabinol HG capsule is for use in treating nausea and vomiting associated with cancer chemotherapy when conventional treatments fail and we expect our dronabinol product candidates to be used primarily as second-line treatments prescribed only after earlier treatment alternatives fail. In the breakthrough cancer pain market, physicians typically treat breakthrough cancer pain with a variety of short-acting opioid medications, including morphine, morphine and codeine derivatives, and fentanyl. If we receive regulatory approvals for our Fentanyl SL spray product candidate, it will likely compete against numerous products already in the market and in developments such as Cephalon Inc.’s Fentora, Actiq and its generic alternatives from Barr Pharmaceuticals, Inc. and Watson Pharmaceuticals, Inc. In addition, we are aware of numerous companies developing other treatments and technologies for rapid delivery of opioids to treat breakthrough pain, including transmucosal, transdermal, nasal spray, inhaled delivery systems and sublingual delivery systems, among others. If these technologies are successfully developed and approved over the next few years, they could represent significant competition for our Fentanyl SL spray product candidate, if approved.

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New developments, including the development of other drug technologies and methods of preventing the incidence of disease, occur in the pharmaceutical and life sciences industries at a rapid pace. These developments may render our product candidates obsolete or noncompetitive. Compared to us, many of our potential competitors have substantially greater:

• research and development resources, including personnel and technology;

• regulatory experience;

• drug development, clinical trial and drug marketing and commercialization experience;

• experience and expertise in intellectual property rights;

• name recognition; and

• capital resources.

As a result of these and other factors, our competitors may obtain FDA approval or DEA classification of their products more rapidly than us or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates. Our competitors may also develop products for the treatment of pain management, nausea and vomiting or other indications we pursue that are more effective, better tolerated, subject to fewer or less severe side effects, more useful, more widely prescribed or accepted, or less costly than ours. Our competitors may succeed in obtaining approvals or classifications from the FDA, the DEA and foreign regulatory authorities for their product candidates sooner than we do for ours or in a manner that is more favorable than ours, and may also be more successful in manufacturing and marketing their products. If we receive regulatory approvals for our products, manufacturing and sales and marketing efficiency are likely to be significant competitive factors. Our plan is to develop a targeted internal sales force and marketing infrastructure without using third party sale or marketing channels in the United States, and there can be no assurance that we can develop these capabilities in a manner that will be competitive with the sales and marketing efforts of our competitors, especially since some or all of those competitors will expend greater economic resources than we and/or employ third party sales and marketing channels.

We will also face competition from third parties in obtaining allotments of dronabinol and fentanyl under applicable DEA quotas, recruiting and retaining qualified personnel, establishing clinical trial sites and subject enrollment for clinical trials, and in identifying and in-licensing new products and product candidates.

Our short operating history and the recent additions to our management team of many of our officers make it difficult to evaluate our business and prospects.

We were incorporated in October 2002 and commenced our product development activities in 2002. Our operations to date have been limited to organizing and staffing our company and conducting product development activities for our product candidates. We have not yet demonstrated an ability to obtain regulatory approval for or commercialize a product candidate. In addition, most members of our management, including our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Medical Officer, Chief Scientific Officer, Vice President of Business Development and Strategic Alliances and Director of Regulatory Affairs, only joined us in 2007. Consequently, any predictions about our future performance may not be as accurate as they could be if we had a history of successful development and commercialization of pharmaceutical products or if our management team had been with us for a longer period of time.

We will need to increase the size of our organization and we may experience difficulties in managing growth.

Our management and personnel, systems and facilities currently in place may not be adequate to support our business plan and future growth. As of August 2007, we had 17 full-time employees. In addition, we have engaged part-time consultants to assist us with regulatory submissions, statistical analysis, clinical research site review and protocol design. We have been building our management team largely in the past several months while transitioning from our Illinois facility to our new Phoenix, AZ headquarters facility. Most members of

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management only joined us in 2007. Moreover, in August 2007, we expanded our board of directors to include four independent directors, for a total of seven board members. We will need to further expand our managerial, operational, financial and other resources, and build a sales force and marketing infrastructure, in order to manage and fund our operations and clinical trials, continue our research and development activities, and commercialize our product candidates.

Our need to effectively manage our operations, growth and various projects requires that we:

• manage our clinical trials effectively, including our two pivotal planned Fentanyl SL spray Phase 3 clinical trials;

• manage our internal development efforts effectively while carrying out our contractual obligations to licensors, contractors and other third parties;

• continue to improve our operational, financial and management controls and reporting systems and procedures;

• continue to expand and improve our new facilities; and

• attract and retain sufficient numbers of talented employees.

To date, we have utilized the services of outside vendors to perform tasks including accounting and finance, clinical trial management, statistics and analysis, regulatory affairs, formulation development, stability analysis and other drug development functions. Our growth strategy may also entail expanding our group of contractors or consultants to implement these tasks going forward. Because we rely on a substantial number of consultants, effectively outsourcing many key functions of our business, we will need to be able to effectively manage these consultants to ensure that they successfully carry out their contractual obligations and meet expected deadlines. However, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is or has been compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all. If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may be unable to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals.

If we fail to attract and keep management and other key personnel, we may be unable to successfully develop or commercialize our product candidates.

Our success depends on our continued ability to attract, retain and motivate highly qualified management and key clinical development, regulatory, sales and marketing and other personnel. We are highly dependent on the development, regulatory, commercial and financial expertise of our executive officers, most of whom joined us in 2007. The loss of the services of any of our executive officers could delay or prevent the commercialization of our product candidates. If we lose any members of our senior management team, we may not be able to find suitable replacements on a timely basis or at all, and our business may be harmed as a result. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees. We employ all of our executive officers and key personnel on an at-will basis and their employment can be terminated by us or them at any time, for any reason and without notice.

We may not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the Phoenix, AZ area where we are in the process of relocating our primary operations. Our industry has experienced a high rate of turnover of management personnel in recent years. As such, we could have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in our employee recruitment and retention efforts. If we are not able to attract and retain the

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necessary personnel to accomplish our business objectives, we may experience constraints that will impede significantly the achievement of our development objectives, our ability to raise additional capital and our ability to implement our business strategy. In particular, if we lose any of our executive officers, we may not be able to find suitable replacements and our business may be harmed as a result.

We have scientific and clinical advisors who assist us in formulating our development and clinical strategies. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, our advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours.

If we fail to successfully develop, identify and acquire or in-license additional products or product candidates, we may have limited growth opportunities.

In addition to our dronabinol, Fentanyl SL spray and other existing product candidates, as resources allow and opportunities present themselves, we intend to develop a pipeline of new products or product candidates through acquisition or in-licensing. The success of this strategy will depend upon our ability to identify, select and acquire or in-license pharmaceutical products or product candidates.

The process of proposing, negotiating and implementing the acquisition or in-license of a product or product candidate is lengthy and complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with us for these products or product candidates. We have limited resources to identify and execute acquisition or in-licensing transactions. Even if we acquire or in-license additional products or product candidates, we have limited resources to integrate the acquired or licensed assets into our current infrastructure. In addition, we may devote resources to potential acquisition or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts after expenditure of considerable time and resources. We may not be able to acquire the rights to additional products or product candidates on terms that we find acceptable, or at all.

Future acquisition and in-licensing transactions may entail numerous operational and financial risks including:

• exposure to unknown liabilities;

• disruption of our business and diversion of our management’s time and attention to the development of these products or product candidates;

• incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions or in-licensing transactions; and

• high acquisition and integration costs.

Product candidates that we acquire or in-license will likely require additional development efforts prior to commercial sale, including product development, extensive clinical testing and approval by the FDA and other applicable regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe or effective for approval by regulatory authorities. In addition, we cannot provide assurance that any products or product candidates that we acquire or in-license will be manufactured profitably or achieve market acceptance.

We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.

From time to time we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of products, product candidates or technologies. Additional potential transactions we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships,

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joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could harm our operations and financial results.

We may incur substantial liabilities from any product liability claims if our insurance coverage for those claims is inadequate.

We face an inherent risk of product liability exposure related to the testing, manufacturing and marketing of our product candidates in human clinical trials, and will face an even greater risk if we sell our product candidates commercially. Common adverse events for dronabinol products include: abdominal pain, nausea, vomiting, dizziness, euphoria, paranoid reaction, somnolence, abnormal thought patterns, or difficulty with concentration/attention. Common adverse events for fentanyl products include: nausea, dizziness, somnolence, vomiting, asthenia or lack of energy and strength and anxiety. An individual may bring a liability claim against us if one of our product candidates causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

• decreased demand for our product candidates;

• product recall or withdrawal from the market;

• impairment to our business reputation or acceptance in the medical community;

• withdrawal of clinical trial participants;

• costs of related litigation;

• distraction of management’s attention from our primary business;

• substantial monetary awards to patients or other claimants;

• loss of revenues; and

• the inability to commercialize our product candidates.

We have obtained product liability insurance coverage for our clinical trials with a $3,000,000 per occurrence and $3,000,000 aggregate limit. Our insurance coverage may not be sufficient to reimburse us for any 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, in sufficient amounts or upon adequate coverage terms to protect us against losses due to liability. We intend to expand our insurance coverage to include the sale of commercial products if regulatory approval is obtained for any of our product candidates. However, we may be unable to obtain this product liability insurance on commercially reasonable terms or with insurance coverage that will be adequate to satisfy any liability that may arise. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects, including side effects which are less severe than those of our product candidates. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

Currency exchange rate fluctuations may increase our costs.

The exchange rate between the U.S. dollar and non-U.S. currencies in which we conduct our business have and will likely fluctuate in the future. Any appreciation in the value of these non-U.S. currencies would result in higher expenses for our company. We do not have any hedging arrangements to protect against such exchange rate exposures.

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Import/export regulations and tariffs may change and increase our costs.

We are subject to risks associated with the regulations relating to the import and export of products and materials. We cannot predict whether the import and/or export of our products will be adversely affected by changes in, or enactment of new quotas, duties, taxes or other charges or restrictions imposed by India or any other country in the future. Any of these factors could have a material adverse effect on our operating costs.

Risks Related to Development, Testing and Commercialization of Our Products

We are highly dependent on the success of our dronabinol and Fentanyl SL spray product candidates, and we cannot give any assurance that any of these product candidates will receive regulatory approval or be successfully commercialized.

We are a development stage biopharmaceutical company and do not have internal new drug discovery capabilities. To date, we have not successfully developed any marketable products, and have focused on improved formulations and delivery methods for existing FDA approved products, particularly dronabinol and fentanyl. We are highly dependent on the success of our dronabinol and Fentanyl SL spray product candidates, and we cannot give you any assurance that we will obtain regulatory approval for any of these product candidates or that any of these product candidates will be successfully commercialized.

In particular, we are highly dependent on Dronabinol HG capsule, which we intend to be a generic formulation of Marinol. We submitted an ANDA, for Dronabinol HG capsule to the FDA in September 2006. To date, the FDA has not approved a generic version of Marinol, the composition of matter patent for which has expired. Synthetic dronabinol in any form other than the specific sesame oil soft gelatin capsule dosage form of Marinol as approved by the FDA is a Schedule I controlled substance, and thus may not be commercially marketed. Therefore, we have petitioned the DEA to classify Dronabinol HG capsule, if approved by the FDA, as a Schedule III substance to be consistent with the Schedule III classification for Marinol. Although we believe that there would be no basis for the DEA to schedule our Dronabinol HG capsules or Dronabinol RT capsules differently than Marinol, the DEA may reach a different conclusion. We cannot assure you that the FDA will approve our ANDA for Dronabinol HG capsules or that the DEA will classify our Dronabinol HG capsules as a Schedule III substance, in the timeline that we currently anticipate, or at all.

We are also highly dependent on the success of our other dronabinol product candidates, including Dronabinol RT capsule, Dronabinol RT syrup and Dronabinol RT nebulizer, and our Fentanyl SL spray product candidate. In addition to FDA approval for each of these other product candidates, the DEA will be required to schedule each dronabinol product before it may be commercially marketed. If we are successful in having the DEA classify Dronabinol HG capsule as a Schedule III substance, we believe that the same classification would likely be applied to Dronabinol RT capsule. We plan to petition the DEA to classify each of our dronabinol products as Schedule III substances. However, because our Dronabinol RT syrup and Dronabinol RT nebulizer will, if approved, represent new delivery methods for dronabinol, the DEA may determine that the stricter controls of Schedule II are appropriate for those products. All currently approved fentanyl products are classified as Schedule II substance and we expect our fentanyl products will be classified as a Schedule II substance as well.

Our business strategy is to generate revenue from the sale of Dronabinol HG capsules to offset the development costs of our other product candidates, submit and obtain FDA regulatory approvals and the appropriate DEA classification for our other product candidates, develop an internal sales force and marketing infrastructure to sell any products that we successfully develop and expand the market for the medical use of dronabinol. If we are unable to develop, receive approval and the appropriate classification for, develop sales and marketing capabilities for, successfully commercialize these product candidates, or successfully expand the market for the medical use of dronabinol, in the sequence and on the timeline we anticipate, we will not be able to execute our business strategy effectively and our ability to generate revenues will be limited.

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We may experience delays in the commencement of our pre-clinical studies and clinical trials, which could result in increased costs to us and delay or limit our ability to pursue regulatory approval.

Delays in the commencement of pre-clinical and clinical testing of our product candidates could significantly impact our product development costs and business plan. We do not know whether our anticipated pre-clinical studies or clinical trials of Dronabinol RT syrup, Dronabinol RT nebulizer or Fentanyl SL spray, or any of our other pre-clinical studies or clinical trials, will begin or be conducted on our anticipated timeline, or at all. The commencement of clinical trials in particular can be delayed for many different reasons, including delays:

• in obtaining regulatory approvals to commence a clinical trial;

• in identifying, recruiting and training suitable clinical investigators;

• in identifying, recruiting and enrolling subjects to participate in a clinical trial;

• in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, clinical investigators and trial sites, the terms of which can be subject to extensive negotiation and may in vary significantly among different CROs, clinical investigators and trial sites;

• in obtaining sufficient quantities of a product candidate for use in clinical trials or other materials necessary to conduct our clinical trials, in particular obtaining sufficient quantities of dronabinol and fentanyl due to regulatory and manufacturing constraints;

• in obtaining institutional review board, or IRB, approval to initiate and conduct a clinical trial at a prospective site;

• due to regulatory concerns with cannabinoid or opioid products generally and the potential for patient abuse of the drugs; and

• due to the need to repeat clinical trials as a result of inconclusive or negative results or unforeseen complications in testing.

Any delays in the commencement of our pre-clinical studies or clinical trials will delay our ability to pursue regulatory approval for our product candidates and adversely affect our ability to execute on our business plan and anticipated product development timeline. In addition, many of the factors that cause, or lead to, a delay in the commencement of clinical trials may also ultimately prevent regulatory approval of a product candidate.

Clinical trials for our product candidates are expensive, time consuming, uncertain and susceptible to change, delay or termination.

Clinical trials are very expensive, time consuming and difficult to design and implement. Even if the results of our clinical trials are favorable, we estimate that the clinical trials of our most advanced product candidates will continue for several years and may take significantly longer than expected to complete. In addition, we, the FDA, an IRB or other regulatory authorities may suspend, delay or terminate our clinical trials at any time, or the DEA could suspend or terminate the registrations and quota allotments we require in order to procure and handle controlled substances, for various reasons, including:

• lack of effectiveness of any product candidate during clinical trials;

• discovery of serious or unexpected toxicities or side effects experienced by study participants or other safety issues;

• slower than expected rates of subject recruitment and enrollment rates in clinical trials;

• difficulty in retaining subjects who have initiated a clinical trial but may withdraw at any time due to adverse side effects from the therapy, insufficient efficacy, fatigue with the clinical trial process or for any other reason they choose;

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• delays or inability in manufacturing or obtaining sufficient quantities of materials for use in clinical trials, in particular obtaining sufficient quantities of dronabinol and fentanyl due to regulatory and manufacturing constraints;

• inadequacy of or changes in our manufacturing process or product formulation;

• delays in obtaining regulatory consent to commence a study, or “clinical holds” or delays requiring suspension or termination of a study by a regulatory agency, such as the FDA, before or after a study is commenced;

• DEA-related violations at a clinical site, leading the DEA to suspend or revoke the site’s controlled substance license and causing a delay or termination of planned or ongoing studies;

• changes in applicable regulatory policies and regulations;

• delays or failure in identifying and reaching agreement on acceptable terms in clinical trial contracts or protocols with prospective clinical trial sites;

• uncertainty regarding proper dosing;

• unanticipated side effects;

• unfavorable results from on-going clinical trials and pre-clinical studies;

• failure of our CROs or other third-party contractors to comply with all contractual requirements or to perform their services in a timely or acceptable manner;

• failure by us, our employees, our CROs or their employees to comply with all applicable regulatory requirements relating to the conduct of clinical trials or the handling, storage, security and record-keeping for controlled substances;

• scheduling conflicts with participating clinicians and clinical institutions;

• failure to design appropriate clinical trial protocols;

• insufficient data to support regulatory approval;

• inability or unwillingness of medical investigators to follow our clinical protocols;

• difficulty in maintaining contact with subjects during or after treatment, which may result in incomplete data; or

• regulatory concerns with cannabinoid or opioid products generally and the potential for abuse of the drugs.

There is typically a high rate of failure for drug candidates proceeding through clinical trials. We may suffer significant setbacks in our clinical trials similar to a number of other companies in the pharmaceutical and biotechnology industries that have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. If we abandon or are delayed in our clinical development efforts related to our dronabinol, Fentanyl SL spray or any other product candidate, we may not be able to generate sufficient revenues or obtain financing to continue our operations or become profitable, we may not be able to execute on our business plan effectively, our reputation in the industry and in the investment community would likely be significantly damaged and our stock price would likely decrease significantly.

The results of pre-clinical studies and clinical trials are not necessarily predictive of future results, and our current product candidates may not have favorable results in later studies or trials.

Companies frequently suffer significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising results. Favorable results in our early studies or trials may not be repeated in later studies or trials, including continuing pre-clinical studies and large-scale clinical trials, and our product candidates in

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later stage trials may fail to show desired safety and efficacy despite having progressed through earlier trials. In particular, pre-clinical data and the limited clinical results that we have obtained for Dronabinol RT syrup and Fentanyl SL spray may differ from results from studies in larger numbers of subjects drawn from more diverse populations treated for longer periods of time. They also may not predict the ability of the product candidates to achieve or sustain the desired effects in the intended population or to do so safely. Unfavorable results from ongoing pre-clinical studies or clinical trials could result in delays, modifications or abandonment of ongoing or future clinical trials. In addition, we may report top-line data from time to time, which is based on a preliminary analysis of key efficacy and safety data, and is subject to change following a more comprehensive review of the data related to the applicable clinical trial. Any of our planned later stage clinical trials may not be successful for a variety of reasons, including the clinical trial designs, the failure to recruit or enroll a sufficient number of suitable subjects, undesirable side effects and other safety concerns, and the inability to demonstrate efficacy or safety.

Many of our research and development programs are in early stages of development and may not result in the commencement of clinical trials.

Many of our research and development programs are in the early stages of development. For example, we are in the process of designing pre-clinical studies for our Dronabinol RT nebulizer. We are also developing additional product candidates for which we have not designed or commenced pre-clinical studies or clinical trials, including other dronabinol line extensions, dronabinol combination products, fentanyl line extensions and derivatives of morphine-6-O sulfate and buprenorphine microspheres. The process of developing product candidates requires the commitment of a substantial amount of our technical, financial and personnel resources and is unpredictable. We may not discover additional product candidates with therapeutic potential and any of the product candidates for which we are conducting pre-clinical studies may not result in the commencement of clinical trials. We cannot be certain that results sufficiently favorable to justify commencement of Phase 1 studies will be obtained in pre-clinical investigations. If we are unable to identify and develop new product candidates and advance them to clinical trials, we may not be able to maintain a clinical development pipeline or generate revenues from a clinical development pipeline.

We have never sponsored or conducted a pivotal clinical trial, including a Phase 3 clinical trial, and our planned pivotal clinical trial protocols and designs for our product candidates, including our anticipated pivotal clinical trials of Dronabinol RT syrup and Fentanyl SL spray, may not be sufficient to obtain FDA approval.

We have never conducted a pivotal clinical trial, including Phase 3 clinical trials, which, in general are significantly more complex and time-consuming and involve more patients than the earlier stage clinical trials that we have conducted to date. The clinical trial protocols and designs of our anticipated pivotal clinical trials of Dronabinol RT syrup and Fentanyl SL spray may prove to be insufficient for product approval, and we do not plan to conduct Phase 2 trials for these product candidates. Moreover, we have not yet sought FDA agreement on our planned primary endpoints or the statistical plans under which the results of our anticipated pivotal clinical trials will be analyzed. We conducted a pre-investigational new drug, or IND, meeting with the FDA in August 2005 at which we received preliminary guidance from the FDA on, among other things, a draft Phase 3 protocol synopsis and our clinical development approach for Fentanyl SL spray. Although we believe that we have planned for and designed all necessary clinical and non-clinical studies in accordance with the FDA’s guidance at the meeting, the FDA may not agree with the specific manner in which we have interpreted and sought to implement its guidance. Moreover, there can be no assurance that when our New Drug Application, or NDA, is submitted, the FDA will continue to adhere to the guidance provided at the pre-IND meeting, or that no new or modified FDA policies or requirements will have been adopted that could require new or additional studies in support of product approval. It is possible that the FDA could determine that it is not satisfied with our plan or the details of our pivotal clinical trial protocols and designs. Moreover, even if we achieve positive results on the endpoints for a trial, the results may not be sufficient to demonstrate efficacy at the level required by the FDA for product approval. It is possible that we may make modifications to the clinical trial protocols or the designs of

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one or more of our pivotal clinical trials that delay the enrollment or completion of our clinical trials or delay our pursuit of regulatory approval of these product candidates.

We are conducting a clinical trial in the United Kingdom and may choose to conduct one or more of our other clinical trials outside the United States.

We are currently conducting a Phase 3 clinical trial for the use of dronabinol in the treatment of multiple sclerosis in the United Kingdom, and we may choose to conduct one or more of our other clinical trials outside the United States in the future. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of such study data by the FDA is subject to certain conditions. For example, the study must be well designed and conducted and performed by qualified investigators in accordance with ethical principles. The study population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. The FDA has advised us that the patient population in which our clinical studies are conducted should be representative of the population in which we intend to use the product. In addition, such studies would be subject to the applicable local laws and FDA acceptance of the data would be dependent upon its determination that the studies also complied with all applicable U.S. laws and regulations.

Our stock price could decline significantly based on the results of clinical trials and pre-clinical studies of, and decisions affecting, our product candidates.

Results of clinical trials and pre-clinical studies of our product candidates, including our anticipated clinical trials of Dronabinol RT syrup, Dronabinol RT nebulizer and Fentanyl SL spray and our anticipated pre-clinical studies of Dronabinol RT nebulizer, may not be viewed favorably by us or third parties, including investors, analysts and potential collaborators. The same may be true of how we design the clinical trials and pre-clinical studies of our lead product candidates (which may change significantly and be more expensive than currently anticipated) and regulatory decisions affecting those clinical trials and pre-clinical studies. Moreover, we may not be successful in completing these clinical trials or pre-clinical studies on our projected timeline, if at all. In particular, if we do not obtain regulatory approval for our Dronabinol HG capsule product as anticipated, then our planned application for the approval of Dronabinol RT capsule, our planned clinical trials for Dronabinol RT syrup and Dronabinol RT nebulizer and our planned pre-clinical studies for Dronabinol RT nebulizer may be delayed or suspended indefinitely. Biotechnology and pharmaceutical company stock prices have declined significantly when such results and decisions were unfavorable or perceived negatively or when a product candidate did not otherwise meet expectations.

Our product candidates contain controlled substances, the use of which may generate public controversy.

Dronabinol, though synthetic, is a cannabinoid. Moreover, fentanyl is a Schedule II controlled substance narcotic derivative and despite the strict regulations on the marketing, prescribing and dispensing of Schedule II substances, illicit use and abuse of fentanyl products is well-documented. Since our product candidates contain controlled substances, regulatory approval of these product candidates may generate public controversy. Political and social pressures and adverse publicity could lead to delays in, and increased expenses for, and limit or restrict the introduction and marketing of our product candidates. For some or all of our products, the FDA will require us to develop a comprehensive risk management program to reduce the inappropriate use of our product candidates, including restrictions on the manner in which they are marketed and sold, so as to reduce the risk of improper patient selection and diversion or abuse of the product. The DEA could encourage the FDA to take such actions. Developing such a program in consultation with the FDA may be a time-consuming process and could delay approval of any of our product candidates. Such a program or delays of any approval from the FDA could limit market acceptance of the product.

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Legalization of marijuana or non-synthetic cannabinoids in the United States could significantly limit the commercial success of any dronabinol product candidate.

Currently, dronabinol is one of a limited number of FDA-approved synthetic cannabinoids in the United States. Therefore in the United States, dronabinol products do not have to compete with natural cannabis or non-synthetic cannabinoids such as GW Pharmaceutical’s Sativex^®. Literature has been published arguing the benefits of marijuana over dronabinol. Moreover, irrespective of its potential medical applications, there is some support in the United States for legalization of marijuana. If marijuana or non-synthetic cannabinoids were legalized in the United States, the market for dronabinol product sales would likely be significantly reduced and our ability to generate revenue and our business prospects would be materially adversely affected.

If we are unable to establish sales and marketing capabilities or execute on our sales and marketing strategy, we may not be able to effectively market and sell our products and generate product revenue.

We do not currently have an organization for the sales, marketing and distribution of pharmaceutical products and we must build this organization or make arrangements with third parties to perform these functions in order to commercialize any products we successfully develop and for which we obtain regulatory approvals. We currently intend to establish an internal sales force and marketing infrastructure utilizing a model that has been employed by companies certain of our management have worked with in the past. Under this model, we expect to maintain a smaller sales force than many of our competitors, which could hinder our efforts relative to our competitors to market any products that we are able to commercialize. The establishment and development of an internal sales force and marketing infrastructure will be expensive and time consuming and could delay any product launch. We cannot be certain that we will be able to successfully develop these capabilities. If we are unable to establish our sales and marketing capabilities or any other capabilities necessary to commercialize any products we may develop and for which we obtain regulatory approvals, we will need to contract with third parties to market and sell such products. This would likely result in significantly greater sales and marketing expenses than currently estimated in our business plan. Moreover, we cannot assure that our sales and marketing strategy, which is based on the model used in other companies, will work effectively for our company and the markets for our product candidates. For international sales, we plan to contract with third parties as opposed to building an internal international sales force or marketing infrastructure. We currently possess limited resources and may not be successful in establishing our own internal sales force and marketing infrastructure for the United States or in establishing arrangements with third-parties for international sales on acceptable terms, if at all.

If we obtain regulatory approvals for our dronabinol and fentanyl products or any other product candidate and those products do not achieve broad market acceptance among physicians, patients, hospitals, healthcare payors and the medical community, we will generate limited revenues from sales of that product.

Even if our product candidates receive regulatory approval, they may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Coverage and reimbursement of our product candidates by third-party payors, including government payors, generally is also necessary for commercial success. The degree of market acceptance of any of our approved products will depend on a number of factors, including:

• the clinical indications for which the product is approved;

• our ability to provide acceptable evidence of safety and efficacy, and acceptance by physicians and patients of the product as a safe and effective treatment;

• the relative convenience and ease of administration, and our expectation that dronabinol products that can be stored at room temperature will gain market acceptance over cool or refrigerated storage versions of dronabinol and also expand the overall medical use of dronabinol products;

• the prevalence and severity of any adverse side effects;

• warnings or limitations contained in a product’s FDA-approved labeling;

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• the DEA scheduling classification;

• the availability of alternative treatments, and the perceived advantages of one product over alternative treatments;

• pricing and cost effectiveness;

• the effectiveness of our sales, marketing and distribution strategies, particularly the targeted internal sales force and marketing infrastructure we anticipate forming;

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

• the willingness of patients to pay out of pocket in the absence of third-party coverage.

Dronabinol and fentanyl treatments can be costly to patients. Accordingly, hospitals and physicians may resist prescribing our products and patients may not purchase our products due to cost. If any of our product candidates are approved but do not achieve an adequate level of acceptance by physicians, patients, hospitals, healthcare payors and the medical community, we may not generate sufficient revenue from these products and we may not become or remain profitable.

Even if we obtain regulatory approval for any of our dronabinol product candidates and they are successfully commercialized, an inability to expand the market for the medical use of dronabinol will have a material adverse affect on our business plan and ability to generate revenue.

Solvay Pharmaceuticals, the company that markets Marinol, a drug that was first commercialized in the United States in 1985, reported Marinol sales of approximately $133 million in 2006. There is no guarantee the market for dronabinol products will expand in the future. Moreover, we have initially applied for our Dronabinol HG capsule to be indicated solely for the treatment of nausea and vomiting associated with cancer chemotherapy in patients who have failed to respond adequately to conventional treatments. Marinol sales include sales of dronabinol not only to treat this indication but also to treat appetite loss associated with weight loss in people with acquired immunodeficiency syndrome.

Our business plan is highly dependent upon our ability to expand the market for the medical use of dronabinol through commercial introduction of our various dronabinol candidates and maintain or increase a significant overall share of that market. The potential market for dronabinol products may not expand as anticipated or may even decline based on numerous factors, including the introduction of superior alternative products and regulatory action negatively impacting the dronabinol market. In particular, DEA quotas on dronabinol production may place limits on the potential size of the dronabinol market. Moreover, even if we obtain regulatory approval for our dronabinol product candidates and they are successfully commercialized, there is no guarantee that introduction of improved formulations of dronabinol will result in expansion of the dronabinol market or permit us to gain share in that market or maintain or increase any market share we may have already captured. New dronabinol products that we introduce could potentially replace our then currently marketed dronabinol products, thus not impacting the overall size of the market or increasing our overall share of that market. If we are unable to expand the market for the medical use of dronabinol or gain, maintain or increase market share in that market, this failure would have a material adverse affect on our ability to execute on our business plan and ability to generate revenue.

Even if our product candidates receive regulatory approval in the United States, we may never obtain regulatory approval or successfully commercialize our products outside of the United States.

In order to market any products outside of the United States, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales and distribution of our products. Approval procedures vary among countries and can involve additional product testing and additional

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administrative review periods, and may be otherwise complicated by our product candidates being controlled substances such as synthetic cannabinoids and fentanyl. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA and DEA approval. The regulatory approval process in other countries may include all of the risks described above regarding FDA and DEA approval in the United States, as well as additional risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.

To date, we have not initiated any discussions with the European Medicines Agency, or EMEA, or other foreign regulatory authorities with respect to seeking regulatory approval for any product in Europe or in any other country outside the United States. As in the United States, the regulatory approval process in Europe and in other countries is a lengthy and challenging process. Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed above regarding FDA and DEA approval in the United States. Such effects include the risk that our product candidates may not be approved for all indications requested or may be subject to stringent controls on their prescription and distribution by physicians and pharmacies, and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing studies, all of which could limit the uses of our product candidates and adversely impact potential product sales and/or collaboration opportunities.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

We are subject to uncertainty relating to healthcare reform measures and reimbursement policies which, if not favorable to our product candidates, could hinder or prevent our product candidates’ commercial success.

Our ability to commercialize our product candidates successfully will depend in part on the extent to which governmental authorities, private health insurers and other third-party payors establish appropriate coverage and reimbursement levels for our product candidates and related treatments. As a threshold for coverage and reimbursement, third-party payors generally require that drug products have been approved for marketing by the FDA. Third-party payors are increasingly imposing additional requirements and restrictions on coverage, and limiting reimbursement levels for medical products. These restrictions and limitations influence the purchase of healthcare services and products. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our product candidates or exclusion of our product candidates from coverage and reimbursement programs. The cost containment measures that healthcare payors and providers are instituting and the effect of any healthcare reform could significantly reduce our revenues from the sale of any approved product. We cannot provide any assurances that we will be able to obtain third-party coverage or reimbursement for our product candidates in whole or in part.

In the United States, there have been a number of legislative and regulatory changes to the healthcare system in ways that could affect our future revenues and profitability and the future revenues and profitability of our potential customers. For example, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a new Medicare Part D prescription drug benefit, which became effective January 1, 2006. It remains difficult to predict the impact that the prescription drug program will have on us and our industry. Under the prescription drug benefit, Medicare beneficiaries can obtain prescription drug coverage from private sector plans that are permitted to limit the number of prescription drugs that are covered in each therapeutic category and class on their formularies. If our products are not widely included on the formularies of these plans, our ability to market our products to the Medicare population could be harmed.

There also have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be

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adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare costs to contain or reduce costs of healthcare may adversely affect one or more of the following:

• our ability to set a price that we desire for our products;

• our ability to generate revenues and achieve profitability;

• the future revenues and profitability of our potential customers, suppliers and collaborators; and

• the availability of capital.

In certain foreign markets, the pricing of prescription drugs is subject to government control and reimbursement may, in some cases, be unavailable. In the United States, given recent federal and state government initiatives directed at lowering the total cost of healthcare, Congress and state legislatures will likely continue to focus on healthcare reform, the cost of prescription drugs and the reform of the Medicare and Medicaid programs. While we cannot predict the full outcome of any such legislation, it may result in decreased reimbursement for prescription drugs, which may further exacerbate industry-wide pressure to reduce prescription drug prices. This could harm our ability to market our products and generate revenues. It is also possible that other proposals having a similar effect will be adopted.

Risks Related to Regulatory Approval and Regulation of Our Product Candidates

Although we intend to seek to utilize various regulatory mechanisms which may accelerate drug development and approval for some of our product candidates, there is no guarantee that the FDA will permit us to do so or that these mechanisms would lead to accelerated drug development or approval.

In January 2007, we were advised by the Office of Generic Drugs of the FDA that applications for generic dronabinol capsules are currently being evaluated on an “expedited review” basis, which according to the FDA means that these applications are among the reviewers’ highest priorities in their work queues. However, for generic drugs, there is no official “fast track” or “priority review” designation as there is for non-generic drugs, and our expectation of the FDA’s timeline for reviewing applications for generic versions of Marinol on an “expedited” basis may be different, and possibly materially different, from the FDA’s actual review period. If our ANDA for Dronabinol HG capsule is not reviewed in the time frame we anticipate, or if we are unable to adequately address all the deficiencies in our ANDA which have been identified by the FDA in a manner that is satisfactory to the FDA, our anticipated timeline for FDA approval of and commercial production and marketing of our Dronabinol HG capsule will be delayed, or we may be unable to market the product at all. Any such delays would adversely affect our ability to execute on our business plan.

On April 4, 2007, the FDA issued a “major deficiency” letter in which it cited 38 separate deficiencies in our Dronabinol HG capsule ANDA. In response to this deficiency letter, we submitted to the FDA a “major amendment” to our ANDA on June 26, 2007 but have not yet received any response from the FDA on the adequacy of this response. Under FDA procedures, the agency may take 180 days or longer to review and respond to a major amendment. Among the deficiencies cited in the FDA’s letter were the following:

• The FDA rejected the use of our pivotal product batches based on a number of missing critical controls, stating that the details of Dronabinol HG capsule manufacture must be “unassailable” and that a number of critical controls are missing in the documentation for our exhibit batches. The FDA therefore believes that it is not possible to justify the proposed manufacturing process for commercial production and requested that we manufacture new test batches prior to the evaluation of our manufacturing process controls.

We did not follow the FDA’s request to manufacture new test batches, but rather provided information and arguments for the adequacy of the original exhibit batch controls. We cannot assure you that the FDA will accept our response. If we are required to manufacture and test new exhibit batches, including

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repeating our clinical trials, we estimate that we would not be able to generate and submit the new data for FDA review for approximately four months after hearing back definitively from the FDA on this point, after which time the FDA would resume its review of our ANDA, which further review could take 180 days or longer.

• The FDA also questioned the impurity profile and impurity levels of our Dronabinol HG capsule product, stating that data provided in the ANDA do not justify the very high levels of observed impurities. We responded by noting that our product’s impurity profile is similar to that of Marinol, that the analytical methods used to test impurities in this drug product may cause over-estimation of some impurities, and that our drug substance supplier, Austin Pharma, has been working to improve its manufacturing processes to reduce impurities in the drug substance and the finished drug product.

• The FDA noted that there were deficiencies in the Drug Master File, or DMF, of our supplier, Austin Pharma LLC. While we have not seen the list of deficiencies, we assisted Austin Pharma in developing its response to the FDA’s DMF deficiency observations, which was submitted about June 21, 2007. If the DMF continues to be deemed deficient by the FDA, our ability to obtain FDA approval of our ANDA or other applications will be delayed and our business will suffer.

We cannot assure you that the FDA will consider these or any of our other responses adequate. A refusal by the FDA to accept any one or more of our responses, including those described above, could require us to undertake additional time-consuming and expensive manufacturing and testing activities, including clinical testing, which could cause significant delay in the review and potential approval of our ANDA, or prevent us from receiving approval at all. Moreover, any requirement to produce additional test batches of Dronabinol HG capsule would entail usage of dronabinol we currently anticipate allocating for other uses. Any delay in obtaining regulatory approval for Dronabinol HG capsule will afford our competition additional time to produce and seek regulatory approval for other generic versions of Marinol, which would likely have a material negative impact upon our competitive position and ability to generate revenue from Dronabinol HG capsule product sales. This in turn could have a material adverse affect on our ability to execute on our business plan and develop our other product candidates.

Moreover, we cannot file a supplement to our ANDA for our Dronabinol RT capsule product candidate and labeling providing for storage at room temperature until the Dronabinol HG capsule ANDA is first approved by the FDA. Therefore, any delay in obtaining FDA approval for Dronabinol HG capsule will have a negative impact upon our timing for regulatory review of Dronabinol RT capsule which would harm our competitive position and our ability to generate revenue.

In addition, we intend to seek FDA approval of certain of our product candidates, including Dronabinol RT syrup, Dronabinol RT nebulizer and Fentanyl SL spray, utilizing Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or Section 505(b)(2). Section 505(b)(2), if applicable to any NDA we file, would allow us to file that NDA with the FDA relying in part on data in the public domain or on the FDA’s prior findings regarding the safety and effectiveness of approved drugs, which could expedite the development program for our product candidates by potentially decreasing the overall scope of work we must do ourselves. If we are unable to utilize Section 505(b)(2), the development program for certain of our product candidates, including Dronabinol RT syrup, Dronabinol RT nebulizer and Fentanyl SL spray, would be materially longer than we expect, and we would also have to conduct significantly more costly trials than we anticipate, which would harm our business. In addition, Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our NDAs for up to 30 months or longer depending on the outcome of any litigation. Moreover, even if we are able to utilize Section 505(b)(2), there is no guarantee this would ultimately lead to accelerated drug development or approval.

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We are subject to numerous complex regulatory requirements and failure to comply with these regulations, or the cost of compliance with these regulations, may harm our business.

The research, testing, development, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, marketing, distribution, possession and use of our product candidates, among other things, are subject to regulation by numerous governmental authorities in the United States and elsewhere. The FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, and implementing regulations. Noncompliance with any applicable regulatory requirements can result in refusal of the governmental authority to approve products for marketing, criminal prosecution and fines, warning letters, product recalls or seizure of products, total or partial suspension of production, prohibitions or limitations on the commercial sale of products or refusal to allow the entering into of federal and state supply contracts. FDA and comparable governmental authorities have the authority to withdraw product approvals that have been previously granted. In addition, the regulatory requirements relating to our products may change from time to time and it is impossible to predict what the impact of any such changes may be.

We are developing product candidates that are “controlled substances” as defined in the Controlled Substances Act of 1970, or CSA, which establishes, among other things, certain registration, production quotas, security, record keeping, reporting, import, export and other requirements administered by the DEA. The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use, and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances. Dronabinol in sesame oil and encapsulated in a soft gelatin capsule in the form previously approved by the FDA for the commercial sale of Marinol is currently listed by the DEA as a Schedule III substance under the CSA. Dronabinol in bulk or other product forms is currently classified by the DEA as a Schedule I substance under the CSA. If the FDA approves formulations of dronabinol other than Marinol, the DEA will have to make a scheduling determination and place the products in a schedule other than Schedule I, which does not apply to FDA-approved products. Fentanyl is listed by the DEA as a Schedule II substance under the CSA.

The manufacture, shipment, storage, sale and use, among other things, of controlled substances that are pharmaceutical products are subject to a high degree of regulation. For example, all Schedule II substance prescriptions, such as prescriptions for fentanyl, must be written and signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription.

Moreover, the DEA limits the availability and production of all Schedule I and Schedule II substances through a quota system which includes a national aggregate quota and individual quotas. Our contract manufacturers must annually apply to the DEA for procurement quotas in order to obtain the active ingredients used in our product candidates, because they are currently classified, and in bulk form will remain classified, as Schedule I or Schedule II substances. As a result, the procurement quotas of the active ingredients for our product candidates may not be sufficient to meet our clinical trials needs or if we obtain regulatory approvals for any of these product candidates, our commercial needs. Any delay or refusal by the DEA in establishing the procurement quotas or a reduction in our contract manufacturer’s quota for any controlled substances could delay or stop our pre-clinical studies or clinical trials or if we obtain regulatory approvals for any of these product candidates, the launch or commercial sale of those products. This could have a material adverse effect on our business, our ability to execute on our business plan, our financial position and results of operations and our ability to generate revenue to fund the development of our other product candidates.

The DEA also conducts periodic inspections of registered establishments that handle controlled substances. Facilities that conduct research, manufacture, distribute, import or export controlled substances must be registered to perform these activities and have the security, control and inventory mechanisms required by the DEA to prevent drug loss and diversion. Failure to maintain compliance, particularly non-compliance resulting in loss or diversion, can result in regulatory action that could have a material adverse effect on our business, results

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of operations, financial condition and prospects. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.

Every state also has its own controlled substance laws. Though state controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule our product candidates as well. While some states automatically schedule a drug when the DEA does so, in other states there has to be rulemaking or a legislative action. State scheduling may delay commercial sale of any product for which we obtain federal regulatory approval and adverse scheduling could have a material adverse effect on the commercial attractiveness of such product. We or our partners must also obtain separate state registrations in order to be able to obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions from the states in addition to those from the DEA or otherwise arising under federal law.

Annual DEA quotas on the amount of dronabinol allowed to be produced in the United States and our specific allocation of dronabinol by the DEA could significantly limit the clinical development of our dronabinol product candidates as well as the production or sale of any of dronabinol product candidates for which we obtain regulatory approval.

Because dronabinol is subject to the DEA’s production and procurement quota scheme, the DEA establishes annually an aggregate quota for how much dronabinol may be produced in total in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. This limited aggregate amount of dronabinol that the DEA allows to be produced in the United States each year is allocated among individual companies, who must submit applications annually to the DEA for individual production and procurement quotas. Our dronabinol manufacturer, Austin Pharma, must receive an annual quota from the DEA in order to produce dronabinol for us. The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. The DEA’s aggregate production quota for dronabinol was 312.5 kilograms for each of 2005, 2006 and 2007. In 2007, Austin Pharma was allocated a sufficient quantity of dronabinol to meet our testing needs through 2007. We will need significantly greater amounts of dronabinol in 2008 to implement our business plan. The DEA will allocate dronabinol among requesting parties in November 2007, and is unlikely to allocate a quota to any manufacturer that is greater than the amount that the DEA estimates the manufacturer could produce in any given year. Austin Pharma will wait to apply to the DEA for a 2008 dronabinol procurement quota until December 2007, because it must complete a build out of its current manufacturing capacity to support an increased quota request. If Austin Pharma fails to successfully complete its build out on a timely basis, it will not be able to procure adequate allocation for dronabinol and our business will be adversely affected.

Moreover, when Austin Pharma applies for its quota, it will be necessary that the DEA either have remaining quantity from its aggregate production quota for 2008 to allocate to Austin Pharma, or that the DEA agree to increase the 2008 aggregate production quota for dronabinol in order to provide Austin Pharma its requested allocation. We would first allocate any dronabinol Austin Pharma produces for us to our clinical trials in which human subjects are enrolled. Currently, that means we would give priority allocation of dronabinol to our program studying dronabinol as a potential treatment for multiple sclerosis over our other dronabinol product candidates. We believe we will need approximately four kilograms of dronabinol for these multiple sclerosis studies in 2008. Additionally, if the FDA were to respond to our Dronabinol HG capsule ANDA amendment and require that we produce new test batches, we believe we would need approximately one kilogram of dronabinol to produce those test batches. Finally, we do not know what amounts of dronabinol Solvay will be requesting for 2008 for its Marinol production or for use in other dronabinol development programs such as their program developing a metered dose inhaler version of dronabinol with Nektar which is currently in Phase 2 clinical trials. Nor do we know what amounts of dronabinol other companies developing dronabinol product candidates will request for 2008. The DEA, in assessing factors such as medical need, abuse potential and other policy

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considerations, may choose to set the aggregate dronabinol quota lower than the total amount requested by the companies, and we may in any event not receive our requested allotment of dronabinol under whatever quota the DEA sets. We are permitted to petition the DEA to increase the 2008 aggregate quota after it is initially established, but there is no guarantee the DEA would act upon such a petition. Our procurement quota of dronabinol may not be sufficient to meet our pre-clinical and clinical development needs or commercial demand if we receive regulatory approval for any of our dronabinol product candidates. The success of our business plan will depend in large part on our being able to expand the overall market for the medical use of dronabinol by introducing new dronabinol formulations, and increasing the overall sales of any dronabinol product candidates for which we receive requisite regulatory approvals. In order to be able to increase our overall aggregate sales of our dronabinol product candidates, Austin Pharma will need to receive increasing allotments over time under the quotas set by the DEA. Austin Pharma can request an increase of its procurement quota at any time. However, any delay or refusal by the DEA in establishing the procurement quota or a reduction in our quota for dronabinol or a failure to increase it over time as we anticipate could delay or stop the clinical development of one or more of our dronabinol product candidates or if approved, the product launches or commercial sale of our dronabinol products or cause us to fail to achieve our expected operating results, which could have a material adverse effect on our business, our ability to execute on our business plan, our financial position and results of operations and our ability to generate revenue to fund the development of our other product candidates.

Failure to obtain or maintain Schedule III classification for any of our dronabinol product candidates would substantially limit our ability to produce and commercialize any such product candidates.

The DEA generally regulates dronabinol as a Schedule I controlled substance, except in the FDA-approved Marinol product, which is a Schedule III controlled substance. Schedule I controlled substances are deemed not to have any medically recognized use and may not lawfully be commercially sold or marketed. After the initial FDA approval of Marinol in 1985, the DEA scheduled dronabinol in sesame oil and encapsulated in a soft gelatin capsule in a form approved by the FDA under Schedule II. In 1999, the DEA promulgated a regulation that reclassified this formulation as a Schedule III controlled substance. This regulation directly corresponds to the product characteristics of Marinol, whose sponsor had petitioned the DEA for the scheduling change. Because our dronabinol HG and RT capsule product candidates utilize a hard capsule dosage form, which differs from the “soft capsule” form described in the DEA’s dronabinol Schedule III regulation, we submitted a rescheduling petition in November of 2006 requesting the DEA to amend its regulation in one of several alternative ways so that our dronabinol capsules would also be regulated as Schedule III drugs. The DEA has not yet acted on our petition, but it has informed us that our product will remain in Schedule I and may not be marketed until such time as the DEA amends its dronabinol scheduling regulation. The DEA also informed us that it is unable to predict whether our petition will be granted, or whether any such rescheduling decision will be made prior to any FDA approval of our Dronabinol HG ANDA. Although we believe the DEA will ultimately schedule our Dronabinol capsules under Schedule III, if approved by the FDA, it is possible that the DEA could decide to schedule our capsule product, or all dronabinol capsule products including Marinol and any other generic versions, as Schedule II controlled substances. It is also possible that the DEA will schedule other dosage forms of dronabinol, including our syrup or nebulizer products, in Schedule II.

Failure to obtain Schedule III classification for our dronabinol product candidates would result in significantly greater restrictions on our anticipated ability to produce and commercialize any such dronabinol products and would have a material adverse affect on our business and ability to generate revenue. This is because the restrictions on the manufacture, sale, distribution, prescribing, and dispensing of Schedule III substances are less stringent than for Schedule II substances. For instance, Schedule II drugs or substances may not be dispensed without the written prescription of a practitioner, and prescriptions for these drugs or substances may not be refilled. Although the DEA regulates the frequency of Schedule III prescription refills, physicians are not prohibited from issuing non-written prescriptions and permitting refills of prescriptions for such substances. A failure by the DEA to respond favorably to the petition before, or in a timely manner after, FDA approval of our dronabinol HG ANDA, or a refusal by the DEA to grant our request to schedule our product under Schedule III, would have an adverse impact on our ability to promptly or effectively commercialize our dronabinol HG product.

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Because the DEA currently regulates the scheduling of dronabinol on a product-specific basis, as opposed to regulating all dronabinol-containing products under one schedule as it does with many other controlled substances, such as fentanyl, we believe that the DEA will also need to make individual scheduling decisions with respect to our dronabinol syrup and nebulizer products, based on, among other factors, assessments of the drug abuse potential for each of our formulations. Even if the DEA agrees to classify our dronabinol capsules under Schedule III, because our Dronabinol RT syrup and Dronabinol RT nebulizer will, if approved, represent novel dosage forms, and in the case of the nebulizer a novel route of administration, for dronabinol, the DEA may determine that the stricter controls of Schedule II are appropriate for those products and the agency may not agree to schedule these other dronabinol products under Schedule III. Moreover, the DEA’s scheduling decisions for any or all of our products may be not be issued until significantly after any FDA approval of those products, if any. Even with FDA approval, we will not be able to market any of our controlled substance products until the DEA has issued a scheduling decision with respect to each drug product.

We use hazardous materials, chemicals and controlled substances in our research and development activities and we may incur significant costs complying with the environmental, health and safety laws and regulations that govern such use. In addition, if we fail to comply with the applicable environmental, health and safety regulations, we could be exposed to significant liabilities.

Our research and development activities involve the use of potentially harmful hazardous materials, chemicals and controlled substances that could be hazardous to human health and safety or the environment and which are subject to a variety of federal, state and local laws and regulations governing their use, generation, manufacture, storage, handling and disposal. These materials and various wastes resulting from their use are stored at our facility pending ultimate use and disposal. We cannot completely eliminate the risk of contamination, which could cause:

• an interruption of our research and development efforts;

• injury to our employees and others;

• environmental damage resulting in costly clean up; and

• liabilities under federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products.

In such an event, we may be held liable for any resulting damages, and any such liability could exceed our resources. Although we carry insurance in amounts and type that we consider commercially reasonable, we do not have insurance coverage for losses relating to an interruption of our research and development efforts caused by contamination, and we cannot be certain that the coverage or coverage limits of our insurance policies will be adequate

Even if any of our product candidates receives regulatory approvals, our product candidates will still be subject to extensive ongoing obligations of the FDA and DEA and continued regulatory review, which may result in significant expense and limit our ability to commercialize our product candidates.

If we receive regulatory approval for any of our product candidates, we will also be subject to ongoing FDA obligations and continued regulatory review, such as continued safety testing, surveillance and reporting requirements, and we may also be subject to additional FDA post-marketing obligations, all of which may result in significant expense and limit our ability to commercialize our product candidates. We and our contract manufacturers will also be subject to ongoing DEA regulatory obligations, including annual registration renewal, security, recordkeeping, theft and loss reporting, and periodic inspection, and must receive annual quota allotments for the raw material for commercial production of our products.

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If any of our product candidates receive U.S. regulatory approval, the FDA may impose significant restrictions or limitations on the indicated uses for which such drugs may be marketed or impose ongoing requirements for potentially costly post-marketing testing and surveillance to monitor the safety and efficacy of the products. In addition, regulatory agencies such as the FDA and the DEA, subject a drug, its manufacturer and the manufacturer’s facilities to continual review and inspections. The subsequent discovery of previously unknown problems with a drug, including adverse events of unanticipated severity or frequency, or problems with the facility where the drug is manufactured, may result in restrictions on the marketing of that drug, and could include withdrawal of the drug from the market. Failure to comply with applicable regulatory requirements may result in:

• withdrawal of product approvals by the FDA, or revocation of necessary DEA licenses;

• issuance of warning letters by the FDA or show cause notices by the DEA;

• fines and other civil penalties;

• criminal investigations and prosecutions;

• injunctions, suspensions or revocations of marketing licenses;

• suspension of any ongoing pre-clinical studies and clinical trials;

• denial or reduction of quota;

• suspension of manufacturing;

• delays in commercialization;

• refusal by the FDA to approve pending applications or supplements to approved applications filed by us;

• refusals to permit drugs or precursor chemicals to be imported or exported to or from the United States;

• restrictions on operations, including costly new manufacturing requirements; and

• product recalls or seizures.

In addition, our product labeling, advertising and promotion is subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription drug products. In particular, a drug may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution.

The FDA’s regulations, policies or guidance may change and new or additional statutes or government regulations may be enacted that could prevent or delay regulatory approval of our product candidates or further restrict or regulate post-approval activities. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are not able to achieve and maintain regulatory compliance, we might not be permitted to market our drugs and our business could suffer.

If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

In addition to FDA and DEA restrictions on the marketing of pharmaceutical products and federal and state restrictions on prescribing these products, several other types of state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical and medical device industries in recent years. These laws include anti-kickback statutes and false claims statutes.

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The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or, in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not, in all cases, meet all of the criteria for safe harbor protection from anti-kickback liability.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the company’s marketing of the product for unapproved, and thus non-reimbursable, uses. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines and imprisonment.

Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Such a challenge could have a material adverse effect on our business, financial condition and results of operations.

If we are not able to obtain regulatory approvals or we are unable to successfully sell our generic Dronabinol HG capsules, our future results of operations would be adversely affected.

Our future results of operations depend on our ability to obtain regulatory approval for and commercialize our generic and most advanced product candidate, Dronabinol HG capsule. To obtain regulatory approval for this product candidate, we will be required to demonstrate to the satisfaction of the FDA, among other things, that our generic product contains the same active ingredients, is of the same dosage strength, form and route of administration, and has the same labeling, with certain exceptions. Our generic product must also meet compendial or other applicable standards for strength, quality, purity and identity. Our generic product must also be bioequivalent, meaning generally that there are no significant differences in the rate and extent to which the active ingredients are absorbed and become available at the site of drug action.

We must also demonstrate the adequacy of our methods, controls and facilities used in the manufacture of the product, including that they meet current good manufacturing practices, or cGMP. We cannot predict whether any of our generic product candidates will meet FDA requirements for approval.

The patent covering the Marinol composition, known as U.S. Patent No. 3,668,224, expired in June 1989. Also, U.S. Patent No. 6,703,418 includes claims to the use of Marinol to treat weight loss in patients suffering from symptomatic HIV infection, which is a different indication than that sought in our ANDA. This is the only use patent listed in the FDA’s Orange Book for Marinol. We will not seek approval of that appetite loss use in our ANDA for Dronabinol HG capsule or our ANDA supplement for Dronabinol RT capsule. In the past, other companies have attempted to produce a generic version of Marinol and we believe other companies are currently in the process of attempting to successfully produce or seeking FDA approval for a generic version of Marinol.

Our ability to successfully sell generic products, including Dronabinol HG capsule if approved, depends in large part on the acceptance of those products by third parties such as wholesalers, pharmacies, physicians and

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patients. Although the brand-name products generally have been marketed safely for many years prior to the introduction of a generic alternative, there is a possibility that one of our generic products could produce an unanticipated clinical side effect, or be considered less effective or less convenient, or otherwise inferior, to the branded product, which could result in an adverse effect on our ability to achieve acceptance by third parties. In addition, brand-name manufacturers have taken numerous steps to combat competition from generics, including:

• pursuing new patents for existing products which may be granted just before the expiration of one patent which could extend patent protection for a number of years or otherwise delay the launch of generics;

• submitting Citizen Petitions to request the FDA to take adverse administrative action with respect to an ANDA approval;

• seeking changes to the United States Pharmacopeia, a government and industry recognized compendia of drug standards;

• filing patent infringement lawsuits whether or not meritorious, to trigger up to a 30-month stay in the approval of an ANDA;

• attaching special patent extension amendments via federal legislation;

• limiting DEA quotas, in the case of a controlled substance, in order to limit the ability of generic companies to obtain adequate quantities of the drug; and

• engaging in state-by-state initiatives to enact legislation or regulatory policies that restrict the substitution of some generic drugs for brand-name drugs.

If these or other efforts, including action to oppose rescheduling of dronabinol generics, or to delay or impede generic competition, are successful, we may be delayed or unable to sell our generic products, such as Dronabinol HG capsule if approved, that are subject to these efforts which could have a material adverse effect on our sales and profitability.

Risks Relating to Our Intellectual Property

Our success depends in part upon our ability to protect our intellectual property for our branded products, such as Dronabinol RT capsule, Dronabinol RT syrup, Dronabinol RT nebulizer and Fentanyl SL spray.

Our commercial success with respect to our branded products, including Dronabinol RT capsule, Dronabinol RT syrup, Dronabinol RT nebulizer and Fentanyl SL spray, depends on obtaining and maintaining patent protection in both the United States and in other countries and trade secret protection for our product candidates, proprietary technologies and their uses. Our ability to protect our drug products from unauthorized or infringing use by third parties depends in substantial part on our ability to obtain and maintain valid and enforceable patents.

Due to evolving legal standards relating to patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our ability to maintain, obtain and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights under any issued patents may not provide us with sufficient protection for our product candidates and products or provide sufficient protection to afford a commercial advantage against competitive products or processes, including those from branded and generic pharmaceutical companies. In addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us. Even if patents have issued or will issue, we cannot guarantee that the claims of these patents are or will be valid or enforceable or will provide us with any significant protection against competitive products or otherwise be commercially valuable to us. Patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications remain confidential in the United States Patent and Trademark Office, or USPTO, for the entire time prior to issuance as a U.S. patent. Similarly, publication of discoveries in the scientific or patent literature often lag behind actual discoveries. Consequently, we cannot be certain that we or our licensors were the first to invent, or the first to file patent applications on our product candidates or products.

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In the event that a third party has also filed a U.S. patent application relating to our drug product or a similar invention, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention in the United States. The costs of these proceedings could be substantial and it is possible that our efforts would be unsuccessful, resulting in a loss of our U.S. patent position. Furthermore, we may not have identified all U.S. and foreign patents or published applications that affect our business either by blocking our ability to commercialize our product candidates or by covering similar technologies that affect our target markets.

The laws of some foreign jurisdictions do not have intellectual property rights to the same extent as in the United States and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. If we encounter such difficulties in protecting or are otherwise precluded from effectively protecting our intellectual property in foreign jurisdictions, our business prospects could be substantially harmed.

The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in the interpretations of patent laws in the United States and 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.

The degree of future protection for our proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

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

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

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

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

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

• any patents we obtain or our licensors’ issued patents may not encompass commercially viable products, may not provide us with any competitive advantages, or may be challenged by third parties;

• any patents we obtain or our in-licensed issued patents may not be valid or enforceable; or

• we may not develop additional proprietary technologies that are patentable.

If we or our licensors fail to appropriately prosecute and maintain patent protection for Dronabinol RT capsule, Dronabinol RT syrup, Dronabinol RT nebulizer, Fentanyl SL spray or other product candidates that we may develop, our ability to develop and commercialize these or any other product candidates we develop may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products. This failure to properly protect the intellectual property rights relating to these product candidates could have a material adverse effect on our business, financial condition and results of operation.

Proprietary trade secrets and unpatented know-how are also very important to our business. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with certain of our employees, consultants and advisors, third parties may still obtain this information or we may be unable to protect our rights. Enforcing a claim that a third party illegally obtained and is using our trade secrets or unpatented know-how is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secret information. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how, and we would not be able to prevent their use.

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We license patent rights from third party owners. If such owners do not properly maintain or enforce the patents underlying such licenses, our competitive position and business prospects will be harmed.

We are party to a number of licenses that give us rights to third party intellectual property that is necessary or useful for our business. In particular, we have obtained licenses from the University of Mississippi and University of Kentucky with respect to a suppository formulation of dronabinol hemisuccinate esters and morphine-6-O-sulfate, respectively. We may enter into additional licenses to third-party intellectual property in the future. Our success will depend in part on the ability of our licensors to obtain, maintain and enforce patent protection for their intellectual property, in particular, those patents to which we have secured exclusive rights. Our licensors may not successfully prosecute the patent applications to which we are licensed. Even if patents issue in respect of these patent applications, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue such litigation less aggressively than we would. In addition, our licensors may terminate their agreements with us in the event we breach the applicable license agreement and fail to cure the breach within a specified period of time. Without protection for the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects.

If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.

Our commercial success also depends upon our ability and the ability of our future collaborators to develop, manufacture, market and sell our product candidates and to use our proprietary technologies without infringing the proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing products. Because patent applications can take many years to issue, there may be currently pending applications, which may later result in issued patents that our product candidates or proprietary technologies may infringe. Similarly, there may be issued patents relevant to our product candidates of which we are not aware.

We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our product candidates and/or proprietary technologies infringe their intellectual property rights. If one of these patents was found to cover our product candidates, proprietary technologies or their uses, we or our future collaborators could be required to pay damages and could be unable to commercialize our product candidates or to use our proprietary technologies unless we or they obtained a license to the patent. A license may not be available to us or our future collaborators on acceptable terms, if at all. In addition, during litigation, the patent holder could obtain a preliminary injunction or other equitable right which could prohibit us from making, using or selling our products, technologies or methods.

There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. And in particular, the generic drug industry is characterized by frequent litigation between generic drug companies and branded drug companies. If a third party claims that we infringe its intellectual property rights, we may face a number of issues, including, but not limited to:

• infringement and other intellectual property claims which, with or without merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business;

• substantial damages for infringement, including treble damages and attorneys’ fees, which we may have to pay if a court decides that the product or proprietary technology at issue infringes on or violates the third party’s rights;

• a court prohibiting us from selling or licensing the product or using the proprietary technology unless the third party licenses its technology to us, which it is not required to do;

• if a license is available from the third party, we may have to pay substantial royalties, fees and/or grant cross licenses to our technology; and

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• redesigning our product candidates or processes so they do not infringe, which may not be possible or may require substantial funds and time.

We have not conducted an extensive search of patents issued to third parties, and no assurance can be given that third party patents containing claims covering our product candidates, technology or methods do not exist, have not been filed, or could not be filed or issued. Because of the number of patents issued and patent applications filed in our technical areas or fields, we believe there is a significant risk that third parties may allege they have patent rights encompassing our products, technology or methods. Other product candidates that we may in-license or acquire could be subject to similar risks and uncertainties.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed alleged trade secrets of their other clients or former employers to us.

As is common in the biotechnology and pharmaceutical industry, certain of our employees were formerly employed by other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Moreover, we engage the services of consultants to assist us in the development of our product candidates, many of whom were previously employed at or may have previously been or are currently providing consulting services to, 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 and consultants or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or their former or current customers. Litigation may be necessary to defend against these claims. 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 Our Dependence on Third Parties

Failure to maintain our relationships with our third-party suppliers of fentanyl or the two starting materials for dronabinol, or any failure by either of these suppliers to supply the materials in sufficient quantities or on a timely basis, may delay the clinical development of or regulatory approval for our product candidates, or their ultimate commercial production if approved.

We purchase the fentanyl utilized in connection with our Fentanyl SL spray candidate from Johnson Matthey, Inc. For dronabinol, there are two chemicals that are used as starting materials for its production—olivetol and para-menthadienol, or PMD. Austin Pharma sources olivetol from Avra Laboratories in Hyderabad, India, and sources PMD, a highly unstable and scarce chemical compound, from Kumar Organics Private Ltd. in Bangalore, India, through their U.S.-based intermediary QV Chemicals. Our ability and the ability of Austin Pharma to obtain fentanyl or the starting materials for dronabinol in sufficient quantities and on a timely basis will be critical to the successful completion of our clinical trials for our Fentanyl SL spray and dronabinol product candidates on our anticipated timeline and, if we obtain regulatory approvals for any of these product candidates, their commercial sale. There is no assurance that these suppliers will be able to continue to produce the materials in the quantities and at the time they are needed, if at all, or that Austin Pharma will be able to manufacture dronabinol using those materials in the amounts and at the time needed if at all, especially in light of the fact that we intend to significantly increase our orders for these materials in the years ahead. Moreover, the replacement of any of these suppliers, particularly the suppliers of the dronabinol starting materials or Austin Pharma, could lead to significant delays and increase in our costs.

In addition, the suppliers of the two starting materials we utilize to manufacture dronabinol are located in India. This exposes us to a number of risks and uncertainties outside our control. India has suffered political instability in the past due to various factors including the failure of any party to win an absolute majority in the Indian Parliament for several years. In addition, there have been armed conflicts between India and neighboring Pakistan. Moreover, extremist groups within India and neighboring Pakistan have from time to time targeted Western interests. In addition, India is susceptible to natural disasters such as earthquakes and floods. Political instability, future hostilities with countries such as Pakistan, targeting of our interests by extremist attacks, and

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earthquakes or other natural disasters in India could harm our operations and impede our ability to produce dronabinol and complete our clinical trials on our anticipated timeline, or at all.

We do not have internal manufacturing capabilities, and if we fail to develop and maintain supply relationships with various third-party manufacturers, we may be unable to develop or commercialize our product candidates.

Our ability to develop and commercialize our product candidates depends, in part, on our ability to outsource their manufacturing at a competitive cost, in accordance with regulatory requirements and in sufficient quantities for clinical testing and eventual commercialization. All of our manufacturing is outsourced to third parties and we do not plan to build manufacturing capabilities. In particular, we are highly dependent on our exclusive relationship with Austin Pharma, which is currently in the process of building a second manufacturing facility for the production of our dronabinol supply. Austin Pharma is our sole supply source for dronabinol. We are only aware of one other manufacturer that is able to produce dronabinol in the United States. We are aware of five manufacturers that hold DMFs for the production of dronabinol in the United States. Because dronabinol is a controlled substance, inability to manufacture dronabinol in the United States would have a material adverse affect on our business given the regulatory difficulties associated with obtaining authorization to import and transport controlled substances cross-border. Moreover, we believe dronabinol is very hard to produce. DPT Labs in Lakewood, New Jersey fills the fentanyl liquid vials and assembles the spray technology device for our Fentanyl SL spray product candidate. Our Dronabinol RT nebulizer product candidate requires a nebulizer unit from PARI Pharma and our Fentanyl SL spray product candidate requires a delivery unit from Pfeiffer GmbH. Though we are in discussions with PARI and Pfeiffer to obtain long-term exclusive supply arrangements, there is no assurance we will be able to procure such arrangements on reasonable terms, if at all. If we are unable to obtain exclusive supply rights to the PARI nebulizer unit for our Dronabinol RT nebulizer product candidate or exclusive supply rights to the Pfeiffer delivery unit for our Fentanyl SL spray product candidate, we may not be able to replace these manufacturers or these manufacturers may offer such units through our competitors, which would harm our ability to compete in our core markets. The replacement of any of these manufacturers, in particular Austin Pharma, or any other manufacturer of our products candidates would lead to significant delays due to commercial and regulatory reasons and increase in our costs.

Our contract manufacturers may encounter manufacturing failures that could delay the clinical development or regulatory approval of our product candidates, or their commercial production if approved.

Any performance failure on the part of any of our manufacturers could delay the clinical development or regulatory approval of our product candidates. Our manufacturers may encounter difficulties involving, among other things, obtaining DEA quotas, production yields, regulatory compliance, quality control and quality assurance, as well as shortages of qualified personnel. In connection with our ANDA for Dronabinol HG capsule, the FDA raised questions regarding the quality of the product candidate test batch we sent them. Approval of our product candidates could be delayed, limited or denied if the FDA does not approve and maintain the approval of our contract manufacturer’s processes or facilities. Moreover, our contract manufacturers may encounter difficulties that have a negative impact on our operations and business. In particular, our sole contract manufacturer of dronabinol, Austin Pharma, has not manufactured commercial batches or pivotal clinical supplies of dronabinol. In addition, Austin Pharma is currently in the process of expanding its facilities and manufacturing capacity and must demonstrate it can produce dronabinol satisfying FDA standards in order to do so. Austin Pharma or our other manufacturers may encounter difficulties with the manufacturing processes required to manufacture commercial quantities of our product candidates or the quantities needed for our pre-clinical studies or clinical trials. Such difficulties could result in delays in our pre-clinical studies, clinical trials and regulatory submissions, in the commercialization of our product candidates or, if our dronabinol product candidates, Fentanyl SL spray product candidate or any of our other product candidates are approved, in the recall or withdrawal of such products from the market. Further, development of large-scale manufacturing processes may require additional validation studies, which the FDA must review and approve. If any of our manufacturers, including Austin Pharma, fail to deliver the required commercial

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quantities or quantities needed for our pre-clinical studies and clinical trials on a timely basis and upon terms that we find acceptable, we may be unable to meet demand for any of our product candidates that are approved and could lose potential revenue.

Our contract manufacturers must comply with current good manufacturing practices, or cGMP, enforced by the FDA through its facilities inspection program and review of submitted technical information. In addition, they must obtain and maintain necessary DEA licenses, and must establish and maintain processes to assure compliance with DEA requirements governing among other things, the storage, handling, security, record-keeping and reporting for controlled substances. They must also apply for and receive a quota for these products. We have little control over our contract manufacturers’ compliance with these regulations and standards, and they may not comply. Any failure by our contract manufacturers to comply with these requirements may result in penalties, including fines and civil penalties, suspension of production, suspension or delay in product approvals, product seizure or recall, operating restrictions, criminal prosecutions or withdrawal of product approvals, any of which could significantly and adversely affect our business. If the safety of any drug product or component supplied by third parties is compromised due to their failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize the affected product candidate, and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay or termination of clinical trials, regulatory submissions, approvals or commercialization of our product candidates, entail higher costs or result in our being unable to effectively commercialize our products.

Certain changes in the manufacturing process or procedure, including a change in the location where the product candidate is manufactured or a change of a third-party manufacturer, generally require prior FDA, or foreign regulatory authority, review and/or approval of the manufacturing process and procedures in accordance with cGMP. We may need to conduct additional pre-clinical studies and clinical trials to support approval of such changes. This review may be costly and time-consuming, and could delay or prevent the launch of a product candidate.

We rely on third parties to conduct and oversee our clinical trials. If these third parties do not meet our deadlines or otherwise conduct the trials as required we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.

We rely on third parties to conduct and oversee our clinical trials. For example, we have contracted with Clinimetics, Inc. to serve as our master CRO for our Fentanyl SL spray Phase 3 clinical trials. We also rely upon medical institutions, clinical investigators and contract laboratories to conduct our trials in accordance with our clinical protocols and all applicable regulatory requirements, including the FDA’s good clinical practice regulations and DEA regulations governing the handling, storage, security and record-keeping for controlled substances. These CROs play a significant role in the conduct of these trials and the subsequent collection and analysis of data from the clinical trials.

There is no guarantee that Clinimetics or other CROs, investigators and third parties will devote adequate time and resources to our clinical trials or perform as required by contract and in accordance with regulatory requirements. If Clinimetics or any other third parties upon which we rely for administration and conduct of our clinical trials fail to meet expected deadlines, fail to adhere to our clinical protocols or act in accordance with regulatory requirements, or otherwise perform in a substandard manner, our clinical trials may be extended, delayed or terminated, and we may not be able to commercialize our product candidates.

If any of our clinical trial sites terminate their involvement in one of our clinical trials for any reason, we may experience the loss of follow-up information on patients enrolled in our ongoing clinical trials unless we are able to transfer the care of those patients to another qualified clinical trial site. In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site may be questioned by the FDA.

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Risks Relating to Our Finances

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

Our operations have consumed substantial amounts of cash since inception. To date, our sole funding source has been a trust controlled by our chairman, John N. Kapoor. We expect to continue to spend substantial amounts on development, including significant amounts on conducting clinical trials for our product candidates, manufacturing clinical supplies and expanding our product development programs. Our cash flow used for operating activities in 2006 was an average of approximately $0.6 million per month. We expect that our monthly cash used by operations will increase substantially for the next several years.

We believe that the net proceeds from this offering, together with interest thereon, and our existing cash, cash equivalents and short-term investments, will be sufficient to fund our operations through at least the next 12 months, and to allow us to advance and commercialize current product candidates while developing our product pipeline and identifying in-license prospects. We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect. Further, we may need to raise additional capital following this offering to fund our operations and continue to conduct clinical trials to support potential regulatory approval of marketing applications.

The amount and timing of our future funding requirements will depend on many factors, including, but not limited to the:

• rate of progress and cost of our clinical trials and other product development programs for our dronabinol and Fentanyl product candidates and any other product candidates that we may develop, in-license or acquire;

• costs and timing of completion of outsourced commercial manufacturing supply arrangements for each product candidate;

• timing of FDA approval and DEA classification of our product candidates, if at all;

• costs of establishing or outsourcing sales, marketing and distribution capabilities;

• costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with our product candidates;

• effect of competing technological and market developments; and

• terms and timing of any collaborative, licensing, co-promotion or other arrangements that we may establish.

We will be required to raise additional capital to complete the development and commercialization of our current product candidates. Future capital requirements will also depend on the extent to which we acquire or in-license additional product candidates. We currently have no commitments or agreements relating to any of these types of transactions.

Until we can generate a sufficient amount of product revenue and achieve profitability, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements, as well as through interest income earned on cash balances. We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue one or more of our product development programs. We also may be required to relinquish, license or otherwise dispose of rights to product candidates or products that we would otherwise seek to develop or commercialize ourselves on terms that are less favorable than might otherwise be available.

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

We may raise additional funds through public or private equity offerings, debt financings or licensing arrangements. To the extent that we raise additional capital by issuing equity securities or convertible debt, your ownership will be diluted. Any future debt financing we enter into may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any borrowings under any future debt financing will need to be repaid, which creates additional financial risk for us, particularly if our business or prevailing financial market conditions are not conducive to paying-off or refinancing our outstanding debt obligations.

In addition, if we raise additional funds through licensing arrangements, it may be necessary to relinquish potentially valuable rights to our product candidates, or grant licenses on terms that are not favorable to us. If adequate funds are not available, our ability to achieve profitability or to respond to competitive pressures would be significantly limited and we may be required to delay, significantly curtail or eliminate the development of one or more of our product candidates.

If we are unable to successfully remediate the material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected.

In connection with the audit of our financial statements for the year ended December 31, 2006, our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. A material weakness is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Our management and independent registered public accounting firm did not perform an evaluation of our internal control over financial reporting during such periods in accordance with the provisions of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act. Had we and our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional control deficiencies may have been identified by management or our independent registered public accounting firm, and those control deficiencies could have also represented one or more material weaknesses.

Our independent registered public accounting firm identified material weaknesses related to a lack of sufficient staff with appropriate training in GAAP and SEC rules and regulations with respect to financial reporting. This deficiency resulted in a more than remote likelihood that a material misstatement of our interim financial statements would not be prevented or detected. As a result, audit adjustments to our financial statements were identified during the course of the audit. In an effort to remediate these weaknesses, we hired a new chief financial officer in August 2007. We intend to hire additional finance and accounting personnel, build our financial management and reporting infrastructure, further develop and document our accounting policies and financial reporting procedures. We cannot assure you that these measures will significantly improve or remediate any of the material weaknesses described above. We also cannot assure you that we have identified all or that we will not in the future have additional material weaknesses. Accordingly, material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting for purposes of our attestation required by reporting requirements under the Securities Exchange Act of 1934 or Section 404 of the Sarbanes-Oxley Act after this offering.

The standards required for a Section 404 assessment under the Sarbanes-Oxley Act will require us to implement additional corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules. These stringent standards require that our audit committee be advised and regularly updated on management’s review of internal controls. Our management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to us as a public company. If we fail to staff our accounting and finance

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function adequately or maintain internal controls adequate to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial results accurately or in a timely manner and our business and stock price may suffer.

Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act and the Nasdaq Stock Market Rules, or Nasdaq rules. The requirements of these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our personnel, systems and resources. The Exchange Act will require, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition.

The Sarbanes-Oxley Act will require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Ensuring that we have adequate internal financial and accounting controls and procedures in place is a costly and time-consuming effort that needs to be re-evaluated frequently. We are in the process of documenting, reviewing and, where appropriate, improving our internal controls and procedures in preparation for compliance with the SEC regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent auditors addressing these assessments. Both we and our independent auditors will be testing our internal controls in connection with the Section 404 requirements and could, as part of that documentation and testing, identify material weaknesses, significant deficiencies or other areas for further attention or improvement. Implementing any appropriate changes to our internal controls may require specific compliance training for our directors, officers and employees, entail substantial costs to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could cause the market value of our common stock to decline.

In accordance with Nasdaq rules, we will be required to maintain a majority independent board of directors. We also expect that the various rules and regulations applicable to public companies will make it more difficult and more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. If we are unable to maintain adequate directors’ and officers’ insurance, our ability to recruit and retain qualified directors, especially those directors who may be deemed independent for purposes of Nasdaq rules, and officers will be significantly curtailed.

Compliance with these reporting, Sarbanes-Oxley Act and Nasdaq requirements will require us to build out our accounting and finance staff. We recently hired our Chief Financial Officer, our only dedicated accounting and finance employee. Our failure to adequately build out our accounting and financing staff would harm our ability to comply with the requirements listed above.

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Rules established by the Financial Accounting Standards Board, or FASB, require us to expense equity compensation given to our employees and may impact our ability to effectively utilize equity compensation to attract and retain employees.

The FASB has adopted changes that require companies to record a charge to earnings for employee stock option grants and other equity incentives effective January 1, 2006, which we have adopted. These accounting changes may cause us to reduce the availability and amount of equity incentives provided to employees, which may make it more difficult for us to attract, retain and motivate key personnel. Additionally, it may be difficult for us to estimate the impact of such compensation charges on future operating results because they will be based upon the fair market value of our common stock and other assumptions at future dates.

Future interpretations of existing accounting standards could adversely affect our operating results.

Generally accepted accounting principles in the United States are subject to interpretation by FASB, the American Institute of Certified Public Accountants, or AICPA, the SEC and various other bodies that promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

Risks Related to This Offering and Ownership of Our Common Stock

Our chairman and principal stockholder can individually control our direction and policies, and his interests may be adverse to the interests of our stockholders.

A trust controlled our chairman, by John N. Kapoor, has been our sole source of financing to date. At July 31, 2007, Dr. Kapoor beneficially owned approximately 69.7% of our outstanding shares of capital stock. Upon completion of this offering, assuming no exercise of the underwriters’ option to purchase additional shares and including the shares of common stock beneficially owned by Dr. Kapoor will receive upon conversion of $         million in aggregate principal amount of notes and accrued interest thereon at the completion of this offering, Dr. Kapoor will beneficially own approximately             % of our outstanding shares of common stock. By virtue of his holdings, Dr. Kapoor can and will continue to be able to effectively control the election of the members of our board of directors, our management and our affairs and prevent corporate transactions such as mergers, consolidations or the sale of all or substantially all of our assets that may be favorable from our standpoint or that of our other stockholders or cause a transaction that we or our other stockholders may view as unfavorable. Accordingly, this concentration of ownership may harm the market price of our common stock by:

• delaying, deferring or preventing a change in control;

• impeding a merger, consolidation, takeover or other business combination involving us; or

• discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

In addition, sales of shares beneficially owned by Dr. Kapoor could be viewed negatively by third parties and have a negative impact on our stock price. Moreover, upon his passing, we cannot assure you as to how these shares will be distributed and subsequently voted.

There may not be a viable public market for our common stock.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations between us and the representatives of the underwriters and may not be indicative of the market price of our common stock following this offering. If you purchase shares of our common stock, you may not be able to resell those shares at or above the initial public offering price. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the Nasdaq Global Market or otherwise or how liquid that market

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might become. An active public market for our common stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all.

There has been no prior market for our common stock, our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

Following this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

• the development status of our product candidates, including results of our clinical trials and whether and when any of our product candidates receive regulatory approval or drug scheduling;

• variations in the level of expenses related to our product candidates or clinical development programs, including relating to the timing of invoices, from and other billing practices of, our CROs and clinical trial sites;

• our execution of our manufacturing, sales and marketing, and other aspects of our business plan;

• price and volume fluctuations in the overall stock market;

• changes in operating performance and stock market valuations of other pharmaceutical companies;

• market conditions or trends in our industry or the economy as a whole;

• our execution of collaborative, co-promotion, licensing or other arrangements, and the timing of payments we may make or receive under these arrangements;

• the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC and announcements relating to litigation, intellectual property or cannabinoids, dronabinol or fentanyl impacting us or our business;

• the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

• changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;

• ratings downgrades by any securities analysts who follow our common stock;

• the development and sustainability of an active trading market for our common stock;

• future sales of our common stock by our officers, directors and significant stockholders;

• other events or factors, including those resulting from war, incidents of terrorism, natural disasters or responses to these events; and

• changes in accounting principles.

In addition, the stock markets, and in particular the Nasdaq Global Market, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many pharmaceutical companies. Stock prices of many pharmaceutical companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

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Future sales of our common stock or securities convertible into our common stock may depress our stock price.

Sales of a substantial number of shares of our common stock or securities convertible into our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have              outstanding shares of common stock based on the number of shares outstanding as of July 31, 2007. This includes the shares that we are selling in this offering, which may be resold in the public market immediately unless held by an affiliate of ours. Of the remaining shares,              shares may be sold upon the expiration of lock-up agreements at least 180 days after the date of this offering and the remaining shares may be sold from time to time after the expiration of applicable holding periods specified in Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, or Rule 144, as more fully described in the “Shares Eligible for Future Sale” section of this prospectus.

In July 2007, the SEC announced proposed revisions to Rule 144. If the proposed changes to Rule 144 are approved, the holding period for restricted shares of our common stock after the completion of this offering may be reduced to six months under specified circumstances, the restrictions on the sale of restricted shares of our common stock held by our affiliates may be reduced and certain other restrictions on resale of the shares of our common stock under Rule 144 may be modified to make it easier for our stockholders under specified circumstances to sell their shares upon the expiration of the lock-up agreements, beginning 180 days after the date of this prospectus. We do not know whether these proposed revisions to Rule 144 will be adopted as proposed or in a modified form, or at all.

Moreover, we also intend to register all shares of common stock that we may issue after this offering under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements described above and in the “Underwriting” section of this prospectus.

If a large number of our shares of our common stock or securities convertible into our common stock are sold in the public market after they become eligible for sale, the sales could reduce the trading price of our common stock and impede our ability to raise future capital.

Anti-takeover provisions in our charter documents and Delaware law might deter acquisition bids for us that you might consider favorable.

Our amended and restated certificate of incorporation and bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors. These provisions:

• establish a classified board of directors so that not all members of our board are elected at one time;

• authorize the issuance of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval, and which may include rights superior to the rights of the holders of common stock;

• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

• provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws; and

• establish advance notice requirements for nominations for elections to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us. These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a

41

change in control of our company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire.

If you purchase shares of common stock sold in this offering, you will incur immediate and substantial dilution.

If you purchase shares of common stock in this offering, you will incur immediate and substantial dilution in the amount of $             per share, because the initial public offering price of $             is substantially higher than the pro forma net book value per share of our outstanding common stock. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares. In addition, you may also experience additional dilution upon future equity issuances or the exercise of stock options to purchase common stock granted to our employees, consultants and directors under our stock option and equity incentive plans. See the “Dilution” section of this prospectus.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Because management has broad discretion as to the use of the net proceeds from this offering, you may not agree with how we use them, and such proceeds may not be applied successfully.

Our management will have considerable discretion over the use of proceeds from this offering. We intend to use the net proceeds from this offering to:

• fund the commercial production and sale of Dronabinol HG capsule, if approved;

• fund the clinical and pre-clinical development of our other product candidates; and

• fund our working capital and general corporate purposes.

In addition, a portion may also be used to acquire or license products, technologies or businesses. However, we do not currently have any specific plans for use of the proceeds of this offering, nor have we performed studies or made preliminary decisions with respect to the best use of the capital resources resulting from this offering. As such, our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of our common stock. You will be relying on the judgment of our management concerning these uses and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The failure of our management to apply these funds effectively could result in unfavorable returns and uncertainty about our prospects, each of which could cause the price of our common stock to decline.

We do not expect to pay any cash dividends for the foreseeable future.

The continued operation and expansion of our business will require substantial funding. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future. Any

42

determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

• our ability to achieve or sustain profitability;

• our ability to obtain regulatory approval for and commercialize our Dronabinol HG capsule;

• our ability to successfully complete pre-clinical and clinical development of and commercialize Dronabinol RT capsule, Dronabinol RT syrup, Dronabinol RT nebulizer, Fentanyl SL spray and any other current or future product candidates;

• the content and timing of submissions to and decisions made by the FDA, the DEA and other regulatory agencies;

• our ability to manufacture, or otherwise secure the manufacture of, sufficient amounts of our product candidates for clinical trials and, if approved, products for commercialization activities;

• our ability to develop a sufficient sales and marketing force to sell and market any of our product candidates that may be approved for sale;

• the success of our competitors;

• our ability to obtain, maintain and successfully enforce adequate patent and other intellectual property protection of any of our product candidates that may be approved for sale;

• our ability to avoid infringement of the intellectual property of others;

• our ability to raise additional funds in the capital markets or from other sources;

• our reliance on our key personnel;

• the effects of government regulation;

• our ability to obtain sufficient capital to expand our business;

• our ability to effectively transact business in foreign countries; and

• our ability to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.

In some cases, you can identify these statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or the negative of those terms, and similar expressions. These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties. We discuss many of these risks in greater detail under the heading “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. The forward-looking statements contained in this prospectus are excluded from the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act.

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You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements.

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $             million, based upon 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, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $             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. If the underwriters fully exercise their option to purchase additional shares, we estimate that the net proceeds to us from this offering will be approximately $             million.

We anticipate using the net proceeds of this offering to:

• fund the commercial production and sale of Dronabinol HG capsule, if approved (approximately $         million);

• fund the clinical and pre-clinical development of our other product candidates (approximately $         million); and

• the balance, if any, for general corporate purposes, such as general and administrative expenses, capital expenditures and working capital needs.

In addition, we may use a portion of the net proceeds to us from this offering to acquire or in-license products or product candidates, technologies or businesses, but we currently have no agreements or commitments relating to material acquisitions or licenses.

The expected use of proceeds of this offering represents our intentions based on our current plans and business conditions, and we have not performed studies or made preliminary decisions with respect to the best use of the capital resources resulting from this offering. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the proceeds of this offering, or the amounts we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures will depend on numerous factors, including progress of our research, development and commercialization efforts, the progress and results of our clinical trials, and our operating costs and expenditures. Accordingly, our management will have broad discretion in the application of the net proceeds of this offering to us, and investors will be relying on the judgment of our management regarding the application of these proceeds.

Pending their use, we plan to invest the net proceeds to us from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to dividend policy will be made at the discretion of our board of directors.

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CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2007:

• on an actual basis; and

• on an as adjusted basis to give effect to (1) the filing of an amended and restated certificate of incorporation, (2) the sale of shares of common stock by us in this offering at an assumed initial offering price of $             per share, the mid-point of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses, (3) the conversion of all of our outstanding non-voting common stock into 841,812 shares of common stock immediately prior to the closing of this offering, and (4) the issuance of              shares of our common stock upon the completion of this offering upon the conversion of $         million in aggregate principal amount of notes and accrued interest thereon owed to a trust controlled by our chairman, assuming an initial public offering price of $             per share (the mid-point of the price range set forth on the front cover of this prospectus), immediately prior to the closing of this offering.

You should read the information in this table together with our financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

	As of June 30, 2007
	Actual			As Adjusted(1)
	(In thousands, except per share data)
	(Unaudited)
Cash, cash equivalents and short-term investments	$	95		$
Long-term debt, less current portion		17,535
Stockholders’ equity:
Common stock, $0.001 par value: 28,000,000 shares authorized and 22,318,175 shares issued and outstanding, actual;              shares authorized and              shares issued and outstanding, as adjusted		22
Non-voting common stock, $0.001 par value: 2,000,000 shares authorized and 841,812 shares issued and outstanding, actual; no shares authorized, issued or outstanding		1			—
Additional paid-in capital		393
Notes receivable from stockholders		(42	)
Deficit accumulated during the development stage		(17,618	)
Total stockholders’ deficit		(17,244	)
Total capitalization		291

(1) A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase (decrease) each of the pro forma as adjusted additional paid-in capital and total capitalization by approximately $             million and decrease (increase) as adjusted total stockholder’s deficit by approximately $                 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 number of shares of our common stock that will be outstanding after the closing of this offering is based on 23,159,987 shares outstanding as of June 30, 2007, and excludes the following:

• 1,333,438 shares of common stock subject to outstanding options under our stock option and equity incentive plans, with a weighted average exercise price of $0.08 per share; and

•              shares of common stock reserved for future issuance under our equity incentive plans, each of which will become effective upon the signing of the underwriting agreement for this offering.

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering. The historical net tangible book value of our common stock as of June 30, 2007 was approximately $(17,618,000), or approximately $(0.76) per share of common stock, based on the number of shares of common stock outstanding as of June 30, 2007. Historical net tangible book value per share is determined by dividing the number of shares of our common stock outstanding as of June 30, 2007 into our total tangible assets (total assets less intangible assets) less total liabilities. Pro forma net tangible book value as of June 30, 2007 of approximately $             million, or $             per share of our common stock, represents our historical net tangible book value as of June 30, 2007 after giving effect to the automatic conversion of all shares of our non-voting common stock into common stock and the issuance of              shares of our common stock upon the completion of this offering upon the conversion of $         million in aggregate principal amount of notes and accrued interest thereon owed to a trust controlled by our chairman, assuming an initial public offering price of $             per share (the mid-point of the price range set forth on the front cover of this prospectus), immediately prior to the closing of this offering.

After giving effect to the sale of common stock by us in this offering at an assumed initial public offering price of $             per share, the mid-point range of the price 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, our pro forma as adjusted net tangible book value as of June 30, 2007 would have been approximately $             million, or approximately $             per share of common stock. This represents an immediate increase in pro forma as adjusted net tangible book value of $             per share to existing common stockholders, and an immediate dilution of $             per share to investors participating in this offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share, the mid-point of the price range set forth on the cover page of this prospectus				$
Historical net tangible book value per share as of June 30, 2007	$	(17,618	)
Pro forma increase in net tangible book value per share as of June 30, 2007 attributable to conversion of non-voting common stock and note conversion	$	0.74
Pro forma net tangible book value per share as of June 30, 2007	$
Pro forma increase in net tangible book value per share attributable to investors participating in this offering	$
Pro forma as adjusted net tangible book value per share after this offering				$
Dilution per share to investors participating in this offering					$

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted 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 in full their option to purchase additional shares, the pro forma net tangible book value per share after the offering would be $             per share, the increase in net tangible book value per share to existing stockholders would be $             per share and the dilution to new investors would be $             per share.

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The following table summarizes, on a pro forma basis as of June 30, 2007, the differences between the number of shares of common stock purchased from us, the total consideration, which includes cash received from the exercise of stock options and the value of common stock issued to employees and non-employees, and the average price per share paid by existing stockholders and by investors participating in this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, 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.

	Shares Purchased			Total Consideration			Average Price Per Share
	Number	Percent		Amount	Percent
	(In thousands, except shares)
Existing stockholders before this offering			%	$		%	$
Investors participating in this offering			%			%
Total		100	%	$	100	%	$

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering by $         million, or increase (decrease) the percent of total consideration paid by investors participating in this offering by         %, 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’ option to purchase additional shares is exercised in full, the number of shares of common stock held by existing stockholders will be further reduced to         % of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by investors participating in this offering will be further increased to              shares or         % of the total number of shares of common stock to be outstanding after this offering.

As of June 30, 2007, there were:

• 1,333,438 shares of common stock subject to outstanding options under our stock option and equity incentive plans, with a weighted average exercise price of $0.08 per share; and

•              shares of common stock reserved for future issuance under our equity incentive plans, each of which will become effective upon the signing of the underwriting agreement for this offering.

Effective upon the closing of this offering, an aggregate of             ,              and              shares of our common stock will be reserved for issuance under our 2007 equity incentive plan, our 2007 non-employee directors’ stock option plan and our 2007 employee stock purchase plan, respectively, and these share reserves will also be subject to automatic annual increases in accordance with the terms of the plans. Furthermore, we may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that any of these options or warrants are exercised, new stock awards are issued under our equity incentive plans or we issue additional shares of common stock or other equity securities in the future, there will be further dilution to investors participating in this offering.

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SELECTED FINANCIAL DATA

The following selected financial data should be read together with our 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 statement of operations data for the period from October 2002 (inception) through June 30, 2007 and the years ended December 31, 2002, 2003, 2004, 2005 and 2006 and the selected balance sheet data as of December 31, 2002, 2003, 2004, 2005 and 2006 are derived from our audited financial statements. Our audited statements of operations for the years ended December 31, 2004, 2005 and 2006 and our audited balance sheets as of December 31, 2005 and 2006 are included elsewhere in this prospectus. The selected statement of operations data for the six months ended June 30, 2006 and 2007 and the selected balance sheet data as of June 30, 2007 are derived from our unaudited interim condensed financial statements, which are included elsewhere in this prospectus.

You should read this selected financial data in conjunction with the financial statements and related notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. The historical results set forth below are not necessarily indicative of our future results.

	Years Ended December 31,															Six Months Ended June 30,						Period from October 2002 (inception) through June 30, 2007
	2002			2003			2004			2005			2006			2006			2007
																(Unaudited)						(Unaudited)
	(In thousands, except per share data)
Statement of Operations Data:
Operating expenses:
Research and development	$	111		$	599		$	888		$	2,260		$	5,707		$	3,391		$	4,409		$	13,974
General and administrative		22			144			163			356			571			286			681			1,937
Loss from operations		(133	)		(743	)		(1,051	)		(2,616	)		(6,278	)		(3,677	)		(5,090	)		(15,911	)
Interest expense, net		—			(8	)		(60	)		(210	)		(727	)		(249	)		(702	)		(1,707	)
Net loss	$	(133	)	$	(751	)	$	(1,111	)	$	(2,826	)	$	(7,005	)	$	(3,926	)	$	(5,792	)	$	(17,618	)
Basic and diluted net loss per share(1)	$	(0.01	)	$	(0.04	)	$	(0.06	)	$	(0.15	)	$	(0.36	)	$	(0.20	)	$	(0.28	)
Shares used to compute basic and diluted net loss per share(1)		18,593,750			18,593,750			18,593,750			18,756,498			19,673,174			19,318,175			20,842,154

(1) Please see Note 2 to our audited financial statements and Note 3 to our unaudited financial statements for an explanation of the method used to calculate the net loss per share and the number of shares used in the computation of the per share amounts.

	As of December 31,															As of June 30, 2007
	2002			2003			2004			2005			2006
																(Unaudited)
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	1		$	1		$	4		$	4		$	17		$	95
Total current assets		6			46			8			16			21			151
Total assets		46			171			731			778			1,707			6,427
Total current liabilities		41			72			1,296			3,216			4,631			5,997
Total liabilities		138			1,014			2,685			5,558			13,456			23,671
Total stockholders’ deficit	$	(92	)	$	(843	)	$	(1,954	)	$	(4,781	)	$	(11,749	)	$	(17,244	)

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Selected Financial Data” and our financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Forward-Looking Statements.”

Overview

We are a biopharmaceutical company focused on discovering, developing and commercializing innovative products to address CINV, pain management and other central nervous system disorders. We seek to apply new proprietary formulations and delivery methods to existing pharmaceutical compounds in order to achieve enhanced efficacy, faster onset of action, reduced side effects, convenient delivery and increased patient compliance. We are basing our drug development programs on existing compounds with known safety, efficacy and commercialization histories, which we believe will increase the likelihood of success of our drug development and commercialization efforts. Our goal is to leverage our expertise in the expanding synthetic cannabinoid derivatives and specialized opioid markets to build a portfolio of products that address the limitations of existing therapies.

Our initial product candidate is Dronabinol HG capsule. This product candidate is designed to provide us with near-term revenues to help fund development of our other product candidates, and to help us establish a market presence. We have filed an ANDA for Dronabinol HG capsule and if our ANDA is approved by the FDA, Dronabinol HG capsule could be the first generic version of the branded CINV drug Marinol. The approval of our Dronabinol HG capsule is an important first step in the development of our additional proprietary dronabinol formulations, such as formulations suitable for room temperature storage.

Our other most advanced product candidates focus on new proprietary formulations and delivery methods for dronabinol, the active ingredient in Marinol, and fentanyl, the active ingredient in the pain management drugs Actiq and Fentora. These product candidates include Dronabinol RT capsule, Dronabinol RT syrup, Dronabinol RT nebulizer and Fentanyl SL spray. We believe these markets are underserved due to limitations of existing therapies, and that our product candidates have the potential to provide a number of advantages over currently marketed products. We anticipate filing NDAs using the drug approval process under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, which we expect will reduce the time and cost of development and commercialization.

We are a clinical-stage development company. We were incorporated in Delaware in October 2002. To date we have generated no revenues and have incurred significant losses. We have financed our operations and internal growth through the issuance of promissory notes to our principal stockholder, The John Kapoor Trust. We have devoted substantially all of our efforts to research and development activities, including pre-clinical studies and clinical trials. Our net loss applicable to common stockholders was approximately $5.8 million for the six months ended June 30, 2007 and approximately $7.0 million for the year ended December 31, 2006. As of June 30, 2007, we had a deficit accumulated during the development stage of approximately $17.6 million. The deficit accumulated during the development stage is attributable primarily to our research and development activities.

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Revenues

To date, we have generated no revenues. We do not expect to begin generating any revenues unless any of our product candidates receive marketing approval.

Research and Development Expenses

Research and development expenses consist of costs associated with our pre-clinical studies and clinical trials, and other expenses related to our drug development efforts. Our research and development expenses consist primarily of:

• external research and development expenses incurred under agreements with third-party contract research organizations and investigative sites, third-party manufacturing organizations and consultants;

• employee-related expenses, which include salaries and benefits for the personnel involved in our pre-clinical and clinical drug development activities; and

• facilities, depreciation and other allocated expenses, and equipment and laboratory and other supplies.

To date, our research and development efforts have been focused primarily on product candidates from our dronabinol and fentanyl programs. Historically we have not tracked research and development expenses by product candidate. However, in the future we intend to separately track expenses related to activities such as manufacturing and pre-clinical studies or clinical trials for each of our primary product candidates and products. We expect our research and development expenses to increase as we continue our planned pre-clinical studies and clinical trials for our dronabinol and fentanyl product candidates. Clinical development timelines, likelihood of commercialization and associated costs are uncertain and therefore vary widely. We anticipate determining which research and development projects to pursue as well as the level of funding available for each project based on the scientific and clinical results of each product candidate.

At this time, due to the risks inherent in the pre-clinical study and clinical trial process, the related regulatory process and the costs of preparing, filing and prosecuting patent applications and defending intellectual property-related claims, our development completion dates and costs will vary significantly for each product candidate and are very difficult to estimate. The lengthy process of seeking regulatory approvals and the subsequent compliance with applicable regulations require the expenditure of substantial additional resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals or classifications for our product candidates could cause our research and development expenditures to increase and, in turn, have a material adverse effect on our results of operations.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related expenses for our business development, operational and our administrative support functions. Other general and administrative expenses include facility and maintenance related costs, legal fees, accounting costs of fees, and other professional fees, corporate compliance and preparing to become a public reporting company. Our general and administrative expenses have increased and we expect these expenses to continue to increase as we expand our infrastructure to support increased commercialization efforts relating to any fentanyl or dronabinol product candidates for which we obtain regulatory approval. We also anticipate incurring additional expenses as a public company following the completion of this offering as a result of additional legal, accounting and corporate governance expenses, including costs associated with tax return preparations, accounting support services, Sarbanes-Oxley compliance expenses, filing annual and quarterly reports with the SEC, directors’ fees, directors’ and officers’ insurance, listing and transfer agent fees, and investor relations expenses.

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Interest Expense and Interest Income

Interest expense consists primarily of the interest accrued on our outstanding promissory notes payable to The John N. Kapoor Trust. The interest on these promissory notes payable range from 1.82% to prime + 2.0%. As of June 30, 2007, the prime interest rate was 8.25%. Approximately $3.7 million of the principal amount of these promissory notes are payable on demand and approximately $16.4 million of the principal amount of these promissory notes expire at the earlier of October 11, 2010 or a change in control of Insys. We also incur interest expense as our capital lease obligations are paid. Interest income consists of amounts received from our interest-bearing checking account. Following this offering, we plan to invest the net proceeds to us from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with generally accepted accounting principals in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosed amounts of contingent assets and liabilities and our reported expenses. Significant management judgment is required to make estimates in relation to clinical trial costs and costs related to public reporting company preparation. We evaluate our estimates, and judgments related to these estimates, on an ongoing basis. We base our estimates of the carrying values of assets and liabilities that are not readily apparent from other sources, on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

We believe that the following accounting policies are critical to a full understanding of our reported financial results. Our significant accounting policies are more fully described in Note 1 of our audited and unaudited condensed financial statements.

Federal and State Income Taxes

We operate as an S Corporation for federal and state income tax purposes. Accordingly, no provision has been made for federal or state income taxes, since it is the personal responsibility of our individual stockholders to separately report their proportionate share of our taxable income or loss. In connection with the completion of this offering, we will convert to a C corporation and be taxed as a C corporation for federal and state tax purposes.

Stock-Based Compensation

Effective January 1, 2006 we adopted FASB Statement of Financial Accounting Standards, or SFAS, No. 123(R), Share-Based Payment, or SFAS 123(R), which revises SFAS 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion, or APB, No. 25, Accounting for Stock Issued to Employees. SFAS 123(R) requires that all share-based payments to employees, including grants of employee stock options and restricted stock, be recognized in our financial statements based on their respective grant date fair values. Under this standard, the fair value of each share-based payment award is estimated on the date of grant using an option pricing model that meets certain requirements. We currently use the Black-Scholes option pricing model to estimate the fair value of our share-based payment awards. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including expected volatility, risk-free interest rate, expected term, expected dividend yield and expected forfeiture rate. We do not have a history of market prices of our common stock as we are not a public company, and as such we estimate volatility in accordance with Staff Accounting Bulletin No. 107 using historical volatilities of similar public entities. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards. The expected term of the awards is based on a simplified method which defines the life as the average of the contractual term of the options and the weighted average vesting

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period for all open tranches. The dividend yield assumption is based on our history and expectation of paying no dividends. Forfeiture rates are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense recognized in our financial statements in 2006 and thereafter is based on awards that are ultimately expected to vest. We periodically evaluate the assumptions used to value our awards. If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional equity awards to employees or we assume unvested equity awards in connection with acquisitions. We issued our first stock option grants in June 2006.

We estimate the grant date fair value of stock option awards under the provisions of SFAS 123(R) using the Black-Scholes option pricing model. For the six months ended June 30, 2007 and the year ended December 31, 2006, the fair value of stock options was estimated at the grant date using the following assumptions:

	Six Months Ended June 30, 2007	Year Ended December 31, 2006
Expected volatility	127.1% - 127.4%	131.1% - 132.9%
Risk-free interest rate	4.7% - 5.1%	4.5% - 5.2%
Expected term (in years)	5.1 - 6.0	5.6 - 6.0
Expected dividend yield	0.0%	0.0%

We have granted to our employees options to purchase common stock at exercise prices equal to the fair market value of the underlying stock at the time of each grant, as determined by our board of directors. Given the absence of an active market for our common stock, our board of directors was required to estimate the fair value of our common stock at the time of each grant. Our board of directors considered objective and subjective factors in determining the estimated fair value of our common stock on each option grant date, including:

• the illiquidity of our capital stock as a private company;

• the vesting restrictions imposed upon the equity awards and restrictions on transferability;

• the business risks we faced and continue to face;

• risks and volatility associated with us, our industry and our peers;

• the likelihood of a liquidity event;

• concentration in control of ownership;

• our actual financial condition and results of operations relative to our formal operating plan during the relevant period; and

• the development status of our product candidates and regulatory issues encountered during the relevant period.

In addition to considering such factors in determining the fair value of our common stock, prior to our first grant of options in June 2006, we engaged a third party independent valuation consultant upon whose valuation our board of directors also relied. In April 2007, we once again engaged this third party independent valuation consultant whose new valuation was utilized by our board of directors in determining the fair value of our common stock. Our board of directors believes it properly valued our common stock in all periods, although we also understand that the judgments required in such efforts necessarily involve an element of subjectivity.

The adoption of SFAS 123(R) has resulted in stock-based compensation expense of approximately $52,000 for the six months ended June 30, 2007 and approximately $23,000 for the year ended December 31, 2006. The weighted average estimated fair value of employee stock options outstanding as of December 31, 2006 was approximately $63,000 and outstanding as of June 30, 2007 was approximately $0.1 million.

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Results of Operations

Comparison of Six Months Ended June 30, 2007 to Six Months Ended June 30, 2006

Revenues. We did not recognize any revenues during the six months ended June 30, 2007 or 2006.

Research and Development Expenses. Research and development expenses were approximately $4.4 million for the six months ended June 30, 2007, an increase of $1.0 million, or 29%, from approximately $3.4 million for the six months ended June 30, 2006. This increase was principally a result of increased salaries and contract work performed during clinical trials.

General and Administrative Expenses. General and administrative expenses were approximately $0.7 million for the six months ended June 30, 2007, an increase of $0.4 million, or 133%, from approximately $0.3 million for the six months ended June 30, 2006. This increase was primarily due to increased salaries, costs associated with the opening of our new office in Phoenix, AZ and professional fees.

Interest Expense and Interest Income. Interest expense increased to approximately $0.7 million for the six months ended June 30, 2007, an increase of $0.4 million, or 133%, from approximately $0.3 million for the six months ended June 30, 2006. This increase was primarily a result of additional advances made under promissory notes payable to The John N. Kapoor Trust. As of June 30, 2007 and June 30, 2006, the principal balance of these notes payable was $20.1 million and $8.3 million, respectively. Interest income increased to approximately $5,000 for the six months ended June 30, 2007, from approximately $2,000 for the six months ended June 30, 2006. The increase was due to higher balances of cash.

Comparison of Year Ended December 31, 2006 to Year Ended December 31, 2005

Revenues. We did not recognize any revenues during the years ended December 31, 2006 or 2005.

Research and Development Expenses. Research and development expenses were approximately $5.7 million for the year ended December 31, 2006, an increase of $3.4 million, or 148%, from approximately $2.3 million for the year ended December 31, 2005. This increase was primarily a result of increases in clinical studies and research performed on our product candidates and increased outside contract work performed.

General and Administrative Expenses. General and administrative expenses were approximately $0.6 million for the year ended December 31, 2006, an increase of $0.2 million, or 50%, from approximately $0.4 million for the year ended December 31, 2005. This increase was primarily due to a $0.1 million increase in legal professional and other fees. There were also significant additional temporary services performed in 2006.

Interest Expense and Interest Income. Interest expenses was approximately $0.7 million for the year ended December 31, 2006, from approximately $0.2 million for the year ended December 31, 2005. This increase was primarily a result of additional advances made under promissory notes payable to The John N. Kapoor Trust. As of December 31, 2006 and December 31, 2005, the principal balance of these notes payable was approximately $12.8 million and $4.9 million, respectively. Interest income increased to approximately $5,000 for the year ended December 31, 2006 from approximately $1,000 for the year ended December 31, 2005. The increase was due to higher balances of cash.

Comparison of Year Ended December 31, 2005 to Year Ended December 31, 2004

Revenues. We did not recognize any revenues during the years ended December 31, 2005 or 2004.

Research and Development Expenses. Research and development expenses were approximately $2.3 million for the year ended December 31, 2005, an increase of $1.4 million, or 156%, from approximately $0.9 million for the year ended December 31, 2004. This increase was primarily a result of increases in clinical studies and research performed on our product candidates.

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General and Administrative Expenses. General and administrative expenses were approximately $0.4 million for the year ended December 31, 2005, an increase of $0.2 million, or 100%, from approximately $0.2 million for the year ended December 31, 2004. This increase was primarily a result of increases in rent, insurance, depreciation expenses and professional fees.

Interest Income. Interest income increased to approximately $1,000 for the year ended December 31, 2005 from $0 for the year ended December 31, 2004.

Interest Expense. Interest expense was approximately $0.2 million for the year ended December 31, 2005, from approximately $60,000 for the year ended December 31, 2004. This increase was primarily a result of additional advances made under promissory notes payable to The John N. Kapoor Trust. As of December 31, 2005 and December 31, 2004, the principal balance of these notes payable was approximately $4.9 million and $2.0 million, respectively.

Liquidity and Capital Resources

Sources of Liquidity

We have incurred losses since our inception. As of June 30, 2007, we had an accumulated deficit of approximately $17.6 million. We have financed our operations through the issuance of promissory notes to The John N. Kapoor Trust. During the years ended December 31, 2006, 2005 and 2004, we received net proceeds of approximately $7.2 million, $2.6 million and $1.1 million, respectively, from the issuance of such promissory notes. During the six months ended June 30, 2007, we received net proceeds of approximately $8.3 million from the issuance of additional promissory notes payable to The John N. Kapoor Trust.

As of June 30, 2007, we had approximately $21.5 million in debt, including accrued interest, under the promissory notes payable to The John N. Kapoor Trust and approximately $95,000 in cash and cash equivalents. Immediately prior to the closing of this offering, all of the principal and interest outstanding under the promissory notes that we have issued to The John N. Kapoor Trust will convert into shares of our common stock at the initial public offering price.

Cash Flows

Net Cash Used in Operating Activities. Net cash used in operating activities was approximately $4.3 million and $3.3 million for the six months ended June 30, 2007 and 2006, respectively, and $6.1 million, $2.4 million and $1.0 million for the years ended December 31, 2006, 2005 and 2004, respectively. The net cash used in each of these periods primarily reflects the net loss for those periods, offset in part by depreciation, stock-based compensation and increases in current liabilities.

Net Cash Used in Investing Activities. Net cash used in investing activities was approximately $3.9 million, $0.3 million for the six months ended June 30, 2007 and 2006, respectively, and $1.0 million, $37,000 and $46,000 for the years ended December 31, 2006, 2005 and 2004, respectively. The significant increase in net cash used in investing activities during the six months ended June 30, 2007, primarily reflects advances on notes receivable to Austin Pharma related to the manufacturing facility to be utilized to produce dronabinol for us.

Net Cash Provided by Financing Activities. Net cash provided by financing activities was approximately $8.3 million and $3.7 million for the six months ended June 30, 2007 and 2006, respectively, and $7.0 million, $2.5 million and $1.1 million for the years ended December 31, 2006, 2005 and 2004, respectively. Net cash provided by financing activities was primarily attributable to the promissory notes payable to The John N. Kapoor Trust, slightly offset by principal payments made on capital leases.

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Our cash flows for the remainder of 2007 and beyond will depend on a variety of factors, including anticipated revenue and funding requirements, as well as timing of completion of this offering and our use of offering proceeds as described under “Use of Proceeds.” Until we obtain regulatory approval and commence sales of our products, we expect our net cash outflows to continue increasing as we expand our research and development, manufacturing, regulatory and sales and marketing activities.

Funding Requirements

We believe that our existing cash and cash equivalents, along with the net proceeds of this offering, will be sufficient to fund our anticipated operating expenses and capital expenditures for at least the next 12 months. We have based this estimate upon assumptions that may prove to be wrong and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current anticipated pre-clinical studies, clinical trials and product introduction. Our funding requirements will depend on numerous factors, including:

• the timing, scope and results of our pre-clinical studies and clinical trials;

• the timing of, and the costs involved in, obtaining regulatory approvals;

• the timing and amount of revenue from sales of our product candidates, if approved;

• the timing and amount of revenue from grants and other sources;

• the timing and levels of manufacturing of our product candidates;

• our ability to acquire or in-license products and product candidates, technologies or businesses;

• personnel, facilities and equipment requirements; and

• the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other patent-related costs, including litigation costs, if any, and the result of any such litigation.

Until we can consistently generate significant cash from our sales of our product candidates and other operations, we expect to continue to fund our operations primarily from the proceeds of offerings of our equity securities, including this offering, from revenue or payments received under licenses, grants and possibly from debt financing. However, we may not be successful in obtaining licenses or grants, or in receiving milestone or royalty payments under any such licenses. If we do not generate sufficient revenue from licenses and grants, we may require additional funding sooner than we currently anticipate. We cannot be sure that our existing cash and cash equivalents 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 research or development programs or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. If we raise additional funds by issuing equity securities, substantial dilution to existing stockholders will likely result. If we raise additional funds by incurring debt obligations, the terms of the debt will likely involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict our ability to operate our business.

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Contractual Obligations

The following table summarizes our outstanding contractual obligations as of June 30, 2007:

	Payments Due By Period
			Less Than 1 Year						More Than 5 Years
	Total				1-3 Years		3-5 Years
Operating leases	$	928,000	$	118,000	$	362,000	$	448,000	—
Promissory notes payable, including accrued interest (1)		21,540,000		4,005,000		—		17,535,000	—
Future interest on promissory notes (1)(2)		5,756,000		1,969,000		3,366,000		421,000	—
Capital lease obligations, including interest		284,000		132,000		152,000		—
Total	$	28,508,000	$	6,224,000	$	3,880,000	$	18,404,000	—

(1) Immediately prior to the closing of this offering, all of the principal amount and interest outstanding under all the promissory notes that we have issued to The John N. Kapoor Trust will convert into shares of our common stock at the initial public offering price.

(2) Based on prevailing interest rates as of June 30, 2007.

We enter into agreements with clinical sites and contract research organizations that conduct our clinical trials. Due to the variability associated with these agreements, we are unable to estimate with certainty the future costs we will incur and therefore have excluded these costs from the above table. We do, however, anticipate that these costs will increase significantly in future periods as a result of our initiation of multiple pre-clinical studies and clinical trials.

Quantitative and Qualitative Disclosure About Market Risk

Our exposure to market risk is limited to our cash and cash equivalents and we invest in high-quality financial instruments. Our cash may be subject to interest rate risk and could fall in value if interest rates were to increase. We do not hedge interest rate exposure. Because most of our transactions are denominated in United States dollars, we do not have any material exposure to fluctuations in currency exchange rates.

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SAFS No. 157, “Fair Value Measurements”, or SFAS 157. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements, but may change current practice for some entities. SFAS 157 is effective for fiscal years beginning after December 15, 2006. The adoption of SFAS 157 is not expected to have a material effect on our financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (Statement No. 159), or Statement No. 159. Statement No. 159 permits entities to elect to measure certain assets and liabilities at fair value with changes in the fair values of those items (unrealized gains and losses) recognized in the statement of income for each reporting period. Under this Statement, fair value elections can be made on an instrument by instrument basis, are irrevocable, and can only be made upon specified election date events. In addition, new disclosure requirements apply with respect to instruments for which fair value measurement is elected. We are currently evaluating the impact, if any, of adopting this Statement.

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BUSINESS

Overview

We are a biopharmaceutical company focused on discovering, developing and commercializing innovative products to address chemotherapy-induced nausea and vomiting, or CINV, pain management and other central nervous system disorders. We seek to apply new proprietary formulations and delivery methods to existing pharmaceutical compounds in order to achieve enhanced efficacy, faster onset of action, reduced side effects, convenient delivery and increased patient compliance. We are basing our drug development programs on existing compounds with known safety, efficacy and commercialization histories, which we believe will reduce the risks involved with our drug development and commercialization efforts. Our goal is to leverage our expertise in the expanding synthetic cannabinoid derivatives and specialized opioid markets to build a portfolio of products that address the limitations of existing therapies.

Our initial product candidate is a dronabinol hard gelatin, or Dronabinol HG, capsule. This product candidate is designed to provide us with near-term revenues to help fund the development of our other product candidates, and to help us establish a market presence. We have filed an Abbreviated New Drug Application, or ANDA, for our Dronabinol HG capsule. If approved by the U.S. Food and Drug Administration, or FDA, Dronabinol HG capsules could be the first generic version of the branded CINV drug Marinol^®. The approval of our Dronabinol HG capsule is an important first step in the development of our additional proprietary dronabinol formulations, such as formulations suitable for room temperature storage.

Our other most advanced product candidates focus on new proprietary formulations and delivery methods for dronabinol, the active ingredient in Marinol, and fentanyl, the active ingredient in the pain management drugs Actiq^® and Fentora^®. We intend to build an internal sales force and marketing infrastructure to market our proprietary product candidates, if they receive regulatory approvals. We believe these markets are underserved due to the limitations of existing therapies, and that our product candidates have the potential to provide a number of advantages over currently marketed products. We anticipate filing New Drug Applications, or NDAs, using the drug approval process under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or Section 505(b)(2), which we expect will reduce the time and cost of development and commercialization.

Below is a description of our most advanced product candidates:

• Dronabinol product candidates. We are seeking regulatory approval by the FDA for our Dronabinol HG capsule product candidate. We have filed an ANDA for our Dronabinol HG capsule. If we obtain such approval, Dronabinol HG will be a generic version of Marinol, and will be indicated for the treatment of CINV in patients who have failed to respond adequately to conventional treatments. According to IMS Health, U.S. sales for all types of drugs used in treating CINV totaled approximately $2.7 billion in 2006. Sales of Marinol totaled approximately $133 million in 2006, an increase of 27% over 2005. We anticipate using revenue from this product candidate to help fund development of our other product candidates and to establish a presence in the market.

If we receive FDA approval of our Dronabinol HG capsule, we anticipate submitting a supplement to our ANDA with the FDA for a product formulation change to our proprietary room temperature capsule formulation of dronabinol, or Dronabinol RT capsule. Since Marinol and our Dronabinol HG capsules require cool storage (meaning storage at 8°-15°C) or storage in a refrigerator, we believe a formulation of dronabinol that may be stored at room temperature will make this treatment option more convenient for patients and physicians, and will reduce costs and storage burdens for pharmacies and distributors. We also believe this more convenient formulation will potentially expand the medical use of dronabinol.

Thereafter, we intend to submit an NDA under Section 505(b)(2) with the FDA for Dronabinol RT syrup, our proprietary room temperature syrup formulation, and Dronabinol RT nebulizer, our proprietary nebulizer-delivered formulation. We believe that these proprietary product line extensions for dronabinol have the potential to offer improved performance over capsule versions of dronabinol, including enhanced

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efficacy, faster onset of action, reduced side effects and increased patient compliance. We believe these proprietary dronabinol products will therefore be attractive therapy options for patients and prescribing physicians, potentially allowing us to further penetrate and expand the market for the medical use of dronabinol.

• Fentanyl product candidate. We have completed a Phase 1 clinical trial for fentanyl sublingual spray, or Fentanyl SL spray, our proprietary opioid product candidate for the treatment of breakthrough cancer pain in opioid-tolerant patients. Our Fentanyl SL spray product candidate is administered through sublingual delivery, or delivery under the tongue. We have utilized data from this clinical trial, along with preliminary guidance from the FDA at the pre-IND meeting for our Fentanyl SL spray in August 2005, to design our two pivotal Fentanyl SL spray Phase 3 clinical trials. According to IMS Health, U.S. sales for breakthrough cancer pain management drugs totaled approximately $740 million in 2006. Like our dronabinol line extensions, we believe that our Fentanyl SL spray product candidate has the potential to offer improved performance over currently available pain management alternatives and will therefore be an attractive therapy option for patients and prescribing physicians. Potential advantages of this product candidate over currently marketed products include a potential increase in patient compliance through faster onset of action, improved dosing convenience, and improved level of efficacy.

Our internal development pipeline also includes fentanyl and dronabinol line extensions, and other pain management and central nervous system product candidates. We intend to focus on continuing to develop these early stage product candidates, and any other products and product candidates that we might acquire or in-license, with the goal of building a broad product portfolio, pursuing additional indications and expanding our market opportunities in our core areas of focus.

Our Strategy

Our goal is to become a leading biopharmaceutical company focused on CINV, pain management and other central nervous system disorders, with specific expertise in the expanding synthetic cannabinoid derivatives and specialized opioid markets. Key aspects of our strategy to achieve this goal include:

• Secure regulatory approval for and commercialize Dronabinol HG capsule. We anticipate obtaining FDA approval of our ANDA for Dronabinol HG capsule as a generic version of Marinol. We have petitioned the U.S. Drug Enforcement Administration, or DEA, to classify our Dronabinol HG capsule as a Schedule III drug, the same classification as Marinol. If approved, we currently anticipate beginning commercial sale of Dronabinol HG capsule thereafter, and intend to use revenue from this product candidate to help fund development of our other product candidates, particularly our proprietary room temperature versions of dronabinol and our proprietary Fentanyl SL spray product candidate. Moreover, we believe that this product introduction would allow us to capture market share, help establish us as a competitor in the CINV market, and allow us to form relationships in healthcare and pharmacy distribution channels, which we believe will potentially facilitate the introduction of our planned future products.

• Utilize proprietary formulations and delivery systems to develop additional differentiated dronabinol products, including room temperature storage. The formulations for Marinol and Dronabinol HG capsule require cool storage or storage in a refrigerator. We believe that, if approved, our proprietary room temperature formulations of dronabinol will be more convenient and will potentially expand the medical use of dronabinol. In addition to our Dronabinol RT capsules, we believe that our other proprietary product line extensions for dronabinol, including Dronabinol RT syrup and Dronabinol RT nebulizer, have the potential to offer improved performance over capsule versions of dronabinol and will therefore be attractive therapy options for patients and prescribing physicians. We believe potential advantages of these product candidates over capsule versions of dronabinol may include enhanced efficacy, faster onset of action and reduced side effects, which may result in increased patient compliance.

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• Conduct pivotal Phase 3 clinical trials and seek regulatory approval of our sublingual Fentanyl SL spray. We believe that the breakthrough cancer pain market will continue to grow, and that products that relieve breakthrough cancer pain more quickly or by means of a more efficient delivery system will be attractive therapy options for patients and physicians. Since our Fentanyl SL spray is administered by spraying our proprietary fentanyl formulation under the tongue, we believe that this product candidate could provide a number of potential advantages over currently marketed products, including a faster onset of action, lower dosing requirements and improved dosing convenience, which may result in increased patient compliance. We have utilized the data from our completed Phase 1 clinical trial for Fentanyl SL spray, along with preliminary guidance from the FDA at the pre-IND meeting, to design our two pivotal Fentanyl SL spray Phase 3 clinical trials.

• Implement strategies to mitigate risks and reduce the costs and time associated with the development and commercialization of products. We intend to initially focus our pipeline development on products with established safety and efficacy records, but whose market potential may have been limited by less than optimal storage requirements, method of delivery, onset of action, side effect profile, level of efficacy, or patient compliance. We seek to enhance the therapeutic benefits and commercial appeal of proven drugs while minimizing risk by capitalizing on their known safety, efficacy and commercialization history.

• Advance our early stage pipeline opportunities and acquire or in-license products and product candidates that fall within our core areas of focus. We remain focused on advancing our existing early stage product candidates and developing new product candidates in the synthetic cannabinoid and opioid markets. In addition, we anticipate supplementing our existing product pipeline through strategic acquisitions and by in-licensing products and product candidates, including drug delivery technologies. Our goal is to use these product development, acquisition and in-licensing activities to build a broad product portfolio, pursue additional indications and expand our market opportunities in our core areas of focus.

• Internally develop sales and marketing capabilities. Our management team has successfully built internal sales and marketing capabilities at other pharmaceutical companies. We plan to utilize this experience to build an internal sales force and marketing infrastructure to market our products. If our generic Dronabinol HG capsule is approved, we intend to develop a targeted sales force and marketing infrastructure for this product that will focus primarily on pharmacy distribution channels. We expect to expand our sales force and marketing infrastructure if our other product candidates receive regulatory approvals. We also intend to launch a marketing campaign directed at patient advocacy groups, clinicians, researchers and the academic community. Due to overlap in target prescribers for both our dronabinol and Fentanyl SL spray product candidates, we expect the sales and marketing expertise that we develop with our dronabinol product candidates will facilitate the commercial launch of Fentanyl SL spray, if approved by the FDA.

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Our Product Candidates

The following table summarizes certain information regarding our most advanced product candidates:

Product Candidate	Primary Indication	Delivery Method	FDA Status
Dronabinol Product Candidates:
Dronabinol HG capsule	CINV*	Capsule	ANDA under expedited review
Dronabinol RT capsule	CINV*	Capsule	File supplement to ANDA, once approved, requesting RT label change
Dronabinol RT syrup	CINV*	Syrup	Finalize development plan and conduct pre-NDA meeting with the FDA
Dronabinol RT nebulizer	CINV*	Nebulizer	Conduct pre-clinical studies
Fentanyl SL spray	Breakthrough cancer pain in opioid-tolerant patients	Sublingual spray	Conduct Phase 3 clinical trials

* Indicated for the treatment of CINV in patients who have failed to respond adequately to conventional treatments.

In addition to our product candidates described in the table above, we are developing additional product candidates, which are based on existing FDA approved products, in our core areas of focus. These product candidates include other dronabinol line extensions, fentanyl line extensions, dronabinol combination products, derivatives of morphine-6-O-sulfate and buprenorphine microspheres.

Dronabinol Product Candidates

Dronabinol, the active ingredient in Marinol, is a synthetic compound whose technical name is delta-9-tetrahydrocannabinol, or THC. Approved by the FDA in 1985, Marinol is indicated for the treatment of CINV in patients who have failed to respond adequately to conventional treatments, as well as for the treatment of appetite loss associated with weight loss in people with acquired immunodeficiency syndrome. Marinol is formulated in sesame oil and encapsulated in soft gelatin capsules, and the label for Marinol indicates cool storage conditions or storage in a refrigerator. Marinol is delivered orally and is metabolized in a patient’s liver, where the drug is broken down by enzymes.

We believe that our Dronabinol HG capsule, if approved as a generic version of Marinol, will provide us with near-term revenues to help fund the development of our other product candidates and will help us establish a market presence. Our other proprietary versions of dronabinol are designed to address what we believe are limitations of Marinol. We believe that, if approved, our proprietary RT formulation of dronabinol, which may be stored at room temperature, will make treatment options more convenient for patients and physicians and will reduce costs and storage burdens for pharmacies and distributors. Our proprietary Dronabinol RT syrup and Dronabinol RT nebulizer are designed to provide alternative delivery options that we believe will provide a number of key advantages over existing synthetic cannabinoid products. We believe these product candidates will potentially further expand the medical use of dronabinol.

Market Overview

CINV is a common and often debilitating side effect of cancer chemotherapy. According to the American Cancer Society, it is estimated that in January 2003 there were approximately 10.5 million people living in the

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United States with a history of cancer and over 1.4 million new cases are expected to be diagnosed in 2007. Chemotherapy is one of the most common treatments for cancer, and 70%-80% of all cancer patients who receive chemotherapy experience nausea and vomiting associated with their therapy. According to data published by IMS Health, sales for all marketed products in the United States used in treating CINV were approximately $2.7 billion in 2006. Due to the high prevalence of nausea and vomiting associated with chemotherapy, physicians typically offer a preventive anti-nausea agent prior to initiating chemotherapy. However, many patients fail to respond adequately to these conventional treatments.

There are two synthetic cannabinoid products currently approved by the FDA for treatment of CINV in patients who have failed to respond adequately to conventional treatments, Marinol and Cesamet. Marinol was approved by the FDA in 1985 and Cesamet received marketing approval by the FDA in 2006. The DEA classifies Marinol as a Schedule III drug and Cesamet as a Schedule II drug. As such, both are available by prescription, but Cesamet is subject to a higher degree of regulation. For example, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription. Solvay Pharmaceuticals, the company that markets Marinol, reported Marinol sales of approximately $133 million in the United States for 2006, an increase of 27% over 2005.

Limitations of Existing Therapies

We believe the synthetic cannabinoid market is underserved due to the limitations of existing therapies, and that our room temperature product candidates have the potential to provide a number of advantages over currently marketed products. We believe such advantages will potentially lead to increased patient compliance and expansion of the current market for the medical use of dronabinol. Such limitations include:

• Cool storage. The product label for Marinol indicates cool storage conditions at 8°-15°C or storage in a refrigerator. We believe this cool storage requirement limits the market potential for Marinol by making its treatment of CINV inconvenient for patients and physicians and increasing costs and storage burdens for pharmacies and distributors.

• Onset of action. Marinol is only available in a capsule formulation, which must be orally ingested and metabolized in the patient’s liver where the drug is broken down by enzymes. We believe that this capsule formulation and digestion process delays onset of action and relief of nausea and vomiting. After oral administration, Marinol has an onset of action of approximately 30 minutes to one hour, and peak effect at two to four hours.

• Side effects. Dronabinol side effects include euphoria, dizziness, confusion and drowsiness. Such side effects are greater or more severe in patients taking higher doses. The dosage levels for the capsule formulation of dronabinol vary widely among patients, making it difficult to predict the level or severity of side effects experienced by different patients.

• Level of efficacy. Due to the capsule formulation and digestion process of Marinol, only 10%-20% of an administered dose of Marinol reaches the systemic circulation in the body. This low rate of absorption significantly reduces the bioavailability of dronabinol in patients using its capsule formulation. As a result, patients may take dosages that are too low or too high in an effort to relieve symptoms.

Our Solutions

We believe that, if approved, our proprietary dronabinol room temperature product candidates have the potential to address some of the limitations of existing synthetic cannabinoid products by providing a number of key advantages. Because they may be stored at room temperature, we believe our proprietary Dronabinol RT capsule will make treatment options more convenient for patients and physicians and will reduce costs and storage burdens for pharmacies and distributors.

To build upon our dronabinol room temperature platform, we have designed alternative delivery options that we believe will further address current market limitations. Because it is a syrup formulation instead of an

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oil-based capsule formulation, our proprietary Dronabinol RT syrup product candidate may be absorbed more consistently and provide increased flexibility in dosing. In addition, since our Dronabinol RT nebulizer is inhaled instead of being ingested, we believe that this formulation may alleviate symptoms more quickly than currently available treatments because it is more rapidly absorbed into the bloodstream. We expect these qualities to enhance onset of action, reduce side effects, enhance efficacy and ultimately increase patient compliance relative to other synthetic cannabinoid products. In addition to providing these advantages, we believe these product candidates, if approved, will potentially expand the medical use of dronabinol. Our regulatory strategy is to obtain approval of these product candidates, after which, we may conduct additional clinical trials to seek to establish advantages over Marinol.

Dronabinol HG Capsule

Our most advanced product candidate is Dronabinol HG capsule, which, if approved by the FDA, will be a generic version of Marinol. Dronabinol, the active ingredient in our Dronabinol HG capsules, is a synthetic form of THC formulated in sesame oil. If our generic Dronabinol HG capsule is approved by the FDA, we intend to utilize a targeted sales force and marketing infrastructure for this product that will focus primarily on pharmacy distribution channels. As a generic alternative, we believe our Dronabinol HG capsules will provide a competitively priced alternative to the current branded product.

We believe that Dronabinol HG capsules will provide us with near-term revenues to help fund development of our other proprietary product candidates. Moreover, we believe that this product introduction will allow us to capture market share, help establish us as a competitor in the market for CINV, and allow us to form relationships in healthcare and pharmacy distribution channels, which may facilitate the introduction of our planned future products. We also believe the development or our sales and marketing capabilities for Dronabinol HG capsule will be an important first step in establishing a sales force and marketing infrastructure with which to launch our future products.

Clinical Trials and Regulatory Status. The bioequivalence, or equivalent pharmacological properties, of our Dronabinol HG capsule relative to Marinol was evaluated in a comparative bioavailability study. This trial was completed in June 2006 and compared the rate and extent of absorption of our Dronabinol HG capsules with those of Marinol. In September 2006, we submitted an ANDA for Dronabinol HG capsule requesting approval for the treatment of CINV in patients who have failed to respond adequately to conventional treatments. In January 2007, we were advised by the Office of Generic Drugs of the FDA that applications for generic versions of Marinol are currently being evaluated on an “expedited review” basis, which according to the FDA means that such applications are among the reviewers’ highest priorities in their work queues. In April 2007 we received a deficiency letter from the FDA on our ANDA, and in June 2007 we submitted an amendment to our ANDA in response to the deficiencies identified by the FDA. We have also petitioned the DEA to classify our Dronabinol HG capsule as a Schedule III drug like Marinol. If approved by the FDA, our Dronabinol HG capsule could be the first generic version of Marinol. We currently anticipate beginning commercial sale of our Dronabinol HG capsule thereafter.

Dronabinol RT Capsule

Dronabinol RT capsule is a proprietary line extension of our Dronabinol HG capsule product candidate, and is part of our strategy of developing additional products by applying improved formulations to existing pharmaceutical compounds. Our Dronabinol RT capsule product candidate, for which we have filed a patent application, includes an additive to stabilize the synthetic THC at room temperature. We believe that this formulation will eliminate the need for cool or refrigerated storage, a requirement for Marinol and our Dronabinol HG capsules, and will make treatment of CINV more convenient for patients and physicians, as well as reduce costs and storage burdens for pharmacies. As a result, while some patients may switch from Dronabinol HG capsules to Dronabinol RT capsules, we believe that our Dronabinol RT capsule product candidate, if approved, could help us further penetrate and potentially expand the market for medicinal dronabinol drugs as patients, physicians, pharmacists and payors recognize the convenience of a room temperature treatment option.

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Regulatory Status. If our ANDA for Dronabinol HG capsules is approved by the FDA, we intend to file a supplement to our ANDA for our proprietary Dronabinol RT capsules product candidate requesting approval of the new formulation and a labeled storage condition of room temperature. We currently anticipate obtaining FDA approval of the supplement to our ANDA for Dronabinol RT capsules within six to 12 months after FDA approval of our Dronabinol HG capsule.

Dronabinol RT Syrup

Dronabinol RT syrup is a proprietary synthetic THC oral syrup formulation containing inactive ingredients to enhance and sustain absorption as well as provide flavor and color. Because it is a syrup formulation as opposed to a capsule, we believe that this product candidate may provide increased flexibility in dosing more convenient delivery and improved absorption profile in patients. We believe these attributes will ultimately increase patient compliance because of better efficacy and fewer side effects, which we believe will permit us to further penetrate and expand the market for the medical use of dronabinol.

Clinical Trials and Regulatory Status. We completed a single-site, randomized Phase 1 clinical trial in May 2007 to determine the pharmacokinetics, or bodily absorption, distribution, metabolism, and excretion, as well as the safety and tolerability of Dronabinol RT syrup. This clinical trial evaluated ascending doses of 2.5 mg, 5.0 mg and 10.0 mg in 31 subjects. Based on publicly available information regarding Marinol, preliminary results from this clinical trial suggest potentially faster absorption and longer time of therapeutic benefit relative to Marinol, which has an onset of action of approximately 30 minutes to one hour, and peak effect at two to four hours. We intend to review our preliminary data from this trial with the FDA to determine whether additional clinical trials are necessary, and then file an NDA for FDA approval of Dronabinol RT syrup using the FDA’s Section 505(b)(2) process. We also intend to petition the DEA to classify Dronabinol RT syrup as a Schedule III substance.

Dronabinol RT Nebulizer

We plan to offer a nebulizer device that converts our room temperature proprietary dronabinol solution into a fine mist for inhalation. The formulation, which we believe will be stable at room temperature, is a liquid formulation of synthetic THC. Our objective in developing this product candidate is to provide a unique, rapid-onset delivery system for dronabinol that utilizes a nebulizer device. Since it is inhaled instead of being ingested, we believe that this product candidate may be more readily absorbed into the bloodstream and may alleviate symptoms more quickly than currently available treatments. Further, dronabinol taken through an inhaled delivery system will bypass metabolism in a patient’s liver, which we believe may increase the drug’s availability to the patient and possibly support more consistent dosing, improving efficacy and enhancing patient compliance. If approved, we expect that this Dronabinol RT nebulizer will enable us to continue to further penetrate and potentially expand the market for the medical use of dronabinol by offering patients another choice for taking dronabinol. We also believe these attributes could further enhance patient compliance by reducing side effects, and by improving efficacy through a faster onset of action. We have filed a patent application on our dronabinol nebulizer formulation and are currently discussing terms of an exclusive agreement for the nebulizer device for use with our proprietary dronabinol formulation.

Clinical Trials and Regulatory Status. Our proprietary Dronabinol RT nebulizer is currently in pre-clinical development, and we plan to initiate toxicology studies evaluating the impact of nebulized dronabinol on the lungs. If we establish the pre-clinical safety of the delivery system, we intend to submit an Investigational New Drug, or IND, application with the FDA for our product candidate and perform the required studies with the goal of filing an NDA using the FDA’s Section 505(b)(2) process. We also intend to petition the DEA to classify Dronabinol RT nebulizer as a Schedule III substance.

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Fentanyl Product Candidate

Fentanyl is an opioid analgesic approved in the United States for acute and chronic pain management. Depending upon the type of pain, physicians can prescribe fentanyl in three forms of administration: injectable, transmucosal, or delivery by diffusion through the mucous membranes of the mouth, and transdermal, or delivery through the skin. Fentanyl imitates natural biochemicals found in the body that moderate pain and block the transmission of pain signals that travel along nerves to the brain. These properties make fentanyl a potent and attractive therapy for use in patients with cancer who suffer from acute or breakthrough episodes of moderate-to-severe pain.

We are currently developing our sublingual delivery formulation, Fentanyl SL spray, for the treatment of breakthrough cancer pain. We believe that this delivery method represents an improvement over currently marketed fentanyl formulations by meeting patient needs of rapid onset, convenience, and level of efficacy. Our regulatory strategy is to obtain approval of these product candidates, after which we may conduct additional clinical trials to seek to establish advantages over existing fentanyl products. If we receive FDA approval for our Fentanyl SL spray product candidate, we intend to grow our sales force and marketing infrastructure to attempt to capture a portion of the breakthrough cancer pain market and expand the medical use of fentanyl. Due to overlap in target prescribers for both our dronabinol and Fentanyl SL spray product candidates, we expect the sales and marketing expertise that we develop with our dronabinol product candidates will facilitate the commercial launch of our Fentanyl SL spray.

Market Overview

Pain management is a large and rapidly growing area of pharmaceutical drug development. According to a November 2006 DataMonitor publication, nearly two-thirds of cancer patients in the United States experience pain associated with their disease, and almost two-thirds of those patients experience breakthrough cancer pain. According to IMS Health, U.S. sales for all drugs indicated for breakthrough cancer pain management totaled approximately $740 million in 2006. Medical advances in cancer therapy have led to improved patient survival rates, and we believe this prolonged survival has also resulted in an increase of the prevalence of patients living with cancer pain.

Cancer pain can occur because of tumors pressing on nerves, damage caused by cancer cells in bone, and treatments for cancer such as chemotherapy, radiation therapy or surgery. Many cancer patients experiencing pain will suffer from two types of pain, persistent or continuous pain, which is typically managed by long-acting or sustained-release drugs taken by patients on a regular schedule, and breakthrough pain, which can be severe and sudden, and may require a stronger fast-acting medication. Breakthrough cancer pain is defined as a transient flare of moderate-to-severe pain that essentially “breaks through” the state of relief that is established by long-acting or sustained release drugs that the cancer patient is taking on a regular basis for persistent pain. The incidence of breakthrough cancer pain is relatively common in cancer patients and is particularly difficult to treat due to its severity, rapid onset and the often unpredictable nature of its occurrence. Breakthrough cancer pain is usually characterized by rapid onset with short duration that can last several minutes to an hour, and usually occurs in several episodes per day. Physicians typically treat breakthrough cancer pain with a variety of short-acting opioid medications, including morphine, morphine and codeine derivatives, and fentanyl.

Morphine and such morphine and codeine derivatives are prescribed in immediate release forms of tablets, capsules or liquids that are ingested by the patient. More recently approved by the FDA, Cepahlon’s short-acting opioid-based fentanyl formulations, Actiq and Fentora, utilize transmucosal delivery in an attempt to improve upon existing fentanyl therapies. Actiq, approved by the FDA in 1998 and now available in several generic options, is an oral transmucosal lozenge, and Fentora, approved by the FDA in 2006, is a fentanyl buccal tablet. Despite the improvement over oral opioids that these newer therapies provide, we believe limitations remain with current therapy options and there remains a significant unmet need for faster patient relief, patient convenience, and level of efficacy.

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Limitations of Existing Therapies

We believe that the breakthrough cancer pain market is underserved due to the limitations of existing therapies, and that, if approved by the FDA, our Fentanyl SL spray product candidate has the potential to provide a number of advantages over currently marketed products and may lead to increased patient compliance. Such limitations include:

• Onset of action. Patients suffering from breakthrough cancer pain require rapid pain relief as peak intensity of episodic breakthrough pain can occur within 5 to 15 minutes from the onset of pain symptoms. Oral opioids in tablet or liquid form are metabolized in the liver and consequently may take up to 30 to 45 minutes to become effective. In addition, the peak effect of transmucosal delivery systems may be delayed due to the time required for the lozenge or tablet to fully dissolve, which may take up to 15 to 25 minutes, from the limited mucosal area in the mouth in direct contact with the lozenge or buccal tablet, and from the portion of active drug that is swallowed by the patient and metabolized in the liver.

• Ease of use and patient convenience. We believe current therapies do not effectively address ease of use and patient convenience. Existing cancer breakthrough pain therapies can require an administration period of several minutes, be disruptive to daily activities and cause patient discomfort. For example, patients place lozenge products between their cheek and lower gum and rub the lozenge from side to side over a 15 minute period. In addition, patients with dry mouth may experience difficulty in using current therapies.

• Level of efficacy. Current fentanyl transmucosal delivery therapies achieve average levels of less than 50% of the drug being absorbed transmucosally, with the remainder being ingested into the gut. To the extent that any delivery method can achieve higher rates of transmucosal absorption, we believe such delivery method would be more effective in relieving symptoms of breakthrough cancer pain.

Our Solution

Our proprietary opioid product candidate, Fentanyl SL spray, is being developed for the treatment of breakthrough cancer pain in opioid-tolerant patients and utilizes sublingual, or under the tongue, delivery of fentanyl. We believe this method of delivery offers several advantages over other transmucosal and ingested drug alternatives, and that physicians and patients may be attracted to the ease of use and convenience of the rapid delivery method of our Fentanyl SL spray. We believe our Fentanyl SL spray will potentially lead to improved patient compliance and expanded medical use of fentanyl.

Since the area under the tongue has a high density of blood vessels, sublingual delivery results in fast absorption of the drug. By avoiding ingestion, this method of delivery allows the drug to bypass metabolism in the liver, where the drug would be broken down by enzymes, reducing its overall absorption profile in the patient. As a result, we believe sublingual delivery will result in a faster onset of action and greater bioavailability compared to alternatives in which a portion of, or the entire drug, is ingested. Assuming this product candidate is approved by the FDA, patients using our Fentanyl SL spray may be able to experience rapid onset of action, unlike current therapies which require 15 minutes or more to take effect.

In addition, our Fentanyl SL spray is easy and convenient to use for patients. The Fentanyl SL spray delivery system is a small handheld device that patients use to spray our fentanyl formulation under the tongue. This quick action allows administration in a matter of seconds, rather than the 15 minutes or more required for currently marketed lozenge or buccal tablet formulations to completely dissolve. Patients can self-administer the drug or, if they are in too much pain to do so, caregivers can conveniently administer the drug for them, a practice which would be relatively more difficult if using a lozenge that must be rubbed in the mouth for approximately 15 minutes or inserting of a buccal tablet into the rear of the mouth. In addition, for patients with dry mouth, we believe sublingual spray delivery of fentanyl could be advantageous since it does not require mixing with saliva.

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We filed a patent application claiming the formulation as well as the spray characteristics of the manufacturer’s device for our Fentanyl SL spray in January 2006. We are in discussions for an exclusive arrangement with the device manufacturer and we intend to file a design patent on the physical characteristics of the finished device for our Fentanyl SL spray.

Clinical Trials and Regulatory Status. We have conducted two Phase 1 clinical trials evaluating the absorption rate, availability of the active drug to patients and pharmacokinetics, or PK, of our Fentanyl SL spray product candidate. The results of our 22 subject Phase 1 open-label trial, completed in April 2007, compared the rate of absorption and availability of the active drug to the patients of our Fentanyl SL spray relative to patients receiving Actiq and a fentanyl intravenous injection, or IV. These results are presented below.

In the trial, we observed our proprietary Fentanyl SL spray reaching a higher maximum plasma concentration in the body, or Cmax, than Actiq, as well as a more rapid rate of absorption. Our proprietary Fentanyl SL spray had a mean Cmax of 0.813 nanograms per milliliter (or ng/mL) versus 0.607 ng/mL for Actiq. In addition, Fentanyl SL spray reached maximum concentration in the body in approximately 1.3 hours versus 1.7 hours for Actiq. We also observed that Fentanyl SL spray remained in the body at higher levels when compared to the same dose of Actiq. As expected, we observed that the fentanyl IV had a higher Cmax and more rapid rate of absorption than our proprietary Fentanyl SL spray, but that its plasma concentration in the body declined much more rapidly than Actiq and our Fentanyl SL spray. Cmax for the fentanyl IV was 0.292 ng/mL and time to maximum plasma concentration was 0.16 hours.

Clinical data from our Phase 1 clinical trial relative to pharmacokinetic results supports our belief in the relative rapid absorption of fentanyl using our Fentanyl SL spray product candidate. The data further illustrates a duration of action, comparable to Actiq, providing support for our belief that our Fentanyl SL spray may be a faster and more convenient alternative to existing treatment options. We intend to discuss these results with the FDA to determine whether the increased fentanyl exposure will affect the trial design of our planned safety study. A second Phase 1 single-site trial was recently completed in 64 patients evaluating pharmacokinetic data across five different doses of Fentanyl SL spray and the impact on PK. The preliminary results suggest a linear relationship between dose and PK.

Other Product Candidates

Our other product candidates include other dronabinol line extensions and dronabinol combination products, fentanyl line extensions, analogs of morphine-6-O-sulfate and buprenorphine microspheres.

Other Dronabinol Line Extensions and Dronabinol Combination Products. We plan to develop additional dronabinol delivery systems, including intravenous administration and suppository delivery of dronabinol. We

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are also investigating the use of dronabinol for additional treatment indications, including the treatment of multiple sclerosis. In addition, we are evaluating and developing product candidates that combine dronabinol with other compounds for the treatment of pain disorders and cancer cachexia, a progressive loss of body weight in patients with cancer.

Fentanyl Line Extensions. We plan to investigate using fentanyl as a treatment option in other indications such as the areas of neuropathic and post-operative breakthrough pain relief. We also plan to investigate additional fentanyl delivery methods.

Morphine-6-O-Sulfate. We have licensed a morphine derivative from the University of Kentucky and plan to develop oral and intravenous formulations of the derivative substance. Preliminary studies suggest that this morphine derivative may prolong analgesic response several hours longer than morphine and is reported to be several times more potent. These advantages could offer improved efficacy and a reduced side effect profile.

Buprenorphine Microspheres. We have licensed the method for formulating buprenorphine microspheres from Murty Pharmaceuticals. We intend to use the microsphere technology in the development of a long-term 15 to 30 day deep tissue injection for the treatment of pain and drug addiction.

Sales and Marketing

We currently have no sales, marketing or distribution capabilities. In order to commercialize our dronabinol and fentanyl products or any future product candidates, we must develop sales, marketing and distribution capabilities. Our management team has successfully built internal sales and marketing capabilities at other pharmaceutical companies, and we plan to utilize this experience to build an internal sales and marketing force to market our products.

If our Dronabinol HG capsule is approved for sale, we intend to utilize a targeted internal sales force and marketing infrastructure for this product and focus primarily on pharmacy distribution channels. We expect to expand our sales force and marketing infrastructure if our other product candidates receive regulatory approvals. We also intend to supplement our sales activities with a marketing campaign directed at patient advocacy groups, clinicians, researchers and academic communities. Due to overlap in target prescribers for both our dronabinol and Fentanyl SL spray product candidates, we expect the sales and marketing expertise that we develop with dronabinol will facilitate the commercial launch of Fentanyl SL spray, if approved.

Subject to marketing approval in the relevant countries, we intend to engage sales, marketing and distribution partners in Europe, Asia and Latin America to sell our product candidates outside of the United States.

Governmental Regulation

FDA approval process

In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, or the FDC Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

Pharmaceutical product development in the United States typically involves, among other things, pre-clinical laboratory and animal tests, the submission to the FDA of a notice of claimed investigational exemption

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or an IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease.

Pre-clinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the pre-clinical tests must comply with federal regulations and requirements including good laboratory practices. The results of pre-clinical testing are submitted to the FDA as part of an IND along with other information including information about product chemistry, manufacturing and controls and a proposed clinical trial protocol. Long-term pre-clinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.

A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has not commented on or questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin.

Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted in compliance with federal regulations, good clinical practices, or GCP, as well as under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing in U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

The FDA may order the temporary or permanent discontinuation of a clinical trial at any time or impose other sanctions if it believes that the clinical trial is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board, or IRB, for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.

Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap or be combined. In Phase 1, the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population to evaluate the effectiveness of the drug for a particular indication or indications, dosage tolerance and optimum dosage, and identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to establish the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug.

The current FDA standards of approving new pharmaceutical products are more stringent than those that were applied in the past. These standards were not applied to many established products currently on the market, including certain opioid products. As a result, the FDA does not have as extensive safety databases on these products as on some products developed more recently. Accordingly, we believe the FDA has recently expressed an intention to develop such databases for certain of these products, including many opioids. In particular, the FDA has expressed interest in specific chemical structures that may be present as impurities in a number of opioid narcotic active pharmaceutical ingredients, such as oxycodone, which based on certain structural characteristics, may indicate the potential for having mutagenic effects. If, after testing, such effects are ultimately demonstrated to exist, more stringent controls of the levels of these impurities may be required for FDA approval of products containing these impurities, such as oxymorphone. The FDA’s more stringent

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requirements together with any additional testing or remedial measures that may be necessary could result in increased costs for, or delays in, obtaining approval for certain of our products in development.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the United States. The NDA must include the results of all pre-clinical, clinical and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture and controls. The cost of preparing and submitting an NDA is substantial. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, currently $896,200, and the manufacturer and/or sponsor under an approved new drug application are also subject to annual product and establishment user fees, currently $49,750 per product and $313,100 per establishment. These fees are typically increased annually.

The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of new drug applications. Most such applications for non-priority drug products are reviewed within ten months. The review process may be extended by the FDA for three additional months to consider certain information or clarification regarding information already provided in the submission. The FDA may also refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unless compliance with current good manufacturing practices, or cGMP, is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.

After the FDA evaluates the NDA and the manufacturing facilities, it issues an approval letter, an approvable letter or a not-approvable letter. Both approvable and not-approvable letters generally outline the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included.

An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy and may impose other conditions, including labeling or distribution restrictions or other risk-management mechanisms which can materially affect the potential market and profitability of the drug. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.

The Hatch-Waxman Act

Abbreviated New Drug Applications

In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant’s product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown

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through bioequivalence testing to be therapeutically equivalent to the listed drug. ANDA applicants are not required to conduct or submit results of pre-clinical or clinical tests to prove the safety or effectiveness of their drug product, other than the requirement for bioequivalence testing. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug, and can often be substituted by pharmacists under prescriptions written for the original listed drug.

The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid is called a Paragraph IV certification. If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph 4 certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.

The ANDA application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired. Federal law provides a period of five years following approval of a drug containing no previously approved active ingredients, during which ANDAs for generic versions of those drugs cannot be submitted unless the submission contains a Paragraph IV challenge to a listed patent, in which case the submission may be made four years following the original product approval. Federal law provides for a period of three years of exclusivity following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage form, route of administration or combination, or for a new use, the approval of which was required to be supported by new clinical trials conducted by or for the sponsor, during which FDA cannot grant effective approval of an ANDA based on that listed drug.

Section 505(b)(2) New Drug Applications

Most drug products obtain FDA marketing approval pursuant to an NDA or an ANDA. A third alternative is a special type of NDA, commonly referred to as a Section 505(b)(2) NDA, which enables the applicant to rely, in part, on the FDA’s findings of safety and efficacy of an existing product, or published literature, in support of its application.

505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The applicant may rely upon the FDA’s findings with respect to certain pre-clinical or clinical studies conducted for an approved product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is subject to existing exclusivity for the reference product and is required to certify to the

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FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. Thus approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.

Other Regulatory Requirements

Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.

Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing NDAs.

Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as Phase 4 testing, risk minimization action plans and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control as well as drug manufacture, packaging, and labeling procedures must continue to conform to cGMP after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA during which the agency inspects manufacturing facilities to access compliance with cGMP. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMP. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

The distribution of prescription pharmaceutical products is also subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.

Controlled Substances; Drug Enforcement Administration

We intend to sell products that are “controlled substances” as defined in the Controlled Substances Act of 1970, or CSA, which establishes registration, security, record keeping, reporting and other requirements administered by the DEA. The DEA is concerned with the control of handlers of controlled substances, and with the equipment and raw materials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce.

The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use, and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to

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present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances. Fentanyl, the active ingredient in one of our products, is listed by the DEA as a Schedule II substance under the CSA. Consequently, its manufacture, shipment, storage, sale and use are subject to a high degree of regulation. For example, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription.

Dronabinol is listed by the DEA as a Schedule I substance, but when formulated in sesame oil and encapsulated in a soft gelatin capsule in Marinol, it is a Schedule III substance. Because our dronabinol formations will not meet this Schedule III definition, we have petitioned the DEA to classify these products into Schedule III.

Registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized.

The DEA typically inspects a facility to review its security measures prior to issuing a registration. Security requirements vary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule II substances. Required security measures include background checks on employees and physical control of inventory through measures such as cages, surveillance cameras and inventory reconciliations. Records must be maintained for the handling of all controlled substances, and periodic reports made to the DEA, for example distribution reports for Schedule I and II controlled substances, Schedule III substances that are narcotics, and other designated substances. Reports must also be made for thefts or losses of any controlled substance, and to obtain authorization to destroy any controlled substance. In addition, special authorization and notification requirements apply to imports and exports.

A DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II. Distributions of any Schedule I or II controlled substance must also be accompanied by special order forms, with copies provided to the DEA. Because dronabinol is a Schedule I controlled substance, it is subject to the DEA’s production and procurement quota scheme. The DEA establishes annually an aggregate quota for how much dronabinol may be produced in total in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. This limited aggregate amount of dronabinol that the DEA allows to be produced in the United States each year is allocated among individual companies, who must submit applications annually to the DEA for individual production and procurement quotas. We or our partners, including our contract manufacturers, must receive an annual quota from the DEA in order to produce or procure any Schedule I or Schedule II substance, including dronabinol and fentanyl. The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Our, or our contract manufacturers’, quota of the active ingredient may not be sufficient to meet commercial demand or complete clinical trials. Any delay or refusal by the DEA in establishing our, or our contract manufacturers’, quota for controlled substances could delay or stop our clinical trials or product launches which could have a material adverse effect on our business, financial position and results of operations.

To meet its responsibilities, the DEA conducts periodic inspections of registered establishments that handle controlled substances. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or diversion, can result in enforcement action that could have a material adverse effect on our business, results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain circumstances, violations could eventuate in criminal proceedings.

Individual states also regulate controlled substances, and we and our contract manufacturers will be subject to state regulation on distribution of these products.

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Anti-Kickback, False Claims Laws & The Prescription Drug Marketing Act

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Violations of the anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

Pending Legislation

Legislative or regulatory proposals are currently being considered that could alter the review and approval process relating to our pharmaceutical products. It is likely that Congress, the FDA, or other governmental authorities will issue additional legislation or regulations further regulating the development, manufacture or sale of our present or future pharmaceutical products. Any change in legislation or regulations that govern the review and approval process relating to our current and future pharmaceutical products could make it more difficult and costly to obtain approval for new pharmaceutical products, or to produce, market, and distribute existing pharmaceutical products.

Approval Outside the United States

In order to market any product outside of the United States, we must comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales and distribution of our products. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods, and may be otherwise complicated by our product candidates being controlled substances such as synthetic cannabinoids and fentanyl. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval and DEA classification. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.

To date, we have not initiated any discussions with the European Medicines Agency, or EMEA, or any other foreign regulatory authorities with respect to seeking regulatory approval for any indication in Europe or in any other country outside the United States. As in the United States, the regulatory approval process in Europe and in other countries is a lengthy and challenging process.

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If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face competition from many different sources, including pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions, many of which have significantly greater financial and other resources than us. While we believe that our dronabinol and fentanyl product candidates, as well as our proprietary formulations and delivery systems, will be an improvement over existing products, our product candidates will compete against established and yet to be approved products.

Compared to us, many of our potential competitors have substantially greater research and development resources, including personnel and technology; regulatory experience; drug development, clinical trial and drug marketing and commercialization experience; experience and expertise in intellectual property rights; name recognition; and capital resources. As a result, our competitors may obtain regulatory approval of their products more rapidly than us or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates. Our competitors may also develop products for the treatment of pain management, nausea and vomiting or other indications we pursue that are more effective, better tolerated, more useful and less costly than ours and may also be more successful in manufacturing and marketing their products. Our competitors may succeed in obtaining approvals from the FDA, the DEA and foreign regulatory authorities for their product candidates sooner than we do for ours. In addition, if we receive regulatory approvals for our products, manufacturing and sales and marketing efficiency are likely to be significant competitive factors. We will also face competition from these third parties in recruiting and retaining qualified personnel, establishing clinical trial sites and patient registration for clinical trials and in identifying and in-licensing new product candidates.

The indications for which we are developing products have a number of established therapies and products under development with which our product candidates will compete. In the treatment of CINV, physicians typically offer a conventional antinausea agent prior to initiating chemotherapy, such as substance P antagonists, seratonin receptor antagonists, corticosteroids and phenothiazines. If we receive regulatory approvals for our dronabinol product candidates, they will likely compete against these agents, as well as Solvay Pharmaceutical, Inc.’s Marinol and Valeant Pharmaceutical Inc.’s Cesamet. In addition, although there are no generic versions of Marinol that have been approved by the FDA to date, we believe that other companies are pursuing regulatory approval for generic dronabinol products, and we cannot give any assurance that other companies will not obtain regulatory approval or commercialize their generic dronabinol products on a more rapid timeline or more effectively than us. Moreover, we will compete with non-synthetic cannabinoid drugs and therapies such as GW Pharmaceuticals’ Sativex^®, especially in the many countries outside of the United States where natural-based cannabinoids are legal. We also cannot assess the extent to which patients utilize natural cannabis (marijuana) to alleviate CINV, instead of using prescribed therapies such as our dronabinol products.

In the breakthrough cancer pain market, physicians typically treat breakthrough cancer pain with a variety of short-acting opioid medications, including morphine, morphine and codeine derivatives, and fentanyl. If we receive regulatory approvals for our Fentanyl SL spray product candidate, it will likely compete against numerous products, already in the market and in development. Products already in the market include Cephalon Inc.’s Fentora, Actiq and its generic alternatives from Barr Pharmaceuticals, Inc. and Watson Pharmaceuticals, Inc. We are aware of numerous companies developing other treatments and technologies for rapid delivery of opioids to treat breakthrough pain, including transmucosal, transdermal, nasal spray, inhaled delivery systems and sublingual delivery systems, among others. If these technologies are successfully developed and approved over the next few years, they could represent significant competition for our Fentanyl SL spray product

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candidate, if approved. By the time we are able to commercialize a product candidate, the competition and potential competition may be greater and more direct.

We expect to compete on, among other things, the improved convenience 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. We currently have no sales, marketing or distribution capabilities. In order to commercialize our dronabinol and fentanyl product candidates or any future product candidates, we must develop sales, marketing and distribution capabilities. 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 instead of building our own international sales force. In addition, our ability to compete may be affected because insurers and other third-party payors in some cases may seek to encourage the use of generic products making branded products like our Dronabinol RT capsule and Fentanyl SL spray product candidates less attractive, from a cost perspective, to buyers.

Intellectual Property

The success of most of our product candidates will depend in large part on our ability to:

• obtain and maintain patent and other legal protections for the proprietary technology, inventions and improvements we consider important to our business,

• prosecute and defend our patents,

• preserve the confidentiality of our trade secrets, and

• operate without infringing the patents and proprietary rights of third parties.

We intend to continue to seek appropriate patent protection for our lead compounds and product candidates, drug delivery systems, molecular modifications, as well as other proprietary technologies and their uses by filing patent applications in the United States and selected other countries. We intend for these patent applications to cover, where possible, claims for composition of matter, medical uses, processes for preparation, processes for delivery and formulations.

As of August 15, 2007, we own or have licensed from third parties a total of four issued U.S. patents, four pending U.S. utility patent applications, and three pending U.S. provisional applications. The U.S. patents licensed to us will expire in 2013 through 2018, although they may also be eligible for patent term adjustment and patent term restoration. The U.S. patents, if they issue from the applications we own, will expire in 2023 through 2027.

Our dronabinol patent portfolio currently consists of six U.S. pending patent applications (including provisionals) and foreign counterparts. The claims of these applications currently cover at least formulations and methods of use relating to the Dronabinol RT capsules, Dronabinol RT syrup and Dronabinol RT nebulizer. In addition, the patent applications include claims that would also cover other Dronabinol RT extension products, such as a sublingual spray, a transdermal gel, an intravenous liquid, and an ophthalmic drop or ointment. Any patents that issue from our pending patent applications will expire between 2025 and 2027.

The fentanyl patent portfolio currently consists of one U.S. pending patent application, one pending patent application under the Patent Cooperation Treaty, and two pending U.S. provisional patent applications. The claims of these applications currently cover at least formulations and methods of use relating to the Fentanyl SL spray. Any patents that issue from our pending patent applications will expire in 2027 and 2028.

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Although we believe our rights under these patents and patent applications provide a competitive advantage, the patent positions of pharmaceutical and biotechnology companies are highly uncertain and involve complex legal and factual questions. We may not be able to develop patentable products or processes, and may not be able to obtain patents from pending applications. Even if patent claims are allowed, the claims may not issue, or in the event of issuance, may not be sufficient to protect the technology owned by or licensed to us. Any patents or patent rights that we obtain may be circumvented, challenged or invalidated by our competitors.

We also rely on trade secrets, proprietary know-how and continuing innovation to develop and maintain our competitive position, especially when we do not believe that patent protection is appropriate or can be obtained. We intend to require each of our employees, consultants and advisors to execute proprietary information and inventions assignment agreement before they begin providing services to us. Among other things, this agreement will obligate our employee, consultant or advisor to refrain from disclosing any of our confidential information received during the course of providing services and, with some exceptions, to assign to us any inventions conceived or developed during the course of these services. We also require confidentiality agreements from third parties that receive our confidential information.

The biotechnology and biopharmaceutical industries are characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement. As our current and potential product candidates and others based upon our proprietary technologies progress toward commercialization, the possibility of an infringement claim against us increases. While we attempt to be certain that our products and proprietary technologies do not infringe other parties’ patents and other proprietary rights, competitors or other parties may assert that we infringe on their proprietary rights.

We have conducted clearance searches of issued U.S. patents, but cannot guarantee that the searches were comprehensive and therefore whether any of our product candidates or the methods of using, making or identifying our product candidates infringe the patents searched, or that other patents do not exist that cover our product candidates or these methods. We are aware of two patents owned by two different companies that relate to fentanyl, and we are currently evaluating these patents for scope of coverage and for any invalidity positions. There may also be pending patent applications related to these patents that are unknown to us and may prevent us from marketing our product candidates. Other product candidates that we may develop, either internally or in collaboration with others, could be subject to similar delays and uncertainties.

We have a number of manufacturing and supply partners which we plan to rely upon in producing our products. In order to execute our dronabinol strategy, we have established a joint venture with Cerilliant Corporation, an analytical reference-standards company, to form a Texas-based subsidiary, Austin Pharma, LLC. Under this arrangement, we have provided a loan to Austin Pharma in order to fund construction of manufacturing facilities for our dronabinol drug substance. Austin Pharma is our exclusive manufacturer for dronabinol under a contract that expires 180 months from commercialization and automatically renews in increments of 36 months. We believe that securing an exclusive manufacturing relationship with a dedicated U.S.-based manufacturer that has demonstrated an ability to manufacture dronabinol gives us a competitive advantage and is strategically important because cannabinoid-based products are inherently unstable and require significant expertise to produce. We have contracted with Austin Pharma to produce enough dronabinol drug substance for our dronabinol product candidates to satisfy our current growth strategy.

There are two chemicals that are used as starting materials for producing dronabinol, olivetol and para-menthadienol, or PMD. Austin Pharma sources olivetol from Avra Laboratories in Hyderabad, India, and sources PMD, a highly unstable and scarce chemical compound, from Kumar Organics Private Ltd. in Bangalore, India, through their United States-based intermediary, QV Chemicals. Both chemical materials are manufactured utilizing well-established chemical techniques and we believe that Avra Laboratories and Kumar Organics are equipped to meet our current and future chemical material needs for the development and commercialization of our dronabinol-based product candidates.

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Our Dronabinol RT nebulizer utilizes a device from PARI Pharma, a company based in Germany. PARI has successfully nebulized our proprietary dronabinol drug substance by creating a vibrating mesh screen that converts our proprietary, liquid dronabinol formulation into a fine mist which can be inhaled into the lung. We are in discussions with PARI for a long-term agreement for PARI to be a dedicated supplier for our nebulized Dronabinol RT.

Our Fentanyl SL spray device was developed using a sublingual spray device developed by Pfeiffer GmbH, a medical device company based in Germany. We have an agreement in place for the spray devices to be used in our Phase 3 clinical trial for Fentanyl SL spray, and we are in discussions with Pfeiffer for a master agreement under which Pfeiffer would supply us the spray devices necessary for the development and commercialization of our Fentanyl SL spray, if Fentanyl SL spray receives regulatory approval.

DPT Labs in Lakewood, New Jersey, fills the fentanyl liquid vials and assembles the spray technology device for our Fentanyl SL spray. We believe that our agreement with DPT Labs will provide us with adequate fill and assembly capacity to meet our commercialization plans for our Fentanyl SL spray product candidate, if Fentanyl SL spray receives regulatory approval.

Research and Development

We have a research and development organization that includes expertise in pharmaceutical development, product formulation and clinical development. Our research and development efforts are focused on making proprietary improvements to marketed or development-stage products by utilizing our drug formulation and delivery technologies. Improvements to existing products or compounds generally involve less development and regulatory risk, while shortening the time from concept to market compared to traditional new drug development programs.

Our internal product pipeline team, consisting of our research and development group, oversees new product development activities. This team meets regularly to discuss product concepts and conduct product portfolio management assessments. Input from this team and external resources is gathered to identify product concepts that meet an existing therapeutic need or improve current methods of delivery for a therapeutic need. We then examine the commercial potential of the product while reviewing our concepts with our scientific advisory board, board of directors and other key opinion leaders.

Environmental and Safety Matters

We use hazardous materials, including chemicals, biological agents and compounds, that could be dangerous to human health and safety or the environment. Our operations also produce hazardous waste products. Federal, state and local laws and regulations govern, among other things, the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our drug development efforts.

In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. If one of our employees was accidentally injured as a result of the use, storage, handling or disposal of these materials or wastes, the medical costs related to his or her treatment is within the coverage terms of our workers’ compensation insurance policy. However, we do not carry specific biological or hazardous waste insurance coverage and our property and casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.

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Employees

As of August 2007, we employed 17 full-time employees, consisting of 11 employees in research, development and regulatory affairs, and six in management, administration, finance and facilities. As of the same date, seven of our employees had a Ph.D. or M.D. degree. None of our employees is subject to a collective bargaining agreement and we consider our relationship with our employees to be good.

Scientific Advisory Board

We have established a scientific advisory board consisting of industry experts with knowledge of our target markets. Our scientific advisors generally meet twice a year as a group to assist us in formulating our research, development, clinical and sales and marketing strategies. Some individual scientific advisors consult with and meet informally with us on a more frequent basis. Our scientific advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, our scientific advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours.

Properties

We lease approximately 16,000 square feet of office and lab space in Phoenix, AZ under a lease agreement that expires in October 2012. We have an option to extend this lease for an additional 5 years and a right of first offer to purchase the facility. We also lease approximately 5,000 square feet of space in Mundelein, IL under a month-to-month lease agreement. Upon approval by the DEA of our Phoenix, AZ research lab, we plan to vacate the Mundelein, IL facility and consolidate our operations in our new Phoenix, AZ facilities. In addition, we are responsible for expenses associated with the use and maintenance of our Arizona facilities, such as utility and common area maintenance expenses. We believe that the Phoenix, AZ facility is adequate to meet our current needs, and that suitable additional or alternative space will be available in the future on commercially reasonable terms.

Legal Proceedings

We are currently not a party to any material legal proceedings.

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MANAGEMENT

Executive Officers and Directors

The following table sets forth certain information regarding our executive officers and directors as of the date of this prospectus:

Name	Age	Position(s)
Jon W. McGarity	65	President, Chief Executive Officer and Director
Mike L. Babich	30	Chief Operating Officer and Director
Ellen G. Feigal	53	Chief Medical Officer
Ramesh Acharya	65	Chief Scientific Officer
S. George Kottayil	44	Executive Vice President, Technology
Troy A. Ignelzi	39	Vice President, Business Development & Strategic Alliances
Kelly Tate	51	Director of Regulatory Affairs
John N. Kapoor	63	Director and Chairman of the Board
Patrick Fourteau(2)(3)	60	Director
Steve Meyer(1)(2)	51	Director
Brian Tambi(1)(2)(3)	62	Director
Gary Tollefson(1)(3)	56	Director

(1) Member of the audit committee.

(2) Member of the compensation committee.

(3) Member of the nominating and corporate governance committee.

Jon W. McGarity has served as our President, Chief Executive Officer and a member of our board of directors since March 2007. From 1996 to March 2007, Mr. McGarity served as the President and Chief Executive Officer of EthiX Associates, a company he founded in 1996 that provides executive consulting services in pharmaceutical, biotech and healthcare business planning, strategy and development. Prior to founding EthiX Associates, Mr. McGarity was the Vice Chairman, President and Chief Operating Officer of Pharmaceutical Marketing Services, a company which provided marketing and information services to the global pharmaceutical and healthcare industry. From August 2004 to March 2007, Mr. McGarity also served as the President and Chief Executive Officer of the Arizona BioIndustry Association. He is also a member of the Board of the Global Advisory Council at Thunderbird, The Garvin School of International Management and serves on the boards of directors of the Arizona BioIndustry Association, the Arizona Technology Council, the Masters Level Computational Biosciences Degree Program and the Technopolis Program at Arizona State University. Mr. McGarity also serves on the boards of directors of several biotechnology companies, including Cypress Bioscience, a public company, GenBioPro, Restorative Biosciences and Apthera. He is also a member of the board of directors of Clinical Information Network, a company that provides communication services to the medical community. Mr. McGarity earned his B.S. in Biology, with a Minor in Chemistry and Physics, from the State University of New York at Albany.

Mike L. Babich has served as our Chief Operating Officer since March 2007. Prior to joining us, he worked at EJ Financial Enterprises, a company affiliated with the chairman of our board, John N. Kapoor, since 2001. During his time at EJ Financial Enterprises, Mr. Babich held various roles and worked on various projects, including private equity transactions, asset management and strategic consulting for both public and private companies. Prior to his work at EJ Financial Enterprises, Mr. Babich worked at the Northern Trust Company managing mid- to large-cap portfolios for high net worth individuals. Mr. Babich received a B.A. from the University of Illinois at Urbana-Champaign and an MBA from the Kellogg School of Management at Northwestern University.

Ellen G. Feigal has served as our Chief Medical Officer since February 2007. From 2006 until January 2007, Dr. Feigal served as the director of medical devices and imaging at the Critical Path Institute, a joint

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venture between the FDA, SRI International and the University of Arizona, whose research focuses on pharmaceutical drugs. From 2004 to 2006, she served as the vice president of clinical studies and deputy scientific director at the Translational Genomics Research Institute. From 1992 to 2004, Dr. Feigal was employed by the National Cancer Institute (NCI) where she initially served as senior investigator for lung, neck and head cancer, as well as AIDS malignancies. She later served as deputy director of NCI’s Division of Cancer Treatment and Diagnosis in 1997, before becoming the division director. Prior to NCI, Dr. Feigal served as a member of the medical faculty at University of California, San Francisco and University of California, San Diego. Dr. Feigal earned her M.D. from the University of California, Davis School of Medicine in 1981 whereupon she began an internal medical residency at University of California, Davis and Stanford University.

Ramesh Acharya has served as our Chief Scientific Officer since August 2007. From 2002 until August 2007, Dr. Acharya worked independently as the President of Acharya Consulting Company, specializing in providing consulting services to pharmaceutical companies. Prior to this, Dr. Acharya served as Executive Vice President at Akorn, a pharmaceutical development and marketing company, as well as Vice President of Research at TheraTech, a drug delivery company and Watson Pharmaceuticals, a pharmaceutical company. Dr. Acharya was a co-founder of Oramed, a drug delivery and development company. Dr. Acharya earned his B.Sc. Tech from the University of Bombay, M.S. in pharmacy from the University of Pacific and Ph.D. in Pharmacy from the University of Illinois.

S. George Kottayil is a co-founder of Insys and currently serves as our Executive Vice President, Technology. During his time with us, Dr. Kottayil has served as our President, Chief Scientific Officer and member of our board of directors. Prior to co-founding Insys in 2002, Dr. Kottayil spent six years with Unimed Pharmaceuticals, a pharmaceutical development and marketing company. During his time with Unimed, he served in various roles, including director of product development. Dr Kottayil earned his B.Sc. in chemistry from Fergusson College, M.Sc. in Physical Chemistry from the University of Poona and his Ph.D. in Organic and Medicinal Chemistry from the University of Kentucky.

Troy A. Ignelzi has served as our Vice President, Business Development & Strategic Alliances since February 2007. Previously, he served as the Vice President of Emerging Technologies for the Greater Phoenix Economic Council beginning in August 2005. From February 2002 through August 2005, Mr. Ignelzi served as a sales executive at Eli Lilly and Company, a pharmaceutical company. Mr. Ignelzi is a member of the board of directors of the Arizona BioIndustry Association. Mr. Ignelzi earned a B.S. in Accounting from Ferris State University.

Kelly Tate has served as our Director of Regulatory Affairs since June 2007. Previously, he was Director of Regulatory Affairs with Transgenomics Drug Development, consulting with multiple companies on their strategic oncology drug development strategies. From 2003 through 2006, Mr. Tate was Senior Director of Regulatory Affairs with Mylan/Bertek Pharmaceuticals, a pharmaceutical development and marketing company. From 1997 through 2003, Mr. Tate held several positions including Associate Director of Regulatory Affairs and Director of Program Management with ILEX Oncology, a biopharmaceutical company focused on the treatment of cancer patients. Prior to 1997, Mr. Tate held several positions including Senior Applications Programmer and Manager of Governmental Submissions with Parke-Davis, a subsidiary of the pharmaceutical company Pfizer. Mr. Tate earned an M.A. in Industrial/Organizational Psychology and MBA from Wayne State University and is currently working towards a Ph.D. in Industrial/Organizational Psychology.

John N. Kapoor is a co-founder of Insys and has served as the Chairman of our board of directors since our inception. Dr. Kapoor has served as the President and Chairman of the board of directors of EJ Financial Enterprises, since forming the company in 1990. Dr. Kapoor is also the Managing Partner of Kapoor-Pharma Investments, an investment company that he founded in 2000. Dr. Kapoor serves as the chairman of the board of directors of Akorn, a publicly traded specialty pharmaceutical company, where he served as the Chief Executive Officer from March 2001 to December 2002 and from May 1996 to November 1998. Dr. Kapoor also serves as the chairman of the board of directors of Option Care, a specialty pharmaceutical services company, where he

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served as Chief Executive Officer from August 1993 to April 1996. In addition, Dr. Kapoor serves as chairman of the board of directors of NeoPharm and serves as a member of the board of directors of Introgen Therapeutics, both publicly traded biopharmaceutical companies. Dr. Kapoor received his Ph.D. in medicinal chemistry from the State University of New York at Buffalo and a B.S. in pharmacy from Bombay University in India.

Patrick Fourteau has served on our board of directors since August 2007. Mr. Fourteau has served as President and Chief Executive Officer of Sciele Pharma, Inc., a pharmaceutical company, since November 2003, after serving as Sciele’s President and Chief Operating Officer since May 2003. He has also served as a member of Sciele’s board of directors since May 2004. Prior to Sciele, Mr. Fourteau served as President of Ventiv Health Sales, an international contract sales organization. Previously, he has served as President of various divisions of St. Jude Medical and as an executive with Eli Lilly and Company. Mr. Fourteau earned his B.A. and M.A. in Mathematics from University of California, Berkeley and an MBA from Harvard University.

Steve Meyer has served on our board of directors since August 2007. Since November 2005, Mr. Meyer has served as the Chief Financial Officer of JVM Realty Corporation, a private investment firm specializing in the acquisition, re-positioning and management of real estate for investors. Prior to that, Mr. Meyer was employed by Baxter International Incorporated, a global healthcare company, where he served as Corporate Treasurer from January 1997 to July 2004. Mr. Meyer earned his MBA in finance and accounting from the Kellogg Graduate School of Management at Northwestern University and his B.A. in economics from the University of Illinois in Campaign-Urbana. He is an Illinois CPA.

Brian Tambi has served on our board of directors since August 2007. He has served as the Chairman of the Board, President and Chief Executive Officer of BrianT Laboratories LLC, a pharmaceutical company currently focused on developing drug delivery systems, since forming the company in January 2007. Dr. Kapoor is the principal investor in BrianT Laboratories. Previously, Mr. Tambi had served as the Chairman, President and Chief Executive Officer of Morton Grove Pharmaceuticals since 1995. Mr. Tambi currently serves as Morton Grove’s non-executive Chairman of the Board. Prior to Morton Grove, Mr. Tambi served as President of Ivax North American Pharmaceuticals and as a member of the Board of Directors of Ivax Corporation, a publicly traded pharmaceutical company, President of Fujisawa Pharmaceutical Company USA, a pharmaceutical company and held executive positions at Lyphomed and Bristol-Myers Squibb, also pharmaceutical companies. He earned his MBA in International Finance & Economics in 1974 and his B.S. in Finance and Economics in 1972, both from Syracuse University.

Gary Tollefson has served on our board of directors since August 2007. He has served as the President and Chief Executive Officer of Orexigen Therapeutics, Inc., a biopharmaceutical company focused on the development of pharmaceutical products for the treatment of central nervous system disorders, since May 2005. During such time, he has also served as a member of Orexigen’s board of directors. Previously, Dr. Tollefson was employed by Eli Lilly and Company where he served as President of the Neuroscience Product Group from January 1999 to December 2000 and Vice President of Lilly Research Laboratories from January 1997 to March 2004. Dr. Tollefson has also served as a volunteer Clinical Professor of Psychiatry at Indiana University School of Medicine since April 2004. He is also the founder of Consilium, a consulting company dedicated to psychopharmacological product development. Dr. Tollefson currently holds the senior guest scientific position at Eli Lilly and Company as the Distinguished Visiting Lilly Research Scholar. Dr. Tollefson also serves on the boards of directors for Xenoport, a publicly traded pharmaceutical company and Cortex Pharmaceuticals, also a pharmaceutical company. Dr. Tollefson earned his M.D. from the University of Minnesota where he went on to complete a residency in psychiatry and a Ph.D. in psychopharmacology.

Board Composition

Our business and affairs are organized under the direction of our board of directors, which currently consists of seven members. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors meets on a regular basis and

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additionally as required. Written board materials are distributed in advance of meetings as a general rule, and our board of directors schedules meetings with and presentations from members of our senior management on a regular basis and as required.

Our board of directors has determined that four of our seven directors, Patrick Fourteau, Steve Meyer, Brian Tambi and Gary Tollefson, are independent directors, as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules.

Effective upon the closing of this offering, we will divide our board of directors into three classes, as follows:

• Class I, which will consist of Mr. Tambi and Dr. Tollefson, and whose terms will expire at our annual meeting of stockholders to be held in 2008;

• Class II, which will consist of Messrs. McGarity and Babich, and whose terms will expire at our annual meeting of stockholders to be held in 2009; and

• Class III, which will consist of Messrs. Fourteau and Meyer and Dr. Kapoor and whose terms will expire at our annual meeting of stockholders to be held in 2010.

At each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then expire will serve until the third annual meeting following their election and until their successors are duly elected and qualified. The authorized size of our board of directors is currently seven members. The authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed between the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the board of directors may have the effect of delaying or preventing changes in our control or management. Our directors may be removed for cause by the affirmative vote of the holders of at least 66-2/3% of our voting stock.

Board Committees

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee.

Audit Committee

Our audit committee consists of Steve Meyer, Brian Tambi and Gary Tollefson. Our board of directors has determined that each of the members of our audit committee satisfies the Nasdaq Stock Market and SEC independence requirements. Mr. Meyer serves as the chair of our audit committee. The functions of this committee include, among other things:

• evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors;

• reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;

• monitoring the rotation of partners of our independent auditors on our engagement team as required by law;

• reviewing our annual and quarterly financial statements and reports, including the disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with our independent auditors and management;

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• reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation, and matters concerning the scope, adequacy and effectiveness of our financial controls;

• reviewing with management and our auditors any earnings announcements and other public announcements regarding material developments;

• establishing procedures for the receipt, retention and treatment of complaints received by us regarding financial controls, accounting or auditing matters and other matters;

• preparing the report that the SEC requires in our annual proxy statement;

• reviewing and providing oversight of any related-person transactions in accordance with our related person transaction policy and reviewing and monitoring compliance with our code of conduct and ethics;

• reviewing on a periodic basis our investment policy; and

• reviewing and evaluating on an annual basis the performance of the audit committee.

Our board of directors has determined that Mr. Meyer qualifies as an audit committee financial expert within the meaning of SEC regulations and the Nasdaq Marketplace Rules. In making this determination, our board has considered Mr. Meyer’s formal education and the nature and scope of experience that he has previously had with public companies. Both our independent registered public accounting firm and management periodically meet privately with our audit committee.

Compensation Committee

Our compensation committee consists of Patrick Fourteau, Steve Meyer and Brian Tambi. Mr. Fourteau serves as the chair of our compensation committee. Our board of directors has determined that each of the directors serving on our compensation committee is independent within the meaning of the rules of the SEC and the listing standards of the Nasdaq Stock Market. The functions of this committee include, among other things:

• reviewing, modifying and approving (or if it deems appropriate, making recommendations to the full board of directors regarding) our overall compensation strategy and policies;

• reviewing and approving the compensation and other terms of employment of our executive officers;

• reviewing and approving performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these goals and objectives;

• reviewing and approving (or if it deems it appropriate, making recommendations to the full board of directors regarding) the equity incentive plans, compensation plans and similar programs advisable for us, as well as modifying, amending or terminating existing plans and programs;

• reviewing and approving (or if it deems it appropriate, making recommendations to the full board of directors regarding) the type and amount of compensation to be paid or awarded to our non-employee board members;

• administering our equity incentive plans;

• establishing policies with respect to equity compensation arrangements;

• reviewing the competitiveness of our executive compensation programs and evaluating the effectiveness of our compensation policy and strategy in achieving expected benefits to us;

• reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for our executive officers;

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• reviewing with management and approving our disclosures under the caption “Compensation Discussion and Analysis” in our periodic reports or proxy statements to be filed with the SEC; and

• reviewing and assessing on an annual basis the performance of the compensation committee.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of Gary Tollefson, Brian Tambi and Patrick Fourteau. Our board of directors has determined that each of the members of this committee satisfies the Nasdaq Stock Market independence requirements. Dr. Tollefson serves as the chair of our nominating and corporate governance committee. The functions of this committee include, among other things:

• identifying, reviewing and evaluating candidates to serve on our board of directors consistent with criteria approved by our board of directors;

• determining the minimum qualifications for service on our board of directors;

• evaluating director performance on the board and applicable committees of the board and determining whether continued service on our board is appropriate;

• evaluating, nominating and recommending individuals for membership on our board of directors;

• evaluating nominations by stockholders of candidates for election to our board of directors;

• considering and assessing the independence of members of our board of directors;

• developing a set of corporate governance policies and principles, including a code of business conduct and ethics, periodically reviewing and assessing these policies and principles and their application, and recommending to our board of directors any changes to such policies and principles;

• considering questions of possible conflicts of interest of directors as such questions arise; and

• annually evaluating the performance of the nominating and corporate governance committee.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

Our board of directors administers our executive compensation program. Upon the closing of this offering, we will establish a compensation committee whose role will be to oversee our compensation and benefits plans and policies, to administer our stock plans and to review and approve annually all compensation decisions relating to all executive officers.

Our Philosophy

From our inception in 2002 to the end of 2006, the objectives of our executive compensation program during these early years were to attract and retain executive and non-executive employees who were instrumental in the technological development of our products and product candidates. This plan was designed to reward technological feasibility, product development and pertinent scientific applications.

During these early years, our co-founder, Dr. S. George Kottayil, initially served as our sole executive officer and President and later, as our Chief Scientific Officer. In determining the compensation for Dr. Kottayil during these years, our board of directors was guided by the following key principles:

• Competition. Compensation should reflect the competitive marketplace, so we can retain, attract, and motivate our executive officer.

• Accountability for Product and Patent Development. Compensation should be tied to the potential business introduced to the us through the development of patents, licenses and other product pipeline related activities.

• Accountability for Individual Performance. Compensation should be tied, in part, to the executive officer’s performance to encourage and reflect his contributions to our corporate performance.

In 2007, we began an expansion of our management team. During this year, we have hired most of our current management team, including our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Medical Officer, Chief Scientific Officer and Director of Regulatory Affairs. In connection with this organizational growth, Dr. Kottayil transitioned from serving as our President to serving as our Executive Vice President of Technology. To manage this growth, our board of directors revisited the objectives of our executive compensation program and determined that, going forward, we should retain our current executive officers and employees and attract additional technological, scientific and administrative employees. These objectives, they feel, are designed to reward, motivate and align executive officers and employees to achieve our desired corporate objectives. As such, in determining the compensation of executive officers, we are now guided by the following key principles:

• Competition. Compensation should reflect the competitive marketplace, so we can retain, attract, and motivate talented executives.

• Accountability for Product and Patent Development. Compensation should be tied to the potential business introduced to us through development of patents, licenses and other product pipeline related activities.

• Accountability for Business Performance. Compensation should be tied, in part, to financial performance, so that executive officers are held accountable through their compensation for contributions to our performance as a whole, through the performance of the businesses for which they are responsible.

• Accountability for Individual Performance. Compensation should be tied, in part, to the executive officer’s performance to encourage and reflect individual contributions to our performance. Our board of directors considers individual performance as well as performance of the businesses and responsibility

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areas that an individual oversees, and weighs these factors as appropriate in assessing a particular executive officer’s performance.

• Alignment with Stockholder Interests. Compensation should be tied, in part, to our financial performance through equity awards to align executives’ interests with those of our stockholders.

Application of Our Philosophy

Our executive compensation program aims to encourage our executive officers to continually pursue our strategic opportunities while effectively managing the risks and challenges inherent to our business. Specifically, we have created an executive compensation package that balances short versus long-term components, cash versus equity elements, and fixed versus contingent payments, in ways we believe are most appropriate to provide incentives to our executive officers and reward them for achieving the following goals:

• develop a culture that embodies a passion for our business, creative contribution and a drive to achieve established goals and objectives;

• provide leadership to the organization in such a way as to maximize the results of our business operations;

• lead us by demonstrating forward thinking in the operation, development and expansion of our business;

• effectively manage organizational resources to derive the greatest value possible from each dollar invested; and

• take strategic advantage of the market opportunity to expand and grow our business.

The components of our executive compensation program not only aim to be competitive in our industry, but also to be fair relative to (i) compensation paid to other professionals within our organization; (ii) our short and long-term performance and (iii) the value we deliver to our stockholders. We seek to maintain a performance-oriented culture and a compensation approach that rewards our executive officers when we achieve our goals and objectives, while putting at risk an appropriate portion of their compensation against the possibility that our goals and objectives may not be achieved. Overall, our approach is designed to relate the compensation of our executive officers to (x) the achievement of short and longer term goals and objectives; (y) their willingness to challenge and improve existing policies and structures and (z) their capability to take advantage of unique opportunities and overcome difficult challenges within our business. Our board of directors will periodically evaluate both the performance and compensation to make sure that the compensation provided to our executive officers remains competitive relative to compensation paid by companies of similar size and stage of development operating in the biopharmaceutical industry, taking into account our relative performance and our own strategic goals.

Components of Executive Compensation

During 2006, Dr. Kottayil, our sole executive officer in such year, was compensated with a base salary of $155,000 and a discretionary bonus of $20,000, which was paid out in February 2007. Our board of directors acknowledged that Dr. Kottayil’s salary was below market for his position of President and Chief Scientific Officer, but determined that his current equity holdings that he received in connection with co-founding Insys offset this disparity.

Our current executive compensation program consists of three components: short-term compensation (including base salary and annual bonuses), long-term equity-based incentives and benefits.

Short-Term Compensation

We utilize short-term compensation, including base salary, annual adjustments to base salary and annual bonuses, to motivate and reward our executive officers in accordance with our performance-based program. Each executive officer’s short-term compensation components are tied to an annual assessment of his or her progress against our corporate objectives.

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Base salary is used to recognize the experience, skills, knowledge and responsibilities required of each executive officer, as well as competitive market conditions. In establishing the 2007 base salaries of our executive officers, our board of directors and management took into account a number of factors, including the executive officer’s seniority, position and functional role, level of responsibility and, to the extent such individual was employed by us for at least the prior six months, his or her accomplishments against personal and group objectives. For newly hired executive officers, our board of directors and management considered the base salary of the individual at his or her prior employment, any unique personal circumstances that motivated the executive to leave that prior position to join us and the compensation range for the particular role being filled. In addition, we consider the competitive market for corresponding positions within comparable geographic areas and industries.

The base salary of our executive officers is reviewed on an annual basis and adjustments are made to reflect performance-based factors, as well as competitive conditions. Increases are considered within the context of our overall annual merit increase structure as well as individual and market competitive factors. We do not apply specific formulas to determine increases. Generally, executive officer base salaries are adjusted and reviewed during the first quarter of each year based on a review of:

• their achievement of specific objectives established during the prior review;

• an assessment of their professional effectiveness, consisting of a portfolio of competencies that include leadership, commitment, creativity and organizational accomplishment; and

• their knowledge, skills and attitude, focusing on capabilities, capacity and ability to drive results.

A portion of the executive officers’ annual bonuses are discretionary and tied to the achievement of our annual corporate goals, functional area goals and/or individual performance objectives. Our board of directors set goals for each executive officer, with an emphasis on quantifiable and achievable targets. Moreover, each executive officer’s bonus is also tied to the achievement of targets relative to the performance of the particular business segment or functional area for which they are responsible, with the remainder tied to similar targets relative to our overall financial goal. Individual awards under this structure are based on a thorough review of the applicable performance results of the company, business, function or individual as compared to the applicable goals. Based on the review, each individual may receive an award from zero to 100% of his or her pre-determined bonus percentage based on his or her base salary or, in the alternative, if no pre-determined bonus percentage is set by our board of directors, the board has absolute discretion in awarding such executive officer with a bonus. In addition to these discretionary bonuses, certain executive officers are also entitled to received a guaranteed bonus amount that is equal to a pre-determined percentage of his or her base salary. The 2007 base salary and guaranteed and discretionary bonus percentage amounts for each executive officer, as applicable, are set forth in the following table:

Name	Base Salary			Guaranteed Bonus Percentage		Discretionary Bonus Percentage
Jon W. McGarity, President and Chief Executive Officer	$	276,000	*	35	%	15	%
Michael L. Babich, Chief Operating Officer	$	175,000		30	%	20	%
Ellen G. Feigal, Chief Medical Officer	$	265,000		—		—
Ramesh Acharya, Chief Scientific Officer	$	100,000		—		—
S. George Kottayil, Executive Vice President, Technology	$	155,000		—		—
Troy A. Ignelzi, Vice President of Business Development and Strategic Alliances	$	123,000		20	%**	15	%
Kelly Tate, Director of Regulatory Affairs	$	130,000		—		10	%

* A portion of this salary is deferred and will be paid in full upon the earlier of (i) December 31, 2007 or (ii) the closing of this offering.

** 10% of this bonus amount was paid on the executive’s employment start date and is subject to repayment if the executive terminates his employment within 12 months of such date.

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We hired a Chief Financial Officer in August 2007. We anticipate his base salary will be $175,000 and that he will be entitled to a guaranteed bonus equal to 30% of his base salary and a discretionary bonus equal to 20% of his base salary.

Our Chief Executive Officer periodically reviews the performance of our executive officers on the bases noted above and recommends to our board of directors any base salary changes or bonuses deemed appropriate.

Long-Term Equity-Based Compensation

Our long-term compensation program consists solely of stock option grants. Stock option grants made to executive officers are designed to provide them with incentive to execute their responsibilities in such a way as to generate long-term benefit to us and our stockholders. Through possession of stock options, our executive officers participate in the long-term results of their efforts, whether by appreciation of our company’s value or the impact of business setbacks, either company-specific or industry-based. Additionally, stock options provide a means of ensuring the retention of our executive officers, in that they are in almost all cases subject to vesting over an extended period of time.

Upon joining us, each executive officer is granted an initial option award that is primarily based on competitive conditions applicable to such officer’s specific position. In addition, our board of directors considers the number of options owned by other executive officers in comparable positions within our company. We believe this strategy is consistent with the approach of other companies at the same stage of development in our industry and, in our board of directors’ view, is appropriate for aligning the interests of our executive officers with those of our stockholders over the long term.

Periodic awards to executive officers are made based on an assessment of their sustained performance over time, their ability to impact results that drive value to our stockholders and their organization level. Option awards are not granted regularly or automatically to our executive officers on an annual basis. Our Chief Executive Officer periodically reviews the performance of our executive officers on the bases noted above and recommends to our board of directors any option awards deemed appropriate.

During the first half of 2007, our board of directors granted stock options based upon the recommendations of our Chief Executive Officer. These grants were generally made during regularly scheduled board meetings. The exercise price of options was determined by our board of directors after taking into account a variety of factors, including the quality and growth of our management team and specific and general market comparables within our industry. In addition, our board of directors took into account the valuation opinion of our outside consulting firm, who provided valuations of our common stock on April 13, 2007. In the future, we expect to increase our use of restricted stock awards and reduce our use of stock options as a form of stock-based compensation.

Benefits

We provide the following benefits to our executive officers on the same basis as the benefits provided to all employees:

• health and dental insurance;

• life insurance;

• short- and long-term disability; and

• 401(k) plan.

These benefits are consistent with those offered by other companies and specifically with those companies with which we compete for employees.

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Our Competitive Market

The market for experienced management with the knowledge, skills and experience our organization requires is highly competitive. Our objective is to attract and retain the most highly qualified executives to manage each of our business functions. In doing so, we draw upon a pool of talent that is highly sought after by other companies in our industry and those industries that also produce the requisite skills we seek.

We believe that our ability to offer significant upside potential through equity-based compensation gives us a competitive advantage. Nonetheless, we must also offer cash compensation to our existing and prospective executive officers through base salaries and cash bonuses that are competitive in the marketplace and allow them to satisfy their day to day financial requirements.

We also compete on the basis of our vision of future success, our culture and company values, and the excellence of our management personnel. In all of these areas, we believe we compete with other companies in our industry.

Total Compensation

We intend to continue our strategy of compensating our executive officers at competitive levels, with the opportunity to impact their total annual compensation through performance-based compensation that include both cash and equity elements. Our approach to total executive compensation is designed to drive results that maximize our financial performance and deliver value to our stockholders. In light of our compensation philosophy, we believe that the total compensation package for our executives should continue to consist of base salary, annual bonus and long-term equity-based incentives.

Evolution of Our Compensation Approach

Our compensation approach is necessarily tied to our stage of development as a company. Accordingly, the specific direction, emphasis and components of our executive compensation program will continue to evolve as our company and its underlying business strategy continue to grow and develop. For example, we intend to reduce our executive compensation program’s emphasis on stock options as a long-term incentive component in favor of other forms of equity compensation such as restricted stock awards. Similarly, we may revise how we measure senior executive performance to take into account the unique requirements of being a public company including, but not limited to, strict compliance with the standards of the Sarbanes Oxley Act. In addition, we may engage a compensation consultant to assist our board of directors and future compensation committee in continuing to evolve our executive compensation program, and we may look to programs implemented by comparable public companies in refining our compensation approach.

Summary Compensation Table

During the first half of 2007, we significantly expanded our management team by hiring most of our executive officers, including Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Medical Officer, Chief Scientific Officer, Vice President of Business Development and Strategic Alliances and Director of Regulatory Affairs. The following table, however, only provides information regarding the compensation earned during the year ended December 31, 2006. Therefore, the following table only provides information regarding the compensation of our sole executive officer during that time period, our former President and Chief Scientific Officer, whom we refer to as our “named executive officer.”

Name and Principal Position	Year	Salary		Bonus		Total
S. George Kottayil(1) Executive Vice President, Technology	2006	$	155,000	$	20,000	$	175,000

(1) Position listed reflects the named executive officer’s positions with us as of July 31, 2007. Dr. Kottayil was a named executive officer in 2006, but as a result of our recent growth is no longer serving as our President and Chief Scientific Officer. Dr. Kottayil co-founded Insys and continues to be employed by us as our Executive Vice President, Technology.

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Grants of Plan-Based Awards

We did not make a grant of a plan-based award to our named executive officer during the year ended December 31, 2006.

Outstanding Equity Awards as of December 31, 2006

Our named executive officer did not have any equity awards that were outstanding as of December 31, 2006.

Option Exercises and Stock Vested

Our named executive officer did not acquire any of shares of our common stock and did not have any value realized pursuant to the exercise of stock options and the vesting of stock during the year ended December 31, 2006.

Pension Benefits

Our named executive officer did not participate in or have account balances in qualified or nonqualified defined benefit plans sponsored by us. Our board of directors or future compensation committee may elect to adopt qualified or nonqualified benefit plans in the future if it determines that doing so is in our best interests.

Nonqualified Deferred Compensation

Our named executive officer did not participate in or have account balances in nonqualified defined contribution plans or other nonqualified deferred compensation plans maintained by us. Our board of directors or future compensation committee may elect to provide our executive officers and other employees with nonqualified defined contribution or other nonqualified deferred compensation benefits in the future if it determines that doing so is in our best interests.

Director Compensation

Prior to the closing of this offering, our board of directors plans to adopt a compensation policy that will be applicable to all of our non-employee directors.

Equity Benefit Plans

Amended and Restated Equity Incentive Plan

Our board of directors adopted our amended and restated equity incentive plan, or amended plan, in June 2006 and our stockholders also approved the amended plan in June 2006. As of July 31, 2007, 825,000 shares of common stock had been issued upon the exercise of options granted, no options to purchase shares of common stock were outstanding and 175,000 shares of common stock remained available for future grant under the amended plan. As of that same date, 1,051,062 shares of non-voting common stock had been issued upon the exercise of options granted, options to purchase 299,188 shares of non-voting common stock were outstanding and 659,750 shares of non-voting common stock remained available for future grant under the amended plan. Immediately prior to the closing of this offering, all outstanding options to purchase non-voting common stock will be amended to provide that such options will be exercisable for voting common stock only. Upon the signing of the underwriting agreement related to this offering, the amended plan will be terminated and no further option grants will be made under the amended plan and any shares then remaining available for future grant, plus any shares underlying outstanding options that expire or are forfeited, will be allocated to our 2007 equity incentive plan.

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Administration. Our board of directors administers the amended plan and has the authority to determine the exercise price of the stock options, the recipients of stock options granted under the plan and the terms, conditions and restrictions applicable to all options granted under the amended plan. Our board of directors approves the form of option agreement and has authority to accelerate, continue, extend or defer the exercisability of any stock option issued under the amended plan. Our board of directors may amend or modify the amended plan at any time, provided that no such amendment may change or impair any then outstanding option without the consent of the optionee.

Eligibility. The amended plan permits us to grant stock options to our key employees, non-employee directors and consultants. A stock option may be an incentive stock option within the meaning of Section 422 of the Code or a nonstatutory stock option.

Stock option provisions generally. In general, the duration of a stock option granted under the amended plan cannot exceed ten years. An incentive stock option may be transferred only on death, but a nonstatutory stock option may be transferred as permitted by our board of directors or other permitted plan administrator. In addition, our board of directors may amend, modify, extend, cancel or renew any outstanding option or may waive any restrictions or conditions applicable to any outstanding option.

The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to which incentive stock options are exercisable for the first time by an optionholder during any calendar year under all of our stock plans may not exceed $100,000. An incentive stock option granted to a person who at the time of grant owns or is deemed to own more than 10% of the total combined voting power of all classes of our outstanding stock or any of our affiliates must have a term of no more than five years and an exercise price that is at least 110% of fair market value at the time of grant.

Effect on stock options of certain corporate transactions. If we experience a change in control, stock options held by individuals whose service has not terminated prior to the change in control will be accelerated in full and shall be immediately exercisable in full on the date of such change in control.

Other provisions. If there is a transaction or event which changes our stock that does not involve our receipt of consideration, such as a merger, consolidation, reorganization, stock dividend or stock split, our board of directors will appropriately adjust the class and the maximum number of shares subject to the amended plan.

2007 Equity Incentive Plan

Our board of directors adopted the 2007 equity incentive plan, or 2007 plan, in August 2007 and we expect our stockholders to approve the 2007 plan prior to the closing of this offering. The 2007 plan will become effective upon the date of the underwriting agreement related to this offering. The 2007 plan will terminate in August 2017, unless sooner terminated or suspended by our board of directors.

Awards. The 2007 plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards, and other forms of equity compensation, or collectively, stock awards. In addition, the 2007 plan provides for the grant of performance cash awards. Our board of directors, a committee delegated by our board, or one or more officers delegated by our board with limited authority to make grants in accordance with the limitations of Delaware law determines the recipients of awards under this plan. Incentive stock options may be granted only to our employees or employees of our parent or subsidiary corporations. All other awards may be granted to employees, directors, including non-employee directors, and consultants.

Share reserve. Following this offering, the aggregate number of shares of our common stock that may be issued initially pursuant to stock awards under the 2007 plan is              shares, which number includes the unallocated shares remaining available for issuance under our amended plan as of the effective date of the 2007

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Plan (             shares as of July 31, 2007) plus an additional              shares to be approved by our stockholders as part of the approval of the 2007 plan. In addition, the number of shares of our common stock reserved for issuance will automatically increase on January 1st of each year, from January 1, 2008 through January 1, 2017, by the lesser of (a)             % of the total number of shares of our common stock outstanding on December 31st of the preceding year, (b)              shares or (c) a lesser number determined by our board of directors prior to the first day of any calendar year. The reserve will also be increased by any shares of common stock that would have reverted from time to time to our amended plan but for its termination.

The following types of shares under the 2007 plan may become available for subsequent issuance under the 2007 plan: (a) shares granted under the 2007 plan which expire or otherwise terminate, in whole or in part, without being exercised in full, (b) shares forfeited back to or repurchased by us after being issued to a participant pursuant to a stock award because of the failure to meet a contingency or condition required for the vesting of such shares, (c) shares granted under a stock award which is settled in cash and (d) shares of common stock which are cancelled in accordance with our cancellation and regrant provisions. In addition, if any shares are withheld to satisfy payment of taxes, used to pay the exercise price of an option in a net exercise arrangement, or used to pay for a stock appreciation right, the shares not delivered to the participant remain available for subsequent issuance under the 2007 plan. Shares issued under the 2007 plan may be authorized but unissued or required common stock, including shares repurchased by us on the open market. As of the date hereof, no shares of our common stock have been issued under the 2007 plan.

The maximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2007 plan is equal to              shares, as increased from time to time pursuant to annual increases. No person may be granted stock awards covering more than             shares of our common stock under the 2007 plan during any calendar year pursuant to stock options or stock appreciation rights. In addition, no person may be granted a performance stock award covering more than              shares or a performance cash award covering more than $             in any calendar year. Such limitations are designed to help assure that any deductions to which we would otherwise be entitled with respect to such stock awards will not be subject to the $1,000,000 limitation on the income tax deductibility of compensation paid per covered executive officer imposed by Section 162(m) of the Code.

Administration. Our board of directors has the authority to administer the 2007 plan. Our board may delegate limited or full administration of the 2007 plan to one or more committees or limited administration to one or more officers. Subject to the terms of the 2007 plan, our board, authorized committee or authorized officer, referred to as the plan administrator, determines recipients, dates of grant, the numbers and types of stock awards to be granted and the terms and conditions of the stock awards, including the period of their exercisability and vesting. Subject to the limitations set forth below, the plan administrator will also determine the exercise price of options granted, the consideration to be paid for restricted stock awards and the strike price of stock appreciation rights. Our board has the authority to reprice any outstanding stock award under the 2007 plan without the approval of our stockholders.

Stock options. Incentive and nonstatutory stock options are granted pursuant to incentive and nonstatutory stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for a stock option, within the terms and conditions of the 2007 plan, provided that the exercise price of a stock option cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2007 plan vest at the rate specified by the plan administrator.

The plan administrator determines the term of stock options granted under the 2007 plan, up to a maximum of ten years, except in certain cases of termination, as described below. Unless the terms of an optionholder’s stock option agreement provide otherwise, if an optionholder’s relationship with us, or any of our affiliates, ceases for any reason other than for cause, disability or death, the optionholder may exercise any vested options for a period of three months following the cessation of service. If an optionholder’s service relationship is terminated for cause, then the option terminates immediately. If an optionholder’s service relationship ceases due

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to disability or death, or an optionholder dies within a certain period following cessation of service, the optionholder or a beneficiary may exercise any vested options for a period of 12 months following the date of termination due to disability or 18 months following the date of termination due to death. The option term may be extended in the event that exercise of the option following termination of service is prohibited by applicable securities laws. In no event, however, may an option be exercised beyond the expiration of its term.

Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (a) cash, check, bank draft or money order, (b) a same day sale under Regulation T promulgated by the Federal Reserve Board that results in a receipt of cash, check, or irrevocable instructions to pay the aggregate exercise price to us from the sales proceeds, (c) the tender of common stock previously owned by the optionholder, (d) a net exercise of the option and (e) other legal consideration approved by the plan administrator.

Unless the plan administrator provides otherwise, all stock options are not transferable except by will, the laws of descent and distribution, or pursuant to a domestic relations order. An optionholder may designate a beneficiary, however, who may exercise the option following the optionholder’s death. The plan administrator in its sole discretion and in compliance with applicable tax and securities laws may permit transfers upon the optionee’s request.

Tax limitations on incentive stock options. Incentive stock options may be granted only to our employees. The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to stock options that are exercisable for the first time by an optionholder during any calendar year under all of our stock plans may not exceed $100,000. No incentive stock option may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates unless the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant.

Restricted stock awards. Restricted stock awards are granted pursuant to restricted stock award agreements adopted by the plan administrator. Restricted stock awards may be granted in consideration for (a) cash, check, bank draft or money order, (b) past or future services rendered to us or our affiliates, or (c) any other form of legal consideration acceptable to the plan administrator in his sole discretion. Shares of common stock acquired under a restricted stock award may, but need not, be subject to a share repurchase option in our favor in accordance with a vesting schedule to be determined by the plan administrator. In the event an awardholder is terminated, we may receive any or all of the unvested shares under a forfeiture condition or repurchase right. Rights to acquire shares under a restricted stock award may be transferred only upon such terms and conditions as set by the plan administrator.

Restricted stock unit awards. Restricted stock unit awards are granted pursuant to restricted stock unit award agreements adopted by the plan administrator. Any form of legal consideration acceptable to the plan administrator in its sole discretion may be paid by the participant for each share of common stock subject to the award. A restricted stock unit award may be settled by the delivery of cash, stock, a combination of cash and stock, or in any other form of consideration determined by the plan administrator and set forth in the restricted stock unit award agreement. The plan administrator may delay the delivery or settlement of an award to a time after the vesting of the award by imposing restrictions or conditions at the time of grant. Additionally, dividend equivalents may be credited in respect of shares covered by a restricted stock unit award and may be converted into additional shares of common stock covered by the award. Except as otherwise provided in the applicable award agreement, restricted stock unit awards that have not vested will be forfeited upon the participant’s cessation of continuous service for any reason.

Stock appreciation rights. Stock appreciation rights are granted pursuant to stock appreciation rights agreements adopted by the plan administrator. The plan administrator determines the strike price for a stock appreciation right which cannot be less than 100% of the fair market value of our common stock on the date of

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grant. Upon the exercise of a stock appreciation right, we will pay the participant an amount not greater than the product of (a) the excess of the per share fair market value of our common stock on the date of exercise over the strike price, multiplied by (b) the number of shares of common stock with respect to which the stock appreciation right is exercised. The appreciation distribution may be paid in common stock, cash or any combination or in any other form of consideration acceptable by the plan administrator and set forth in the stock appreciation right agreement. A stock appreciation right granted under the 2007 plan vests at the rate specified in the stock appreciation right agreement and may be restricted by the plan administrator at the time of grant.

The plan administrator determines the term of stock appreciation rights granted under the 2007 plan, up to a maximum of ten years. If a participant’s service relationship with us, or any of our affiliates, ceases for any reason other than cause, then the participant, or the participant’s beneficiary, may exercise any vested stock appreciation right for three months (or such longer or shorter period specified in the stock appreciation right agreement) after the date such service relationship ends. If the participant’s service relationship with us is terminated for cause, then the stock appreciation right terminates immediately. In no event, however, may a stock appreciation right be exercised beyond the expiration of its term.

Performance awards. The 2007 plan permits the grant of performance stock awards and performance cash awards that may qualify as performance-based compensation under Section 162(m) of the Code. To assure that the compensation attributable to performance-based awards will so qualify, our compensation committee can structure such awards so that stock will be issued or paid pursuant to such award only upon the achievement of certain pre-established performance goals during a designated performance period. The plan administrator may specify the form of payment of performance awards and may permit a participant to elect for deferred payment of a performance cash award. The maximum number of shares that may be granted to a participant in any calendar year attributable to performance stock awards may not exceed              shares of common stock and the maximum value that may be granted to a participant in any calendar year attributable to performance cash awards may not exceed $             .

Other stock awards. The plan administrator may grant other awards based in whole or in part by reference to our common stock. The plan administrator will set the number of shares under the award and all other terms and conditions of such awards.

Changes to capital structure. In the event that there is a specified type of change in our capital structure, appropriate adjustments will be made to (a) the classes and maximum number of securities reserved under the 2007 plan, (b) the classes and maximum number of securities by which the share reserve increases automatically each year, (c) the classes and maximum number of securities that may be issued pursuant to the exercise of incentive stock options, (d) the classes and maximum number or securities that may be awarded as stock awards and performance awards and (e) the classes and maximum number of securities and price per share of stock subject to outstanding stock awards.

Dissolution or liquidation. In the event of a dissolution or liquidation, all outstanding stock awards under the 2007 plan will terminate immediately prior to the completion of such dissolution or liquidation, other than vested and outstanding shares of common stock not subject to a forfeiture condition or our right of repurchase and except as otherwise provided in a stock award agreement. The shares subject to our repurchase right may be repurchased by us if subject to repurchase rights despite the participant providing continuous service. Alternatively, the plan administrator may cause some or all of the outstanding stock awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such stock awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

Corporate transactions. In the event of certain significant corporate transactions, awards under the 2007 plan may be assumed, continued or substituted for by any surviving or acquiring entity or its parent company. If the surviving or acquiring entity or its parent company elects not to assume, continue or substitute for such stock

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awards, then (a) with respect to any such stock awards that are held by individuals whose service with us or our affiliates has not terminated prior to the effective date of the corporate transaction, the vesting and exercisability provisions of such stock awards will be accelerated in full and such awards will be terminated if not exercised prior to the effective date of the corporate transaction, and (b) all other outstanding stock awards will terminate if not exercised prior to the effective date of the corporate transaction, provided that under stock awards held by persons other than current participants, we may continue to exercise our reacquisition or repurchase rights notwithstanding the corporate transaction. The plan administrator also has the discretion to provide for the surrender of a stock award in exchange for a payment equal to the excess of (a) the value of the property that the optionholder would have received upon the exercise of the stock award over (b) the exercise price otherwise payable in connection with the stock award.

Changes in control. A stock award under the 2007 plan may vest as to all or any portion of the shares subject to the stock award (a) immediately upon the occurrence of certain specified change in control transactions, whether or not such stock award is assumed, continued or substituted by a surviving or acquiring entity in the transaction or (b) in the event a participant’s service is terminated actually or constructively within a designated period before or after the occurrence of certain specified change in control transactions. Stock awards held by participants under the 2007 plan will not vest automatically on such an accelerated basis unless specifically provided by the participant’s applicable award agreement or by any other written agreement between us or any affiliate and the participant.

Plan amendments. The plan administrator may amend or modify the 2007 plan at any time. However, no amendment shall be effective unless approved by our stockholders to the extent stockholder approval is necessary to satisfy applicable law. No amendment may adversely affect any rights under awards already granted to a participant unless requested by us and agreed to in writing by the affected participant.

2007 Non-Employee Directors’ Stock Option Plan

Our board of directors adopted the 2007 non-employee directors’ stock option plan, or directors’ plan, in August 2007 and we expect our stockholders to approve the directors’ plan before the closing of this offering. The directors’ plan will become effective upon the date of the underwriting agreement related to this offering. The directors’ plan will terminate at the discretion of our board of directors. The directors’ plan provides for the automatic grant of nonstatutory stock options to purchase shares of our common stock to our non-employee directors.

Share reserve. An aggregate of              shares of our common stock are reserved for issuance under the directors’ plan. This amount will be automatically increased annually on January 1st of each year, from January 1, 2008 through January 1, 2017, by the lesser of (a) the number of shares of our common stock subject to options granted under the directors’ plan during the preceding calendar year, (b)              shares or (c) a lesser number determined by our board of directors prior to the first day of any calendar year.

Shares of our common stock subject to stock options that have expired or otherwise terminated under the directors’ plan without having been exercised in full shall again become available for grant under the directors’ plan. Shares available for issuance under the directors’ plan include shares not delivered to the optionholder because the shares are withheld for payment of taxes and shares used to pay the exercise price of an option in a net exercise arrangement. Shares of our common stock issued under the directors’ plan may be previously authorized but unissued or reacquired common stock, including shares repurchased by us on the open market. If the exercise of any stock option granted under the directors’ plan is satisfied by tendering shares of our common stock held by the participant, then the number of shares tendered shall again become available for the grant of options under the directors’ plan.

Administration. The directors’ plan will be administered by our board of directors. Our board may not delegate the administration of the directors’ plan.

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Stock options. Stock options will be granted pursuant to the director’s plan and may contain additional terms and conditions as determined by our board of directors. The exercise price of the options granted under the directors’ plan will be equal to 100% of the fair market value of our common stock on the date of grant.

In general, the term of stock options granted under the directors’ plan may not exceed ten years. If an optionholder’s service relationship with us, or any affiliate of ours, ceases, then the optionholder or his or her beneficiary may exercise any vested options for such period as provided under the terms of the stock option agreement. If an optionholder’s relationship with us, or any of our affiliates, ceases for any reason other than for cause, disability, death or upon a change in control, the optionholder may exercise any vested options for a period of three months following the cessation of service. If an optionholder’s service relationship ceases due to disability, the optionholder may exercise any vested option for a period of 12 months following the date of termination due to disability. If an optionholder’s service relationship ceases due to death, or the optionholder dies within the three month period after termination for a reason other than death, the optionholder or his or her beneficiary may exercise any vested options for a period of 18 months following the date of death. If an optionholder’s service relationship terminates within 12 months following a change in control, the optionholder may exercise any vested options for a period of 12 months following the date of change in control. The option term may be extended in the event that applicable securities laws prohibit the exercise of the option following termination of service. In no event, however, may an option be exercised beyond the expiration of its term.

Acceptable consideration for the purchase of our common stock issued under the directors’ plan may include any combination of (a) cash or check, (b) delivery of shares of common stock to us or (c) a program developed under Regulation T as promulgated by the Federal Reserve Board that results in a receipt of irrevocable instructions to pay the aggregate exercise price to us from the sales proceeds.

Generally, an optionholder may not transfer a stock option other than by will or the laws of descent and distribution. However, an optionholder may transfer an option under certain circumstances with our board’s written consent if (a) a Form S-8 registration statement is available for the exercise of the option and the subsequent resale of the shares or (b) the transfer is to the optionholder’s employer or affiliate at the time of transfer. In addition, an optionholder may designate a beneficiary who may exercise the option following the optionholder’s death.

Automatic grants.

• Initial grant. Any person who becomes a non-employee director after the completion of this offering will automatically receive an initial grant of an option to purchase              shares of our common stock upon his or her election. These options will vest in              installments over             .

• Annual grant. In addition, any person who is a non-employee director at the beginning of each calendar year, commencing with January 1, 2008, will be granted, on January 1^st of each year, an option to purchase              shares of our common stock. These options will vest in              installments over             .

Changes to capital structure. In the event that there is a specified type of change in our capital structure, our board of directors will make the appropriate adjustments to (a) the classes and maximum number of securities reserved under the directors’ plan, (b) the classes and maximum number of securities by which the share reserve increases automatically each year, (c) the classes and maximum number or securities for which nondiscretionary grants are made and (d) the classes and maximum number of securities and price per share of stock subject to outstanding options.

Dissolution or liquidation. In the event of a dissolution or liquidation, all outstanding options will terminate immediately prior to the completion of such dissolution or liquidation.

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Corporate transactions. In the event of certain corporate transactions, options under the directors’ plan may be assumed, continued or substituted for by any surviving or acquiring entity or its parent company. If the surviving or acquiring entity or its parent company elects not to assume, continue or substitute for such options, then the vesting options held by non-employee directors whose service has not been terminated as of, or immediately prior to, the effective time of the corporate transaction, generally will be accelerated in full to a date prior to the effective time of the corporate transaction. All options outstanding under the directors’ plan will be terminated if not exercised prior to the effective date of the corporate transaction, provided that under options held by directors whose service has been terminated prior to or as of the corporate transaction, we may continue to exercise our reacquisition or repurchase rights notwithstanding the corporate transaction. If an option will terminate if not exercised prior to the effective time of a corporate transaction, in lieu of exercise, our board may provide that we will pay the optionholder the excess of (a) the value of the property the optionholder would receive upon exercise of the option, over (b) the exercise price.

Changes in control. Outstanding options will immediately vest and become exercisable in the event that an optionholder (a) is required to resign his or her position as a non-employee director as a condition of a change in control, or (b) is removed from his or her position as a non-employee director in connection with a change in control.

Plan amendments. Our board of directors will have the authority to amend or terminate the directors’ plan. However, no amendment or termination of the directors’ plan may adversely affect any rights under options already granted to a participant unless requested by us and agreed to in writing by the affected participant. Except as related to changes in capital structure, we will obtain stockholder approval of any amendment to the directors’ plan to the extent required by applicable law.

2007 Employee Stock Purchase Plan

Our board of directors adopted our 2007 employee stock purchase plan, or 2007 purchase plan, in August 2007 and we expect our stockholders to approve the 2007 purchase plan prior to the closing of this offering. The 2007 purchase plan will become effective upon the date of the underwriting agreement related to this offering. The 2007 purchase plan will terminate when all shares of our common stock reserved for issuance under the 2007 purchase plan, as increased and/or adjusted from time to time, have been issued under the terms of the 2007 purchase plan, or sooner in the discretion of our board of directors.

Share reserve. Subject to any capitalization adjustments, the 2007 purchase plan authorizes the issuance of              shares of our common stock pursuant to purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our common stock reserved for issuance will automatically increase on January 1st of each year, from January 1, 2008 through January 1, 2017, by the lesser of (a)     % of the total number of shares of our common stock outstanding on December 31st of the preceding year, (b)              shares or (c) a lesser number determined by our board of directors prior to the first day of any calendar year. The 2007 purchase plan is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code.

Administration. Our board of directors has the authority to administer the 2007 purchase plan. Our board may delegate limited or full administration of the 2007 purchase plan to one or more committees. The 2007 purchase plan is implemented through a series of offerings of purchase rights to eligible employees. Under the 2007 purchase plan, we may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for employees participating in the offering. An offering may be terminated under certain circumstances.

Payroll deductions. All participants may contribute to the 2007 purchase plan, normally through payroll deductions, up to 20% of their earnings for the purchase of our common stock under the 2007 purchase plan. For

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the first purchase period of the initial offering only, eligible employees may choose to contribute funds directly in cash. Unless otherwise determined by our board of directors, common stock will be purchased for accounts of employees participating in the 2007 purchase plan at a price per share not less than the lesser of (a) 85% of the fair market value of a share of our common stock on the first date of an offering or (b) 85% of the fair market value of a share of our common stock on the date of purchase.

Limitations. Employees may have to satisfy one or more of the following service requirements before participating in the 2007 purchase plan, as determined by our board of directors: (a) customarily employed for more than 20 hours per week, (b) customarily employed for more than five months per calendar year or (c) continuous employment with us or one of our affiliates for a period of time not to exceed two years. No employee may purchase shares under the 2007 purchase plan at a rate in excess of $25,000 worth of our common stock based on the fair market value per share of our common stock at the beginning of an offering for each year such purchase right is outstanding. Finally, no employee will be eligible for the grant of any purchase rights under the 2007 purchase plan if, immediately after such rights are granted, such employee has voting power over 5% or more of our outstanding capital stock measured by vote or value.

If an employee’s relationship with us or any of our affiliates ceases for any reason, such employee’s purchase rights will terminate immediately and we will distribute all of the employee’s accumulated contributions. Purchase rights are not transferable except by will and the laws of descent and distribution.

Changes to capital structure. In the event that there is a specified type of change in our capital structure, our board will make appropriate adjustments to (a) the classes and maximum number of securities reserved under the 2007 purchase plan, (b) the classes and maximum number of securities by which the share reserve may increase automatically each year, (c) the classes and number of securities subject to outstanding purchase rights and (d) the classes and number of securities imposed by purchase limits under each ongoing offering.

Corporate transactions. In the event of certain significant corporate transactions, any then-outstanding rights to purchase our stock under the 2007 purchase plan may be assumed, continued or substituted for by any surviving or acquiring entity or its parent company. If the surviving or acquiring entity or its parent company elects not to assume, continue or substitute for such purchase rights, then the participants’ accumulated payroll contributions will be used to purchase shares of our common stock within ten business days prior to such corporate transaction, and such purchase rights will terminate immediately thereafter.

401(k) Plan

We maintain a defined contribution employee retirement plan, or 401(k) plan, for our employees. Our executive officers are also eligible to participate in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Code. The plan provides that each participant may contribute up to the lesser of 100% of his or her pre-tax compensation or the statutory limit, which is $15,500 for calendar year 2007. Participants that are 50 years or older can also make “catch-up” contributions, which in calendar year 2007 may be up to an additional $5,000 above the statutory limit. Under the 401(k) plan, each participant is fully vested in his or her deferred salary contributions when contributed. Participant contributions are held and invested, pursuant to the participant’s instructions, by the plan’s trustee.

Compensation Committee Interlocks and Insider Participation

We intend to establish a compensation committee upon the completion of this offering. Prior to such time, our full board of directors has and will make decisions relating to compensation of our executive officers. Our board of directors have appointed Patrick Fourteau, Steve Meyer and Brian Tambi to serve on the compensation committee once established. None of these individuals has ever been an executive officer or employee of ours. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

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Limitation of Liability and Indemnification

Our amended and restated certificate of incorporation, which will become effective upon the completion of this offering, limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:

• breach of their duty of loyalty to the corporation or its stockholders;

• act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

• unlawful payment of dividends or redemption of shares; or

• transaction from which the directors derived an improper personal benefit.

These limitations of liability do not apply to liabilities arising under federal securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission.

Our amended and restated bylaws, which will become effective upon the completion of this offering, provide that we will indemnify our directors and officers, and may indemnify other employees and other agents, to the fullest extent permitted by law. Our amended and restated bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with his or her services to us (but shall not include any judgments, fines or penalties actually levied against such individual’s violations of law), regardless of whether our amended and restated bylaws permit such indemnification. We have obtained a policy of directors’ and officers’ liability insurance.

We have entered, and intend to continue to enter, into separate indemnification agreements with our directors and officers, in addition to the indemnification provided for in our amended and restated bylaws. These agreements, among other things, require us to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of his or her services as one of our directors or officers, or any other company or enterprise to which the person provides services at our request.

At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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RELATED-PERSON TRANSACTIONS

The following includes a summary of transactions since January 1, 2004 to which we have been a party, in which the amount involved in the transaction exceeded $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive Compensation.”

Sales of Securities

In December 2002, we granted 106,250 shares of restricted common stock to Dr. George Kottayil under our equity incentive plan in exchange for services to be rendered. In October 2005, in connection with an agreement with respect to such restricted common stock, we issued 28,977 shares of voting common stock to Dr. Kottayil in exchange for his surrender of 77,273 of the 106,250 shares of restricted common stock previously granted to him in December 2002.

In May 2007, we issued an aggregate of 3,000,000 shares of voting common stock to The John N. Kapoor Trust dated September 20, 1989 and various of its affiliates in lieu of repayment of interest totaling $240,000 accrued under outstanding notes payable to such Trust. The John N. Kapoor Trust is controlled by our Chairman and one of our two 5% or greater stockholders.

Loan Transactions

We have entered into various loan arrangements with The John N. Kapoor Trust, pursuant to which we have issued promissory notes in an aggregate principal amount of $28.0 million. These notes include: (i) a note dated November 29, 2002 in an aggregate principal amount of $1.0 million, which we amended and restated on November 28, 2005 to extend the maturity date to May 28, 2007, (ii) a note dated January 23, 2004 in an aggregate principal amount of $100,000, which we amended and restated on November 28, 2005 to extend the maturity date to October 31, 2006, (iii) a note dated January 23, 2004 in an aggregate principal amount of $2.6 million, (iv) a note dated October 11, 2005 in an aggregate principal amount of $12.3 million, and (v) a note dated May 15, 2007 in an aggregate principal amount of $12.0 million. With the exception of the January 23, 2004 note, all of the other notes are secured against our assets. As of June 30, 2007, we had approximately $21.5 million in debt, including accrued interest, related to these promissory notes. All of these notes remain outstanding and the aggregate principal amount and interest accrued on all these promissory notes will convert into                      shares of our common stock at a price of $             per share, the mid-point of the price range set forth on the cover page of this prospectus, immediately prior to the closing of this offering.

Amended and Restated Stockholders’ Agreement

We have entered into an amended and restated stockholders’ agreement with all of the holders of our voting and non-voting common stock. This agreement governs the election of the members of our board of directors, along with our amended and restated certificate of incorporation. This agreement also requires holders of our voting and non-voting common stock to vote in favor of any proposed change in control transaction that is approved by the holders of a majority of our common stock. Additionally, this agreement provides for rights of first refusal and co-sale, and generally restricts the sale or transfer of any shares held by our stockholders. Upon the closing of this offering, the amended and restated stockholders’ agreement will terminate in its entirety.

Employment Arrangements

Offer Letters

With the exception of our Executive Vice President, Technology, Dr. Kottayil, we have entered into offer letters with all of our executive officers setting forth their respective base salaries, bonus eligibility, if

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any, stock option grants and other employment benefits. Each executive officer’s employment is on an “at-will” basis and can be terminated by us or the executive officer at any time, for any reason and with or without notice.

Proprietary Information and Inventions Assignment Agreements

We have entered into a standard form agreement with each of our executive officers relating to proprietary information and inventions. Among other things, this agreement obligates the executive officer to refrain from disclosing any of our confidential information received during the course of employment and, with some exceptions, to assign to us any inventions conceived or developed during the course of such executive’s employment with us.

Consulting Arrangements

From April to June of 2007, Ramesh Acharya assisted us in drafting the amendment to our ANDA for Dronabinol HG capsule which we submitted to the FDA in June 2007. In consideration of this assistance, on June 20, 2007, we granted Mr. Acharya an option to purchase 75,000 shares of our non-voting common stock.

Stock Options Granted to Executive Officers and Directors

From January 1, 2004 to July 31, 2007, we granted stock options to purchase an aggregate of 825,000 shares of our common stock and 320,000 shares of our non-voting common stock to our current executive officers and directors, with exercise prices ranging from $0.07247 to $0.08.

Policies and Procedures for Transactions with Related Persons

In connection with this offering, we have adopted a related-person transactions policy to monitor transactions in which we and any of the following have an interest: any of our directors or executive officers or a nominee to become a director; a security holder known by us to be the record or beneficial owner of more than 5% of any class of our voting securities; an “immediate family member” of any of the foregoing, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such person, and any person (other than a tenant or employee) sharing the household of such person; and any firm, corporation or other entity in which any of the foregoing persons is an executive, partner or principal or holds a similar control position or in which such person directly or indirectly has a 10% or greater equity interest. The policy covers any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we are, were or will be participants in which the amount involved exceeds $120,000 and in which any related person had, has or will have a direct or indirect material interest. Transactions involving compensation for services provided to us as an employee, consultant or director are not considered related-person transactions under this policy.

Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to our audit committee (or, where approval by our audit committee would be inappropriate, to another independent body of our board of directors) for review. The presentation must include a description of, among other things, the material facts, the direct and indirect interests of the related persons, the benefits of the transaction to us and whether any alternative transactions are available. To identify related-person transactions in advance, we rely on information supplied by our executive officers, directors and certain significant stockholders. In considering related-person transactions, our audit committee takes into account the relevant available facts and circumstances including, but not limited to:

• the risks, costs and benefits to us;

• the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;

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• the terms of the transaction;

• the availability of other sources for comparable services or products; and

• the terms available to or from, as the case may be, unrelated third parties or to or from our employees generally.

In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberations and approval.

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PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership of our capital stock outstanding as of July 31, 2007 by:

• each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

• each of our directors;

• our named executive officer; and

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

The percentage ownership information shown in the table is based upon 24,194,237 shares of common stock outstanding as of July 31, 2007, which assumes the conversion of all of our outstanding non-voting common stock into 1,051,062 shares of common stock, which will occur immediately prior to the closing of this offering. The percentage ownership information does not assume (i) the exercise of the underwriters’ option to purchase additional shares; (ii) the conversion of $     million in aggregate principal amount of notes and accrued interest thereon owed to a trust controlled by our chairman into              shares of common stock, which will occur immediately prior to the closing of this offering; and (iii) the issuance of              shares of common stock in this offering.

Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than 5% of our common stock. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants that are either immediately exercisable or exercisable on or before September 29, 2007, which is 60 days after July 31, 2007. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

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Except as otherwise noted below, the address for each person or entity listed in the table is c/o Insys Therapeutics, Inc., 10220 South 51^st Street, Suite 2, Phoenix, AZ 85044.

	Number of Shares Beneficially Owned	Percentage of Shares Beneficially Owned
Name and Address of Beneficial Owner		Before Offering		After Offering
5% or Greater Stockholder
The John N. Kapoor Trust dated September 20, 1989 (1)	16,262,500	67.22	%		%
225 E. Deerpath Rd. Ste. 250
Lake Forest, IL 60045
5% or Greater Stockholder and Named Executive Officer
Santosh George Kottayil	3,080,675	12.73	%		%
Directors
John N. Kapoor (2)	16,862,500	69.70	%		%
Jon W. McGarity	600,000	2.48	%		%
Mike Babich (3)	437,500	1.81	%		%
Steve Meyer	—	—	%		%
Gary Tollefson	—	—	%		%
Brian Tambi	—	—	%		%
Patrick Fourteau	—	—	%		%
All executive officers and directors as a group (12 persons)	21,158,175	84.6	%		%

* Represents beneficial ownership of less than 1%.

(1) Does not include              shares of common stock to be issued to The John N. Kapoor Trust dated September 20, 1989, or the Trust, upon conversion of the $         million in aggregate principal amount of notes and accrued interest thereon owed to the Trust, which will occur immediately prior to the closing of this offering.

(2) Includes 16,262,500 shares of our common stock held by The John N. Kapoor Trust dated September 20, 1989, for which Dr. Kapoor is the trustee. Also includes 600,000 shares of our common stock held by The John N. Kapoor 1999 Descendants Trust, for which Dr. Kapoor is the grantor.

(3) Includes 37,500 shares of non-voting common stock, which will be converted into 37,500 shares of common stock automatically immediately prior to the closing of the offering.

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DESCRIPTION OF CAPITAL STOCK

Upon closing of this offering and the filing of our amended and restated certificate of incorporation, our authorized capital stock will consist of 200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.

The following is a summary of the rights of our voting and non-voting common stock. This summary is not complete. For more detailed information, please see our amended and restated certificate of incorporation and amended and restated bylaws, which are filed as exhibits to the registration statement of which this prospectus is a part.

Common Stock

Outstanding Shares. On July 31, 2007, there were 23,143,175 shares of our common stock outstanding, held of record by approximately 41 stockholders. This amount excludes our outstanding shares of non-voting stock as of July 31, 2007, which will convert into 1,051,062 shares of common stock automatically immediately prior to the closing of this offering. Based on (i) 23,143,175 shares of our common stock outstanding as of July 31, 2007, (ii) the conversion of all outstanding shares of non-voting common stock (iii) the conversion of $         million in aggregate principal amount of notes and accrued interest thereon owed to a trust controlled by our chairman into              shares of common stock, which will occur immediately prior to the closing of this offering, and (iv) the issuance of              shares of common stock in this offering, there will be              shares of our common stock outstanding upon the closing of this offering.

As of July 31, 2007, there were no shares of our common stock subject to outstanding options and 299,188 shares of our non-voting common stock subject to outstanding options.

Voting Rights. Each holder of our common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of the stockholders, including the election of directors. Our amended and restated certificate of incorporation and amended and restated bylaws do not provide for cumulative voting rights. Because of this, the holders of a majority of the shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election.

Dividends. Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of our outstanding shares of common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.

Liquidation. In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.

Rights and Preferences. Holders of our common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.

Fully Paid and Nonassessable. All of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering will be, fully paid and nonassessable.

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Non-Voting and Preferred Stock

Immediately prior to the closing of this offering, there will be no shares of non-voting common stock or preferred stock issued and outstanding. Following this offering, under our amended and restated certificate of incorporation, our board of directors will have the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.

Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.

Delaware Anti-Takeover Law and Provisions of our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws

Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware General Corporation Law, or Section 203. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which 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 interested 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 66-2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Section 203 defines a business combination to include:

• any merger or consolidation involving the corporation and the interested stockholder;

• any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

• subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; and

• the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.

Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws. Provisions of our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective

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upon the closing of this offering, may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws:

• permit our board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change in our control);

• provide that the authorized number of directors may be changed only by resolution of the board of directors;

• provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

• divide our board of directors into three classes;

• require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;

• provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice;

• do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); and

• provide that special meetings of our stockholders may be called only by the chairman of the board, our chief executive officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors.

The amendment of any of these provisions, with the exception of the ability of our board of directors to issue shares of preferred stock and designate any rights, preferences and privileges thereto, would require approval by the holders of at least 66-2/3% of our then outstanding common stock.

Nasdaq Global Market Listing

We have applied for listing of our common stock on the Nasdaq Global Market under the symbol INRX.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. The transfer agent and registrar’s address is 250 Royall Street, Canton, MA 02021.

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SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of common stock in the public market could adversely affect prevailing market prices. Furthermore, since only a limited number of shares will be available for sale shortly after this offering because of contractual and legal restrictions on resale described below, sales of substantial amounts of common stock in the public market after the restrictions lapse could adversely affect the prevailing market price for our common stock as well as our ability to raise equity capital in the future.

Based on the number of shares of common stock outstanding as of July 31, 2007, upon the closing of this offering,              shares of our common stock will be outstanding, assuming no exercise of the underwriters’ option to purchase additional shares and no exercise of outstanding options. All of the shares sold in this offering will be freely tradable unless held by one of our affiliates. Except as set forth below, the remaining              shares of common stock outstanding after this offering will be restricted as a result of securities laws or lock-up agreements. These remaining shares will generally become available for sale in the public market as follows:

•              shares of common stock will be eligible for immediate sale upon the closing of this offering;

•              shares of common stock will be eligible for sale (including pursuant to Rule 144 or Rule 701) upon expiration of lock-up agreements at least 180 days after the date of this prospectus; and

•              shares of common stock will be eligible for sale from time to time thereafter upon expiration of their respective holding periods under Rule 144 or Rule 145, but certain of these shares could be sold earlier if the holders exercise any available registration rights.

Rule 144

In general, pursuant to Rule 144 under the Securities Act, or Rule 144, as in effect on the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

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

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

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

In July 2007, the SEC announced proposed revisions to Rule 144. If the proposed changes to Rule 144 are approved, the holding period for restricted shares of our common stock after the completion of this offering may be reduced to six months under specified circumstances, the restrictions on the sale of restricted shares of our common stock held by our affiliates may be reduced and certain other restrictions on resale of the shares of our common stock under Rule 144 may be modified to make it easier for our stockholders under specified circumstances to sell their shares upon the expiration of the lock-up agreements, beginning 180 days after the date of this prospectus. We do not know whether these proposed revisions to Rule 144 will be adopted as proposed or in a modified form, or at all.

Rule 144(k)

Pursuant to Rule 144(k) promulgated under the Securities Act as in effect on the date of this prospectus, a person who is not deemed to have been one of our affiliates 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 an affiliate, is entitled to sell the shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

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Rule 701

Rule 701 under the Securities Act, or Rule 701, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement.

Most of our employees, executive officers, directors or consultants who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares.

Lock-Up Agreements

We, along with our directors, executive officers and substantially all of our other stockholders and optionholders, have agreed with the underwriters that for a period of 180 days after the date of this prospectus, subject to specified exceptions, we or they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock. The “lock-up” period is subject to limited extension as described in “Underwriting” below.

Equity Incentive Plans

We intend to file with the SEC a registration statement under the Securities Act covering the shares of common stock reserved for issuance under our 2007 equity incentive plan, our 2007 non-employee directors’ stock option plan and our 2007 employee stock purchase plan. The registration statement is expected to be filed and become effective as soon as practicable after the closing of this offering. Accordingly, shares registered under the registration statement will be available for sale in the open market following its effective date, subject to Rule 144 volume limitations and the lock-up agreements described above, if applicable.

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a general discussion of the material U.S. federal income tax consequences of the ownership and disposition of our common stock to a non-U.S. holder. For purposes of this discussion, a non-U.S. holder is any holder that for U.S. federal income tax purposes is not:.

• an individual citizen or resident of the United States;

• a corporation or other entity taxable as a corporation or a partnership or entity taxable as a partnership created or organized in the United States or under the laws of the United States or any political subdivision thereof;

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

• a trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (y) which has made an election to be treated as a U.S. person.

If a partnership holds common stock, the tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Accordingly, we urge partnerships that hold our common stock and partners in such partnerships to consult their tax advisors.

This discussion assumes that a non-U.S. holder will hold our common stock issued pursuant to the offering as a capital asset (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant in light of a non-U.S. holder’s special tax status or special tax situations. U.S. expatriates, life insurance companies, tax-exempt organizations, dealers in securities or currency, banks or other financial institutions, investors whose functional currency is other than the U.S. dollar, and investors that hold common stock as part of a hedge, straddle or conversion transaction are among those categories of potential investors that are subject to special rules not covered in this discussion. This discussion does not address any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. Furthermore, the following discussion is based on current provisions of the Internal Revenue Code and Treasury Regulations and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Accordingly, we urge each non-U.S. holder to 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 have not paid any dividends on our common stock and we do not plan to pay any dividends for the foreseeable future. However, if we do pay dividends on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those dividends exceed our current and accumulated earnings and profits, the dividends will constitute a return of capital and will first reduce a holder’s basis, but not below zero, and then will be treated as gain from the sale of stock.

Any dividend (out of earnings and profits) paid to a non-U.S. holder of common stock generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable tax treaty. To receive a reduced treaty rate, a non-U.S. holder must provide us with an IRS Form W-8BEN or other appropriate version of Form W-8 certifying qualification for the reduced rate.

Dividends received by a non-U.S. holder that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder are exempt from such withholding tax. To obtain this exemption, a non-U.S. holder must provide us with an IRS Form W-8ECI properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to

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U.S. persons, net of certain deductions and credits, subject to any applicable tax treaty providing otherwise. In addition to the graduated tax described above, dividends received by corporate non-U.S. holders that are effectively connected with a U.S. trade or business of the corporate non-U.S. holder may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable tax treaty.

A non-U.S. holder of common stock that is eligible for a reduced rate of withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts currently withheld if an appropriate claim for refund is filed with the IRS.

Gain on Disposition of Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

• the gain is effectively connected with a U.S. trade or business of the non-U.S. holder (which gain, in the case of a corporate non-U.S. holder, must also be taken into account for branch profits tax purposes), subject to any applicable tax treaty providing otherwise;

• the non-U.S. holder is an individual who is present in the U.S. for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or

• our common stock constitutes a U.S. real property interest by reason of our status as a “U.S. real property holding corporation” for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the holder’s holding period for our common stock. We believe that we are not currently, and that we will not become, a “U.S. real property holding corporation” for U.S. federal income tax purposes.

Backup Withholding and Information Reporting

Generally, we must report annually to the IRS the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.

Payments of dividends or of proceeds on the disposition of stock made to a non-U.S. holder may be subject to backup withholding (currently at a rate of 28%) unless the non-U.S. holder establishes an exemption, for example, by properly certifying its non-U.S. status on a Form W-8BEN or another appropriate version of Form W-8. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person.

Backup withholding is not an additional tax. Rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is furnished to the IRS.

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UNDERWRITING

We are offering the shares of common stock described in this prospectus through a number of underwriters. Banc of America Securities LLC and UBS Securities LLC are the representatives of the underwriters. We have entered into a firm commitment underwriting agreement with the representatives. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has agreed to purchase, the number of shares of common stock listed next to its name in the following table:

Underwriter	Number of Shares
Banc of America Securities LLC
UBS Securities LLC
JMP Securities LLC
Natixis Bleichroeder Inc.
Total

The underwriting agreement is subject to a number of terms and conditions and provides that the underwriters must buy all of the shares if they buy any of them. The underwriters will sell the shares to the public when and if the underwriters buy the shares from us.

The underwriters initially will offer the shares to the public at the price specified on the cover page of this prospectus. The underwriters may allow a concession of not more than $             per share to selected dealers. The underwriters may also allow, and those dealers may re-allow, a concession of not more than $             per share to some other dealers. If all the shares are not sold at the public offering price, the underwriters may change the public offering price and the other selling terms. The common stock is offered subject to a number of conditions, including:

• receipt and acceptance of the common stock by the underwriters; and

• the underwriters’ right to reject orders in whole or in part.

Option to Purchase Additional Shares. We have granted the underwriters an option to purchase up to                  additional shares of our common stock at the same price per share as they are paying for the shares shown in the table above. These additional shares would cover sales by the underwriters which exceed the total number of shares shown in the table above. The underwriters may exercise this option at any time and from time to time, in whole or in part, within 30 days after the date of this prospectus. To the extent that the underwriters exercise this option, each underwriter will purchase additional shares from us in approximately the same proportion as it purchased the shares shown in the table above. We will pay the expenses associated with the exercise of this option.

Discount and Commissions. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by us. These amounts are shown assuming no exercise and full exercise of the underwriters’ option to purchase additional shares.

We estimate that the expenses of the offering to be paid by us, not including underwriting discounts and commissions, will be approximately $            .

	Paid by Us
	No Exercise	Full Exercise
Per Share	$	$
Total	$	$

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Listing. We expect our common stock to be approved for quotation on the Nasdaq Global Market under the symbol “INRX”.

Stabilization. In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common stock, including:

• stabilizing transactions;

• short sales;

• syndicate covering transactions;

• imposition of penalty bids; and

• purchases to cover positions created by short sales.

Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our common stock while this offering is in progress. Stabilizing transactions may include making short sales of our common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock from us or on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ option to purchase additional shares referred to above, or may be “naked” shorts, which are short positions in excess of that amount. Syndicate covering transactions involve purchases of our common stock in the open market after the distribution has been completed in order to cover syndicate short positions.

The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares as referred to above.

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 that could adversely affect investors who purchased in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The representatives also may impose a penalty bid on underwriters and dealers participating in the offering. This means that the representatives may reclaim from any syndicate members or other dealers participating in the offering the underwriting discount, commissions or selling concession on shares sold by them and purchased by the representatives in stabilizing or short covering transactions.

These activities may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result of these activities, the price of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence the activities, they may discontinue them at any time. The underwriters may carry out these transactions on the Nasdaq Global Market, in the over-the-counter market or otherwise.

Discretionary Accounts. The underwriters have informed us that they do not expect to make sales to accounts over which they exercise discretionary authority in excess of 5% of the shares of common stock being offered.

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IPO Pricing. Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between us and the representatives of the underwriters. Among the factors to be considered in these negotiations are:

• the history of, and prospects for, our company and the industry in which we compete;

• our past and present financial performance;

• an assessment of our management;

• the present state of our development;

• the prospects for our future earnings;

• the prevailing conditions of the applicable United States securities market at the time of this offering;

• market valuations of publicly traded companies that we and the representatives of the underwriters believe to be comparable to us; and

• other factors deemed relevant.

The estimated initial public offering price range set forth on the cover of this preliminary prospectus is subject to change as a result of market conditions and other factors.

Lock-up Agreements. We, our directors and executive officers, all of our existing stockholders and all of our option holders have entered into lock-up agreements with the underwriters. Under these agreements, subject to exceptions, we may not issue any new shares of common stock, and those holders of stock and options may not, directly or indirectly, offer, sell, contract to sell, pledge or otherwise dispose of or hedge any common stock or securities convertible into or exchangeable for shares of common stock, or publicly announce the intention to do any of the foregoing, without the prior written consent of Banc of America Securities LLC and UBS Securities LLC for a period of 180 days from the date of this prospectus. This consent may be given at any time without public notice. The lock-up provisions do not limit our ability to (a) file a registration statement on Form S-8, (b) issue shares or grant stock options pursuant to any stock plan or arrangement described in this prospectus or (c) issue shares of our common stock or securities exercisable for our common stock in an aggregate amount not to exceed 5% of our outstanding common stock as of the date of this prospectus after giving effect to this offering in connection with certain strategic transactions by us, provided that the securities so issued are subject to the same lock-up provisions. In addition, during this 180 day period, we have also agreed not to file any registration statement for, and each of our officers and stockholders has agreed not to make any demand for, or exercise any right of, the registration of, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock or the filing of a prospectus with any Canadian securities regulatory authority without the prior written consent of Banc of America Securities LLC and UBS Securities LLC. In addition, for the purpose of allowing the underwriters to comply with the NASD Rule 2711(f)(4), if, under certain circumstances, we release earnings results or material news or make certain announcements that we will release earnings results, or a material event relating to us occurs, then the 180-day lock-up period will be extended up to 18 days following the date of release of the earnings results or the occurrence of the material news or material event, as applicable.

Directed Share Program. At our request, the underwriters have reserved for sale to our employees, directors, families of employees and directors, business associates and other third parties at the initial public offering price up to 2% of the shares being offered by this prospectus. The sale of the reserved shares to these purchasers will be made by Banc of America Securities LLC. The purchasers of these shares will not be subject to a lock-up except as required by the Conduct Rules of the NASD, which require a 90-day lock-up if they are affiliated with or associated with NASD members or if they or members of their immediate families hold senior positions at financial institutions, or to the extent the purchasers are subject to a lock-up agreement with the underwriters as described above. We do not know if our employees, directors, families of employees and directors, business associates and other third parties will choose to purchase all or any portion of the reserved

116

shares, but any purchases they do make will reduce the number of shares available to the general public. If all of these reserved shares are not purchased, the underwriters will offer the remainder to the general public on the same terms as the other shares offered by this prospectus.

Indemnification. We will indemnify the underwriters against some liabilities, including liabilities under the Securities Act and Canadian provincial securities legislation. If we are unable to provide this indemnification, we will contribute to payments the underwriters may be required to make in respect of those liabilities.

European Economic Area. In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) an offer of the shares to the public may not be made in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that an offer to the public in that Relevant Member State of any shares may be made at any time under the following exemptions under the Prospectus Directive if they have been implemented in the Relevant Member State:

(a) to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or

(c) in any other circumstances falling within Article 3 (2) of the Prospectus Directive,

provided that no such offer of shares shall result in a requirement for the publication by the company or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Securities to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

No prospectus (including any amendment, supplement or replacement thereto) has been prepared in connection with the offering of the shares that has been approved by the Autorité des marchés financiers or by the competent authority of another State that is a contracting party to the Agreement on the European Economic Area and notified to the Autorité des marchés financiers; no shares have been offered or sold and will be offered or sold, directly or indirectly, to the public in France except to permitted investors (“Permitted Investors”) consisting of persons licensed to provide the investment service of portfolio management for the account of third parties, qualified investors (investisseurs qualifiés) acting for their own account and/or investors belonging to a limited circle of investors (cercle restreint d’investisseurs) acting for their own account, with “qualified investors” and “limited circle of investors” having the meaning ascribed to them in Articles L. 411-2, D. 411-1, D. 411-2, D. 411-4, D. 734-1, D. 744-1, D. 754-1 and D. 764-1 of the French Code Monétaire et Financier and applicable regulations thereunder; none of this prospectus or any other materials related to the offering or information contained therein relating to the shares has been released, issued or distributed to the public in France except to Permitted Investors; and the direct or indirect resale to the public in France of any shares acquired by any Permitted Investors may be made only as provided by Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the French Code Monétaire et Financier and applicable regulations thereunder.

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In addition:

• an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 20000) has only been communicated or caused to be communicated and will only be communicated or caused to be communicated ) in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to us; and

• all applicable provisions of the FSMA have been complied with and will be complied with, with respect to anything done in relation to the shares in, from or otherwise involving the United Kingdom.

This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such shares will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

The offering of the shares has not been cleared by the Italian Securities Exchange Commission (Commissione Nazionale per le Società e la Borsa, the “CONSOB”) pursuant to Italian securities legislation and, accordingly, the shares may not and will not be offered, sold or delivered, nor may or will copies of the prospectus any other documents relating to the shares be distributed in Italy, except (i) to professional investors (operatori qualificati), as defined in Article 31, second paragraph, of CONSOB Regulation No. 11522 of July 1, 1998, as amended, (the “Regulation No. 11522”), or (ii) in other circumstances which are exempted from the rules on solicitation of investments pursuant to Article 100 of Legislative Decree No. 58 of February 24, 1998 (the “Financial Service Act”) and Article 33, first paragraph, of CONSOB Regulation No. 11971 of May 14, 1999, as amended.

Any offer, sale or delivery of the shares or distribution of copies of the prospectus or any other document relating to the shares in Italy may and will be effected in accordance with all Italian securities, tax, exchange control and other applicable laws and regulations, and, in particular, will be: (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in Italy in accordance with the Financial Services Act, Legislative Decree No. 385 of September 1, 1993, as amended (the “Italian Banking Law”), Regulation No. 11522, and any other applicable laws and regulations; (ii) in compliance with Article 129 of the Italian Banking Law and the implementing guidelines of the Bank of Italy; and (iii) in compliance with any other applicable notification requirement or limitation which may be imposed by CONSOB or the Bank of Italy.

Any investor purchasing the shares in the offering is solely responsible for ensuring that any offer or resale of the shares it purchased in the offering occurs in compliance with applicable laws and regulations.

The prospectus and the information contained therein are intended only for the use of its recipient and, unless in circumstances which are exempted from the rules on solicitation of investments pursuant to Article 100 of the “Financial Service Act” and Article 33, first paragraph, of CONSOB Regulation No. 11971 of May 14, 1999, as amended, is not to be distributed, for any reason, to any third party resident or located in Italy. No person resident or located in Italy other than the original recipients of this document may rely on it or its content.

Italy has only partially implemented the Prospectus Directive, the provisions under the heading “European Economic Area” above shall apply with respect to Italy only to the extent that the relevant provisions of the Prospectus Directive have already been implemented in Italy.

Insofar as the requirements above are based on laws which are superseded at any time pursuant to the implementation of the Prospectus Directive, such requirements shall be replaced by the applicable requirements under the Prospectus Directive

118

Online Offering. A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters participating in this offering. Other than the prospectus in electronic format, the information on any such website, or accessible through any such website, is not part of the prospectus. The representatives 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 underwriters that will make internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders.

Conflicts/Affiliates. The underwriters and their affiliates have provided, and may in the future provide, various investment banking, commercial banking and other financial services to us or our founder, Dr. John N. Kapoor, for which services they have received, and may in the future receive, customary fees.

119

LEGAL MATTERS

The validity of the shares of common stock being offered by this prospectus will be passed upon for us by Cooley Godward Kronish LLP, San Diego, California. The underwriters are being represented by Wilmer Cutler Pickering Hale and Dorr LLP, Palo Alto, California.

EXPERTS

The financial statements included in this Prospectus and in the Registration Statement have been audited by BDO Seidman LLP, an independent registered public accounting firm, to the extent and for the periods set forth in their report appearing elsewhere herein in the Registration Statement and are included in reliance upon such report given upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE 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 being offered by this prospectus. This prospectus does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street NE, Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. You may also request a copy of these filings, at no cost, by writing or telephoning us at: 10220 South 51st Street, Suite 2, Phoenix, Arizona 85044, (602) 910-2617.

Upon the closing of this offering, we will be subject to the information reporting requirements of the Exchange Act, and we will file reports, proxy statements and other information with the SEC. These 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. We also maintain a website at www.insystherapeutics.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of this prospectus.

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I NSYS THERAPEUTICS, INC.

(A Development-Stage Company)

Index to Financial Statements

Audited Financial Statements:
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets as of December 31, 2006 and 2005	F-3
Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004, and the period from October 2002 (inception) through December 31, 2006	F-4
Statements of Stockholders’ Deficit for the Years Ended December 31, 2006, 2005, 2004 and 2003 and for the Period from October 2002 (inception) through December 31, 2002	F-5
Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004, and the period from October 2002 (inception) through December 31, 2006	F-6
Notes to Audited Financial Statements	F-7
Unaudited Condensed Financial Statements:
Unaudited Condensed Balance Sheets as of June 30, 2007 and December 31, 2006	F-16
Unaudited Condensed Statements of Operations for the Six Months Ended June 30, 2007 and 2006, and the period from October 2002 (inception) through June 30, 2007	F-17
Unaudited Condensed Statements of Stockholders’ Deficit for the period October 2002 (inception) through the Six Months Ended June 30, 2007	F-18
Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006, and the period from October 2002 (inception) through June 30, 2007	F-19
Notes to Unaudited Condensed Financial Statements	F-20

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Insys Therapeutics, Inc.

We have audited the accompanying balance sheets of Insys Therapeutics, Inc. (the “Company”), a development stage company, as of December 31, 2006 and 2005, and the related statements of operations and cash flows for the period from October 2002 (inception) to December 31, 2006 and for each of the three years in the period ended December 31, 2006 and the statements of stockholders’ deficit for the period from October 2002 (inception) through December 31, 2002 and for each of the four years in the period ended December 31, 2006. 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. The Company is not required to have, nor were we engaged to perform, an audit of its 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Insys Therapeutics, Inc. as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the period from October 2002 (inception) through December 31, 2006 and for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

BDO SEIDMAN, LLP

Chicago, Illinois

August 13, 2007

F-2

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

BALANCE SHEETS

	As of December 31,
	2006			2005
ASSETS
Current Assets
Cash and cash equivalents	$	17,000		$	4,000
Prepaid expenses and other assets		4,000			12,000
Total current assets		21,000			16,000
Fixed assets, net		107,000			141,000
Notes receivable		1,579,000			621,000
Total assets	$	1,707,000		$	778,000
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	362,000		$	213,000
Capital lease obligation, short term		134,000			133,000
Notes payable to related party, including interest, short term		4,135,000			2,870,000
Total current liabilities		4,631,000			3,216,000
Capital lease obligation, long term		202,000			337,000
Notes payable to related party, including interest, long term		8,623,000			2,006,000
Total liabilities		13,456,000			5,559,000
Commitments and contingencies (see Notes 9 and 10)
Stockholders’ Deficit
Common stock, voting (par value $0.001 per share, 28,000,000 shares authorized, 19,318,175 shares issued and outstanding as of December 31 2006 and 2005)		19,000			19,000
Common stock, non-voting (par value $0.001 per share, 2,000,000 shares authorized, 767,812 and 0 shares issued and outstanding as of December 31, 2006 and 2005, respectively)		1,000			—
Additional paid in capital		99,000			21,000
Notes receivable from stockholders		(42,000	)
Deficit accumulated during the development stage		(11,826,000	)		(4,821,000	)
Total stockholders’ deficit		(11,749,000	)		(4,781,000	)
Total liabilities and stockholders’ deficit	$	1,707,000		$	778,000

See accompanying notes to audited financial statements.

F-3

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

STATEMENTS OF OPERATIONS

	Years Ended December 31,									Period from October 2002 (inception) through December 31, 2006
	2006			2005			2004
Revenues	$	—		$	—		$	—		$	—
Operating expenses:
Research and development		5,707,000			2,260,000			888,000			9,565,000
General and administrative		571,000			356,000			163,000			1,256,000
Total operating expenses		6,278,000			2,616,000			1,051,000			10,821,000
Loss from operations		(6,278,000	)		(2,616,000	)		(1,051,000	)		(10,821,000	)
Interest expense		(732,000	)		(211,000	)		(60,000	)		(1,011,000	)
Interest income		5,000			1,000			—			6,000
Interest expense, net.		(727,000	)		(210,000	)		(60,000	)		(1,005,000	)
Net loss	$	(7,005,000	)	$	(2,826,000	)	$	(1,111,000	)	$	(11,826,000	)
Basic and diluted net loss per share	$	(0.36	)	$	(0.15	)	$	(0.06	)
Weighted average shares outstanding used in computing basic and diluted net loss per share		19,673,174			18,756,498			18,593,750

See accompanying notes to audited financial statements.

F-4

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

STATEMENTS OF STOCKHOLDERS’ DEFICIT

	Common Stock			Additional Paid-In Capital			Deficit Accumulated during Development- Stage			Notes Receivable from Stockholders			Total
	No. of Shares	Amount
Initial capitalization, October, 2002	18,593,750	$	18,000	$	22,000		$	—		$	—		$	40,000
Net loss	—		—		—			(133,000	)		—			(133,000	)
Balance at December 31, 2002	18,593,750		18,000		22,000			(133,000	)		—			(93,000	)
Net loss	—							(751,000	)					(751,000	)
Balance at December 31, 2003	18,593,750		18,000		22,000			(884,000	)		—			(844,000	)
Net loss	—		—		—			(1,111,000	)		—			(1,111,000	)
Balance at December 31, 2004	18,593,750		18,000		22,000			(1,995,000	)		—			(1,955,000	)
Shares awarded to executive	724,425		1,000		(1,000	)		—			—			—
Net loss	—		—		—			(2,826,000	)		—			(2,826,000	)
Balance at December 31, 2005	19,318,175		19,000		21,000			(4,821,000	)		—			(4,781,000	)
Stock compensation expense	—		—		23,000			—			—			23,000
Exercise of common stock options	767,812		1,000		55,000			—			(42,000	)		14,000
Net loss			—		—			(7,005,000	)		—			(7,005,000	)
Balance at December 31, 2006	20,085,987	$	20,000	$	99,000		$	(11,826,000	)	$	(42,000	)	$	(11,749,000	)

See accompanying notes to audited financial statements.

F-5

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

STATEMENTS OF CASH FLOWS

	Years Ended December 31,									Period from October 2002 (inception) through December 31, 2006
	2006			2005			2004
Cash flows from operating activities:
Net loss	$	(7,005,000	)	$	(2,826,000	)	$	(1,111,000	)	$	(11,826,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of fixed assets		43,000			42,000			34,000			149,000
Stock-based compensation		23,000			—			—			23,000
Interest expense, accrued on notes payable		718,000			192,000			44,000			961,000
Changes in assets and liabilities:
Prepaid expenses and other assets		8,000			(8,000	)		40,000			(4,000	)
Accounts payable and accrued expenses		149,000			172,000			(7,000	)		362,000
Net cash used in operating activities		(6,064,000	)		(2,428,000	)		(1,000,000	)		(10,335,000	)
Cash flows from investing activities:
Purchase of fixed assets		(9,000	)		(1,000	)		(46,000	)		(160,000	)
Advances made under notes receivable		(958,000	)		(36,000	)		—			(994,000	)
Net cash used in investing activities		(967,000	)		(37,000	)		(46,000	)		(1,154,000	)
Cash flows from financing activities:
Proceeds from note payable to related party		7,164,000			2,604,000			1,109,000			11,797,000
Principal payments on capital lease obligations		(134,000	)		(139,000	)		(60,000	)		(345,000	)
Proceeds from exercise of stock options		14,000			—			—			14,000
Initial capitalization											40,000
Net cash provided by financing activities		7,044,000			2,465,000			1,049,000			11,506,000
Net increase in cash and cash equivalents		13,000			—			3,000			17,000
Cash and cash equivalents, beginning of period		4,000			4,000			1,000			—
Cash and cash equivalents, end of period	$	17,000		$	4,000		$	4,000		$	17,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	17,000		$	23,000		$	18,000
Capital lease obligations incurred	$	—		$	44,000		$	585,000

See accompanying notes to audited financial statements.

F-6

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

Notes to audited financial statements

1. INTRODUCTION AND BASIS OF PRESENTATION

Organization

Insys Therapeutics, Inc. (“the Company” or “Insys”) is a Delaware corporation located in Phoenix, Arizona, which was incorporated in October 2002.

The Company is a biopharmaceutical company focused on discovering, developing and commercializing innovative products to address chemotherapy-induced nausea and vomiting (“CINV”), pain management and other central nervous system disorders. The Company seeks to apply new proprietary formulations and delivery methods to existing pharmaceutical compounds in order to achieve enhanced efficacy, faster onset of action, reduced side effects, convenient delivery and increased patient compliance.

Basis of Presentation and Principle Accounting Policies

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company is considered a development-stage entity and has disclosed inception-to-date information within these financial statements. The Company is in the process of seeking regulatory approval for certain of its product candidates.

Amounts presented have been rounded to the nearest thousand, except share and per share data.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

F-7

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of those investments approximates their fair market value due to their short maturity and liquidity.

Fixed Assets

Fixed assets are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Maintenance and repairs that do not extend the life of assets are charged to expense when incurred. When properties are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reported in the period the transaction takes place.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset.

Income Taxes

The Company operates as an S Corporation for federal and state income tax purposes. Accordingly, no provision has been made for federal or state income taxes, since it is the personal responsibility of the individual stockholders of the Company to separately report their proportionate share of the Company’s taxable income or loss. In 2007, in connection with its initial public offering the Company plans to change its status to a C corporation (see Note 11, Subsequent Events).

Revenue Recognition

The Company will recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectibility is reasonably assured. From inception through December 31, 2006, the Company has not recognized any revenue.

Research and Development

Research and development (“R&D”) costs are expensed when incurred. These costs include, among other things, consulting fees and costs reimbursed to third parties under license and research agreements described in Note 9, Commitments. Payments related to the acquisition of technology rights, for which development work is in process, are expensed as incurred and are considered a component of R&D costs. The Company charges the indirect cost of administering R&D activities to R&D expense.

Stock-Based Compensation

The Company adopted the provisions of Financial Accounting Standards Board, or FASB, Statements of Financial Accounting Standards, or SFAS, No. 123(R), Share-Based Payment, or SFAS 123(R), effective January 1, 2006. SFAS 123(R) requires the financial statement recognition of compensation expense related to the fair value of our stock-based compensation awards. The effect of adopting SFAS 123(R) was $23,000 in 2006. The Company did not grant options prior to 2006.

Leases

With respect to our operating leases, we apply the provisions of FASB Technical Bulletin, or FTB, 85-3, Accounting for Operating Leases with Scheduled Rent Increases, to scheduled rent increase provisions contained in lease agreements by recognizing rent expense on a straight-line basis over the lease term. Our capital lease is accounted for under the provision of SFAS No. 13, Accounting for Leases.

F-8

Segment Information

FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Based on the Company’s integration and management strategies, the Company operated in a single business segment.

Recent Accounting Pronouncements

In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of SFAS No. 115 (“SFAS 159”). SFAS 159 permits companies to elect to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently considering the impact of SFAS 159 on its financial statements.

In June 2006, the FASB issued Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”). This interpretation is effective for fiscal years beginning after December 15, 2006 and clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return as well as provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Adoption of FIN 48 is not expected to have a material impact on the Company’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of SFAS 157 on its financial statements.

2. NET LOSS PER SHARE

Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period.

The following table sets forth the computation of basic and diluted net loss per share:

	Years Ended December 31,
	2006			2005			2004
Numerator:
Net loss	$	(7,005,000	)	$	(2,826,000	)	$	(1,111,000	)
Denominator:
Weighted average shares outstanding		19,673,174			18,756,498			18,593,750
Basic and diluted net loss per share	$	(0.36	)	$	(0.15	)	$	(0.06	)
Potential common share equivalents		100,938			—			—

As the Company has incurred a net loss for all periods presented, basic and diluted per share amounts are the same, since the effect of potential common share equivalents is anti-dilutive. The loss per share calculations consider the effect of the 10-for-1 stock split on October 11, 2005 and the 2.5-for-1 stock split on June 15, 2006.

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3. FIXED ASSETS

Fixed assets are comprised of the following:

	Estimated Useful Life (In years)	As of December 31,
		2006			2005
Computer equipment	3-5	$	38,000		$	33,000
Scientific equipment	5-7		61,000			60,000
Furniture	5-7		34,000			31,000
Equipment under capital lease	7		96,000			96,000
Leasehold improvements	*		27,000			27,000
Less accumulated depreciation and amortization	**		(149,000	)		(106,000	)
Fixed assets, net		$	107,000		$	141,000

* The estimated useful life of leasehold improvements is the lesser of the lease term or five years.

** Amortization expense related to assets under capital lease are included in depreciation expense and accumulated depreciation.

Total depreciation expense for the years ended December 31, 2006, 2005, and 2004 was $43,000, $42,000 and $34,000, respectively.

4. NOTES RECEIVABLE

On April 10, 2003, the Company entered into an exclusive purchase and supply agreement with Cerilliant Corporation (“Cerilliant”), covering the development and sale of dronabinol, a synthetic delta-9-THC. Under the terms of the agreement the Company will pay Cerilliant beginning the calendar year in which commercialization occurs. Cerilliant formed a wholly owned subsidiary, Austin Pharma LLC (“Austin Pharma”) to perform its part of the agreement.

In connection with this agreement, Insys agreed to furnish Austin Pharma with the necessary equipment to produce dronabinol. In 2004, the Company entered into a $585,000 capital lease for this equipment and subsequently sub-leased the equipment to Austin Pharma (see Note 9, Commitments, for a description of the capital lease commitments). Additionally, on March 16, 2006, the Company amended the agreement and agreed to fund the scale up and build out of Austin Pharma’s facility to produce dronabinol. In connection with this amendment, Austin Pharma issued two promissory notes in favor of the Company for $1,000,000 and $500,000 (“Note A” and “Note B”, respectively). Note A is convertible at the option of the holder into a 23.75% ownership interest in Austin Pharma at any time prior to March 16, 2014 (the “option expiration date”) and bears interest at a rate of 8% per annum. The principal and interest are payable in 60 equal monthly installments commencing on the earlier of (1) the thirteenth day following the option expiration date or (2) the initial repayment date which is the first day of the second month following the completion of the initial scale up. Note B bears interest at a rate of 8% per annum. The principal and interest are payable in 60 equal monthly installments commencing on the initial repayment date. Both notes are secured by substantially all of the assets of Austin Pharma. As of December 31, 2006, the initial scale up has not been completed.

As of December 31, 2006 and 2005, the Company had advanced Austin Pharma total payments of $1,579,000 and $621,000, respectively, including the $585,000 for the subleased equipment.

The Company entered into a new note agreement with Austin Pharma in 2007.

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5. NOTES PAYABLE—RELATED PARTY

The Company has issued several promissory notes payable in favor of its principal stockholder, The John N. Kapoor Trust (“JNK Trust”). The Company draws on the notes as needed to pay its expenses. The following is a summary of each promissory note:

Note 1—The Company issued a three-year promissory note payable for $1,000,000 to JNK Trust on November 29, 2002. This note bears interest at a rate of 1.82% per annum. The principal and interest are due upon maturity. On November 28, 2005, the note term was extended to mature on May 28, 2007.

Note 2—The Company issued a promissory note payable for $100,000 to JNK Trust on January 22, 2004. This note bears interest at a rate of 1.82% per annum. The principal and interest are due upon maturity, which was November 29, 2005. On November 28, 2005, the note term was extended to mature on October 31, 2006. As of December 31, 2006, amounts owed under this note payable have not been paid to JNK Trust and are currently payable on demand.

Note 3—The Company issued a promissory note payable for $2,600,000 to JNK Trust on January 23, 2004. This note bears interest at a rate of prime (8.25% at December 31, 2006) + 2% per annum. The principal and interest are payable upon demand.

Note 4—The Company issued a promissory note payable for up to $12,300,000 to JNK Trust on October 11, 2005. This note bears interest at a rate of prime (8.25% at December 31, 2006) + 2% per annum. The principal and interest are payable at the earlier date of October 11, 2010 or a change in control of the Company. The Company has drawn down approximately $8.1 million on this note as of December 31, 2006.

As of December 31, 2006, the promissory notes (including interest) issued by the Company to JNK Trust will mature as follows:

For the year ending December 31, 2007	$	4,135,000
For the year ending December 31, 2008		—
For the year ending December 31, 2009		—
For the year ending December 31, 2010		8,623,000
For the year ending December 31, 2011		—
Total debt maturities, including interest		12,758,000

Interest expense for these notes was $717,000, $192,000 and $44,000 for the years ended December 31, 2006, 2005, and 2004, respectively. Additionally, the Company had accrued interest payable of $961,000 and $243,000 as of December 31, 2006 and 2005, respectively.

The Company issued a new promissory note to JNK Trust in May 2007 (see Note 11, Subsequent Events, for a description of the new note’s terms).

Immediately prior to the closing of the initial public offering of the Company, all of the principal and interest outstanding under the promissory notes that the Company has issued to JNK Trust will convert into shares of the Company’s common stock at the initial public offering price.

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6. STOCK-BASED COMPENSATION

The Company is currently sponsoring the following stock-based payment plan:

Amended and Restated Equity Incentive Plan

The Company’s Amended and Restated Equity Incentive Plan (the “Plan”) provides for the grant of awards, primarily stock options, to employees and consultants to acquire up to 2,000,000 shares of the Company’s common stock. The Plan was adopted in December 2002. Option awards under the Plan are generally granted with an exercise price equal to the fair value price of the Company’s common stock on the date of grant. Option awards under the Plan typically have a 10-year life and vest within the first two years of the grant, subject to continuous employment. Stock awards granted to the Company’s non-employee consultants under the Plan typically vest within two years from the date of grant.

Amounts recognized in the statements of operations with respect to the Company’s stock-based compensation plans were as follows:

	Year Ended December 31, 2006
Research and development	$	16,000
General and administrative		7,000
Total cost of share-based payment plans during period	$	23,000

The Company has never capitalized, or recognized an income tax benefit from, stock-based compensation.

There were no stock option awards during the years ended December 2005 and 2004. The following table summarizes employee stock option awards during the year ended December 31, 2006:

	No. of Shares		Weighted Average Exercise Price / Fair Value		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value
Outstanding at December 31, 2005	—		$	—	—	$	—
Granted	868,750		$	0.073/$0.073			—
Exercised	(767,812	)	$	0.073/$0.073			—
Outstanding at December 31, 2006	100,938		$	0.073/$0.073	9.53		—
Exercisable at December 31, 2006	—		$	—	—	$	—

The Company expects to recognize $34,000 of unrecognized stock-based compensation over a weighted average period of 0.96 years.

Stock Option Valuation Information

The Company currently uses the Black-Scholes option pricing model to estimate the fair value of its stock-based payment awards. The determination of the fair value of stock-based payment awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including expected volatility, risk-free interest rate, expected term, expected dividends yield and expected forfeiture rate. The Company does not have a history of market prices of its common stock as it is not a public company, and as such it estimates volatility in accordance with Staff Accounting Bulletin No. 107 using historical volatilities of similar public entities. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards. The life of the awards is based on a simplified method which defines the life as the average of the contractual term of the options and the weighted average vesting period for all open tranches. The dividend yield assumption is

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based on the Company’s history and expectation of paying no dividends. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The weighted-average estimated fair value of employee stock options granted as calculated using the Black-Scholes model and the related weighted-average assumptions follow:

	Year Ended December 31, 2006
Expected volatility	131.1% – 132.9%
Risk-free interest rate	4.5% – 5.2%
Expected term (in years)	5.6 – 6.0
Expected dividend yield	0.0%

For the year ended December 31, 2006, the weighted average estimated fair value per option share was $0.073.

In 2006, the Company received $14,000 in cash proceeds as a result of stock options exercised. In addition, options to purchase 585,938 shares were exercised using promissory notes issued in favor of the Company. The principal amount of promissory notes due from these stockholders as of December 31, 2006 is $42,000 and is reflected as a contra equity account in the financial statements.

7. EQUITY

The share data presented in the balance sheet and statement of stockholders’ deficit and the share and per share data presented in the statement of operations have been retroactively adjusted to account for the 10-for-1 stock split on October 11, 2005 and the 2.5-for-1 stock split on June 15, 2006.

8. INCOME TAXES

As of December 31, 2006, the Company operates as an S Corporation for federal and state income tax purposes. Accordingly, no provision has been made for federal or state income taxes, since it is the personal responsibility of the individual stockholders of the Company to separately report their proportionate share of the Company’s taxable income or loss. In connection with its initial public offering, the Company plans to change its status to a C Corporation in 2007 (see Note 11, Subsequent Events, for description of the resulting tax effect).

9. COMMITMENTS

Lease Commitments

As of December 31, 2006, the Company had an operating lease for a research and development facility, on a month-to-month basis.

Rental expense for the three most recent fiscal years consisted of the following:

	As of December 31,
	2006		2005		2004
Rental expense	$	52,000	$	52,000	$	42,000

There are no future minimum lease payments under non-cancelable operating leases (with initial or remaining terms in excess of one year) as of December 31, 2006.

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Capital Leases

The Company entered into five capital leases from 2003 to 2005 for certain equipment. The leases are non-cancelable and expire from 2006 to 2009. The following is a schedule of future minimum lease payments under the capital leases as of December 31, 2006:

For the year ending December 31, 2007	$	146,000
For the year ending December 31, 2008		132,000
For the year ending December 31, 2009		77,000
Total minimum lease payments		355,000
Less amount representing interest		(19,000	)
Present value of minimum lease payments	$	336,000

The equipment, which is leased under the capital lease agreements and included in fixed assets in the accompanying balance sheets (except for the capital lease entered into on behalf of Austin Pharma – see Note 4), is as follows:

	As of December 31,
	2006			2005
Cost	$	96,000		$	96,000
Accumulated depreciation		(42,000	)		(28,000	)
Net book value	$	54,000		$	68,000

Defined Contribution Retirement Plan (401(k) Plan)

The Company sponsors a 401(k) plan covering all full-time employees. Participants may contribute up to legal limitations. The 401(k) plan provides for employee contributions, but the Company does not make any matching contributions.

10. LEGAL MATTERS

The Company is not presently party to any legal proceedings.

11. SUBSEQUENT EVENTS

Lease Commitment

On March 12, 2007, the Company entered into a non-cancellable lease for an office and research and development facility in Phoenix, AZ, which expires in October 2012. The total rent payments due over the term of the lease are $929,000.

Note Payable

The Company issued a promissory note payable for up to $12,000,000 in favor of JNK Trust on May 15, 2007 which the Company can draw down upon from time to time. This note bears interest at a rate of prime +2% per annum. The principal and interest are payable at the earlier date of October 11, 2010 or a change in control of the Company.

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Initial Public Offering

In August 2007, the Company is filing a registration statement with the Securities and Exchange Commission relating to its initial public offering. There can be no assurance the Company will be successful with this offering.

Income Taxes

In connection with the Company’s anticipated initial public stock offering, the Company will convert from an S corporation to a C corporation. The Company will then be taxed as a C corporation for federal and state tax purposes. Management anticipates that there will not be any significant deferred tax assets or liabilities recognized in connection with the C corporation conversion.

F-15

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

UNAUDITED CONDENSED BALANCE SHEET

	As of June 30, 2007			As of December 31, 2006
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	95,000		$	17,000
Prepaid expenses and other assets		56,000			4,000
Total current assets		151,000			21,000
Fixed assets, net		975,000			107,000
Notes receivable		5,301,000			1,579,000
Total assets	$	6,427,000		$	1,707,000
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	1,860,000		$	362,000
Capital lease obligation, short term		132,000			134,000
Notes payable to related party, including interest		4,005,000			4,135,000
Total current liabilities		5,997,000			4,631,000
Capital lease obligation, long term		139,000			202,000
Notes payable to related party, including interest, long term		17,535,000			8,623,000
Total liabilities		23,671,000			13,456,000
Commitments and contingencies (see Note 6)
Stockholders’ Deficit
Common stock, voting (par value $0.001 per share, 28,000,000 shares authorized, 22,318,175 and 19,318,175 shares issued and outstanding as of June 30, 2007 and December 31 2006, respectively)		22,000			19,000
Common stock, non-voting (par value $0.001 per share, 2,000,000 shares authorized, 841,812 and 767,812 shares issued and outstanding as of June 30, 2007 and December 31, 2006, respectively)		1,000			1,000
Additional paid-in capital		393,000			99,000
Notes receivable from stockholders		(42,000	)		(42,000	)
Deficit accumulated during development-stage		(17,618,000	)		(11,826,000	)
Total stockholders’ deficit		(17,244,000	)		(11,749,000	)
Total liabilities and stockholders’ deficit	$	6,427,000		$	1,707,000

See accompanying notes to unaudited condensed financial statements.

F-16

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

	Six Months Ended June 30,						Period from October 2002 (inception) through June 30, 2007
	2007			2006
Revenues	$	—		$	—		$	—
Operating expenses:
Research and development		4,409,000			3,391,000			13,974,000
General and administrative		681,000			288,000			1,937,000
Total operating expenses		5,090,000			3,679,000			15,911,000
Loss from operations		(5,090,000	)		(3,679,000	)		(15,911,000	)
Interest expense		(707,000	)		(249,000	)		(1,718,000	)
Interest income		5,000			2,000			11,000
Interest expense, net		(702,000	)		(247,000	)		(1,707,000	)
Net loss	$	(5,792,000	)	$	(3,926,000	)	$	(17,618,000	)
Basic and diluted net loss per share	$	(0.28	)	$	(0.20	)
Weighted average shares outstanding used in computing basic and diluted net loss per share		20,842,154			19,318,175

See accompanying notes to unaudited condensed financial statements.

F-17

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

UNAUDITED CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT

For the period October 2002 (inception) through June 30, 2007:

	Common Stock			Additional Paid-In Capital		Deficit Accumulated during Development Stage			Notes Receivable from Stockholders			Total
	No. of Shares	Amount
Balance at January 1, 2007	20,085,987	$	20,000	$	99,000	$	(11,826,000	)	$	(42,000	)	$	(11,749,000	)
Stock compensation expense					52,000								52,000
Shares issued to The John N. Kapoor Trust and family members	3,000,000		3,000		237,000								240,000
Exercise of common stock options	74,000		—		5,000								5,000
Net loss							(5,792,000	)					(5,792,000	)
Balance at June 30, 2007	23,159,987	$	23,000	$	393,000	$	(17,618,000	)	$	(42,000	)	$	(17,244,000	)

See accompanying notes to unaudited condensed financial statements.

F-18

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,						Period from October 2002 (inception) through June 30, 2007
	2007			2006
Cash flows from operating activities:
Net loss	$	(5,792,000	)	$	(3,926,000	)	$	(17,618,000	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment and leasehold improvements		23,000			21,000			172,000
Stock-based compensation		52,000			—			75,000
Interest expense accrued on notes payable		700,000			241,000			1,661,000
Changes in assets and liabilities:
Prepaid expenses and other assets		(48,000	)		8,000			(53,000	)
Accounts payable and accrued expenses		820,000			375,000			1,183,000
Net cash used in operating activities		(4,245,000	)		(3,281,000	)		(14,580,000	)
Cash flows from investing activities:
Purchased property, equipment and leasehold improvements		(213,000	)		(2,000	)		(373,000	)
Advances on notes receivable		(3,722,000	)		(331,000	)		(4,717,000	)
Net cash used in investing activities		(3,935,000	)		(333,000	)		(5,090,000	)
Cash flows from financing activities:
Proceeds from note payable to related party		8,322,000			3,683,000			20,119,000
Principal payments on capital lease obligations		(67,000	)		(68,000	)		(410,000	)
Proceeds from exercise of stock options		3,000			—			16,000
Initial capitalization		—			—			40,000
Net cash provided from financing activities		8,258,000			3,615,000			19,765,000
Net increase in cash and cash equivalents		78,000			1,000			95,000
Cash and cash equivalents, beginning of period		17,000			4,000			—
Cash and cash equivalents, end of period	$	95,000		$	5,000		$	95,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	7,000		$	10,000
Shares issued to pay accrued interest		240,000			—

See accompanying notes to unaudited condensed financial statements.

F-19

INSYS THERAPEUTICS, INC.

(A Development-Stage Company)

Notes To Unaudited Condensed Financial Statements

1. BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements as of June 30, 2007 and for the six months ended June 30, 2007 and 2006 have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The unaudited condensed financial statements as of June 30, 2007 and for the six months ended June 30, 2007 and 2006 have been prepared on the same basis as the financial statements as of and for the year ended December 31, 2006 included herein, and in the opinion of management, reflect all adjustments necessary to present fairly the Company’s financial position as of June 30, 2007 and the results of operations and cash flows for the six months ended June 30, 2007 and 2006. The condensed results of operations for the six months ended June 30, 2007 are not indicative of the results that may be expected for a full year.

The Company is considered a development-stage entity and has disclosed additional information within these financial statements. The Company is in the process of seeking regulatory approval for certain of its product candidates.

Amounts presented have been rounded to the nearest thousand, except share and per share data.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of those investments approximates their fair market value due to their short maturity and liquidity.

Income Taxes

The Company operates as an S Corporation for federal and state income tax purposes. Accordingly, no provision has been made for federal or state income taxes, since it is the personal responsibility of the individual shareholders of the Company to separately report their proportionate share of the Company’s taxable income or loss. In connection with its initial public offering, the Company plans to change its status to a C corporation in 2007 (see Note 9, Income Taxes).

Revenue Recognition

The Company will recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectibility is reasonably assured. As of June 30, 2007, the Company has not recognized any revenue.

Research and Development

Research and development (“R&D”) costs are expensed when incurred. These costs include, among other things, consulting fees and costs reimbursed to third parties under license and research agreements described in Note 9, Commitments. Payments related to the acquisition of technology rights, for which development work is

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in process, are expensed as incurred and are considered a component of R&D costs. The Company charges the indirect cost of administering R&D activities to R&D expense.

Stock-Based Compensation

The Company adopted the provisions of FASB SFAS No. 123(R), Share-Based Payment (SFAS 123(R)), effective January 1, 2006. SFAS 123(R) requires the financial statement recognition of compensation expense related to the fair value of the Company’s stock-based compensation awards.

2. RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board, or FASB, issued Statements of Financial Accounting Standards, or SFAS, No. 157, Fair Value Measurements (Statement No. 157). Statement No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Statement No. 157 is effective beginning an entity’s first fiscal year that begins after November 15, 2007, or upon early adoption of FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (Statement No. 159). The Company is currently estimating the impact, if any, of adopting this statement.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (Statement No. 159). Statement No. 159 which permits entities to elect to measure certain assets and liabilities at fair value with changes in the fair values of those items (unrealized gains and losses) recognized in the statement of income for each reporting period. Under this Statement, fair value elections can be made on an instrument by instrument basis, are irrevocable, and can only be made upon specified election date events. In addition, new disclosure requirements apply with respect to instruments for which fair value measurement is elected. The Company is currently estimating the impact, if any, of adopting this statement.

3. NET LOSS PER SHARE

Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period.

The following table sets forth the computation of basic and diluted net loss per share for the six months ended June 30:

	Six Months Ended June 30,
	2007			2006
Net loss	$	(5,792,000	)	$	(3,926,000	)
Basic and diluted weighted average common shares outstanding		20,842,154			19,318,175
Basic and diluted net loss per common share	$	(0.28	)	$	(0.20	)

4. STOCK-BASED COMPENSATION

Effective January 1, 2006, the Company adopted FASB Statement of Financial Accounting Standards, or SFAS, No. 123(R), Share-Based Payment (SFAS 123(R)), which revises SFAS 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion, or APB, No. 25, Accounting for Stock Issued to Employees. SFAS 123(R) requires that all stock-based payments to employees, including grants of employee stock options and restricted stock, be recognized in its financial statements based on their respective grant date fair values. Under this standard, the fair value of each stock-based payment award is estimated on the date of grant using an option pricing model that meets certain requirements. The Company recognized $52,000 of

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stock-based compensation expense for the six months ended June 30, 2007. No stock-based compensation expense was recognized for the six months ended June 30, 2006, as all 2006 stock options were issued in the second half of 2006.

The Company currently sponsors the following stock-based payment plan:

Amended and Restated Equity Incentive Plan

The Company’s Amended and Restated Equity Incentive Plan (the “Plan”), provides for the grant of awards, primarily stock options, to employees and consultants to acquire up to 2,000,000 shares of its common stock. The Plan was adopted in December 2002. Option awards under the Plan are generally granted with an exercise price equal to the fair value price of its common stock on the date of grant. Option awards under the Plan typically have a 10-year life and vest within the first two years of the grant, subject to continuous employment. Stock awards granted to its non-employee consultants under the Plan typically vest within two years from the date of grant.

Amounts recognized in the statements of operations with respect to the Company’s stock-based compensation plans were as follows:

	Six Months Ended June 30, 2007
Research and development	$	19,000
General and administrative		33,000
Total cost of stock-based payment plans during period	$	52,000

The Company has never capitalized, or recognized an income tax benefit from, stock-based compensation.

The following table summarizes employee stock option awards during the six months ended June 30, 2007:

	No. of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value
Outstanding at December 31, 2006	100,938		$	—	—	$	—
Granted	1,306,500		$	0.08	—	$	—
Exercised	(74,000	)	$	0.08	—	$	—
Outstanding as of June 30, 2007	1,333,438		$	0.08	9.82	$	—
Exercisable as of June 30, 2007	432,290		$	0.08	9.87	$	—

The Company expects to recognize $73,000 of unrecognized stock-based compensation over a weighted average period of 0.62 years.

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Stock Option Valuation Information

The Company has estimated the fair value of its stock-based compensation using the Black-Scholes option-pricing model. This model requires the use of subjective assumptions that have a significant impact on the fair value estimate. The weighted-average estimated fair value of employee stock options granted as calculated using the Black-Scholes model and the related weighted-average assumptions follow:

	Six Months Ended March 31, 2007
Expected volatility	127.1% – 127.4%
Risk-free interest rate	4.7% – 5.1%
Expected term (in years)	5.1 – 6.0
Expected dividend yield	0.0 %

For the six months ended June 30, 2007, the weighted average estimated fair value per option share was $0.08.

The Company currently uses the Black-Scholes option pricing model to estimate the fair value of our stock-based payment awards. The determination of the fair value of stock-based payment awards utilizing the Black-Scholes model is affected by its stock price and a number of assumptions, including expected volatility, risk-free interest rate, expected term, expected dividend yield and expected forfeiture rate. The Company does not have a history of market prices of its common stock as it is not a public company, and as such it estimates volatility in accordance with Staff Accounting Bulletin No. 107 using historical volatilities of similar public entities. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of the Company’s awards. The life of the awards is based on a simplified method which defines the life as the average of the contractual term of the options and the weighted average vesting period for all open tranches. The dividend yield assumption is based on the Company’s history and expectation of paying no dividends. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

In the six months ended June 30, 2007, the Company received $3,000 in cash proceeds as a result of stock options exercised.

5. EQUITY

On May 15, 2007, JNK Trust and various of its affiliates were issued shares of the Company’s common stock in lieu of repayment of accrued interest totalling $240,000. A total of 3,000,000 shares were issued at the fair value of $0.08 per share.

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6. LEASE COMMITMENTS

The Company leases facilities under non-cancelable operating lease agreements. Future minimum commitments for these operating leases in place as of June 30, 2007, with a remaining non-cancelable lease term in excess of one year, are as follows (rounded to nearest thousand):

Year Ended December 31,	Amount
2007 (Starting June 1, 2007)	$	29,000
2008		177,000
2009		181,000
2010		186,000
2011		193,000
Thereafter		162,000
Total	$	928,000

The terms of certain lease agreements provide for rental payments on a graduated basis. The Company recognizes rent expense on the straight-line basis over the lease period and has accrued for rent expense incurred but not paid. Rent expense under operating leases for the six month periods ended June 30, 2007 and 2006 was approximately $79,000 and $26,000, respectively.

Minimum future lease payments under capital leases as of June 30, 2007 are as follows:

For the six months ending December 31, 2007	$	74,000
For the year ending December 31, 2008		132,000
For the year ending December 31, 2009		78,000
Total minimum lease payments		284,000
Less amount representing interest		(13,000	)
Present value of minimum lease payments	$	271,000

7. RELATED PARTY TRANSACTIONS

Notes Payable

The Company has issued several promissory notes payable in favor of its principal stockholder, The John N. Kapoor Trust (“JNK Trust”). The Company draws on the notes as needed to pay its expenses. The following is a summary of the outstanding promissory notes as of June 30, 2007:

Note 1—The Company issued a three-year promissory note payable for $1,000,000 in favor of JNK Trust on November 29, 2002. This note bears interest at a rate of 1.82% per annum. The principal and interest are due upon maturity. On November 28, 2005, the note was extended to mature on May 28, 2007. As of June 30, 2007, the Company has not repaid the principal or interest accrued to this note.

Note 2—The Company issued a promissory note payable for $100,000 in favor of JNK Trust on January 22, 2004. This note bears interest at a rate of 1.82% per annum. The principal and interest are due upon maturity, which was November 29, 2005. On November 28, 2005, the note was extended to mature on October 31, 2006. As of June 30, 2007, the Company has not repaid the principal or interest accrued on this note.

Note 3—The Company issued a promissory note payable for $2,600,000 in favor of JNK Trust on January 23, 2004. This note bears interest at a rate if prime (8.25% at June 30, 2007) + 2% per annum. The principal and interest are payable upon demand.

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Note 4—The Company issued a promissory note payable for $12,300,000 in favor of JNK Trust on October 11, 2005. This note bears interest at a rate of prime (8.25% at June 30, 2007) + 2% per annum. The principal and interest are payable at the earlier date of October 11, 2010 or a change in control of the Company.

Note 5—The Company issued a promissory note payable for up to $12,000,000 in favor of JNK Trust on May 15, 2007 which the Company can draw down upon from time to time. This note bears interest at a rate of prime (8.25% at June 30, 2007) + 2% per annum. The principal and interest are payable at the earlier date of October 11, 2010 or a change in control of the Company.

The balance payable, including interest, was $21,540,000 and $12,758,000 as of June 30, 2007 and December 31, 2006, respectively. Interest expense approximated $707,000 and $249,000 for the six months ended June 30, 2007 and 2006, respectively.

8. RESEARCH AND DEVELOPMENT

Research and development (“R&D”), costs are expensed when incurred. These costs include, among other things, consulting fees and costs reimbursed to third parties under license and research agreements. Payments related to the acquisition of technology rights, for which development work is in process, are expensed as incurred and are considered a component of R&D costs. The Company charges the indirect cost of administering R&D activities to R&D expense. Research and development costs for the six months ended June 30, 2007 and 2006 were approximately $4,409,000 and $3,391,000, respectively, and are included in the condensed statements of operations.

9. INCOME TAXES

In connection with the Company’s anticipated initial public stock offering, the Company will convert to a C corporation. The Company will then be taxed as a C corporation for federal and state tax purposes.

In June 2006, the FASB issued Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“or FIN 48”). This interpretation is effective for fiscal years beginning after December 15, 2006 and clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return as well as provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted FIN 48 on January 1, 2007 and the guidance did not have a material impact on the Company’s financial position or results of operations.

10. LEGAL MATTERS

The Company is not presently party to any legal proceedings.

F-25

             Shares

Common Stock

PROSPECTUS

                    , 2007

Banc of America Securities LLC UBS Investment Bank

JMP Securities Natixis Bleichroeder Inc.

Until                     , 2007, all dealers that buy, sell or trade in shares of our common stock may be required to deliver a prospectus, regardless of whether they are participating in this offering. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

Information not required in prospectus

Item 13. Other expenses of issuance and distribution.

The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the NASD filing fee and the Nasdaq Global Market filing fee.

	Amount to be paid
SEC registration fee	$	2,648
NASD filing fee		9,125
Nasdaq Global Market filing fee		150,000
Blue sky qualification fees and expenses		*
Printing and engraving expenses		*
Legal fees and expenses		*
Accounting fees and expenses		*
Transfer agent and registrar fees and expenses		*
Miscellaneous expenses		*
Total	$	*

* To be provided by amendment.

Item 14. Indemnification of directors and officers.

We are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any persons who were, are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who were, are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses (including attorneys’ fees) actually and reasonably incurred.

Our amended and restated certificate of incorporation and amended and restated bylaws, each of which will become effective upon the closing of this offering, provide for the indemnification of our directors and officers to the fullest extent permitted under the Delaware General Corporation Law. In addition, as permitted by the Delaware General Corporation Law, our amended and restated bylaws provide that expenses incurred by any

II-1

officer or director in defending any action, suit or proceeding described above shall be paid by us in advance of a final disposition upon delivery to us of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it is ultimately determined that such director or officer is not entitled to be indemnified by us.

Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:

• transaction from which the director derives an improper personal benefit;

• act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

• unlawful payment of dividends or redemption of shares; or

• breach of a director’s duty of loyalty to the corporation or its stockholders.

Our amended and restated certificate of incorporation includes such a provision.

Section 174 of the Delaware General Corporation Law provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption, may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.

As permitted by the Delaware General Corporation Law, we have entered into indemnity agreements with each of our directors and executive officers, that require us to indemnify such persons against any and all costs and expenses (including attorneys’, witness or other professional fees) actually and reasonably incurred by such persons in connection with any action, suit or proceeding (including derivative actions), whether actual or threatened, to which any such person may be made a party by reason of the fact that such person is or was a director or officer or is or was acting or serving as an officer, director, employee or agent of Insys or any of its affiliated enterprises. Under these agreements, we are not required to provided indemnification for certain matters, including:

• indemnification beyond that permitted by the Delaware General Corporation Law;

• indemnification for any proceeding with respect to the unlawful payment of remuneration to the director or officer;

• indemnification for certain proceedings involving a final judgment that the director or officer is required to disgorge profits from the purchase or sale of our stock or a final judgment that the director’s or officer’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct or a breach of his or her duty of loyalty;

• indemnification for proceedings or claims brought by an officer or director against us or any of our directors, officers, employees or agents, except for claims to establish a right of indemnification or proceedings or claims approved by our board of directors or required by law;

• indemnification for settlements the director or officer enters into without our consent; or

• indemnification in violation of any undertaking required by the Securities Act or in any registration statement that we file.

The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.

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At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

Prior to the closing of this offering, we plan to have an insurance policy in place that covers our officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act or otherwise.

We plan to enter into an underwriting agreement which provides that the underwriters are obligated, under some circumstances, to indemnify our directors, officers and controlling persons against specified liabilities, including liabilities under the Securities Act.

Reference is made to the following documents filed as exhibits to this registration statement regarding relevant indemnification provisions described above and elsewhere herein:

Exhibit document	Number
Form of Underwriting Agreement	1.1
Form of Amended and Restated Certificate of Incorporation to be effective upon closing of this offering	3.2
Form of Amended and Restated Bylaws to be effective upon closing of this offering	3.4
Form of Indemnity Agreement	10.1

Item 15. Recent sales of unregistered securities.

The following sets forth information regarding all unregistered securities sold since January 1, 2004:

(1) From January 1, 2004 to July 31, 2007, we have granted stock options to purchase up to 1,425,250 shares of our non-voting common stock to employees, consultants and directors under our amended and restated equity incentive plan at exercise prices ranging from $0.07247 to $0.08 per share. Of these options, as of July 31, 2007, options exercisable for 75,000 shares of non-voting common stock have been cancelled without being exercised, options to purchase 1,051,062 shares of non-voting common stock have been exercised of which no shares have been repurchased and options exercisable for up to 299,188 shares of non-voting common stock remain outstanding.

(2) In May 2007, we granted stock options to purchase up to an aggregate of 825,000 shares of our voting common stock to our chief executive officer and chief operating officer under our amended and restated equity incentive plan at an exercise price of $0.08 per share. Of these options, as of July 31, 2007, none have been cancelled without being exercised, options to purchase 825,000 shares of voting common stock have been exercised and no options to purchase shares of voting common stock remain outstanding.

(3) In December 2002, we granted 106,250 shares of restricted common stock to S. George Kottayil under our equity incentive plan in exchange for services to be rendered. In October 2005, in connection with an agreement with respect to such restricted common stock, we issued 28,977 shares of voting common stock to Dr. Kottayil in exchange for his surrender of 77,723 shares of the 106,250 shares of restricted common stock previously granted to him. In October 2005, in connection with a stock split of our common stock on a 10-for-1 basis, we cancelled the stock certificates issued to both such accredited investors in connection with such stock issuances, together representing an aggregate of 772,727 shares of common stock. In connection with this stock split, we issued 6,375,000 shares of voting common stock to The John N. Kapoor Trust dated September 20, 1989 and 1,352,270 shares of voting common stock to Dr. Kottayil. In July 2006, in connection with a stock split of our common stock on a 2.5-for-1 basis, we issued an additional 9,562,500 shares of voting common stock to The John N. Kapoor Trust dated September 20, 1989 and an additional 2,028,405 shares of voting common stock to Dr. Kottayil.

II-3

(4) In May 2007, we issued an aggregate of 3,000,000 shares of voting common stock to The John N. Kapoor Trust, or the Trust, dated September 20, 1989 and various of its affiliates in lieu of repayment of accrued interest totaling $240,000 pursuant to outstanding notes payable to the Trust.

All of the offers, sales and issuances of the securities described in paragraphs (1) and (2) were deemed to be exempt from registration under the Securities Act in reliance on Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of such securities were our employees, directors or bona fide consultants and received the securities under our amended and restated equity incentive plan. Appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions had adequate access, through employment, business or other relationships, to information about us.

The offers, sales, and issuances of the securities described in paragraphs (3) and (4) were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act and Rule 506 promulgated under Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired 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 securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about us.

Item 16. Exhibits and financial statement schedules.

(a) Exhibits.

Exhibit number	Description of document
1.1†	Form of Underwriting Agreement.
3.1	Registrant’s Amended and Restated Certificate of Incorporation, as currently in effect.
3.2	Form of the Registrant’s Amended and Restated Certificate of Incorporation to become effective upon closing of this offering.
3.3	Registrant’s Bylaws, as currently in effect.
3.4	Form of the Registrant’s Amended and Restated Bylaws to become effective upon closing of this offering.
4.1	Reference is made to Exhibits 3.1 through 3.4.
4.2†	Form of Common Stock Certificate of the Registrant.
5.1†	Opinion of Cooley Godward Kronish LLP.
10.1+	Form of Indemnity Agreement by and between the Registrant and its directors and officers.
10.2+	Amended and Restated Equity Incentive Plan.
10.3+	2007 Equity Incentive Plan and Form of Stock Option Agreement and Form of Stock Option Grant Notice thereunder.
10.4+	2007 Non-Employee Directors’ Stock Option Plan and Form of Stock Option Agreement and Forms of Stock Option Grant Notice thereunder.
10.5+	2007 Employee Stock Purchase Plan and Form of Offering Document thereunder.
10.6+	Employment Offer Letter for Jon McGarity dated January 26, 2007.

II-4

Exhibit number	Description of document
10.7+	Employment Offer Letter for Michael Babich dated March 1, 2007.
10.8+	Employment Offer Letter for Ellen Feigal dated January 22, 2007.
10.9+	Employment Offer Letter for Ramesh Acharya dated July 31, 2007.
10.10+	Employment Offer Letter for Troy Ignelzi dated January 26, 2007.
10.11+	Employment Offer Letter for Kelly Tate dated May 17, 2007.
10.12†	Second Amended and Restated Exclusive Purchase and Supply Agreement dated as of March 11, 2005 between the Registrant and Austin Pharma LLC, as amended.
10.13	Lease dated as of March 12, 2007 between the Registrant and First Industrial, L.P.
23.1	Consent of BDO Seidman LLP, Independent Registered Public Accounting Firm.
23.2	Consent of Cooley Godward Kronish LLP. Reference is made to Exhibit 5.1.
24.1	Power of Attorney. Reference is made to the signature page hereto.

† To be filed by amendment.

+ Indicates management contract or compensatory plan.

* Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

(b) Financial statement schedules.

No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or the 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 for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, 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 Registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act, 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 shall be deemed to be part of this registration statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities Act, 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 the 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, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Phoenix, State of Arizona, on the 17th day of August, 2007.

INSYS THERAPEUTICS, INC.
By:	/s/ Jon W. McGarity
	Jon W. McGarity President and Chief Executive Officer

KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jon W. McGarity and Mike L. Babich, and each of them, as his true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him and in his name, place or stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to 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 their, his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Jon W. McGarity Jon W. McGarity	President, Chief Executive Officer and Member of the Board of Directors (Principal Executive Officer)	August 17, 2007
/s/ Michael L. Babich Michael L. Babich	Chief Operating Officer and Member of the Board of Directors (Principal Financial and Accounting Officer)	August 17, 2007
/s/ John N. Kapoor John N. Kapoor	Chairman of the Board of Directors	August 17, 2007
/s/ Patrick Fourteau Patrick Fourteau	Member of the Board of Directors	August 17, 2007
/s/ Steve Meyer Steve Meyer	Member of the Board of Directors	August 17, 2007
/s/ Brian Tambi Brian Tambi	Member of the Board of Directors	August 17, 2007
/s/ Gary Tollefson Gary Tollefson	Member of the Board of Directors	August 17, 2007

II-6

EXHIBIT INDEX

Exhibit number	Description of document
1.1†	Form of Underwriting Agreement.
3.1	Registrant’s Amended and Restated Certificate of Incorporation, as currently in effect.
3.2	Form of the Registrant’s Amended and Restated Certificate of Incorporation to become effective upon closing of this offering.
3.3	Registrant’s Bylaws, as currently in effect.
3.4	Form of the Registrant’s Amended and Restated Bylaws to become effective upon closing of this offering.
4.1	Reference is made to Exhibits 3.1 through 3.4.
4.2†	Form of Common Stock Certificate of the Registrant.
5.1†	Opinion of Cooley Godward Kronish LLP.
10.1+	Form of Indemnity Agreement by and between the Registrant and its directors and officers.
10.2+	Amended and Restated Equity Incentive Plan.
10.3+	2007 Equity Incentive Plan and Form of Stock Option Agreement and Form of Stock Option Grant Notice thereunder.
10.4+	2007 Non-Employee Directors’ Stock Option Plan and Form of Stock Option Agreement and Forms of Stock Option Grant Notice thereunder.
10.5+	2007 Employee Stock Purchase Plan and Form of Offering Document thereunder.
10.6+	Employment Offer Letter for Jon McGarity dated January 26, 2007.
10.7+	Employment Offer Letter for Michael Babich dated March 1, 2007.
10.8+	Employment Offer Letter for Ellen Feigal dated January 22, 2007.
10.9+	Employment Offer Letter for Ramesh Acharya dated July 31, 2007.
10.10+	Employment Offer Letter for Troy Ignelzi dated January 26, 2007.
10.11+	Employment Offer Letter for Kelly Tate dated May 17, 2007.
10.12†	Second Amended and Restated Exclusive Purchase and Supply Agreement dated as of March 11, 2005 between the Registrant and Austin Pharma LLC, as amended.
10.13	Lease dated as of March 12, 2007 between the Registrant and First Industrial, L.P.
23.1	Consent of BDO Seidman LLP, Independent Registered Public Accounting Firm.
23.2	Consent of Cooley Godward Kronish LLP. Reference is made to Exhibit 5.1.
24.1	Power of Attorney. Reference is made to the signature page hereto.

† To be filed by amendment.

+ Indicates management contract or compensatory plan.

* Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

EX-3.1

Exhibit 3.1

Amended and Restated

Certificate of Incorporation

of

Insys Therapeutics, Inc.

Insys Therapeutics, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”) does hereby certify that:

1. That the original Certificate of Incorporation was filed with the Secretary of State of Delaware on October 18, 2002, and was amended on November 12, 2002 and October 18, 2005.

2. The Amended and Restated Certificate of Incorporation in the form attached hereto as Exhibit A has been duly adopted in accordance with the provisions of Sections 242, 245, and 228 of the General Corporation Law of the State of Delaware by the directors and stockholders of the Corporation, and prompt written notice was duly given pursuant to Section 228 to those stockholders who did not approve the Amended and Restated Certificate of Incorporation by written consent.

3. The Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is hereby incorporated herein by this reference.

IN WITNESS WHEREOF, Insys Therapeutics, Inc. has caused this Certificate to be signed by its President this 29^th day of June, 2006.

Insys Therapeutics, Inc.
By:	/s/ S. George Kottayil
	S. George Kottayil President

EXHIBIT A

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

INSYS THERAPEUTICS, INC

FIRST: The name of the corporation is: Insys Therapeutics, Inc.

SECOND: The address of its registered office in the State of Delaware is c/o Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware, New Castle County 19808. The name of its registered agent at such address is Corporation Service Company.

THIRD: 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 the State of Delaware as the same may be amended from time to time (“GCL”).

FOURTH: The total number of shares of all classes of stock which the corporation shall have authority to issue is Thirty Million (30,000,000) shares of Common Stock, $0.001 par value, Twenty-Eight Million (28,000,000) shares of which shall be designated as Common Stock, and Two Million (2,000,000) shares of which shall be designated as Nonvoting Common Stock.

The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the capital stock of the corporation entitled to vote, voting together as a single class, irrespective of the provisions of Section 242(b)(2) of the GCL.

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of the corporation’s Common Stock and Nonvoting Common Stock.

1. General. The shares of Common Stock and Nonvoting Common Stock have identical rights except that the Nonvoting Common Stock is nonvoting as provided below.

2. Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). The holders of Nonvoting Common Stock are not entitled to vote with respect to such shares on any matter except as required by law. There shall be no cumulative voting.

FIFTH: The name and mailing address of the incorporator is Christopher R. Manning, 330 North Wabash Avenue, 22nd Floor, Chicago, Illinois 60611.

SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the by-laws of the corporation.

SEVENTH: The election of directors need not be by written ballot.

EIGHTH: Indemnification.

(a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter, a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer or trustee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such Proceeding is alleged action or inaction in an official capacity as a director, officer or trustee or in. any other capacity while serving as a director, officer or trustee, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the GCL, as the same exists as of the date hereof or as may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide both prior to such amendment and as of the date hereof), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer or trustee and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the corporation shall indemnify any such person seeking indemnification in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the Board The right to indemnification conferred in this. ARTICLE EIGHTH shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in connection with any such Proceeding in advance of its final disposition; provided, however, that, if the GCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a Proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this ARTICLE EIGHTH or otherwise. The corporation may, by action of the Board, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors, officers and trustees.

(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of this ARTICLE EIGHTH is not paid in full by the corporation within thirty days after written notice thereof has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expanse of prosecuting such claim. 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 disposition where the required undertaking, if any is

required, has been tendered to the corporation, and as to any such other action as to which it shall not be a defense) that the claimant has not met the standards of conduct which make it permissible under the GCL for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including the Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct under the GCL, nor an actual determination by the corporation (including the Board, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(c) Non-Exclusivity of Rights. The rights to indemnification and the payment of expenses incurred in connection with a Proceeding in advance of its final disposition conferred in this ARTICLE EIGHTH shall not be (and they shall not be deemed to be) exclusive of any other right which any person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.

(d) Insurance. The corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, trustee, employee or agent of the corporation or another corporation, or of a partnership, joint venture, trust or other enterprise against any expense, liability or loss. (as such terms are used in this ARTICLE EIGHTH), whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the GCL

(e) Impairment of Existing Rights. Any repeal or modification of this ARTICLE EIGHTH shall not impair or otherwise affect any rights, or obligations then existing with respect to any state, of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.

(f) Construction and Presumption. This ARTICLE EIGHTH shall be liberally construed in favor of indemnification and the payment of expenses incurred in connection with a Proceeding in advance of its final disposition and there shall be a rebuttable presumption that a claimant under this ARTICLE EIGHTH is entitled to such indemnification and the corporation shall bear the burden of proving by a preponderance of the evidence that such claimant is not so entitled to indemnification.

(g) Confidentiality. Any finding that a person asserting a claim for indemnification pursuant to this ARTICLE EIGHTH is not entitled to such indemnification, and any information which may support such finding, shall be held in confidence to the extent permitted by law and shall not be disclosed to any third party.

(h) Severability. If any provision of this ARTICLE EIGHTH shall be deemed invalid or unenforceable, the corporation shall remain obligated to indemnification and advance expenses subject to all those provisions of this ARTICLE EIGHTH which are not invalid or unenforceable.

NINTH: No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that this ARTICLE NINTH shall not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit No amendment to or repeal of this ARTICLE NINTH shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

THE UNDERSIGNED, being the President of the corporation, does hereunto set his hand and seal this 29^th day of June, 2006.

/s/ S. George Kottayil

S. George Kottayil, President

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

INSYS THERAPEUTICS, INC.

Insys Therapeutics, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

FIRST: The name of this corporation is Insys Therapeutics, Inc.

SECOND: The date of filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was October 18, 2002.

THIRD: The Certificate of Incorporation of said corporation shall be amended and restated to read in full as follows:

I.

The name of this corporation is Insys Therapeutics, Inc. (the “Company”).

II.

The address of the registered office of the Company in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware, 19801 and the name of the registered agent of the Company in the State of Delaware at such address is The Corporation Trust Company.

III.

The purpose of the Company is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (“DGCL”).

IV.

A. The Company is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares of all classes of capital stock which the Company shall have authority to issue is two hundred ten million (210,000,000), of which two hundred million (200,000,000) shares shall be Common Stock, having a par value of $0.001 per share (the “Common Stock”), and ten million (10,000,000) shares shall be Preferred Stock, having a par value of $0.001 (the “Preferred Stock”).

B. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Company (the “Board of Directors”) is hereby expressly authorized to provide for the issue of any or all of the unissued and undesignated shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting

powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the DGCL. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.

C. Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Company for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series of Preferred Stock are entitled, either separately or together as a class with the holders of one or more other series of Preferred Stock, to vote thereon by law or pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).

V.

For the management of the business and for the conduct of the affairs of the Company, and in further definition, limitation and regulation of the powers of the Company, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:

A. The management of the business and the conduct of the affairs of the Company shall be vested in its Board of Directors. The number of directors that shall constitute the Board of Directors shall be fixed exclusively by resolutions adopted by a majority of the authorized number of directors constituting the Board of Directors.

B. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively.

Directors shall initially be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the filing date of this Amended and Restated Certificate of Incorporation (the “Filing Date”), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following such Filing Date, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following such Filing Date, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

Notwithstanding the foregoing provisions of this section, each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

C. Neither the Board of Directors nor any individual director may be removed without cause. Subject to any limitation imposed by law, any individual director or directors may be removed with cause by the affirmative vote of the holders of at least 66 ²/3% of the voting power of all then-outstanding shares of capital stock of the Company entitled to vote generally at an election of directors, voting together as a single class.

D. Subject to the rights of the holders of any series of Preferred Stock that may be designated from time to time, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders, except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified.

E. Subject to the rights of the holders of any series of Preferred Stock that may be designated from time to time, the Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the Company. Any adoption, amendment or repeal of the Bylaws of the Company by the Board of Directors shall require the approval of a majority of the authorized number of directors. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Company, subject to any restrictions which may be set forth in this Amended and Restated

Certificate of Incorporation (including any certificate of designation that may be filed from time to time); provided, however, that, in addition to any vote of the holders of any class or series of stock of the Company required by law or by this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least 66 ²/3% of the voting power of the then-outstanding shares of the capital stock of the Company entitled to vote generally at an election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the Company.

F. The directors of the Company need not be elected by written ballot unless the Bylaws of the Company so provide.

G. No action shall be taken by the stockholders of the Company except at an annual or special meeting of stockholders called in accordance with the Bylaws of the Company. No action shall be taken by the stockholders of the Company by written consent or electronic transmission.

H. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Company shall be given in the manner provided in the Bylaws of the Company.

VI.

A. The liability of a director of the Company for monetary damages shall be eliminated to the fullest extent under applicable law. 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 Company shall be eliminated to the fullest extent permitted by the DGCL, as so amended.

B. Any repeal or modification of this Article VI shall be prospective and shall not affect the rights under this Article VI in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability or indemnification.

VII.

A. The Company reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, except as provided in Section B of this Article VII, and all rights conferred upon the stockholders herein are granted subject to this reservation.

B. Notwithstanding any other provisions of this Amended and Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Company required by law or by this Amended and Restated Certificate of Incorporation or any certificate of designation filed with respect to a

series of Preferred Stock that may be designated from time to time, the affirmative vote of the holders of at least 66 ²/3% of the voting power of all of the then-outstanding shares of capital stock of the Company entitled to vote generally at an election of directors, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI or VII of this Amended and Restated Certificate of Incorporation.

* * * *

FOURTH: This Amended and Restated Certificate of Incorporation has been duly adopted and approved by the Board of Directors.

FIFTH: This Amended and Restated Certificate of Incorporation has been duly adopted and approved by written consent of the stockholders in accordance with sections 228, 245 and 242 of the DGCL and written notice of such action has been given as provided in section 228.

IN WITNESS WHEREOF, Insys Therapeutics, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by its Chief Executive Officer in Phoenix, Arizona, this [    ] day of [                    ], 2007.

INSYS THERAPEUTICS, INC.

Jon McGarity

President and Chief Executive Officer

EX-3.3

Exhibit 3.3

BY-LAWS

OF

INSYS THERAPEUTICS, INC.

(a Delaware corporation)

ARTICLE I

OFFICES

SECTION 1. The registered office shall be in the City of Dover, County of Kent, State of Delaware.

SECTION 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. All meetings of the stockholders shall be held at any place within or outside the State of Delaware as shall be designated from time to time by the board of directors. In the absence of any such designation, stockholders’ meetings shall be held at the principal executive office of the Corporation.

SECTION 2. An annual meeting of stockholders shall be held on the first Monday of December. At each meeting directors shall be elected and any other proper business may be transacted.

SECTION 3. A majority of the stock issued and outstanding and entitled to vote at any meeting of stockholders, the holders of which are present in person or represented by proxy, shall constitute a quorum for the transaction of business except as otherwise provided by law, by the Certificate of Incorporation, or by these By-Laws. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until adjournment. If, however, such quorum shall not be present or represented at any meeting of the stockholders, a majority of the voting stock represented in person or by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. 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 thereat.

SECTION 4. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of law, or the Certificate of Incorporation, or these By-Laws, a different vote is required in which case such express provision shall govern and control the decision of such question.

SECTION 5. At each meeting of the stockholders, each stockholder having the right to vote may vote in person or may authorize another person or persons to act for him/her by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. All proxies must be filed with the secretary of the Corporation at the beginning of each meeting in order to be counted in any vote at the meeting. Each stockholder shall have one vote for each share of stock having voting power, registered in his/her name on the books of the Corporation on the record date set by the board of directors as provided in Article V, Section 6 hereof. All elections shall be had and all questions decided by a plurality vote.

SECTION 6. Special meetings of the stockholders, for any purpose, or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the president and shall be called by the president or the secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding, and entitled to vote. Such request shall state the purpose of purposes of the proposed meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

SECTION 7. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given to each stockholder entitled to vote at such meeting not less than ten (10) or more than sixty (60) days before the date of the meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.

SECTION 8. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (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. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also 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.

SECTION 9. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the 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 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 and shall be delivered in a manner consistent with the Delaware General Corporation Law. 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.

ARTICLE III

DIRECTORS

SECTION 1. The board of directors shall consist of a minimum of one (1) director and a maximum of seven (7) directors. The number of directors shall be fixed or changed from time to time by an affirmative vote of a majority of the directors then in office. Beginning May 15, 2007, the size of the board shall consist of seven (7) directors. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified, provided, however, that unless otherwise restricted by the Certificate of Incorporation or by law, any director or the entire board of directors may be removed, either with or without cause, from the board of directors at any meeting of the stockholders by a majority represented and entitled to vote thereat.

SECTION 2. Vacancies on the board of directors by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. The directors so chosen shall hold office until the next annual election of directors and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statue. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall 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 ten percent of the total number of the shares 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.

SECTION 3. The property and business of the Corporation shall be managed by or under the direction of its board of directors. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.

MEETINGS OF THE BOARD OF DIRECTORS

SECTION 4. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation outside of the State of Delaware.

SECTION 5. The annual meeting of the board of directors shall be held on the first Monday of December immediately following the annual meeting of the stockholders. Regular meetings of the board of directors may be held without notice at such time and place as shall from time to time be determined by the board.

SECTION 6. Special meetings of the board of directors may be called by the president on twenty-four hours’ notice to each director, either personally or by mail or by fax; special meetings shall be called by the president or the secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case special meetings shall be called by the president or secretary in like manner or on like notice on the written request of the sole director.

SECTION 7. At all meetings of the board of directors a majority of the authorized number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the vote of a majority of the directors present at any meeting at which there is a quorum, shall be the act of the board of directors, except as may be otherwise specifically provided by statue, by the Certificate of Incorporation or by these By-Laws. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. If only one director is authorized, such sole director shall constitute a quorum.

SECTION 8. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the board of directors 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, and the writing or writings are filed with the minutes of proceedings of the board or committee.

SECTION 9. Unless otherwise restricted by the Certificate of Incorporation of these By-Laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communication 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 such meeting.

COMMITTEES OF DIRECTORS

SECTION 10. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each such 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 he or they constitute a quorum, may unanimously appoint another member of the board of directors 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 of directors, shall have and may exercise all the powers and authority of the board of directors 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 which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, recommending to the stockholders a dissolution, or amending the By-Laws of the Corporation; and, unless the resolution, By-Laws, or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a Certificate of Ownership and Merger.

COMPENSATION OF DIRECTORS

SECTION 11. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. Members of special or standing committees may be allowed like compensation for attending committee meetings.

ARTICLE IV

OFFICERS

SECTION 1. The officers of the Corporation shall be chosen by the board of directors and shall include a President, at least one (1) Secretary and one (1) Treasurer. The Corporation may also have at the discretion of the board of directors such other officers as are desired, including a chairman of the board, chief executive officer, chief operating officer, vice

presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article IV. In the event there are two or more vice presidents, then one or more may be designated as executive vice presidents, senior vice president, vice president marketing, or other similar or dissimilar title. At the time of the election of officers, the directors may by resolution determine the order of their rank. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these By-Laws otherwise provide.

SECTION 2. The board of directors, at its first meeting and after each annual meeting of the stockholders, shall choose the officers of the Corporation.

SECTION 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors.

SECTION 4. The salaries of all officers and agents of the Corporation shall be fixed by the board of directors.

SECTION 5. The officers of the Corporation shall hold office until their successors are chosen and qualify in their stead or until his/her death, resignation or earlier removal. Any officer elected or appointed by the board of directors may be removed at any time, either with or without cause, by the board of directors. If the office of any officer or officers becomes vacant for any reason, the board of directors may fill the vacancy.

PRESIDENT

SECTION 6. The President shall, if present, preside at all meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by these By-Laws. The President shall be the principal executive officer of the corporation. Subject to the direction and control of the board of directors, he/she shall be in charge of the business of the corporation; he/she shall see that the resolutions and directions of the board of directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the board of directors; and, in general, he/she shall discharge all duties incident to the office of the President and such other duties as maybe prescribed by the board of directors from time to time. He/she shall preside at all meetings of the shareholders. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, he/she may execute for the Corporation certificates for its shares, and any contracts, deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and he/she may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirements of the form of the instrument. He/she may vote all securities which the corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent of the corporation by the board or directors.

THE VICE-PRESIDENTS

SECTION 7. The Vice-President (or in the event there be more than one Vice-President, each of the Vice-Presidents) shall assist the President in the discharge of his/her duties as from time to time may be assigned to him/her by the President or by the board of directors. In the absence of the President or in the event of his/her inability or refusal to act, the Vice-President, (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated by the board of directors, or by the President if the board of directors has not made such a designation, or in the absence of any designation, then in the order of seniority of tenure as Vice-President) shall perform the duties of the President, and when so acting, shall have the powers of and be subject to all the restrictions upon the President. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, the Vice-President (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and he/she may accomplish such execution either under or without the seal of the corporation and either individually or with the Secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirements of the form of the instrument.

THE TREASURER

SECTION 8. The Treasurer shall be the principal accounting and financial officer of the corporation. He shall: (a) have charge of and be responsible for the maintenance of adequate books of account for the corporation; (b) have charge and custody of all funds and securities of the corporation, and be responsible therefor and for the receipt and disbursement thereof; and (c) perform all the duties incident to the office of the treasurer and such other duties as from time to time may be assigned to him by the chief executive officer or by the board of directors. If required by the board of directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the board of directors may determine.

THE SECRETARY

SECTION 9. The Secretary shall: (a) record the minutes of the shareholders’ and of the board of directors’ meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation; (d) keep a register of the post-office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) sign with the President, or a Vice-President, or any other officer thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the board of directors or these by-laws; (f) have general charge of the stock transfer books of the corporation; (g) have authority to certify the by-laws, resolutions of the shareholders and board of directors and committees thereof, and other documents of the

corporation as true and correct copies thereof, and (h) perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him/her by the President or by the board of directors. In the absence of the President and Vice President or in the event of his/her inability or refusal to act, the secretary shall perform the duties of the President, and when so acting, shall have the powers of and be subject to all the restrictions upon the President.

ASSISTANT TREASURERS AND ASSISTANT SECRETARIES

SECTION 10. The assistant treasurers and assistant secretaries shall perform such duties as shall be assigned to them by the treasurer or the secretary, respectively, or by the chief executive officer or the board of directors. The assistant secretaries may sign with the chief executive officer, the president, or a vice-president, or any other officer thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the board of directors or these by-laws. The assistant treasurers shall respectively, if required by the board of directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the board of directors shall determine.

ARTICLE V

CERTIFICATES OF STOCK

SECTION 1. Every holder of stock of the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the president or a vice president, and by the secretary, or an assistant treasurer of the Corporation, certifying the number of shares represented by the certificate owned by such stockholder in the Corporation.

SECTION 2. 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 shall have 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 he were such officer, transfer agent, or registrar at the date of issue.

SECTION 3. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, 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 which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the Delaware General Corporation Law, or as such section may hereafter be amended, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which 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, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preference and/or rights.

LOST, STOLEN OR DESTROYED CERTIFICATES

SECTION 4. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

SECTION 5. 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 upon its books.

FIXING RECORD DATE

SECTION 6. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders, or any adjournment thereof, or 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 of directors may fix a record date which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. 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 of directors may fix a new record date for the adjourned meeting.

REGISTERED STOCKHOLDERS

SECTION 7. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware.

ARTICLE VI

GENERAL PROVISIONS

DIVIDENDS

SECTION 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation.

SECTION 2. Before payment of any dividend there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation, and the directors may abolish any such reserve.

CHECKS

SECTION 3. Such officer or officers as the board of directors may from time to time designate shall sign all checks or demands for money and notes of the Corporation.

FISCAL YEAR

SECTION 4. The fiscal year of the Corporation shall be the calendar year.

CORPORATE SEAL

SECTION 5. The board of directors may provide for a corporate seal which shall have inscribed thereon the name of the corporation and the words “Corporate Seal, Delaware”, said seal may be used by causing it or a facsimile thereof to be impressed or affixed reproduced or otherwise.

NOTICES

SECTION 6. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his/her address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram or by overnight express mail.

SECTION 7. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

INDEMNIFICATION

SECTION 8. Unless otherwise provided in the Certificate of Incorporation, the Corporation shall indemnify its officers, directors, employees and agents to the fullest extent permitted by law.

ARTICLE VII

AMENDMENTS

SECTION 1. These By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of by the Certificate of Incorporation, at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal these By-Laws is conferred upon the board of directors by the Certificate of Incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal these By-Laws.

EX-3.4

Exhibit 3.4

AMENDED AND RESTATED

BYLAWS

OF

INSYS THERAPEUTICS, INC.

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle.

Section 2. Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II

CORPORATE SEAL

Section 3. Corporate Seal. The Board of Directors may adopt a corporate seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, “Corporate Seal-Delaware.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE III

STOCKHOLDERS’ MEETINGS

Section 4. Place Of Meetings. Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (the “DGCL”).

Section 5. Annual Meetings.

(a) The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the corporation’s notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a

stockholder of record at the time of giving the stockholder’s notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 5.

(b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Amended and Restated Bylaws, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, (ii) such other business must be a proper matter for stockholder action under DGCL, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice (as defined in clause (iii) of the last sentence of this Section 5(b)), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 5. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 90^th day nor earlier than the close of business on the 120^th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120^th day prior to such annual meeting and not later than the close of business on the later of the 90^th day prior to such annual meeting or the 10^th day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth: (A) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and Rule 14a-4(d) thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (X) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner, (Y) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial

owner, and (Z) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”).

(c) Notwithstanding anything in the third sentence of Section 5(b) of these Amended and Restated Bylaws to the contrary, in the event that the number of directors to be elected to the Board of Directors of the corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 5 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 10^th day following the day on which such public announcement is first made by the corporation.

(d) Only such persons who are nominated in accordance with the procedures set forth in this Section 5 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 5. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Amended and Restated Bylaws and, if any proposed nomination or business is not in compliance with these Amended and Restated Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

(e) Notwithstanding the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder with respect to matters set forth in this Section 5. Nothing in these Amended and Restated Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the 1934 Act.

(f) For purposes of this Section 5, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.

Section 6. Special Meetings.

(a) Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total

number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption).

(b) If a special meeting is properly called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by certified or registered mail, return receipt requested, to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than 35 nor more than 120 days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Amended and Restated Bylaws. Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

(c) Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the corporation’s notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who is a stockholder of record at the time of giving notice provided for in these Amended and Restated Bylaws who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 6(c). In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the corporation’s notice of meeting, if the stockholder’s notice required by Section 5(b) of these Amended and Restated Bylaws shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the close of business on the 120^th day prior to such special meeting and not later than the close of business on the later of the 90^th day prior to such meeting or the 10^th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

(d) Notwithstanding the foregoing provisions of this Section 6, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder with respect to matters set forth in this Section 6. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the 1934 Act.

Section 7. Notice Of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each 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, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, 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

any such meeting. If mailed, notice is deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. If sent via electronic transmission, notice is deemed given as of the sending time recorded at the time of transmission. Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder 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. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

Section 8. Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Amended and Restated Certificate of Incorporation, or by these Amended and Restated Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law or by applicable stock exchange or Nasdaq Stock Market rules, or by the Amended and Restated Certificate of Incorporation or these Amended and Restated Bylaws, in all matters other than the election of directors, the affirmative vote of a majority of shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by statute, the Amended and Restated Certificate of Incorporation or these Amended and Restated Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Amended and Restated Certificate of Incorporation or these Amended and Restated Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the Amended and Restated Certificate of Incorporation or these Amended and Restated Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of the outstanding shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting shall be the act of such class or classes or series.

Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote communication, if applicable, or represented by proxy at the meeting. When a meeting is

adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof 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.

Section 10. Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Amended and Restated Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy shall be voted after three years from its date of creation unless the proxy provides for a longer period.

Section 11. Joint Owners Of Stock. If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one votes, his act binds all; (b) if more than one votes, and the vote is not evenly split on a particular matter, the act of the majority so voting binds all; (c) if more than one votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (b) or (c) shall be a majority or even-split in interest.

Section 12. List Of Stockholders. The Secretary shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, (a) 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 (b) during ordinary business hours, at the principal place of business of the corporation. 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. The list shall be open to examination of any stockholder during the time of the meeting as provided by law.

Section 13. Action Without Meeting. No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these Amended

and Restated Bylaws, and no action shall be taken by the stockholders by written consent or by electronic transmission.

Section 14. Organization.

(a) At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy duly authorized, shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

(b) The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

ARTICLE IV

DIRECTORS

Section 15. Number And Term Of Office. The authorized number of directors of the corporation shall be fixed in accordance with the Amended and Restated Certificate of Incorporation. Directors need not be stockholders unless so required by the Amended and Restated Certificate of Incorporation. If for any reason, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Amended and Restated Bylaws.

Section 16. Powers. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Amended and Restated Certificate of Incorporation.

Section 17. Classes of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Initially, directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the initial classification of the Board of Directors, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following such initial classification, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following such initial classification, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

Notwithstanding the foregoing provisions of this section, each director shall serve until his successor is duly elected and qualified or until his earlier death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

Section 18. Vacancies. Unless otherwise provided in the Amended and Restated Certificate of Incorporation and subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Section 18 in the case of the death, removal or resignation of any director.

Section 19. Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, 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, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until his successor shall have been duly elected and qualified.

Section 20. Removal.

(a) Subject to the rights of any series of Preferred Stock to elect additional directors under specified circumstances, neither the Board of Directors nor any individual director may be removed without cause.

(b) Subject to any limitation imposed by law, any individual director or directors may be removed with cause by the affirmative vote of the holders of at least 66 ²/3% of the voting power of all then outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors, voting together as a single class.

Section 21. Meetings.

(a) Regular Meetings. Unless otherwise restricted by the Amended and Restated Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means. No further notice shall be required for regular meetings of the Board of Directors.

(b) Special Meetings. Unless otherwise restricted by the Amended and Restated Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the Chief Executive Officer or a majority of the directors then in office.

(c) Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

(d) Notice of Special Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least 24 hours before the date and time of the meeting. If notice is sent by U.S. mail, it shall be sent by first class mail, charges prepaid, at least three days before the date of the meeting. Notice of any meeting may be waived in writing, or by electronic transmission, at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the 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.

(e) Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be

present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 22. Quorum And Voting.

(a) Unless the Amended and Restated Certificate of Incorporation requires a greater number, and except with respect to questions related to indemnification arising under Section 43 for which a quorum shall be one-third of the exact number of directors fixed from time to time, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Amended and Restated Certificate of Incorporation; provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

(b) At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Amended and Restated Certificate of Incorporation or these Amended and Restated Bylaws.

Section 23. Action Without Meeting. Unless otherwise restricted by the Amended and Restated Certificate of Incorporation or these Amended and Restated Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors 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.

Section 24. Fees And Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

Section 25. Committees.

(a) Executive Committee. The Board of Directors may appoint an Executive Committee to consist of one or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors 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 which may require it; but no such committee shall have the

power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any bylaw of the corporation.

(b) Other Committees. The Board of Directors may, from time to time, appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Amended and Restated Bylaws.

(c) Term. The Board of Directors, subject to any requirements of any outstanding series of Preferred Stock and the provisions of subsections (a) or (b) of this Section 25, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors 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, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

(d) Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special 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. Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

Section 26. Organization. At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the Chief Executive

Officer (if a director), or if the Chief Executive Officer is absent, the President (if a director), or, in the absence of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his absence, any Assistant Secretary directed to do so by the Chairman, shall act as secretary of the meeting.

ARTICLE V

OFFICERS

Section 27. Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer and the Treasurer. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

Section 28. Tenure And Duties Of Officers.

(a) General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

(b) Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time. If there is no President or Chief Executive Officer, unless otherwise determined by the Board of Directors, then the Chairman of the Board of Directors shall also serve as the President of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section 28.

(c) Duties of Chief Executive Officer. The Chief Executive Officer shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. Unless some other officer has been elected Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. To the extent that a Chief Executive Officer has been appointed, all references in these Bylaws to the President shall be deemed references to the Chief Executive Officer. The Chief Executive Officer shall perform other duties commonly incident to the office and shall also

perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.

(d) Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors or the Chief Executive Officer has been appointed and is present. Unless another officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.

(e) Duties of Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time to time.

(f) Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Amended and Restated Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Amended and Restated Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

(g) Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

Section 29. Delegation Of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

Section 30. Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

Section 31. Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or by the Chief Executive Officer or by other superior officers upon whom such power of removal may have been conferred by the Board of Directors.

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION

Section 32. Execution Of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Amended and Restated Bylaws, and such execution or signature shall be binding upon the corporation.

All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do.

Unless authorized or ratified by the Board of Directors 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.

Section 33. Voting Of Securities Owned By The Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

ARTICLE VII

SHARES OF STOCK

Section 34. Form And Execution Of Certificates. The shares of the corporation shall be represented by certificates, or shall be uncertificated. Certificates for the shares of stock of the corporation, if any, shall be in such form as is consistent with the Amended and Restated Certificate of Incorporation and applicable law. Every holder of stock represented by certificate in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President and by the Chief Financial Officer, Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Each certificate, if any, shall state upon the face or back thereof, in full or in summary, all of the powers, designations, preferences, and rights, and the limitations or restrictions of the shares authorized to be issued or shall, except as otherwise required by law, set forth on the face or back a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and 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. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and 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.

Section 35. Lost Certificates. A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.

Section 36. Transfers.

(a) Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and, in the case of stock represented by certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

(b) 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.

Section 37. Fixing Record Dates.

(a) 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, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, subject to applicable law, not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, 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. 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 of Directors may fix a new record date for the adjourned meeting.

(b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders 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 of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

Section 38. Registered Stockholders. The corporation 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, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION

Section 39. Execution Of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 34), may be signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or

other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

ARTICLE IX

DIVIDENDS

Section 40. Declaration Of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Amended and Restated Certificate of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Amended and Restated Certificate of Incorporation and applicable law.

Section 41. Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

ARTICLE X

FISCAL YEAR

Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

ARTICLE XI

INDEMNIFICATION

Section 43. Indemnification Of Directors, Officers, Employees And Other Agents.

(a) Directors and Officers. The corporation shall indemnify its directors and officers to the fullest extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and officers; and, provided, further, that the corporation shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the DGCL or any other applicable law or (iv) such indemnification is required to be made under subsection (d).

(b) Employees and Other Agents. The corporation shall have power to indemnify its employees and other agents as set forth in the DGCL or any other applicable law. The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such employee or other persons as the Board of Directors shall determine.

(c) Expenses. The corporation shall advance to 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, by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding provided, however, that if the DGCL requires, an advancement of expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section 43 or otherwise.

Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Section 43, 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 action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by the Board of Directors by a majority vote of directors who were not parties to the proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors

so direct, by independent legal counsel in a written opinion, that the 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.

(d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Section 43 shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or officer. Any right to indemnification or advances granted by this Section 43 to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within 90 days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence 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, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the officer or director has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. In any suit brought by a director or officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the director or officer is not entitled to be indemnified, or to such advancement of expenses, under this Section 43 or otherwise shall be on the corporation.

(e) Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, 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 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 advances, to the fullest extent not prohibited by the DGCL, or by any other applicable law.

(f) Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

(g) Insurance. To the fullest extent permitted by the DGCL or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Section 43.

(h) Amendments. Any repeal or modification of this Section 43 shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

(i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Section 43 that shall not have been invalidated, or by any other applicable law. If this Section 43 shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director and officer to the full extent under any other applicable law.

(j) Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply:

(1) The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

(2) The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

(3) The term 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, and 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 Section 43 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

(4) References to a “director,” “officer,” “employee,” or “agent” of the corporation shall include, without limitation, situations where such person is serving at the

request of the corporation as, respectively, a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

(5) 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 Section 43.

ARTICLE XII

NOTICES

Section 44. Notices.

(a) Notice To Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Section 7 herein. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by U.S. mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.

(b) Notice To Directors. Any notice required to be given to any director may be given by the method stated in subsection (a), as otherwise provided in these Amended and Restated Bylaws, or by overnight delivery service, facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director.

(c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

(d) Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

(e) Notice To Person With Whom Communication Is Unlawful. Whenever notice is required to be given, under any provision of law or of the Amended and

Restated Certificate of Incorporation or Amended and Restated Bylaws of the corporation, 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 any provision of 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.

(f) Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the DGCL, any notice given under the provisions of the DGCL, the Amended and Restated Certificate of Incorporation or the Amended and Restated 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. Such consent shall have been deemed to have been given if such stockholder fails to object in writing to the corporation within 60 days of having been given notice by the corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the corporation.

ARTICLE XIII

AMENDMENTS

Section 45. Bylaw Amendments. Subject to these Bylaws or the provisions of the Certificate of Incorporation, the Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the corporation. Any adoption, amendment or repeal of the Bylaws of the corporation by the Board of Directors shall require the approval of a majority of the authorized number of Directors. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the corporation.

ARTICLE XIV

LOANS TO OFFICERS OR EMPLOYEES

Section 46. Loans To Officers Or Employees. Except as otherwise prohibited by applicable law, the corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these Amended and

Restated Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

EX-10.1

Exhibit 10.1

INSYS THERAPEUTICS, INC.

INDEMNITY AGREEMENT

THIS INDEMNITY AGREEMENT (this “Agreement”) dated as of                     , 20__, is made by and between INSYS THERAPEUTICS, INC., a Delaware corporation (the “Company”), and                      (“Indemnitee”).

RECITALS

A. The Company desires to attract and retain the services of highly qualified individuals as directors, officers, employees and agents.

B. The Company’s Amended and Restated Bylaws (the “Bylaws”) require that the Company indemnify its directors and officers, and empowers the Company to indemnify its employees and agents, as authorized by the Delaware General Corporation Law, as amended (the “Code”), under which the Company is organized and such Bylaws expressly provide that the indemnification provided therein is not exclusive and contemplates that the Company may enter into separate agreements with its directors, officers and other persons to set forth specific indemnification provisions.

C. Indemnitee does not regard the protection currently provided by applicable law, the Company’s governing documents and available insurance as adequate under the present circumstances, and the Company has determined that Indemnitee and other directors, officers, employees and agents of the Company may not be willing to serve or continue to serve in such capacities without additional protection.

D. The Company desires and has requested Indemnitee to serve or continue to serve as a director, officer, employee or agent of the Company, as the case may be, and has proferred this Agreement to Indemnitee as an additional inducement to serve in such capacity.

E. Indemnitee is willing to serve, or to continue to serve, as a director, officer, employee or agent of the Company, as the case may be, if Indemnitee is furnished the indemnity provided for herein by the Company.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Definitions.

(a) Agent. For purposes of this Agreement, the term “agent” of the Company means any person who: (i) is or was a director, officer, employee or other fiduciary of the Company, a subsidiary of the Company or an employee benefit plan of the Company or a subsidiary of the Company; or (ii) is or was serving at the request or for the convenience of, or

representing the interests of, the Company or a subsidiary of the Company, as a director, officer, employee or other fiduciary of a foreign or domestic corporation, partnership, joint venture, trust or other enterprise.

(b) Expenses. For purposes of this Agreement, the term “expenses” shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’, witness, or other professional fees and related disbursements, premiums, security for and other costs relating to any bonds and other out-of-pocket costs of whatever nature), actually and reasonably incurred by Indemnitee in connection with the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, the Code or otherwise, and amounts paid in settlement by or on behalf of Indemnitee, but shall not include any judgments, fines or penalties actually levied against Indemnitee for such individual’s violations of law. The term “expenses” shall also include reasonable compensation for time spent by Indemnitee for which he is not compensated by the Company or any subsidiary or third party (i) for any period during which Indemnitee is not an agent, in the employment of, or providing services for compensation to, the Company or any subsidiary; and (ii) if the rate of compensation and estimated time involved is approved by the directors of the Company who are not parties to any action with respect to which expenses are incurred, for Indemnitee while an agent of, employed by, or providing services for compensation to, the Company or any subsidiary.

(c) Proceeding. For purposes of this Agreement, the term “proceeding” shall be broadly construed and shall include, without limitation, any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, and whether formal or informal in any case, in which Indemnitee was, is or will be involved as a party or otherwise by reason of: (i) the fact that Indemnitee is or was a director or officer of the Company; (ii) the fact that any action taken by Indemnitee or of any action on Indemnitee’s part while acting as director, officer, employee or agent of the Company; or (iii) 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, employee benefit plan or other enterprise, and in any such case described above, whether or not serving in any such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses may be provided under this Agreement.

(d) Subsidiary. For purposes of this Agreement, the term “subsidiary” means any corporation or limited liability company of which more than 20% of the outstanding voting securities or equity interests are owned, directly or indirectly, by the Company and one or more of its subsidiaries, and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary.

(e) Independent Counsel. For purposes of this Agreement, the term “independent counsel” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter

material to either such party, or (ii) any other party to the proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “independent counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

2. Consideration. The Company acknowledges that it has entered into this Agreement and assumes the obligations imposed on it hereby, in addition to and separate from its obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve, or continue to serve, as a director, officer, employee or agent of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer, employee or agent of the Company.

3. Indemnification.

(a) Indemnification in Third Party Proceedings. Subject to Section 10 below, the Company shall indemnify Indemnitee, if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding, for any and all expenses, actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such proceeding.

(b) Indemnification in Derivative Actions and Direct Actions by the Company. Subject to Section 10 below, the Company shall indemnify Indemnitee, if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding by or in the right of the Company to procure a judgment in its favor, against any and all expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceedings.

4. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of any action without prejudice, the Company shall indemnify Indemnitee against all expenses actually and reasonably incurred in connection with the investigation, defense or appeal of such proceeding.

5. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses actually and reasonably incurred by Indemnitee in the investigation, defense, settlement or appeal of a proceeding, but is precluded by applicable law or the specific terms of this Agreement to indemnification for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

6. Advancement of Expenses. To the extent not prohibited by law, the Company shall advance the expenses incurred by Indemnitee in connection with any proceeding, and such advancement shall be made within twenty (20) days after the receipt by the Company of a statement or statements requesting such advances (which shall include invoices received by Indemnitee in connection with such expenses but, in the case of invoices in connection with legal

services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice) and upon request of the Company, an undertaking to repay the advancement of expenses if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. Advances shall be unsecured, interest free and without regard to Indemnitee’s ability to repay the expenses. Advances shall include any and all expenses actually and reasonably incurred by Indemnitee pursuing an action to enforce Indemnitee’s right to indemnification under this Agreement, or otherwise and this right of advancement, including expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee acknowledges that the execution and delivery of this Agreement shall constitute an undertaking providing that Indemnitee shall, to the fullest extent required by law, repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. The right to advances under this Section shall continue until final disposition of any proceeding, including any appeal therein. This Section 6 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10(b).

7. Notice and Other Indemnification Procedures.

(a) Notification of Proceeding. Indemnitee will notify the Company in writing promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any proceeding or matter which may be subject to indemnification or advancement of expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise.

(b) Request for Indemnification and Indemnification Payments. Indemnitee shall notify the Company promptly in writing upon receiving notice of any demand, judgment or other requirement for payment that Indemnitee reasonably believes to be subject to indemnification under the terms of this Agreement, and shall request payment thereof by the Company. Indemnification payments requested by Indemnitee under Section 3 hereof shall be made by the Company no later than sixty (60) days after receipt of the written request of Indemnitee. Claims for advancement of expenses shall be made under the provisions of Section 6 herein.

(c) Application for Enforcement. In the event the Company fails to make timely payments as set forth in Sections 6 or 7(b) above, Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification or advancement of expenses pursuant to this Agreement. In such an enforcement hearing or proceeding, the burden of proof shall be on the Company to prove that indemnification or advancement of expenses to Indemnitee is not required under this Agreement or permitted by applicable law. Any determination by the Company (including its Board of Directors, stockholders or independent counsel) that Indemnitee is not entitled to indemnification hereunder, shall not be a defense by the Company to the action nor create any presumption that Indemnitee is not entitled to indemnification or advancement of expenses hereunder.

(d) Indemnification of Certain Expenses. The Company shall indemnify Indemnitee against all expenses incurred in connection with any hearing or proceeding under this Section 7 unless the Company prevails in such hearing or proceeding on the merits in all material respects.

8. Assumption of Defense. In the event the Company shall be requested by Indemnitee to pay the expenses of any proceeding, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, or to participate to the extent permissible in such proceeding, with counsel reasonably acceptable to Indemnitee. Upon assumption of the defense by the Company and the retention of such counsel by the Company, the Company shall not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that Indemnitee shall have the right to employ separate counsel in such proceeding at Indemnitee’s sole cost and expense. Notwithstanding the foregoing, if Indemnitee’s counsel delivers a written notice to the Company stating that such counsel has reasonably concluded that there is an actual or potential conflict of interest between the Company and Indemnitee in the conduct of any such defense or the Company shall not, in fact, have employed counsel or otherwise actively pursued the defense of such proceeding within a reasonable time, then in any such event the fees and expenses of Indemnitee’s counsel to defend such proceeding shall be subject to the indemnification and advancement of expenses provisions of this Agreement.

9. Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any subsidiary (“D&O Insurance”), Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

10. Exceptions.

(a) Certain Matters. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of any proceeding with respect to (i) remuneration paid to Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law (and, in this respect, both the Company and Indemnitee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication, as indicated in Section 10(d) below); (ii) a final judgment rendered against Indemnitee for an accounting, disgorgement or repayment of profits made from the purchase or sale by Indemnitee of securities of the Company against Indemnitee or in connection with a settlement by or on behalf of Indemnitee to the extent it is acknowledged by Indemnitee and the Company that such

amount paid in settlement resulted from Indemnitee’s conduct from which Indemnitee received monetary personal profit, pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or other provisions of any federal, state or local statute or rules and regulations thereunder; (iii) a final judgment or other final adjudication that Indemnitee’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct (but only to the extent of such specific determination); or (iv) on account of conduct that is established by a final judgment as constituting a breach of Indemnitee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Indemnitee is not legally entitled. For purposes of the foregoing sentence, a final judgment or other adjudication may be reached in either the underlying proceeding or action in connection with which indemnification is sought or a separate proceeding or action to establish rights and liabilities under this Agreement.

(b) Claims Initiated by Indemnitee. Any provision herein to the contrary notwithstanding, the Company shall not be obligated to indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought by Indemnitee against the Company or its directors, officers, employees or other agents and not by way of defense, except (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or under any other agreement, provision in the Bylaws or Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) or applicable law, or (ii) with respect to any other proceeding initiated by Indemnitee that is either approved by the Board of Directors or Indemnitee’s participation is required by applicable law. However, indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors determines it to be appropriate.

(c) Unauthorized Settlements. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee under this Agreement for any amounts paid in settlement of a proceeding effected without the Company’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold consent to any proposed settlement; provided, however, that the Company may in any event decline to consent to (or to otherwise admit or agree to any liability for indemnification hereunder in respect of) any proposed settlement if the Company is also a party in such proceeding and determines in good faith that such settlement is not in the best interests of the Company and its stockholders.

(d) Securities Act Liabilities. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act of 1933, as amended (the “Act”), or in any registration statement filed with the SEC under the Act. Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K currently generally requires the Company to undertake in connection with any registration statement filed under the Act to submit the issue of the enforceability of Indemnitee’s rights under this Agreement in connection with any liability under the Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue. Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.

11. Nonexclusivity and Survival of Rights. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may at any time be entitled under any provision of applicable law, the Company’s Certificate of Incorporation, Bylaws or other agreements, both as to action in Indemnitee’s official capacity and Indemnitee’s action as an agent of the Company, in any court in which a proceeding is brought, and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors, administrators and assigns of Indemnitee. The obligations and duties of the Company to Indemnitee under this Agreement shall be binding on the Company and its successors and assigns until terminated in accordance with its terms. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree in writing to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her corporate status prior to such amendment, alteration or repeal. To the extent that a change in the Code, whether by statute or judicial decision, permits greater indemnification or advancement of expenses than would be afforded currently under the Company’s Certificate of Incorporation, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, by Indemnitee shall not prevent the concurrent assertion or employment of any other right or remedy by Indemnitee.

12. 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, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

13. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law.

14. Severability. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves

invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 13 hereof.

15. Amendment and Waiver. No supplement, modification, amendment, termination, or cancellation of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

16. Notice. Except as otherwise provided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon the parties hereto shall be in writing and, if by telegram, telecopy or telex, shall be deemed to have been validly served, given or delivered when sent, if by overnight delivery, courier or personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given or delivered three (3) business days after deposit in the United States mail, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice). If to the Company, notices and demands shall be delivered to the attention of the Secretary of the Company.

17. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Arizona, as applied to contracts between Arizona residents entered into and to be performed entirely within Arizona.

18. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.

19. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

20. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, that this Agreement is a supplement to and in furtherance of the Company’s Certificate of Incorporation, Bylaws, the Code and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of Indemnitee thereunder.

IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written.

INSYS THERAPEUTICS, INC.
By:
	Name:                                                                                      Title:
INDEMNITEE
Signature of Indemnitee
Print or Type Name of Indemnitee

EX-10.2

Exhibit 10.2

INSYS THERAPEUTICS, INC.

AMENDED AND RESTATED EQUITY INCENTIVE PLAN

1. Statement of Purpose. The purpose of the Insys Therapeutics, Inc. Amended and Restated Equity Incentive Plan (the “Plan”) is to benefit Insys Therapeutics, Inc. (the “Company”) and its subsidiaries through the maintenance and development of the management by offering certain present and future executives, key personnel, non-employee directors and consultants a favorable opportunity to become holders of stock in the Company over a period of years, thereby giving them a permanent stake in the growth and prosperity of the Company and encouraging the continuance of their services with the Company or its subsidiaries.

2. Administration.

2.1 Plan Administrator. The Plan shall be administered by the board of directors of the Company, except to the extent the board delegates its authority to a committee of the board to administer this Plan. The administrator of this Plan shall hereinafter be referred to as the “Plan Administrator.”

2.2 Grants to Section 16 Persons. If the Company’s shares of common stock are registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), no option shall be granted to a director or officer who is subject to Section 16 of the Exchange Act unless (i) approved in advance by the board or a committee of the board of directors composed solely of two or more “non-employee directors” (as such term is defined in Rule 16b-3(b)(3) under the Exchange Act), (ii) approved in advance, or subsequently ratified by the stockholders in accordance with the provisions of Rule 16b-3(d)(2) under the Exchange Act, or (iii) absent approval pursuant to clauses (i) or (ii), no officer or director of the Company may sell shares acquired upon the exercise of an option during the six-month period immediately following the grant date of the option.

2.3 Compliance with Section 162(m). If the Company’s shares of common stock are registered under Section 12 of the Exchange Act, stock options intended to qualify as “performance based compensation” (as such term is defined under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”)) may be granted only by a committee of the board of directors composed of no fewer than two directors, each of whom is an “outside director” (as such term is defined under Section 162(m) of the Code).

2.4 Acts and Authority of the Plan Administrator. A majority of the persons comprising the Plan Administrator shall constitute a quorum, and the acts of a majority of such persons present at any meeting at which a quorum is present, or acts approved in writing by all such persons, shall be the acts of the Plan Administrator. Subject to the provisions of the Plan, the Plan Administrator shall have full and final authority, in its absolute discretion, (a) to determine the persons to be granted options under the Plan, (b) to determine the number of shares subject to each option, (c) to determine the time or times at which options will be granted, (d) to determine the option price of the shares subject to each option, which price shall not be less than the minimum specified in Section 4 of the Plan, (e) to determine the time or times when

each option becomes exercisable and the duration of the exercise period, (f) to determine whether or not an option is intended to be treated as an incentive stock option as defined in Section 422 of the Code, (g) to prescribe the form or forms of the agreements evidencing any options granted under the Plan (which forms shall be consistent with the Plan), (h) to adopt, amend and rescind such rules and regulations as, in the Plan Administrator’s opinion, may be advisable in the administration of the Plan, (i) to construe and interpret the Plan, the rules and regulations and the agreements evidencing options granted under the Plan and to make all other determinations deemed necessary or advisable for the administration of the Plan, and (j) to appoint such agents as it shall deem appropriate for the proper administration of the Plan. Any decision made or action taken in good faith by the Plan Administrator in connection with the administration, interpretation, and implementation of the Plan and of its rules and regulations shall, to the extent permitted by law, be conclusive and binding upon all optionees under the Plan and upon any person claiming under or through such an optionee, and no director of the Company shall be liable for any such decision made or action taken by the Plan Administrator.

The Plan Administrator may delegate to the Chief Executive Officer of the Company (or to such other officer or officers of the Company as the Chief Executive Officer may designate, acting under the Chief Executive Officer’s supervision), subject to such limitations as the Plan Administrator may determine, the right to grant options to employees who are not officers or directors of the Company; provided, however, that no option shall be granted pursuant to such delegation to any person who could not have been granted an option by the Plan Administrator.

3. Eligibility. Options shall be granted only to key employees, non-employee directors and consultants of the Company and its subsidiaries selected initially and from time to time thereafter by the Plan Administrator on the basis of the special importance of their services in the management, development and operations of the Company or its subsidiaries; provided, however, an incentive stock option may be granted only to a person who, at the time the incentive stock option is granted, is an employee of the Company or any of its subsidiaries (as such term is defined in Section 424 of the Code).

4. Granting of Options. The maximum number of shares of the Company Nonvoting Common Stock, $0.001 par value (“Nonvoting Common Stock”), reserved for issuance under the Plan shall be 2,000,000 (subject to adjustment as provided in Paragraph 11), and the maximum number of shares of the Company Voting Common Stock, $0.001 par value (“Voting Common Stock” and, together with the Nonvoting Common Stock, “Common Stock”), reserved for issuance under the Plan shall be 1,000,000 (subject to adjustment as provided in Paragraph 11) . For purposes of determining the number of shares issued pursuant to the Plan, no shares shall be deemed issued until they are actually delivered to an optionee. Shares covered by options that either wholly or in part are not earned, or that expire or are forfeited, terminated, cancelled, settled in cash, payable solely in cash or exchanged for other awards, shall be available for future issuance under options. Shares issued under the Plan through the settlement, assumption or substitution of outstanding awards or obligations to grant future awards as a condition of the Company acquiring another entity shall not reduce the maximum number of shares available under the Plan. Shares subject to options may be made available from unissued or reacquired shares of Common Stock.

Any option that meets the requirements of Section 422 shall be an incentive stock option unless otherwise determined at the time of grant. An option that is not an incentive stock option shall be referred to herein as a “nonqualified stock option.”

Unless otherwise expressly provided by the Plan Administrator in any specific instance, the action of the Plan Administrator in selecting an individual to receive a grant, determining the number of shares subject to the option and setting the option price constitutes the granting of the option. The date of the Plan Administrator’s action will be considered the date the option is granted.

No options shall be granted under the Plan subsequent to the tenth anniversary of the effective date of the Plan.

The aggregate fair market value (determined at the time of grant of the option) of the shares of Common Stock with respect to which incentive stock options are exercisable for the first time during any calendar year by an employee granted incentive stock options under this Plan or any other plan of the Company or its parent or any subsidiary shall not exceed $100,000; provided however, that this limit shall not apply to those options which are not intended to be treated as incentive stock options as defined in the Code. If an option designated as an incentive stock option exceeds such limitation, such option shall be considered an incentive stock option with respect to the number of shares, if any, that does not exceed limitation, and as a nonqualified stock option with respect to the remaining shares.

Nothing contained in the Plan or in any option granted pursuant thereto shall confer upon any optionee any right to be continued in the employment of the Company or any subsidiary of the Company, or interfere in any way with the right of the Company or its subsidiaries to terminate his or her employment at any time.

5. Option Price. The option price shall be determined by the Plan Administrator and, subject to the provisions of Paragraph 11 hereof, shall be not less than the fair market value, at the time the option is granted, of the stock subject to the option, provided however, that in the case of an incentive stock option granted to an employee who, at the time the option is granted, owns more than 10% of the total combined voting power of all classes of stock of the Company or of the parent or any subsidiary of the Company (a “10% Holder”), the option price shall not be less than 110% of the fair market value, at the time the option is granted, of the stock subject to the option. For purposes of this Plan, the term “fair market value” per common share shall mean (1) the closing sale price per common share on the national securities exchange on which the shares of Common Stock are principally traded for the date in question on which there was a reported sale of shares of Common Stock on such exchange (or, if no sales of shares of Common Stock were made on that date, the closing sale price as reported for the most recent preceding day on which there was a reported sale of shares of Common Stock), or (2) if the shares of Common Stock are not then traded on a national securities exchange, the closing sale price per common share as reported on the Nasdaq Stock Market for the date in question (or, if no sales of shares of Common Stock were made on that date, the closing sale price as reported for the most recent preceding day on which there was a reported sale of shares of Common Stock), or (3) if the shares of Common Stock are not then listed on a national securities exchange or traded in an

over-the-counter market or the value of such shares is not otherwise readily ascertainable, such value as determined by the Plan Administrator in good faith.

6. Duration of Options, Increments, and Extensions. Subject to the provisions of Paragraph 9 hereof, each option shall be for such term of not more than ten years, as shall be determined by the Plan Administrator at the date of the grant; provided, however, that no incentive stock option granted to an employee who, at the time the option is granted, is a 10% Holder, shall have a term of more than five years. Except as otherwise determined by the Plan Administrator, each option shall become exercisable with respect to one-quarter of the total number of shares subject to the option six months after the date of its grant and with respect to an additional one-quarter at the end of each sixth-month period thereafter during the succeeding period (each six month period sometimes referred to herein as a “Vesting Period” and each share increment sometimes referred to herein as an “Periodic vesting amount”). Unapproved leaves of absence that continue for more than six months shall delay the exercisability of the options for a period equal in duration to the length of the unapproved absence. In the event that the number of shares subject to the option is not a whole number, any fractional shares will vest in the last Vesting Period. The exercise date shall be deemed to be the date such notice is actually received by the Secretary or another person designated by the Secretary. Notwithstanding the foregoing, the Plan Administrator may in its discretion (i) specifically provide at the time of the grant for another time or other times of exercise; (ii) accelerate the exercisability of any option upon the consent of the affected optionee, if such acceleration would adversely affect an optionee, and subject to such terms and conditions as the Plan Administrator deems necessary and appropriate to effectuate the purpose of the Plan; or (iii) subject to the consent of the affected optionee, at any time prior to the expiration or termination of any option previously granted, extend the term of any option (including such options held by officers or directors) for such additional period as the Plan Administrator, in its discretion shall determine. In no event, however, shall the aggregate option period with respect to any option, including the original term of the option and any extensions thereof, exceed ten years (or five years, in the case of an incentive stock option granted to any employee who, at the time the option is granted, is a 10% Holder). Subject to the foregoing, all or any part of the shares to which the right to purchase has accrued may be purchased at the time of such accrual or at any time or times thereafter during the option period; provided, however, that the minimum number of shares purchased shall be no less than the greater of either (i) 100 shares or (ii) 25% of the Periodic vesting amount, unless the total number of shares purchasable shall be less than 100.

7. Change in Control. Any option previously granted under the Plan to an optionee who is an employee of the Company or any of its subsidiaries on the date of a “Change in Control” occurring at any time during the specified term of an option granted under the Plan shall be immediately exercisable in full on such date, without regard to any times of exercise established under Paragraph 6 hereof. The term “Change in Control” shall mean the occurrence of any of the following events:

(a) The Company is merged or consolidated or reorganized into or with or shares of stock of the Company are exchanged for stock or securities of, another corporation or other legal person and as a result of such, merger, consolidation, reorganization or exchange less than 51% of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person

are owned in the aggregate by the stockholders of the Company immediately prior to such merger, consolidation, reorganization or exchange;

(b) The Company sells or otherwise transfers all or substantially all of its business and/or assets to any other corporation or other legal person, less than 51% of the outstanding voting securities or other capital interests of which are owned in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to or after such sale or transfer;

(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), as promulgated under the Exchange Act, disclosing that any person or group (as the terms “person” and “group” are used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and the rules and regulations promulgated thereunder) has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 20% or more of the issued and outstanding shares of voting securities of the Company; or

(d) During any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless (i) the election, or nomination for election by the Company’s stockholders of each new director of the Company was approved by a vote of at least two-thirds of such directors of the Company then still in office who were directors of the Company at the beginning of any such period (excluding any director whose initial assumption of office is in connection with an actual or threatened election contest, including a consent solicitation, relating to the election or removal of one or more directors of the Company), or (ii) the new directors were appointed in accordance with the terms and conditions of Section 5 of that certain Shareholders’ Rights Agreement, dated as of March 2, 1999, between the Company and certain of its shareholders.

8. Exercise of Option. An option may be exercised by giving written notice to the Company, attention of the Secretary, specifying the number of shares to be purchased, accompanied by the full purchase price for the shares to be purchased in cash or by check, provided, however, that in lieu of cash an optionee may, with the approval of the Plan Administrator, exercise his or her option by (i) tendering to the Company shares of Common Stock owned by him or her (which he or she must have held for at least six months) and with the certificates therefor registered in his or her name, having a fair market value equal to all or a portion of the cash exercise price of the shares being purchased; or (ii) delivery of an irrevocable written notice instructing the Company to deliver the shares of Common Stock being purchased to a broker selected by the Company, subject to the broker’s written guarantee to deliver cash to the Company, in each case of the foregoing clauses (i) and (ii) equal to the full consideration of the exercise price for the shares being purchased. For these purposes, the per share value of the Company’s shares of Common Stock shall be the fair market value at the close of business on the date preceding the date of exercise (or, if that date is not a trading day, on the trading day next preceding the date of exercise of the option).

At the time of any exercise of any option, the Plan Administrator may, if it shall determine it necessary or desirable for any reason, require the optionee (or his or her heirs, legatees, or legal representative, as the case may be) as a condition upon the exercise thereof, to deliver to the Company a written representation of present intention to purchase the shares for investment and not for distribution or resale. In the event such representation is required to be delivered, an appropriate legend may be placed upon each certificate delivered to the optionee upon his or her exercise of part of all of the option and a stop transfer order may be placed with the transfer agent. Each option shall also be subject to the requirements that, if at any time the Company determines, in its discretion, that the listing, registration or qualification of the shares subject to the option upon any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issue or purchase of shares thereunder, the option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company.

If the Plan Administrator shall determine it necessary or desirable for any reason, an option shall provide that it is contemplated that the shares acquired through the exercise of the option will not be registered under applicable federal and state securities laws and that such shares cannot be resold unless they are registered under such laws or unless an exemption from registration is available, and the certificate for any such shares issued upon the exercise of the option shall bear a legend making appropriate reference to such provisions and a stop transfer order may be placed with the transfer agent.

At the time of the exercise of any option the Company may require, as a condition of the exercise of such option, the optionee to pay the Company an amount equal to the amount of the tax the Company may be required to withhold as a result of the exercise of such option by the optionee.

At any time when an optionee is required to pay to the optionee’s employer an amount required to be withheld under applicable income tax laws in connection with the exercise of an option, the optionee may satisfy this obligation in whole or in part by making an election (the “Election”) to (i) require the recipient of the shares of Common Stock to remit to the Company an amount in cash sufficient to satisfy all withholding taxes or (ii) deduct from the cash payment pursuant to a broker-assisted option exercise (net to optionee in cash or shares of Common Stock) an amount sufficient to satisfy any withholding tax requirements. The value of the shares to be withheld shall be based on the fair market value of the shares of Common Stock of the company on the date that the amount of tax to be withheld shall be determined (the “Tax Date”). Each Election must be made on or prior to the Tax Date and shall be irrevocable. The Plan Administrator may disapprove of any Election or may suspend or terminate the right to make Elections.

At the time of any exercise of any option, the Plan Administrator may, if it shall determine it necessary or desirable for any reason, require the optionee (or his or her heirs, legatees, or legal representative, as the case may be) as a condition upon the exercise thereof, to deliver to the Company a written agreement to be bound by the terms of the Company’s Amended and Restated Stockholders Agreement. In the event such agreement is required to be delivered, an appropriate legend may be placed upon each certificate delivered to the optionee

upon his or her exercise of part of all of the option and a stop transfer order may be placed with the transfer agent.

9. Termination of Employment; Exercise Thereafter. In the event the employment or association of an optionee with the Company or any of its subsidiaries is terminated for any reason other than death, permanent disability or a Change in Control, such optionee’s option shall expire and the optionee may exercise the option, to the extent the option is exercisable at the time of termination, in the three-month period after such termination. Temporary absence from employment because of illness, vacation, approved leaves of absence, and transfers of employment among the Company and its subsidiaries, shall not be considered to terminate employment or to interrupt continuous employment.

In the event of termination of employment because of disability (as that term is defined in Section 22(e)(3) of the Code, as now in effect or as shall be subsequently amended) or death, the option may be exercised in full, without regard to any times of exercise established under Paragraph 6 hereof, by his or her heirs, legatees, or legal representative, as the case may be, during its specified term prior to one year after the date of termination.

10. Non-Transferability of Options. Unless otherwise determined by the Plan Administrator in the case of nonqualified stock options, no option shall be transferable by the optionee otherwise than by will or the laws of descent and distribution, and each option shall be exercisable during an optionee’s lifetime only by him or her.

11. Adjustment. The number of shares subject to the Plan and to options granted under the Plan shall be adjusted as follows: (a) in the event that the Company’s outstanding shares of Common Stock are changed by any stock dividend, stock split or combination of shares, the number of shares subject to the Plan and to options granted thereunder shall be proportionately adjusted; (b) in the event of any merger, consolidation or reorganization of the Company with any other corporation or corporations, there shall be substituted, on an equitable basis as determined by the Plan Administrator, for each common share then subject to the Plan, whether or not at the time subject to outstanding options, the number and kind of shares of stock or other securities to which the holders of shares of Common Stock of the Company will be entitled pursuant to the transaction; (c) in the event of any other relevant change in the capitalization of the Company, the Plan Administrator shall provide for an equitable adjustment in the number of shares of Common Stock then subject to the Plan, whether or not then subject to outstanding options; and (d) in the event of any such adjustment the purchase price per share shall be proportionately adjusted.

12. Amendment of Plan. The board of directors of the Company may amend or discontinue the Plan at any time. However, no such amendment or discontinuance shall change or impair any option previously granted without the consent of the optionee, and any amendment that has any of the following effects shall require the approval of the shareholders: (a) any change in the persons eligible to receive options, (b) any increase in the maximum number of shares available for issuance under the Plan, (c) any change in the minimum purchase price or the maximum number of shares with respect to which options can be granted to any individual in any given calendar year, or (d) any change in the limitations on the option period or increase the time limitations on the grant of options.

13. Effective Date. The Plan shall become effective on the date it is adopted by the shareholders of the Company and shall remain in effect in accordance with its terms unless amended or terminated by the board of directors.

14. Severability. If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.

Adopted by the Board of Directors and the shareholders by written consent in lieu of a meeting on June 29, 2006.

EX-10.3

Exhibit 10.3

INSYS THERAPEUTICS, INC.

2007 EQUITY INCENTIVE PLAN

APPROVED BY THE BOARD: [            , 2007]

APPROVED BY THE STOCKHOLDERS: [            , 2007]

TERMINATION DATE: [            , 2017]

1. GENERAL.

(a) Successor to Prior Plan. The Plan is intended as the successor to the Company’s Amended and Restated Equity Incentive Plan (the “Prior Plan”). Following the Effective Date, no additional stock awards shall be granted under the Prior Plan. Any shares remaining available for issuance pursuant to the exercise of options or settlement of stock awards under the Prior Plan shall become available for issuance pursuant to Stock Awards granted hereunder, as provided in Section 3(a) hereof. Any shares subject to outstanding stock awards granted under the Prior Plan that expire or terminate for any reason prior to exercise or settlement shall become available for issuance pursuant to Stock Awards granted hereunder. All outstanding stock awards granted under the Prior Plan shall remain subject to the terms of the Prior Plan with respect to which they were originally granted.

(b) Eligible Award Recipients. The persons eligible to receive Awards are Employees, Directors and Consultants.

(c) Available Awards. The Plan provides for the grant of the following Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv) Restricted Stock Unit Awards, (v) Stock Appreciation Rights, (vi) Performance Stock Awards, (vii) Performance Cash Awards, and (viii) Other Stock Awards.

(d) Purpose. The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive Awards as set forth in Section 1(b), to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Stock Awards.

2. ADMINISTRATION.

(a) Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).

(b) Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i) To determine from time to time (A) which of the persons eligible under the Plan shall be granted Awards; (B) when and how each Award shall be granted; (C) what type or combination of types of Awards shall be granted; (D) the provisions of each Award granted (which need not be identical), including the time or times when a person shall be permitted to receive cash or Common Stock pursuant to a Stock Award; and (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.

1.

(ii) To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it shall deem necessary or expedient to make the Plan or Award fully effective.

(iii) To settle all controversies regarding the Plan and Awards granted under it.

(iv) To accelerate the time at which a Stock Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.

(v) To effect, at any time and from time to time, with the consent of any adversely affected Participant, (1) the reduction of the exercise price of any outstanding Option or the strike price of any outstanding Stock Appreciation Right; (2) the cancellation of any outstanding Option or Stock Appreciation Right and the grant in substitution therefor of (a) a new Option or Stock Appreciation Right under the Plan or another equity plan of the Company covering the same or different number of shares of Common Stock, (b) a Restricted Stock Award, (c) a Restricted Stock Unit Award, (d) an Other Stock Award, (e) cash, and/or (f) other valuable consideration as determined by the Board in its sole discretion; or (3) any other action that is treated as a repricing under generally accepted accounting principles.

(vi) To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant.

(vii) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or Stock Awards granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law. However, except as provided in Section 9(a) relating to Capitalization Adjustments, stockholder approval shall be required for any amendment of the Plan that either (A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (D) materially extends the term of the Plan, or (E) expands the types of Awards available for issuance under the Plan, but in each of (A) through (E) only to the extent required by applicable law or listing requirements. Except as provided above, rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (1) the Company requests the consent of the affected Participant, and (2) such Participant consents in writing.

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(viii) To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding Incentive Stock Options, or (C) Rule 16b-3.

(ix) To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that a Participant’s rights under any Award shall not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participant’s consent if necessary to maintain the qualified status of the Award as an Incentive Stock Option or to bring the Award into compliance with Section 409A of the Code and the related guidance thereunder.

(x) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.

(xi) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States.

(c) Delegation to Committee.

(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in the Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

(ii) Section 162(m) and Rule 16b-3 Compliance. In the sole discretion of the Board, the Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. In addition, the Board or the Committee, in its sole discretion, may (A) delegate to a Committee who need not be Outside Directors the authority to grant Awards to eligible persons who are either (I) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Stock Award, or (II) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code, or (B) delegate to a Committee who need not be Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.

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(d) Delegation to Officers. The Board may delegate to one or more Officers the authority to do one or both of the following (i) designate Employees of the Company or any of its Subsidiaries to be recipients of Options (and, to the extent permitted by Delaware law, other Stock Awards) and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Employees; provided, however, that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself. Notwithstanding anything to the contrary in this Section 2(d), the Board may not delegate to an Officer authority to determine the Fair Market Value of the Common Stock pursuant to Section 13(v)(ii) below.

(e) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

3. SHARES SUBJECT TO THE PLAN.

(a) Share Reserve. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards under the Plan shall not exceed [                    ] ([            ]) shares, subject to reduction as set forth below. Such share reserve consists of (i) the [                    ] ([            ]) unallocated shares remaining available for issuance under the Prior Plan as of the Effective Date, (ii) an additional [                    ] ([            ]) shares to be approved by the stockholders as part of the approval of this Plan, and (iii) the number of shares that may be added to the Plan pursuant to Section 3(b) below (the “Share Reserve”). In addition, the number of shares of Common Stock available for issuance under the Plan shall automatically increase on January 1st of each year commencing in 2008 and ending on (and including) January 1, 2017, in an amount equal to the lesser of (i) [                    ] ([    ]%)] of the total number of shares of Common Stock outstanding on December 31^st of the preceding year, or (ii) [                    ] ([            ]) shares. Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year, to provide that there shall be no increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year shall be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence. Shares may be issued in connection with a merger or acquisition as permitted by Nasdaq Rule 4350(i)(1)(A)(iii) or, if applicable, NYSE Listed Company Manual Section 303A.08, or AMEX Company Guide Section 711 and such issuance shall not reduce the number of shares available for issuance under the Plan. For clarity, shares of Common Stock issued pursuant to stock awards granted under the Prior Plan shall not reduce the share reserve of this Plan.

(b) Additions to the Share Reserve. The Share Reserve also shall be increased from time to time by a number of shares equal to the number of shares of Common Stock that (i) are issuable pursuant to options outstanding under the Prior Plan as of the Effective Date and (ii) but for the termination of the Prior Plan as of the Effective Date, would otherwise have reverted to the share reserve of the Prior Plan pursuant to the provisions thereof.

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(c) Reversion of Shares to the Share Reserve. If any (i) Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii) shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares, (iii) a Stock Award is settled in cash, (iv) if any shares of Common Stock are cancelled in accordance with the cancellation and regrant provisions of Section 2(b)(v), then the shares of Common Stock not issued under such Stock Award, or forfeited to or repurchased by the Company, shall revert to and again become available for issuance under the Plan. If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld for the payment of taxes or the Stock Award is exercised through a reduction of shares subject to the Stock Award (i.e., “net exercised”) or an appreciation distribution in respect of a Stock Appreciation right is paid in shares of Common Stock, the number of shares subject to the Stock Award that are not delivered to the Participant shall remain available for subsequent issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual delivery or attestation), then the number of shares so tendered shall remain available for issuance under the Plan.

(d) Incentive Stock Option Limit. Notwithstanding anything to the contrary in this Section 3(d), subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be [                    ] ([            ]) shares of Common Stock plus the amount of any increase in the number of shares that may be available for issuance pursuant to Stock Awards pursuant to Section 3(a).

(e) Source of Shares. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.

4. ELIGIBILITY.

(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.

(b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

(c) Section 162(m) Limitation. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, at such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, no Employee shall be eligible to be granted during

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any calendar year Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the Stock Award is granted covering more than [                    ] ([            ]) shares of Common Stock.

(d) Consultants. A Consultant shall be eligible for the grant of a Stock Award only if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is available to register either the offer or the sale of the Company’s securities to such Consultant.

5. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock Option. The provisions of separate Options need not be identical; provided, however, that each Option Agreement shall conform to (through incorporation of provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the following provisions:

(a) Term. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Option Agreement.

(b) Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise price of each Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Section 424(a) of the Code (whether or not such options are Incentive Stock Options).

(c) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board shall have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment. The methods of payment permitted by this Section 5(c) are:

(i) by cash, check, bank draft or money order payable to the Company;

(ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

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(iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

(iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, further, that shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or

(v) in any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

(d) Transferability of Options. The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:

(i) Restrictions on Transfer. An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder; provided, however, that the Board may, in its sole discretion, permit transfer of the Option in a manner that is not prohibited by applicable tax and securities laws upon the Optionholder’s request.

(ii) Domestic Relations Orders. Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order, provided, however, that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

(iii) Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. In the absence of such a designation, the executor or administrator of the Optionholder’s estate shall be entitled to exercise the Option.

(e) Vesting of Options Generally. The total number of shares of Common Stock subject to an Option may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 5(e) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.

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(f) Termination of Continuous Service. In the event that an Optionholder’s Continuous Service terminates (other than for Cause or upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

(g) Extension of Termination Date. An Optionholder’s Option Agreement may provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than for Cause or upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. In addition, unless otherwise provided in an Optionholder’s Option Agreement, if the sale of the Common Stock received upon exercise of an Option following the termination of the Optionholder’s Continuous Service (other than for Cause) would violate the Company’s Window Period Policy, then the Option shall terminate on the earlier of (i) the expiration of a period equal to the post-termination exercise period described in Section 5(f) above or Sections 5(h) or 5(i) below after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of the Company’s Window Period Policy; or (ii) the expiration of the term of the Option as set forth in the Option Agreement.

(h) Disability of Optionholder. In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

(i) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the

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Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death, but only within the period ending on the earlier of (A) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (B) the expiration of the term of such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

(j) Termination for Cause. Except as explicitly provided otherwise in an Optionholder’s Option Agreement, in the event that an Optionholder’s Continuous Service is terminated for Cause, the Option shall terminate upon the termination date of such Optionholder’s Continuous Service, and the Optionholder shall be prohibited from exercising his or her Option from and after the time of such termination of Continuous Service.

(k) Non-Exempt Employees. No Option granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.

6. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

(a) Restricted Stock Awards. Each Restricted Stock Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board. The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical, provided, however, that each Restricted Stock Award Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

(i) Consideration. A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company; (B) past or future services actually or to be rendered to the Company or an Affiliate; or (C) any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

(ii) Vesting. Shares of Common Stock awarded under a Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.

(iii) Termination of Participant’s Continuous Service. In the event a Participant’s Continuous Service terminates, the Company may receive via a forfeiture condition

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or a repurchase right, any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.

(iv) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.

(b) Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical, provided, however, that each Restricted Stock Unit Award Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

(i) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

(ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.

(iii) Payment. A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.

(iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

(v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.

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(vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

(vii) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall incorporate terms and conditions necessary to avoid the consequences of Section 409A(a)(1) of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award.

(c) Stock Appreciation Rights. Each Stock Appreciation Right Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. Stock Appreciation Rights may be granted as stand-alone Stock Awards or in tandem with other Stock Awards. The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be identical; provided, however, that each Stock Appreciation Right Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

(i) Term. No Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Stock Appreciation Right Agreement.

(ii) Strike Price. Each Stock Appreciation Right will be denominated in shares of Common Stock equivalents. The strike price of each Stock Appreciation Right shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant.

(iii) Calculation of Appreciation. The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of shares of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price.

(iv) Vesting. At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole discretion, deems appropriate.

(v) Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

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(vi) Payment. The appreciation distribution in respect of a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and set forth in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

(vii) Termination of Continuous Service. In the event that a Participant’s Continuous Service terminates (other than for Cause), the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (A) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (B) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.

(viii) Termination for Cause. Except as explicitly provided otherwise in an Participant’s Stock Appreciation Right Agreement, in the event that a Participant’s Continuous Service is terminated for Cause, the Stock Appreciation Right shall terminate upon the termination date of such Participant’s Continuous Service, and the Participant shall be prohibited from exercising his or her Stock Appreciation Right from and after the time of such termination of Continuous Service.

(ix) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Stock Appreciation Rights granted under the Plan that are not exempt from the requirements of Section 409A of the Code shall incorporate terms and conditions necessary to avoid the consequences described in Section 409A(a)(1) of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

(d) Performance Awards.

(i) Performance Stock Awards. A Performance Stock Award is either a Restricted Stock Award or Restricted Stock Unit Award that may be granted or may vest based upon the attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may, but need not, require the completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Committee in its sole discretion. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the maximum number of shares that may be granted to any Participant in a calendar year attributable to Performance Stock Awards described in this Section 6(d)(i) shall not exceed the value of [                    ] ([            ]) shares of Common Stock. In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board may determine that cash may be used in payment of Performance Stock Awards.

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(ii) Performance Cash Awards. A Performance Cash Award is a cash award that may be granted upon the attainment during a Performance Period of certain Performance Goals. A Performance Cash Award may also require the completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Committee in its sole discretion. The maximum value that may be granted to any Participant in a calendar year attributable to cash awards described in this Section 6(d)(ii) shall not exceed [                    ] dollars ($[            ]).The Board may provide for or, subject to such terms and conditions as the Board may specify, may permit a Participant to elect for, the payment of any Performance Cash Award to be deferred to a specified date or event. The Committee may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole or in part in cash or other property. In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board may determine that Common Stock authorized under this Plan may be used in payment of Performance Cash Awards, including additional shares in excess of the Performance Cash Award as an inducement to hold shares of Common Stock.

(e) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6. Subject to the provisions of the Plan, the Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.

7. COVENANTS OF THE COMPANY.

(a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.

(b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.

(c) No Obligation to Notify. The Company shall have no duty or obligation to any holder of a Stock Award to advise such holder as to the time or manner of exercising such Stock

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Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.

8. MISCELLANEOUS.

(a) Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.

(b) Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant.

(c) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms, and (ii) the issuance of the Common Stock pursuant to such exercise has been entered into the books and records of the Company.

(d) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or other instrument executed thereunder or in connection with any Award granted pursuant to the Plan shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without Cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

(e) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).

(f) Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and

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risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

(g) Withholding Obligations. Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Award Agreement.

(h) Electronic Delivery. Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.

(i) Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of employment or retirement, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

(j) Compliance with Section 409A. To the extent that the Board determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions necessary to avoid the consequences described in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code and

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Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued or amended after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Board determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Board may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (1) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (2) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

9. ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.

(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a); (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a); (iii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(d); (iv) the class(es) and maximum number of securities that may be awarded to any person pursuant to Section 4(c) and 6(d); and (v) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive.

(b) Dissolution or Liquidation. Except as otherwise provided in a Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights may be repurchased by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

(c) Corporate Transaction. The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the holder of the Stock Award.

(i) Stock Awards May Be Assumed. Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar stock

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awards for Stock Awards outstanding under the Plan (including but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Corporate Transaction. A surviving corporation or acquiring corporation (or its parent) may choose to assume or continue only a portion of a Stock Award or substitute a similar stock award for only a portion of a Stock Award. The terms of any assumption, continuation or substitution shall be set by the Board in accordance with the provisions of Section 2.

(ii) Stock Awards Held by Current Participants. Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards in accordance with subsection (i) above, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction (referred to as the “Current Participants”), the vesting of such Stock Awards (and, with respect to Options and Stock Appreciation Rights, the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), and such Stock Awards shall terminate if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall lapse (contingent upon the effectiveness of the Corporate Transaction).

(iii) Stock Awards Held by Persons other than Current Participants. Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards in accordance with subsections (i) or (ii) above, respectively, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by persons other than Current Participants, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated and such Stock Awards (other than a Stock Award consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall not terminate and may continue to be exercised notwithstanding the Corporate Transaction.

(iv) Payment for Stock Awards in Lieu of Exercise. Notwithstanding the foregoing, in the event a Stock Award will terminate if not exercised prior to the effective time of a Corporate Transaction, the Board may provide, in its sole discretion, that the holder of such Stock Award may not exercise such Stock Award but will receive a payment, in such form as may be determined by the Board, equal in value to the excess, if any, of (A) the value of the

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property the holder of the Stock Award would have received upon the exercise of the Stock Award (including, at the discretion of the Board, any unvested portion of such Stock Award), over (B) any exercise price payable by such holder in connection with such exercise.

(d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant. A Stock Award may vest as to all or any portion of the shares subject to the Stock Award (i) immediately upon the occurrence of a Change in Control, whether or not such Stock Award is assumed, continued, or substituted by a surviving or acquiring entity in the Change in Control, or (ii) in the event a Participant’s Continuous Service is terminated, actually or constructively, within a designated period before or after the occurrence of a Change in Control. In the absence of such provisions, no such acceleration shall occur.

10. TERMINATION OR SUSPENSION OF THE PLAN.

(a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless terminated sooner, the Plan shall terminate on the day before the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the stockholders of the Company. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

(b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Award granted while the Plan is in effect except with the written consent of the affected Participant.

11. EFFECTIVE DATE OF PLAN.

The Plan shall become effective on the IPO Date, but no Award shall be exercised (or, in the case of a Restricted Stock Award, Restricted Stock Unit Award, or Other Stock Award shall be granted) unless and until the Plan has been approved by the Stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

12. CHOICE OF LAW.

The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

13. DEFINITIONS.

As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:

(a) “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

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(b) “Award” means a Stock Award or a Performance Cash Award.

(c) “Board” means the Board of Directors of the Company.

(d) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company). Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without the receipt of consideration” by the Company.

(e) “Cause” means with respect to a Participant, the occurrence of any of the following events: (i) such Participant’s conviction of, or a plea of nolo contendere to, a felony; (ii) such Participant’s theft or embezzlement, or attempted theft or embezzlement, of money or property or assets of the Company; (iii) such Participant’s violation of the Company’s drug policy; or (iv) such Participant’s intentional and willful engagement in misconduct which is materially injurious to the Company.

(f) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such

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merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

(iii) the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation;

(iv) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions relative to each other as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or

(v) individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of the Plan, be considered as a member of the Incumbent Board.

For avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.

Notwithstanding the foregoing or any other provision of the Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.

The Board may, in its sole discretion and without a Participant’s consent, amend the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Committee” means a committee of one (1) or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).

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(i) “Common Stock” means the common stock of the Company.

(j) “Company” means Insys Therapeutics, Inc., a Delaware corporation.

(k) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.

(l) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; provided, however, if the Entity for which a Participant is rendering services ceases to qualify as an “Affiliate,” as determined by the Board in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of: (i) any leave of absence approved by the Board or the chief executive officer of the Company, including sick leave, military leave or any other personal leave; or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

(m) “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

(ii) a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;

(iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

(iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

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(n) “Covered Employee” shall have the meaning provided in Section 162(m)(3) of the Code.

(o) “Director” means a member of the Board.

(p) “Disability” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as provided in Section 22(e)(3) and 409A(a)(2)(c)(i) of the Code.

(q) “Effective Date” means the effective date of the Plan as set forth in Section 11.

(r) “Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

(s) “Entity” means a corporation, partnership, limited liability company or other entity.

(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(u) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.

(v) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock as quoted on such exchange (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

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(ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith and in a manner that complies with Section 409A of the Code.

(w) “Incentive Stock Option” means an Option which qualifies as an “incentive stock option” within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(x) “IPO Date” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.

(y) “Non-Employee Director” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

(z) “Nonstatutory Stock Option” means an Option that does not qualify as an Incentive Stock Option.

(aa) “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.

(bb) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.

(cc) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

(dd) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

(ee) “Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(e).

(ff) “Other Stock Award Agreement” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.

(gg) “Outside Director” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations

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promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.

(hh) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

(ii) “Participant” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

(jj) “Performance Cash Award” means an award of cash granted pursuant to the terms and conditions of Section 6(d)(ii).

(kk) “Performance Criteria” means the one or more criteria that the Board shall select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that shall be used to establish such Performance Goals may be based on any one of, or combination of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization (EBITDA); (iv) total stockholder return; (v) return on equity; (vi) return on assets, investment, or capital employed; (vii) operating margin; (viii) gross margin; (ix) operating income; (x) net income (before or after taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre- and after-tax income; (xiv) pre-tax profit; (xv) operating cash flow; (xvi) sales or revenue targets; (xvii) orders and revenue; (xviii) increases in revenue or product revenue; (xix) expenses and cost reduction goals; (xx) improvement in or attainment of expense levels; (xxi) improvement in or attainment of working capital levels; (xxii) economic value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii) implementation or completion of projects or processes; (xxix) customer satisfaction; (xxx) stockholders’ equity; (xxxi) quality measures; and (xxxii) to the extent that an Award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award. The Board shall, in its sole discretion, define the manner of calculating the Performance Criteria it selects to use for such Performance Period.

(ll) “Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the satisfaction of the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. At the time of the grant of any Awards, the Board is authorized to

24.

determine whether, when calculating the attainment of Performance Goals for a Performance Period: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; and (v) to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles. In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals.

(mm) “Performance Period” means one or more periods of time, which may be of varying and overlapping duration, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Stock Award or a Performance Cash Award.

(nn) “Performance Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(d)(i).

(oo) “Plan” means this Insys Therapeutics, Inc. 2007 Equity Incentive Plan.

(pp) “Prior Plan” means the Company’s Amended and Restated Equity Incentive Plan as in effect immediately prior to the Effective Date.

(qq) “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).

(rr) “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan.

(ss) “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).

(tt) “Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Agreement shall be subject to the terms and conditions of the Plan.

(uu) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

(vv) “Securities Act” means the Securities Act of 1933, as amended.

(ww) “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 6(c).

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(xx) “Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan.

(yy) “Stock Award” means any right to receive Common Stock granted under the Plan, including an Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award, or any Other Stock Award.

(zz) “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.

(aaa) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) .

(bbb) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.

26.

INSYS THERAPEUTICS, INC.

2007 EQUITY INCENTIVE PLAN

OPTION GRANT NOTICE

Insys Therapeutics, Inc. (the “Company”), pursuant to its 2007 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:

Date of Grant:

Vesting Commencement Date:

Number of Shares Subject to Option:

Exercise Price (Per Share):

Total Exercise Price:

Expiration Date:

Type of Grant:	¨  Incentive Stock Option1¨  Nonstatutory Stock Option
Exercise Schedule:	Same as Vesting Schedule
Vesting Schedule:	[1/4th of the shares vest and become exercisable on the first anniversary of the Vesting Commencement Date; the balance of the shares vest and become exercisable in a series of thirty-six (36) successive equal monthly installments measured from the first anniversary of the Vesting Commencement Date.]
Payment:	By one or a combination of the following items (described in the Option Agreement):
	x	By cash or check
	x	Pursuant to a Regulation T Program if the Shares are publicly traded
	x	By delivery of already-owned shares if the Shares are publicly traded

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Option Grant Notice, the Option Agreement, and the Plan. Optionholder further acknowledges that as of the Date of Grant, this Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

OTHER AGREEMENTS:

INSYS THERAPEUTICS, INC.		OPTIONHOLDER:
By:
	Signature		Signature
Title:		Date:
Date:

ATTACHMENTS: Option Agreement, 2007 Equity Incentive Plan, and Notice of Exercise

¹ If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option.

INSYS THERAPEUTICS, INC.

2007 EQUITY INCENTIVE PLAN

OPTION AGREEMENT

(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

Pursuant to your Option Grant Notice (“Grant Notice”) and this Option Agreement, Insys Therapeutics, Inc. (the “Company”) has granted you an option under its 2007 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

The details of your option are as follows:

1. VESTING. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.

2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.

3. EXERCISE RESTRICTION FOR NON-EXEMPT EMPLOYEES. In the event that you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt Employee”), you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant specified in your Grant Notice, notwithstanding any other provision of your option.

4. METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the following:

(a) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

(b) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at

1.

the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

5. WHOLE SHARES. You may exercise your option only for whole shares of Common Stock.

6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

7. TERM. You may not exercise your option before the commencement or after the expiration of its term. The term of your option commences on the Date of Grant and expires upon the earliest of the following:

(a) immediately upon the termination of your Continuous Service for Cause;

(b) three (3) months after the termination of your Continuous Service for any reason other than Cause, your Disability or death; provided, however, that (i) if during any part of such three (3) month period your option is not exercisable solely because of the condition set forth in Section 6, your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service and (ii) if (x) you are a Non-Exempt Employee, (y) you terminate your Continuous Service within six (6) months after the Date of Grant specified in your Grant Notice, and (z) you have vested in a portion of your option at the time of your termination of Continuous Service, your option shall not expire until the earlier of (A) the later of the date that is seven (7) months after the Date of Grant specified in your Grant Notice or the date that is three (3) months after the termination of your Continuous Service, or (B) the Expiration Date;

(c) twelve (12) months after the termination of your Continuous Service due to your Disability;

(d) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason other than Cause;

(e) the Expiration Date indicated in your Grant Notice; or

(f) the day before the tenth (10th) anniversary of the Date of Grant.

2.

If your option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the date of grant of your option and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment with the Company or an Affiliate terminates.

8. EXERCISE.

(a) You may exercise the vested portion of your option during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

(b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your option, or (ii) the disposition of shares of Common Stock acquired upon such exercise.

(c) If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.

9. TRANSFERABILITY. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option. In addition, you may transfer your option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust, provided that you and the trustee enter into transfer and other agreements required by the Company.

10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

3.

11. WITHHOLDING OBLIGATIONS.

(a) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.

(b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes). Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

(c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.

12. NOTICES. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

13. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.

4.

INSYS THERAPEUTICS, INC.

2007 EQUITY INCENTIVE PLAN

NOTICE OF EXERCISE

Insys Therapeutics, Inc.
10220 South 51st Street, Suite 2
Phoenix, Arizona 85044	Date of Exercise:

Ladies and Gentlemen:

This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.

Type of option (check one):	¨ Incentive	¨ Nonstatutory
Stock option dated:
Number of shares as to which option is exercised:
Shares to be issued in name of:
Total exercise price:	$
Cash or check payment delivered herewith:	$
Regulation T Program (cashless exercise)	$
Value of              shares of Insys Therapeutics, Inc. Common Stock delivered herewith1:	$

By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Insys Therapeutics (the “Company”) 2007 Equity Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise relates to an incentive stock option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the shares of Common Stock issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one (1) year after such shares of Common Stock are issued upon exercise of this option.

¹ Shares must meet the public trading requirements set forth in the option. Shares must be valued on the date of exercise in accordance with the terms of the Plan and the option being exercised, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied by an executed assignment separate from certificate.

1.

Very truly yours,

[Name]

2.

EX-10.4

Exhibit 10.4

INSYS THERAPEUTICS, INC.

2007 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

ADOPTED BY THE BOARD OF DIRECTORS: [                    ], 2007

APPROVED BY THE STOCKHOLDERS: [                    ], 2007

1. GENERAL.

(a) Eligible Option Recipients. The persons eligible to receive Options are the Non-Employee Directors of the Company.

(b) Purpose. The Company, by means of the Plan, seeks to retain the services of its Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate by giving them an opportunity to benefit from increases in value of the Common Stock through the automatic grant of Nonstatutory Stock Options.

2. ADMINISTRATION.

(a) Administration by Board. The Board shall administer the Plan. The Board may not delegate administration of the Plan.

(b) Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i) To determine the provisions of each Option to the extent not specified in the Plan.

(ii) To construe and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

(iii) To amend the Plan or an Option as provided in Section 10.

(iv) To terminate or suspend the Plan as provided in Section 11.

(v) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan.

(c) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

1.

3. SHARES SUBJECT TO THE PLAN.

(a) Share Reserve. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued under the Plan shall not exceed [                    ] ([            ]), plus an automatic annual increase beginning on January 1, 2008 and ending on (and including) January 1, 2017, in an amount equal to the lesser of (A) the number of shares subject to Options granted during the preceding calendar year or (B) [            ] shares. Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year, to provide that there shall be no increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year shall be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.

(b) Reversion of Shares to the Share Reserve. If an Option shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Option shall revert to and again become available for issuance under the Plan. If any shares subject to an Option are not delivered to an Optionholder because such shares are withheld for the payment of taxes or the Option is exercised through a reduction of shares subject to the Option (i.e., “net exercised”), the number of shares that are not delivered to the Optionholder shall remain available for issuance under the Plan. If the exercise price of an Option is satisfied by tendering shares of Common Stock held by the Optionholder (either by actual delivery or attestation), then the number of shares so tendered shall remain available for issuance under the Plan.

(c) Source of Shares. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.

4. ELIGIBILITY.

The Options shall automatically be granted under the Plan as set forth in Section 5 to all Non-Employee Directors who meet the specified criteria.

5. NON-DISCRETIONARY GRANTS.

(a) Initial Grants. Without any further action of the Board, each person who after the IPO Date is elected or appointed for the first time to be a Non-Employee Director automatically shall, upon the date of his or her initial election or appointment to be a Non-Employee Director, be granted an Option (the “Initial Grant”) to purchase [            ] shares of Common Stock on the terms and conditions set forth herein.

(b) Annual Grants. Without any further action of the Board, on January 1^st of each year, commencing on January 1, 2008, each person who is then a Non-Employee Director automatically shall be granted an Option (the “Annual Grant”) to purchase [            ] shares of Common Stock on the terms and conditions set forth herein.

2.

6. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and conditions as required by the Plan. Each Option shall contain such additional terms and conditions, not inconsistent with the Plan, as the Board shall deem appropriate. Each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

(a) Term. No Option shall be exercisable after the expiration of ten (10) years from the date it was granted.

(b) Exercise Price. The exercise price of each Option shall be one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.

(c) Consideration. The purchase price of Common Stock acquired pursuant to an Option may be paid, to the extent permitted by applicable law, in any combination of (i) cash or check, (ii) delivery to the Company (either by actual delivery or attestation) of shares of Common Stock or (iii) to the extent permitted by law, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

(d) Transferability. Except as otherwise provided for in this Section 6(d), an Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable only by the Optionholder during the life of the Optionholder. However, an Option may be transferred for no consideration upon written consent of the Board if (i) at the time of transfer, a Form S-8 registration statement under the Securities Act is available for the issuance of shares by the Company upon the exercise of such transferred Option, or (ii) the transfer is to the Optionholder’s employer at the time of transfer or an affiliate of the Optionholder’s employer at the time of transfer. Any such transfer is subject to such limits as the Board may establish, and subject to the transferee agreeing to remain subject to all the terms and conditions applicable to the Option prior to such transfer. The forgoing right to transfer the Option shall apply to the right to consent to amendments to the Option Agreement for such Option. In addition, until the Optionholder transfers the Option, an Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

(e) Vesting. Options shall vest as follows:

(i) Initial Grant. [INSERT VESTING SCHEDULE]

(ii) Annual Grant. [INSERT VESTING SCHEDULE]

(f) Termination of Continuous Service. In the event that an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability or upon a

3.

Change in Control), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

(g) Extension of Termination Date. If the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability or upon a Change in Control) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. In addition, unless otherwise provided in an Optionholder’s Option Agreement, if the sale of the Common Stock received upon exercise of an Option following the termination of the Optionholder’s Continuous Service would violate the Company’s Window Period Policy, then the Option shall terminate on the earlier of (i) the expiration of a period equal to the post-termination exercise period described in Section 6(f) above or Sections 6(h) or 6(i) below after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of the Company’s insider trading policy; or (ii) the expiration of the term of the Option as set forth in the Option Agreement.

(h) Disability of Optionholder. In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement, the Option shall terminate.

(i) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the three (3)-month period after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance, or by a person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death, or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein, the Option shall terminate.

4.

(j) Termination Upon Change in Control. In the event that an Optionholder’s Continuous Service terminates as of, or within twelve (12) months following a Change in Control, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) within such period of time ending on the earlier of (i) the date twelve (12) months following the effective date of the Change in Control, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.

7. COVENANTS OF THE COMPANY

(a) Availability of Shares. During the terms of the Options, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.

(b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Options and to issue and sell shares of Common Stock upon exercise of the Options; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Option or any Common Stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Options unless and until such authority is obtained.

8. MISCELLANEOUS.

(a) Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Options shall constitute general funds of the Company.

(b) Stockholder Rights. No Optionholder shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Option unless and until such Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms.

(c) No Service Rights. Nothing in the Plan, any instrument executed, or Option granted pursuant thereto shall confer upon any Optionholder any right to continue to serve the Company as a Non-Employee Director or shall affect the right of the Company or an Affiliate to terminate the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

(d) Investment Assurances. The Company may require an Optionholder, as a condition of exercising or acquiring Common Stock under any Option, (i) to give written assurances satisfactory to the Company as to the Optionholder’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably

5.

satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option; and (ii) to give written assurances satisfactory to the Company stating that the Optionholder is acquiring the Common Stock subject to the Option for the Optionholder’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares upon the exercise or acquisition of Common Stock under the Option has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

(e) Withholding Obligations. The Optionholder may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Option by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Optionholder by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the Optionholder as a result of the exercise or acquisition of Common Stock under the Option; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of the Common Stock.

(f) Electronic Delivery. Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.

9. ADJUSTMENTS UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.

(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall proportionately and appropriately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities for which the nondiscretionary grants of Options are made pursuant to Section 5, and (iv) the class(es) and number of securities and price per share of stock subject to outstanding Options. The Board shall make such adjustments, and its determination shall be final, binding and conclusive.

(b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, all outstanding Options shall terminate immediately prior to the completion of such dissolution or liquidation.

6.

(c) Corporate Transaction.

(i) Options May Be Assumed. In the event of a Corporate Transaction, any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all Options outstanding under the Plan or may substitute similar stock options for Options outstanding under the Plan (including but not limited to, options to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Options may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Corporate Transaction. A surviving corporation or acquiring corporation may choose to assume or continue only a portion of an Option or substitute a similar option for only a portion of an Option.

(ii) Options Held by Active Optionholders. In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Options or substitute similar stock options for such outstanding Options, then with respect to Options that have not been assumed, continued or substituted and that are held by Optionholders whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction (referred to as the “Active Optionholders”), the vesting of such Options (and, if applicable, the time at which such Options may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), and the Options shall terminate if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Options shall lapse (contingent upon the effectiveness of the Corporate Transaction).

(iii) Options Held by Former Optionholders. In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Options or substitute similar stock options for such outstanding Options, then with respect to any other Options that have not been assumed, continued or substituted and that are held by persons other than Active Optionholders, the vesting of such Options (and, if applicable, the time at which such Options may be exercised) shall not be accelerated unless otherwise provided in Section 9(d) or in a written agreement between the Company or any Affiliate and the holder of such Options, and such Options shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Options shall not terminate and may continue to be exercised notwithstanding the Corporate Transaction.

(iv) Payment for Options in Lieu of Exercise. Notwithstanding the foregoing, in the event an Option will terminate if not exercised prior to the effective time of a Corporate Transaction, the Board may provide, in its sole discretion, that the holder of such Option may not exercise such Option but will receive a payment, in such form as may be determined by the Board, equal in value to the excess, if any, of (i) the value of the property the holder of the Option would have received upon the exercise of the Option, over (ii) the exercise price payable by the Optionholder in connection with such exercise.

7.

(d) Change in Control. In the event that an Optionholder (i) is required to resign his or her position as a Non-Employee Director as a condition of a Change in Control, or (ii) is removed from his or her position as a Non-Employee Director in connection with a Change in Control, the outstanding Options held by such Optionholder shall become fully vested and exercisable immediately prior to the effectiveness of such resignation or removal (and contingent upon the effectiveness of such Change in Control).

(e) Parachute Payments.

(i) If the acceleration of the vesting and exercisability of Options provided for in Sections 9(c) and 9(d), together with payments and other benefits of an Optionholder, (collectively, the “Payment”) (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, or any comparable successor provisions, and (ii) but for this Section 9(e) would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor provisions (the “Excise Tax”), then such Payment shall be either (1) provided to such Optionholder in full, or (2) provided to such Optionholder as to such lesser extent that would result in no portion of such Payment being subject to the Excise Tax, whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by such Optionholder, on an after-tax basis, of the greatest amount of the Payment, notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.

(ii) Unless the Company and such Optionholder otherwise agree in writing, any determination required under this Section 9(e) shall be made in writing in good faith by the Accountant. If a reduction in the Payment is to be made as provided above, reductions shall occur in the following order unless the Optionholder elects in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the date that triggers the Payment or a portion thereof): (i) reduction of cash payments; (ii) cancellation of accelerated vesting of Options; and (iii) reduction of other benefits paid to the Optionholder. If acceleration of vesting of Options is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of date of grant of Options (i.e., the earliest granted Option cancelled last) unless the Optionholder elects in writing a different order for cancellation.

(iii) For purposes of making the calculations required by this Section 9(e), the Accountant may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code and other applicable legal authority. The Company and the Optionholder shall furnish to the Accountant such information and documents as the Accountant may reasonably request in order to make such a determination. The Company shall bear all costs the Accountant may reasonably incur in connection with any calculations contemplated by this Section 9(e).

(iv) If, notwithstanding any reduction described above, the Internal Revenue Service (the “IRS”) determines that the Optionholder is liable for the Excise Tax as a result of the Payment, then the Optionholder shall be obligated to pay back to the Company, within thirty (30) days after a final IRS determination or, in the event that the Optionholder challenges the final IRS determination, a final judicial determination, a portion of the Payment (the “Repayment Amount”). The Repayment Amount with respect to the Payment shall be the

8.

smallest such amount, if any, as shall be required to be paid to the Company so that the Optionholder’s net after-tax proceeds with respect to the Payment (after taking into account the payment of the Excise Tax and all other applicable taxes imposed on the Payment) shall be maximized. The Repayment Amount with respect to the Payment shall be zero if a Repayment Amount of more than zero would not result in the Optionholder’s net after-tax proceeds with respect to the Payment being maximized. If the Excise Tax is not eliminated pursuant to this paragraph, the Optionholder shall pay the Excise Tax.

(v) Notwithstanding any other provision of this Section 9(e), if (i) there is a reduction in the Payment as described above, (ii) the IRS later determines that the Optionholder is liable for the Excise Tax, the payment of which would result in the maximization of the Optionholder’s net after-tax proceeds of the Payment (calculated as if the Payment had not previously been reduced), and (iii) the Optionholder pays the Excise Tax, then the Company shall pay or otherwise provide to the Optionholder that portion of the Payment that was reduced pursuant to this Section 9(e) contemporaneously or as soon as administratively possible after the Optionholder pays the Excise Tax so that the Optionholder’s net after-tax proceeds with respect to the Payment are maximized.

(vi) If the Optionholder either (i) brings any action to enforce rights pursuant to this Section 9(e), or (ii) defends any legal challenge to his or her rights under this Section 9(e), the Optionholder shall be entitled to recover attorneys’ fees and costs incurred in connection with such action, regardless of the outcome of such action; provided, however, that if such action is commenced by the Optionholder, the court finds that the action was brought in good faith.

10. AMENDMENT OF THE PLAN AND OPTIONS.

(a) Amendment of Plan. Subject to the limitations, if any, of applicable law, the Board, at any time and from time to time, may amend the Plan. However, except as provided in Section 9(a) relating to Capitalization Adjustments, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy applicable law.

(b) Stockholder Approval. The Board, in its sole discretion, may submit any other amendment to the Plan for stockholder approval.

(c) No Impairment of Rights. Rights under any Option granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the affected Optionholder, and (ii) such Optionholder consents in writing.

(d) Amendment of Options. The Board, at any time and from time to time, may amend the terms of any one or more Options; provided, however, that the rights under any Option shall not be impaired by any such amendment unless (i) the Company requests the consent of the Optionholder, and (ii) the Optionholder consents in writing.

11. TERMINATION OR SUSPENSION OF THE PLAN.

(a) Plan Term. The Board may suspend or terminate the Plan at any time. No Options may be granted under the Plan while the Plan is suspended or after it is terminated.

9.

(b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Option granted while the Plan is in effect except with the written consent of the Optionholder.

12. EFFECTIVE DATE OF PLAN.

The Plan shall become effective on the IPO Date, but no Option shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

13. CHOICE OF LAW.

The law of the state of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

14. DEFINITIONS.

As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:

(a) “Accountant” means the independent public accountants of the Company.

(b) “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

(c) “Annual Grant” means an Option granted annually to all Non-Employee Directors who meet the specified criteria pursuant to Section 5(b).

(d) “Annual Meeting” means the first annual meeting of the stockholders of the Company held each calendar year at which the Directors are selected.

(e) “Board” means the Board of Directors of the Company.

(f) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Option after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company). Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without the receipt of consideration” by the Company.

10.

(g) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

(iii) the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation;

(iv) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions relative to each other as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or

(v) individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of the Plan, be considered as a member of the Incumbent Board.

11.

For avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.

Notwithstanding the foregoing or any other provision of the Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Optionholder shall supersede the foregoing definition with respect to Options subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.

The Board may, in its sole discretion and without a Optionholder’s consent, amend the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder.

(h) “Code” means the Internal Revenue Code of 1986, as amended.

(i) “Common Stock” means the common stock of the Company.

(j) “Company” means Insys Therapeutics, Inc., a Delaware corporation.

(k) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the Board of Directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.

(l) “Continuous Service” means that the Optionholder’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Optionholder renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Optionholder renders such service, provided that there is no interruption or termination of the Optionholder’s service with the Company or an Affiliate, shall not terminate an Optionholder’s Continuous Service; provided, however, if the corporation for which an Optionholder is rendering service ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Optionholder’s Continuous Service shall be considered to have terminated on the date such corporation ceases to qualify as an Affiliate. For example, a change in status from a Non-Employee Director of the Company to a Consultant of an Affiliate or an Employee of the Company will not constitute an interruption of Continuous Service. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in an Option only to such extent as may be provided in the Company’s leave of absence policy or in the written terms of the Optionholder’s leave of absence.

12.

(m) “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

(ii) a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;

(iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

(iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

(n) “Director” means a member of the Board.

(o) “Disability” means, with respect to a Optionholder, the inability of such Optionholder to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as provided in Section 22(e)(3) and 409A(a)(2)(c)(i) of the Code.

(p) “Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

(q) “Entity” means a corporation, partnership, limited liability company or other entity.

(r) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(s) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.

13.

(t) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock as quoted on such exchange (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith and in a manner that complies with Section 409A of the Code.

(u) “Initial Grant” means an Option granted to a Non-Employee Director who meets the specified criteria pursuant to Section 5(a).

(v) “IPO Date” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.

(w) “Non-Employee Director” means a Director who is not an Employee.

(x) “Nonstatutory Stock Option” means an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(y) “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.

(z) “Option” means a Nonstatutory Stock Option granted pursuant to the Plan.

(aa) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

(bb) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

(cc) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

14.

(dd) “Plan” means this Insys Therapeutics, Inc. 2007 Non-Employee Directors’ Stock Option Plan.

(ee) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

(ff) “Securities Act” means the Securities Act of 1933, as amended.

(gg) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%).

15.

INSYS THERAPEUTICS, INC.

2007 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

INITIAL GRANT NOTICE

Insys Therapeutics, Inc. (the “Company”), pursuant to its 2007 Non-Employee Directors’ Stock Option Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:

Date of Grant:

Vesting Commencement Date:

Number of Shares Subject to Option:

Exercise Price (Per Share):

Total Exercise Price:

Expiration Date:

Type of Grant:	Nonstatutory Stock Option
Exercise Schedule:	Same as Vesting Schedule
Vesting Schedule:	[INSERT VESTING SCHEDULE]
Payment:	By one or a combination of the following items (described in the Option Agreement):
	x By cash or check
	x Pursuant to a Regulation T Program if the Shares are publicly traded
	x By delivery of already-owned shares if the Shares are publicly traded

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Option Grant Notice, the Option Agreement, and the Plan. Optionholder further acknowledges that as of the Date of Grant, this Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

OTHER AGREEMENTS:

INSYS THERAPEUTICS, INC.		OPTIONHOLDER:
By:
	Signature		Signature
Title:		Date:
Date:

ATTACHMENTS: Option Agreement, 2007 Non-Employee Directors’ Stock Option Plan, and Notice of Exercise

ATTACHMENT I

OPTION AGREEMENT

ATTACHMENT II

2007 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

ATTACHMENT III

NOTICE OF EXERCISE

INSYS THERAPEUTICS, INC.

2007 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

ANNUAL GRANT NOTICE

Insys Therapeutics, Inc. (the “Company”), pursuant to its 2007 Non-Employee Directors’ Stock Option Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Option Agreement, the Plan, and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:

Date of Grant:

Vesting Commencement Date:

Number of Shares Subject to Option:

Exercise Price (Per Share):

Total Exercise Price:

Expiration Date:

Type of Grant:	Nonstatutory Stock Option
Exercise Schedule:	Same as Vesting Schedule
Vesting Schedule:	[INSERT VESTING SCHEDULE]
Payment:	By one or a combination of the following items (described in the Option Agreement):
	x  By cash or check
	x  Pursuant to a Regulation T Program if the Shares are publicly traded
	x  By delivery of already-owned shares if the Shares are publicly traded

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Option Grant Notice, the Option Agreement, and the Plan. Optionholder further acknowledges that as of the Date of Grant, this Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

OTHER AGREEMENTS:

INSYS THERAPEUTICS, INC.		OPTIONHOLDER:
By:
	Signature		Signature
Title:		Date:
Date:

ATTACHMENTS: Option Agreement, 2007 Non-Employee Directors’ Stock Option Plan, and Notice of Exercise

ATTACHMENT I

OPTION AGREEMENT

ATTACHMENT II

2007 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

ATTACHMENT III

NOTICE OF EXERCISE

EX-10.5

Exhibit 10.5

INSYS THERAPEUTICS, INC.

2007 EMPLOYEE STOCK PURCHASE PLAN

ADOPTED BY THE BOARD OF DIRECTORS: [            ], 2007

APPROVED BY THE STOCKHOLDERS: [            ], 2007

1. GENERAL.

(a) The purpose of the Plan is to provide a means by which Eligible Employees of the Company and certain designated Related Corporations may be given an opportunity to purchase shares of Common Stock. The Plan is intended to permit the Company to grant a series of Purchase Rights to Eligible Employees under an Employee Stock Purchase Plan.

(b) The Company, by means of the Plan, seeks to retain the services of such Employees, to secure and retain the services of new Employees and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Related Corporations.

2. ADMINISTRATION.

(a) The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).

(b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i) To determine how and when Purchase Rights to purchase shares of Common Stock shall be granted and the provisions of each Offering comprised of such Purchase Rights (which need not be identical).

(ii) To designate from time to time which Related Corporations of the Company shall be eligible to participate in the Plan.

(iii) To construe and interpret the Plan and Purchase Rights, and to establish, amend and revoke rules and regulations for administration of the Plan. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem necessary or expedient to make the Plan or Purchase Rights fully effective.

(iv) To settle all controversies regarding the Plan and Purchase Rights granted under it.

(v) To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall not impair rights and obligations under any Purchase Right granted while the Plan is in effect except with the written consent of the affected Participant.

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(vi) To amend the Plan in any respect the Board deems necessary or advisable. However, except as provided in Section 12(a) relating to Capitalization Adjustments, stockholder approval shall be required for any amendment of the Plan that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to become Participants and receive Purchase Rights under the Plan, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of awards available for issuance under the Plan, but in each of (i) through (v) only to the extent required by applicable law or listing requirements. Except as provided above, the rights and obligations under any Purchase Rights granted before amendment of the Plan shall not be impaired by any amendment of the Plan except: (i) with the consent of the person to whom such Purchase Rights were granted, or (ii) as necessary to comply with any laws or governmental regulations (including, without limitation, the provisions of the Code and the regulations promulgated thereunder relating to Employee Stock Purchase Plans).

(vii) Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company and its Related Corporations and to carry out the intent that the Plan be treated as an Employee Stock Purchase Plan.

(viii) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees who are foreign nationals or employed outside the United States.

(c) The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

(d) All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

(a) Subject to the provisions of Section 12(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that may be sold pursuant to Purchase Rights shall not exceed [                            ] ([            ]) shares. In addition, the number of shares of Common Stock available for issuance under the Plan shall automatically increase on January 1st of each year commencing in 2008 and ending on (and including) January 1, 2017, in an amount equal to the lesser of (i) [                     percent (    %)] of the total number

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of shares of Common Stock outstanding on December 31st of the preceding calendar year, or (ii) [                            ] ([            ]) shares of Common Stock. Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year, to provide that there shall be no increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year shall be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.

(b) If any Purchase Right granted under the Plan shall for any reason terminate without having been exercised, the shares of Common Stock not purchased under such Purchase Right shall again become available for issuance under the Plan.

(c) The stock purchasable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.

4. GRANT OF PURCHASE RIGHTS; OFFERING.

(a) The Board may from time to time grant or provide for the grant of Purchase Rights to purchase shares of Common Stock under the Plan to Eligible Employees in an Offering (consisting of one or more Purchase Periods) on an Offering Date or Offering Dates selected by the Board. Each Offering shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate, which shall comply with the requirement of Section 423(b)(5) of the Code that all Employees granted Purchase Rights shall have the same rights and privileges. The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings need not be identical, but each Offering shall include (through incorporation of the provisions of this Plan by reference in the document comprising the Offering or otherwise) the period during which the Offering shall be effective, which period shall not exceed twenty-seven (27) months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8.

(b) If a Participant has more than one Purchase Right outstanding under the Plan, unless he or she otherwise indicates in agreements or notices delivered hereunder: (i) each agreement or notice delivered by that Participant shall be deemed to apply to all of his or her Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier-granted Purchase Right, if different Purchase Rights have identical exercise prices) shall be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices) shall be exercised.

(c) The Board shall have the discretion to structure an Offering so that if the Fair Market Value of a share of Common Stock on any Purchase Date within that Offering is less than or equal to the Fair Market Value of a share of Common Stock on the Offering Date for that Offering, then (i) that Offering shall terminate immediately following the purchase of shares of Common Stock on such Purchase Date, and (ii) Participants in the terminated Offering automatically shall be enrolled in the Offering that commences immediately after such Purchase Date.

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5. ELIGIBILITY.

(a) Purchase Rights may be granted only to Employees of the Company or, as the Board may designate as provided in Section 2(b), to Employees of a Related Corporation. Except as provided in Section 5(b), an Employee shall not be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee has been in the employ of the Company or the Related Corporation, as the case may be, for such continuous period preceding such Offering Date as the Board may require, but in no event shall the required period of continuous employment be greater than two (2) years. In addition, the Board may provide that no Employee shall be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee’s customary employment with the Company or the Related Corporation is more than twenty (20) hours per week and more than five (5) months per calendar year or such other criteria as the Board may determine consistent with Section 423 of the Code.

(b) The Board may provide that each person who, during the course of an Offering, first becomes an Eligible Employee shall, on a date or dates specified in the Offering which coincides with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive a Purchase Right under that Offering, which Purchase Right shall thereafter be deemed to be a part of that Offering. Such Purchase Right shall have the same characteristics as any Purchase Rights originally granted under that Offering, as described herein, except that:

(i) the date on which such Purchase Right is granted shall be the “Offering Date” of such Purchase Right for all purposes, including determination of the exercise price of such Purchase Right;

(ii) the period of the Offering with respect to such Purchase Right shall begin on its Offering Date and end coincident with the end of such Offering; and

(iii) the Board may provide that if such person first becomes an Eligible Employee within a specified period of time before the end of the Offering, he or she shall not receive any Purchase Right under that Offering.

(c) No Employee shall be eligible for the grant of any Purchase Rights under the Plan if, immediately after any such Purchase Rights are granted, such Employee owns stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation. For purposes of this Section 5(c), the rules of Section 424(d) of the Code shall apply in determining the stock ownership of any Employee, and stock which such Employee may purchase under all outstanding Purchase Rights and options shall be treated as stock owned by such Employee.

(d) As specified by Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase Rights under the Plan only if such Purchase Rights, together with any other rights granted under all Employee Stock Purchase Plans of the Company and any Related Corporations, do not permit such Eligible Employee’s rights to purchase stock of the Company or any Related Corporation to accrue at a rate which exceeds twenty five thousand dollars ($25,000) of Fair Market Value of such stock (determined at the time such rights are granted, and which, with respect to the Plan, shall be determined as of their respective Offering Dates) for each calendar year in which such rights are outstanding at any time.

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(e) Officers of the Company and any designated Related Corporation, if they are otherwise Eligible Employees, shall be eligible to participate in Offerings under the Plan. Notwithstanding the foregoing, the Board may provide in an Offering that Employees who are highly compensated Employees within the meaning of Section 423(b)(4)(D) of the Code shall not be eligible to participate.

6. PURCHASE RIGHTS; PURCHASE PRICE.

(a) On each Offering Date, each Eligible Employee, pursuant to an Offering made under the Plan, shall be granted a Purchase Right to purchase up to that number of shares of Common Stock purchasable either with a percentage or with a maximum dollar amount, as designated by the Board, but in either case not exceeding twenty percent (20%) of such Employee’s earnings (as defined by the Board in each Offering) during the period that begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date shall be no later than the end of the Offering.

(b) The Board shall establish one (1) or more Purchase Dates during an Offering as of which Purchase Rights granted pursuant to that Offering shall be exercised and purchases of shares of Common Stock shall be carried out in accordance with such Offering.

(c) In connection with each Offering made under the Plan, the Board may specify a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering. In connection with each Offering made under the Plan, the Board may specify a maximum aggregate number of shares of Common Stock that may be purchased by all Participants pursuant to such Offering. In addition, in connection with each Offering that contains more than one Purchase Date, the Board may specify a maximum aggregate number of shares of Common Stock that may be purchased by all Participants on any Purchase Date under the Offering. If the aggregate purchase of shares of Common Stock issuable upon exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata allocation of the shares of Common Stock available shall be made in as nearly a uniform manner as shall be practicable and equitable.

(d) The purchase price of shares of Common Stock acquired pursuant to Purchase Rights shall be not less than the lesser of:

(i) an amount equal to eighty-five percent (85%) of the Fair Market Value of the shares of Common Stock on the Offering Date; or

(ii) an amount equal to eighty-five percent (85%) of the Fair Market Value of the shares of Common Stock on the applicable Purchase Date.

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7. PARTICIPATION; WITHDRAWAL; TERMINATION.

(a) A Participant may elect to authorize payroll deductions pursuant to an Offering under the Plan by completing and delivering to the Company, within the time specified in the Offering, an enrollment form (in such form as the Company may provide). Each such enrollment form shall authorize an amount of Contributions expressed as a percentage of the submitting Participant’s earnings (as defined in each Offering) during the Offering (not to exceed the maximum percentage specified by the Board). Each Participant’s Contributions shall be credited to a bookkeeping account for such Participant under the Plan and shall be deposited with the general funds of the Company except where applicable law requires that Contributions be deposited with a third party. To the extent provided in the Offering, a Participant may begin such Contributions after the beginning of the Offering. To the extent provided in the Offering, a Participant may thereafter reduce (including to zero) or increase his or her Contributions. To the extent specifically provided in the Offering, in addition to making Contributions by payroll deductions, a Participant may make Contributions through the payment by cash or check prior to each Purchase Date of the Offering.

(b) During an Offering, a Participant may cease making Contributions and withdraw from the Offering by delivering to the Company a notice of withdrawal in such form as the Company may provide. Such withdrawal may be elected at any time prior to the end of the Offering, except as provided otherwise in the Offering. Upon such withdrawal from the Offering by a Participant, the Company shall distribute to such Participant all of his or her accumulated Contributions (reduced to the extent, if any, such Contributions have been used to acquire shares of Common Stock for the Participant) under the Offering, and such Participant’s Purchase Right in that Offering shall thereupon terminate. A Participant’s withdrawal from an Offering shall have no effect upon such Participant’s eligibility to participate in any other Offerings under the Plan, but such Participant shall be required to deliver a new enrollment form in order to participate in subsequent Offerings.

(c) Purchase Rights granted pursuant to any Offering under the Plan shall terminate immediately upon a Participant ceasing to be an Employee for any reason or for no reason (subject to any post-employment participation period required by law) or other lack of eligibility. The Company shall distribute to such terminated or otherwise ineligible Employee all of his or her accumulated Contributions (reduced to the extent, if any, such Contributions have been used to acquire shares of Common Stock for the terminated or otherwise ineligible Employee) under the Offering.

(d) Purchase Rights shall not be transferable by a Participant except by will, the laws of descent and distribution, or by a beneficiary designation as provided in Section 10. During a Participant’s lifetime, Purchase Rights shall be exercisable only by such Participant.

(e) Unless otherwise specified in an Offering, the Company shall have no obligation to pay interest on Contributions.

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8. EXERCISE OF PURCHASE RIGHTS.

(a) On each Purchase Date during an Offering, each Participant’s accumulated Contributions shall be applied to the purchase of shares of Common Stock up to the maximum number of shares of Common Stock permitted pursuant to the terms of the Plan and the applicable Offering, at the purchase price specified in the Offering. No fractional shares shall be issued upon the exercise of Purchase Rights unless specifically provided for in the Offering.

(b) If any amount of accumulated Contributions remains in a Participant’s account after the purchase of shares of Common Stock and such remaining amount is less than the amount required to purchase one share of Common Stock on the final Purchase Date of an Offering, then such remaining amount shall be held in such Participant’s account for the purchase of shares of Common Stock under the next Offering under the Plan, unless such Participant withdraws from such next Offering, as provided in Section 7(b), or is not eligible to participate in such Offering, as provided in Section 5, in which case such amount shall be distributed to such Participant after the final Purchase Date, without interest. If the amount of Contributions remaining in a Participant’s account after the purchase of shares of Common Stock is at least equal to the amount required to purchase one (1) whole share of Common Stock on the final Purchase Date of the Offering, then such remaining amount shall be distributed in full to such Participant at the end of the Offering without interest.

(c) No Purchase Rights may be exercised to any extent unless the shares of Common Stock to be issued upon such exercise under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable federal, state, foreign and other securities and other laws applicable to the Plan. If on a Purchase Date during any Offering hereunder the shares of Common Stock are not so registered or the Plan is not in such compliance, no Purchase Rights or any Offering shall be exercised on such Purchase Date, and the Purchase Date shall be delayed until the shares of Common Stock are subject to such an effective registration statement and the Plan is in such compliance, except that the Purchase Date shall not be delayed more than twelve (12) months and the Purchase Date shall in no event be more than twenty-seven (27) months from the Offering Date. If, on the Purchase Date under any Offering hereunder, as delayed to the maximum extent permissible, the shares of Common Stock are not registered and the Plan is not in such compliance, no Purchase Rights or any Offering shall be exercised and all Contributions accumulated during the Offering (reduced to the extent, if any, such Contributions have been used to acquire shares of Common Stock) shall be distributed to the Participants without interest.

9. COVENANTS OF THE COMPANY.

The Company shall seek to obtain from each federal, state, foreign or other regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of Common Stock upon exercise of the Purchase Rights. If, after commercially reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Purchase Rights unless and until such authority is obtained.

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10. DESIGNATION OF BENEFICIARY.

(a) A Participant may file a written designation of a beneficiary who is to receive any shares of Common Stock and/or cash, if any, from the Participant’s account under the Plan in the event of such Participant’s death subsequent to the end of an Offering but prior to delivery to the Participant of such shares of Common Stock or cash. In addition, a Participant may file a written 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 during an Offering. Any such designation shall be on a form provided by or otherwise acceptable to the Company.

(b) The Participant may change such designation of beneficiary at any time by written notice to the Company. 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 shall deliver such shares of Common Stock 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 sole discretion, may deliver such shares of Common Stock 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.

11. MISCELLANEOUS PROVISIONS.

(a) The Plan and Offering do not constitute an employment contract. Nothing in the Plan or in the Offering shall in any way alter the at will nature of a Participant’s employment or be deemed to create in any way whatsoever any obligation on the part of any Participant to continue in the employ of the Company or a Related Corporation, or on the part of the Company or a Related Corporation to continue the employment of a Participant.

(b) The provisions of the Plan shall be governed by the laws of the State of Delaware without resort to that state’s conflicts of laws rules.

(c) Proceeds from the sale of shares of Common Stock pursuant to Purchase Rights shall constitute general funds of the Company.

(d) A Participant shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, shares of Common Stock subject to Purchase Rights unless and until the Participant’s shares of Common Stock acquired upon exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent).

12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.

(a) In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities subject to outstanding Purchase Rights, and (iv) the class(es) and number of securities imposed by purchase limits under each ongoing Offering. The Board shall make such adjustments, and its determination shall be final, binding and conclusive.

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(b) In the event of a Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue Purchase Rights outstanding under the Plan or may substitute similar rights (including a right to acquire the same consideration paid to the stockholders in the Corporate Transaction) for those outstanding under the Plan, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such Purchase Rights or does not substitute similar rights for Purchase Rights outstanding under the Plan, then the Participants’ accumulated Contributions shall be used to purchase shares of Common Stock within ten (10) business days prior to the Corporate Transaction under any ongoing Offerings, and the Participants’ Purchase Rights under the ongoing Offerings shall terminate immediately after such purchase.

13. TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate at the time that all of the shares of Common Stock reserved for issuance under the Plan, as increased and/or adjusted from time to time, have been issued under the terms of the Plan. No Purchase Rights may be granted under the Plan while the Plan is suspended or after it is terminated.

(b) Any benefits, privileges, entitlements and obligations under any Purchase Rights while the Plan is in effect shall not be impaired by suspension or termination of the Plan except (i) as expressly provided in the Plan or with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to comply with any laws, regulations or listing requirements, or (iii) as necessary to ensure that the Plan and/or Purchase Rights comply with the requirements of Section 423 of the Code.

14. EFFECTIVE DATE OF PLAN.

The Plan shall become effective on the IPO Date, but no Purchase Rights shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

15. DEFINITIONS.

As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:

(a) “Board” means the Board of Directors of the Company.

(b) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Purchase Right after the Effective Date without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company). Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without the receipt of consideration” by the Company.

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(c) “Code” means the Internal Revenue Code of 1986, as amended.

(d) “Committee” means a committee of one (1) or more members of the Board to whom authority has been delegated by the Board in accordance with Section 2(b)(viii).

(e) “Common Stock” means the common stock of the Company.

(f) “Company” means Insys Therapeutics, Inc., a Delaware corporation.

(g) “Contributions” means the payroll deductions and other additional payments specifically provided for in the Offering, that a Participant contributes to fund the exercise of a Purchase Right. A Participant may make additional payments into his or her account, if specifically provided for in the Offering, and then only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions.

(h) “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i) the consummation of a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

(ii) the consummation of a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;

(iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

(iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

(i) “Director” means a member of the Board.

(j) “Eligible Employee” means an Employee who meets the requirements set forth in the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan.

(k) “Employee” means any person, including Officers and Directors, who is employed for purposes of Section 423(b)(4) of the Code by the Company or a Related Corporation. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

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(l) “Employee Stock Purchase Plan” means a plan that grants Purchase Rights intended to be options issued under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Code.

(m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(n) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock as quoted on such exchange (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith and in a manner that complies with Section 409A of the Code.

(o) “IPO Date” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.

(p) “Offering” means the grant of Purchase Rights to purchase shares of Common Stock under the Plan to Eligible Employees.

(q) “Offering Date” means a date selected by the Board for an Offering to commence.

(r) “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.

(s) “Participant” means an Eligible Employee who holds an outstanding Purchase Right granted pursuant to the Plan.

(t) “Plan” means this Insys Therapeutics, Inc. 2007 Employee Stock Purchase Plan.

(u) “Purchase Date” means one or more dates during an Offering established by the Board on which Purchase Rights shall be exercised and as of which purchases of shares of Common Stock shall be carried out in accordance with such Offering.

(v) “Purchase Period” means a period of time specified within an Offering beginning on the Offering Date or on the next day following a Purchase Date within an Offering and ending on a Purchase Date. An Offering may consist of one or more Purchase Periods.

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(w) “Purchase Right” means an option to purchase shares of Common Stock granted pursuant to the Plan.

(x) “Related Corporation” means any “parent corporation” or “subsidiary corporation” of the Company whether now or subsequently established, as those terms are defined in Sections 424(e) and 424(f), respectively, of the Code.

(y) “Securities Act” means the Securities Act of 1933, as amended.

(z) “Trading Day” means any day on which the exchange(s) or market(s) on which shares of Common Stock are listed, including an established stock exchange, the Nasdaq Global Select Market or the Nasdaq Global Market, the Nasdaq Capital Market, is open for trading.

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INSYS THERAPEUTICS, INC.

2007 EMPLOYEE STOCK PURCHASE PLAN

OFFERING DOCUMENT

ADOPTED BY THE BOARD OF DIRECTORS: [            , 2007]

In this document, capitalized terms not otherwise defined shall have the same definitions of such terms as in the Insys Therapeutics, Inc. 2007 Employee Stock Purchase Plan.

1. GRANT; OFFERING DATE.

(a) The Board hereby authorizes a series of Offerings pursuant to the terms of this Offering document.

(b) The first Offering hereunder (the “Initial Offering”) shall begin on the date the Common Stock is first offered to the public under a registration statement declared effective under the Securities Act and shall end on [            , 2009], unless terminated earlier as provided below. The Initial Offering shall consist of four (4) Purchase Periods, with the first Purchase Period ending on [            , 2008], the second Purchase Period ending on [            , 2008], the third Purchase Period ending on [            , 2009], and the fourth Purchase Period ending on [            , 2009].

(c) After the Initial Offering commences, a concurrent Offering shall begin on [            , 2007] and each [            ] and [            ] beginning in [2008] over the term of the Plan and shall be approximately twenty-four (24) months in duration. Each Offering shall consist of four (4) Purchase Periods, each of which shall be approximately six (6) months in length ending on or about [            ] and [            ] each year. Except as provided below, a Purchase Date is the last day of a Purchase Period or of an Offering, as the case may be.

(d) Notwithstanding the foregoing: (i) if any Offering Date falls on a day that is not a Trading Day, then such Offering Date shall instead fall on the next subsequent Trading Day, and (ii) if any Purchase Date falls on a day that is not a Trading Day, then such Purchase Date shall instead fall on the immediately preceding Trading Day.

(e) Prior to the commencement of any Offering, the Board may change any or all terms of such Offering and any subsequent Offerings. The granting of Purchase Rights pursuant to each Offering hereunder shall occur on each respective Offering Date unless prior to such date (i) the Board determines that such Offering shall not occur, or (ii) no shares of Common Stock remain available for issuance under the Plan in connection with the Offering.

(f) Notwithstanding anything in this Section 1 to the contrary, if the Fair Market Value of a share of Common Stock on any Purchase Date during an Offering is less than or equal to the Fair Market Value of a share of Common Stock on the Offering Date for that Offering, then that Offering shall terminate immediately following the purchase of shares of Common Stock on such Purchase Date. Participants in the terminated Offering automatically shall be enrolled in the Offering that commences immediately after such Purchase Date.

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2. ELIGIBLE EMPLOYEES.

(a) Each Eligible Employee who has been an Employee for a continuous period of at least seven (7) days ending on the Offering Date of an Offering hereunder and is either (i) an employee of the Company; (ii) an employee of a Related Corporation incorporated in the United States; or (iii) an employee of a Related Corporation that is not incorporated in the United States, provided that the Board has designated the employees of such Related Corporation as eligible to participate in the Offering, shall be granted a Purchase Right on the Offering Date of such Offering.

(b) Each person who first becomes an Eligible Employee during an Offering shall not be granted a Purchase Right under such Offering.

(c) Notwithstanding the foregoing, the following Employees shall not be Eligible Employees or be granted Purchase Rights under an Offering:

(i) Employees whose customary employment is twenty (20) hours per week or less or five (5) months per calendar year or less;

(ii) five percent (5%) stockholders (including ownership through unexercised and/or unvested stock options) as described in Section 5(c) of the Plan;

(iii) Employees in jurisdictions outside of the United States if, as of the Offering Date of the Offering, the grant of such Purchase Rights would not be in compliance with the applicable laws of any jurisdiction in which the Employee resides or is employed.

3. PURCHASE RIGHTS.

(a) Subject to the limitations herein and in the Plan, a Participant’s Purchase Right shall permit the purchase of the number of shares of Common Stock purchasable with up to twenty percent (20%) of such Participant’s Earnings paid during the period of such Offering beginning immediately after such Participant first commences participation; provided, however, that no Participant may have more than twenty percent (20%) of such Participant’s Earnings applied to purchase shares of Common Stock under all ongoing Offerings under the Plan and all other plans of the Company and Related Corporations that are intended to qualify as Employee Stock Purchase Plans.

(b) For Offerings hereunder, “Earnings” means the base compensation paid in cash to a Participant, including all salary, wages (including amounts elected to be deferred by such Participant, that would otherwise have been paid, under any cash or deferred arrangement or other deferred compensation program established by the Company or a Related Corporation) overtime pay, commissions, bonuses, but excluding all other remuneration paid directly to such Participant, profit sharing, the cost of employee benefits paid for by the Company or a Related Corporation, education or tuition reimbursements, imputed income arising under any Company or Related Corporation group insurance or benefit program, short-term disability payments,

2.

traveling expenses, business and moving expense reimbursements, income received in connection with stock options, contributions made by the Company or a Related Corporation under any employee benefit plan, and similar items of compensation.

(c) Notwithstanding the foregoing, the maximum number of shares of Common Stock that a Participant may purchase on any Purchase Date in an Offering shall be such number of shares as has a Fair Market Value (determined as of the Offering Date for such Offering) equal to (x) $25,000 multiplied by the number of calendar years in which the Purchase Right under such Offering has been outstanding at any time, minus (y) the Fair Market Value of any other shares of Common Stock (determined as of the relevant Offering Date with respect to such shares) that, for purposes of the limitation of Section 423(b)(8) of the Code, are attributed to any of such calendar years in which the Purchase Right is outstanding. The amount in clause (y) of the previous sentence shall be determined in accordance with regulations applicable under Section 423(b)(8) of the Code based on (i) the number of shares previously purchased with respect to such calendar years pursuant to such Offering or any other Offering under the Plan, or pursuant to any other Company or Related Corporation plans intended to qualify as Employee Stock Purchase Plans, and (ii) the number of shares subject to other Purchase Rights outstanding on the Offering Date for such Offering pursuant to the Plan or any other such Company or Related Corporation Employee Stock Purchase Plan.

(d) The maximum aggregate number of shares of Common Stock available to be purchased by all Participants under an Offering shall be the number of shares of Common Stock remaining available under the Plan on the Offering Date. If the aggregate purchase of shares of Common Stock upon exercise of Purchase Rights granted under all concurrent Offerings would exceed the maximum aggregate number of shares available, the Board shall make a uniform and equitable allocation of the shares available. Any Contributions not applied to the purchase of available shares of Common Stock shall be refunded to the Participants without interest.

(e) Notwithstanding the foregoing, the maximum number of shares of Common Stock that may be purchased on any single Purchase Date by each Eligible Employee under all ongoing Offerings shall not exceed [                     (            )] shares. Any Contributions not applied to the purchase of available shares of Common Stock shall be refunded to the Participants without interest.

4. PURCHASE PRICE.

The purchase price of shares of Common Stock under the Offering shall be the lesser of: (i) eighty-five percent (85%) of the Fair Market Value of such shares of Common Stock on the Offering Date, or (ii) eighty-five percent (85%) of the Fair Market Value of such shares of Common Stock on the applicable Purchase Date. For the Initial Offering, the Fair Market Value of the shares of Common Stock at the time when the Offering commences shall be the price per share at which shares are first sold to the public in the Company’s initial public offering as specified in the final prospectus for that initial public offering.

3.

5. PARTICIPATION.

(a) An Eligible Employee may elect to participate in an Offering on the Offering Date. An Eligible Employee may enroll in only one Offering at a time. An Eligible Employee shall elect his or her payroll deduction percentage on such enrollment form as the Company provides. The completed enrollment form must be delivered to the Company at least seven (7) days prior to the date participation is to be effective, unless a later time for filing the enrollment form is set by the Company for all Eligible Employees with respect to a given Offering. Payroll deduction percentages must be expressed in whole percentages of Earnings, with a minimum percentage of one percent (1%) and a maximum percentage of twenty percent (20%). Except as provided in Section 5(e), a Participant may participate only by way of payroll deductions.

(b) A Participant may increase his or her participation level once during an Offering. In addition, a Participant may decrease (including a decrease to zero percent (0%)) his or her participation level no more than twice during a Purchase Period (and the second decrease in participation level must be to zero percent (0%)). Any such change in participation level shall be made by delivering a notice to the Company or a designated Related Corporation, in such form as the Company may provide at least ten (10) days (or such shorter period of time as determined by the Company and communicated to Participants) prior to the payroll date for which it is to be effective. A Participant may also increase his or her participation level effective for a subsequent Purchase Period.

(c) A Participant may withdraw from an Offering and receive a refund of his or her Contributions (reduced to the extent, if any, such Contributions have been used to acquire shares of Common Stock for the Participant on any prior Purchase Date) without interest, at any time prior to the end of the Offering, excluding the ten (10)-day period immediately preceding a Purchase Date (or such shorter period of time determined by the Company and communicated to Participants), by delivering a withdrawal notice to the Company or a designated Related Corporation in such form as the Company may provide. A Participant who has withdrawn from an Offering shall not again participate in such Offering, but may participate in subsequent Offerings under the Plan in accordance with the terms of the Plan and the terms of such subsequent Offerings.

(d) Notwithstanding the foregoing or any other provision of this Offering document or of the Plan to the contrary, neither the enrollment of any Eligible Employee in the Plan nor any forms relating to participation in the Plan shall be given effect until such time as a registration statement covering the shares reserved under the Plan that are subject to the Offering has been filed by the Company and has become effective.

(e) If the provisions of Section 5(d) are applicable, the Company shall establish such procedures as will enable the purposes of the Plan to be satisfied while complying with applicable securities laws. Such procedures may include, for example, allowing Participants to participate other than by means of payroll deduction and/or allowing Participants to increase their level of participation during a Purchase Period. Except as otherwise provided by the Company pursuant to the preceding sentence, for the initial Purchase Period ending [            , 2007], no payroll deductions shall be required from the Eligible Employee until such time as the Eligible Employee affirmatively elects to commence such payroll deductions following the

4.

Eligible Employee’s receipt of the Securities Act prospectus for the Plan. Each Eligible Employee shall automatically be enrolled in such initial Purchase Period with a contribution rate equal to twenty percent (20%) of Earnings and will have a limited opportunity to make all or part of the contributions in a lump sum payment, rather than through payroll deductions, prior to the end of the initial Purchase Period. To the extent that the Eligible Employee’s payroll deductions for such initial Purchase Period are less than twenty percent (20%) of Earnings paid to the Eligible Employee during such initial Purchase Period, the Eligible Employee may make an additional cash payment at any time on or prior to [            , 2008] in order to fund the purchase of shares of Common Stock purchased on behalf of the Eligible Employee on such initial Purchase Date.

6. PURCHASES.

Subject to the limitations contained herein, on each Purchase Date, each Participant’s Contributions (without any increase for interest) shall be applied to the purchase of whole shares, up to the maximum number of shares permitted under the Plan and the Offering.

7. NOTICES AND AGREEMENTS.

Any notices or agreements provided for in an Offering or the Plan shall be given in writing, in a form provided by the Company (including documents delivered in electronic form, if authorized by the Committee), and unless specifically provided for in the Plan or this Offering, shall be deemed effectively given upon receipt or, in the case of notices and agreements delivered by the Company, five (5) days after deposit in the United States mail, postage prepaid.

8. EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.

The Purchase Rights granted under an Offering are subject to the approval of the Plan by the stockholders of the Company as required for the Plan to obtain treatment as an Employee Stock Purchase Plan.

9. OFFERING SUBJECT TO PLAN.

Each Offering is subject to all the provisions of the Plan, and the provisions of the Plan are hereby made a part of the Offering. The Offering is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of an Offering and those of the Plan (including interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan), the provisions of the Plan shall control.

* * * *

5.

EX-10.6

Exhibit 10.6

January 26, 2007

Mr. Jon McGarity

9940 N. 78th Place

Scottsdale, AZ 85258-1389

Dear Jon:

I am pleased to offer you the position of Chief Executive Officer and President at Insys Therapeutics, Inc. The salary offered for this position is $276,000.00 per year. You are also eligible to receive a bonus potential of up to 50% of your base salary, with 35% guaranteed in the first year. As a full-time employee you will be eligible for health benefits and a 401K retirement plan. The attached “employment statement” summarizes your employment benefits.

On the first day of your employment you will be requested to sign a Confidentiality Agreement. If you are in agreement, please signify your acceptance of this offer of employment by signing and returning this letter and the “offer statement” no later than February 6, 2007.

Jon, you have been offered a key position at Insys and we look forward to your active contribution to the success of our company. It is my hope that you will find your employment at Insys a truly rewarding experience.

I look forward to welcoming you to Insys. Should you have any questions or concerns please do not hesitate to contact me.

Sincerely,

Dr. John N. Kapoor

Chairman

I hereby accept Insys Therapeutics Inc.’s offer as described in this letter.

/s/ Jon McGarity	2-1-07
Signature of Jon McGarity	Date

cc: Kay Armstrong

INSYS THERAPEUTICS, INC. (“COMPANY”)

EMPLOYMENT OFFER STATEMENT (“OFFER STATEMENT”)

TO: Jon McGarity

DATE: January 26, 2007

POSITION: Chief Executive Officer and President

START DATE: February 12th, 2007

COMPENSATION:

SALARY	$276,000 per annum and until year end 2007 or IPO, you will be paid 13K per month, with 10K per month deferred. At either event, you will receive the deferment in a lump sum.
BONUS	Up to 50% bonus potential. 35% bonus is guaranteed.
EQUITY	You shall receive 600,000 options. On an ongoing basis, you will participate in the annual employee stock option award program, to the extent such awards are granted by the Board of Directors.
	34% of the options will be vested immediately upon your joining the company; the remaining 66% will vest per the following schedule:
	33% - March 1, 2008
	33% - March 1, 2009
	In order for any unvested options to vest, you must be an employee of the Company in good standing or reach terms that would complete the vesting.
	The options shall be subject to all the terms and conditions of the Employee Stock Option Program adopted by the Company. Any Shares issued pursuant to these paragraphs shall be subject to a prohibition on transferability until such time as an initial public offering of the Company’s stock is implemented by the Company.
PAID TIME OFF:	After completion of six months of employment, you are entitled to one week vacation. Your annual vacation time will be three weeks. You will have eight paid holidays and five personal/sick days. Please note that vacation time unused for the calendar year cannot be carried over.

HEALTH INSURANCE:	Effective on the first day of the first full month following the Start Date but subject to any pre-existing condition clauses that may be applicable to you or your family, Company Sponsored group medical and dental health coverage will be provided to you consistent with the Company health insurance benefits plan in place.
BENEFITS:	Effective on the first day of the first full month following the Start Date, long term disability and life insurance at one and one-half (1 1/2) times annual salary to a maximum of $100,000.00, consistent with the Company benefits plan, shall be provided to you. These benefits are to be paid in full by the Company. If declined, Insys will cover your personal life insurance policy up to $6,000 annually.
RETIREMENT:	Subject to all eligibility and waiting period requirements, you shall be entitled to participate in the 401(k) Plan.
TERMINATION:	Either you or the Company may terminate the “At-Will” employment upon thirty (30) days written notice to the other.
EMPLOYMENT STATUS:	“At Will” Employment; Nothing herein shall be construed to alter your status as an “At-Will” employee.
TECHNOLOGY & INTELLECTUAL PROPERTY:	All intellectual property and technology developed as a result of projects pursued by Insys, whether directly or indirectly, while employed at Insys Therapeutics, Inc. shall belong to the Company.

Accepted:	/s/ Jon McGarity	Approved:	/s/ John Kapoor
		Its: Chairman

EX-10.7

Exhibit 10.7

March 1st, 2007

Mike Babich

2333 N Leavitt 2N

Chicago, IL 60647

RE: Employment Offer - Position of Chief Operating Officer

Dear Mike:

I am pleased to offer you the position of Chief Operating Officer at Insys Therapeutics. The salary offered for this position is $175,000.00 per year. As a full-time employee you will be eligible for health benefits and a 401K retirement plan. The attached “employment statement” summarizes your employment benefits.

On the first day of your employment you will be requested to sign a Confidentiality Agreement If you are in agreement, please signify your acceptance of this offer of employment by signing and returning this letter and the “offer statement” no later than March 15th, 2006.

Mike, you have been offered a key position at Insys and we look forward to your active contribution to the success of our company. It is my hope that you will find your employment at Insys a truly rewarding experience.

I look forward to welcoming you to Insys. Should you have any questions or concerns please do not hesitate to contact me at (847) 726-1570 ext. 102.

Sincerely,

/s/ John Kapoor

Dr. John Kapoor

Chairman

I hereby accept Insys Therapeutics Inc.’s offer as described in this letter.

/s/ Mike Babich	3/1/07
Signature of Candidate	Date

INSYS THERAPEUTICS, INC. (“COMPANY”)

EMPLOYMENT OFFER STATEMENT (“OFFER STATEMENT”)

TO: Mike Babich

DATE: March 1^st, 2007

POSITION: Chief Operating Officer

START DATE: March 1^st, 2007

COMPENSATION:

SALARY	$175,000.00 per annum
EQUITY	You shall receive 225,000 options. On an ongoing basis, you will participate in the annual employee stock option award program, to the extent such awards are granted by the Board of Directors.
	34% of the options will be vested immediately upon your joining the company; the remaining 66% will vest per the following schedule:
	33% - March 1, 2008
	33% - March 1, 2009
	In order for any unvested options to vest, you must be an employee of the Company in good standing or reach terms that would complete the vesting,
	The options shall be subject to all the terms and conditions of the Employee Stock Option Program adopted by the Company. Any Shares issued pursuant to these paragraphs shall be subject to a prohibition transferability until such time as an initial public offering of the Company’s stock is implemented by the Company.
	You will be given a guaranteed bonus of 30% of your salary with a potential to earn an additional 20% bonus based on performance to be determined by the board of directors.
PAID TIME OFF:	After completion of six months of employment, you are entitled to one week vacation. Your annual vacation time will be three weeks. You will have eight paid holidays and five personal sick days. Please note that vacation time unused for the calendar year cannot be carried over.

HEALTH INSURANCE:	Effective on the first day of the first full month following the Start Date but subject to any pre-existing condition clauses that may be applicable to you or your family, Company Sponsored group medical and dental health coverage will be provided to you consistently with the Company health insurance benefits plan in place.
BENEFITS:	Effective on the first day of the first full month following the Start Date, long term disability and life insurance at one and one-half (1 1/2) times annual salary to a maximum of $100,000.00, consistent with the Company benefits plan, shall be provided to you. These benefits are to be paid in full by the Company.
RETIREMENT:	Subject to all eligibility and waiting period requirements, you shall be entitled to participate in the 401(k) Plan.
TERMINATION:	Either you or the Company may terminate the “At-Will” employment upon thirty (30) days written notice to the other.
EMPLOYMENT STATUS:	“At Will” Employment; Nothing herein shall be construed to alter your status as an “At-Will” employee.
TECHNOLOGY & INTELLECTUAL PROPERTY:	All intellectual property and technology developed as a result of projects pursued by Insys, whether directly or indirectly, while employed at Insys Therapeutics, shall belong to the Company.

Accepted:	/s/ Mike Babich	Approved:	/s/ John Kapoor
		Its: Chairman

EX-10.8

Exhibit 10.8

January 22, 2007

Ellen Feigal, M.D.

1923 East Clubhouse Drive

Phoenix, Arizona 85048

RE: Employment Offer - Position of Chief Medical Officer

Dear Ellen:

I am pleased to offer you the position of Chief Medical Officer at Insys Therapeutics. The salary offered for this position is $265,000.00 per year. As a full-time employee you will be eligible for health benefits and a 401K retirement plan. The attached “employment statement” summarizes your employment benefits.

On the first day of your employment you will be requested to sign a Confidentiality Agreement. If you are in agreement, please signify your acceptance of this offer of employment by signing and returning this letter and the “offer statement” no later than January 29, 2006.

Ellen, you have been offered a key position at Insys and we look forward to your active contribution to the success of our company. It is my hope that you will find your employment at Insys a truly rewarding experience.

I look forward to welcoming you to Insys. Should you have any questions or concerns please do not hesitate to contact me at (847) 726-1570 ext. 102.

Sincerely,

/s/ George Kottayil

George Kottayil, Ph.D.

President

I hereby accept Insys Therapeutics Inc.’s offer as described in this letter.

/s/ Ellen Feigal	January 24, 2007
Ellen Feigal, MD	Date

cc: Kay Armstrong

INSYS THERAPEUTICS, INC. (“COMPANY”)

EMPLOYMENT OFFER STATEMENT (“OFFER STATEMENT”)

TO: Ellen Feigal, M.D.

DATE: January 22, 2007

POSITION: Chief Medical Officer

START DATE: To be determined

COMPENSATION:

SALARY	$265,000.00 per annum
EQUITY	You shall receive 100,000 options. On an ongoing basis, you will participate in the annual employee stock option award program, to the extent such awards are granted by the Board of Directors.
	50% of the options will be vested immediately upon your joining the company; the remaining 50% will vest per the following schedule:
	25% - March 1, 2008
	25% - March 1, 2009
	In order for any unvested options to vest, you must be an employee of the Company in good standing or reach terms that would complete the vesting.
	The options shall be subject to all the terms and conditions of the Employee Stock Option Program adopted by the Company. Any Shares issued pursuant to these paragraphs shall be subject to a prohibition on transferability until such time as an initial public offering of the Company’s stock is implemented by the Company.
PAID TIME OFF:	After completion of six months of employment, you are entitled to one week vacation. Your annual vacation time will be three weeks. You will have eight paid holidays and five personal/sick days. Please note that vacation time unused for the calendar year cannot be carried over.
HEALTH INSURANCE:	Effective on the first day of the first full month following the Start Date but subject to any pre-existing condition clauses that may be applicable to you or your family, Company Sponsored group medical and dental health coverage will be provided to you consistent with the Company health insurance benefits plan in place.

BENEFITS:	Effective on the first day of the first full month following the Start Date, long term disability and life insurance at one and one-half (1 1/2) times annual salary to a maximum of $100,000.00, consistent with the Company benefits plan, shall be provided to you. These benefits are to be paid in full by the Company.
RETIREMENT:	Subject to all eligibility and waiting period requirements, you shall be entitled to participate in the 401(k) Plan.
TERMINATION:	Either you or the Company may terminate the “At-Will” employment upon thirty (30) days written notice to the other.
EMPLOYMENT STATUS:	“At Will” Employment; Nothing herein shall be construed to alter your status as an “At-Will” employee.
TECHNOLOGY & INTELLECTUAL PROPERTY:	All intellectual property and technology developed as a result of projects pursued by Insys, whether directly or indirectly, while employed at Insys Therapeutics, Inc. shall belong to the Company.

Accepted:	/s/ Ellen Feigal	Approved:	/s/ S. George Kottayil
	January 24, 2007	Its:	President

EX-10.9

Exhibit 10.9

Jon W. McGarity

President & CEO

July 31, 2007

Ramesh Acharya, Ph.D.

3716 Carrigan Canyon

Salt Lake City, Utah 84109

Dear Ramesh:

I am pleased to offer you the position of Chief Scientific Officer (CSO) at Insys Therapeutics, Inc. The salary offered for this position, at this time, is $100,000.00 per year. You are also eligible to receive a bonus potential of up to 30% of your base salary based on performance. As a full-time employee you will be eligible for health benefits and a 401K retirement plan. The attached “employment statement” summarizes your employment benefits.

On the first day of your employment you will be requested to sign a Confidentiality Agreement. If you are in agreement, please signify your acceptance of this offer of employment by signing and returning this letter and the “offer statement” no later than August 3, 2007. It is understood that the job requires travel from time to time or as needed to meet business needs.

Ramesh, you are being offered a key position at Insys and we look forward to your active contribution to the success of our company. It is my hope that you will find your employment at Insys a truly rewarding experience.

I look forward to welcoming you to Insys. Should you have any questions or concerns please do not hesitate to contact me at (602) 910 2617 Ext# 9018.

Sincerely,

/s/ Jon W. McGarity

Jon W. McGarity

President and CEO

I hereby accept Insys Therapeutics Inc.’s offer as described in this letter.

/s/ Ramesh Acharya	Aug. 1, 2007
Signature of Ramesh Acharya, Ph.D.	Date

INSYS THERAPEUTICS, INC. (“COMPANY”)

EMPLOYMENT OFFER STATEMENT (“OFFER STATEMENT”)

TO: Ramesh Acharya, Ph.D.

DATE: July 31, 2007

POSITION: Chief Scientific Officer (CSO)

START DATE: August 6, 2007

COMPENSATION:

SALARY	$100,000.00 per annum
BONUS	Up to 30% bonus potential.
EQUITY	You shall receive 200,000 options. On an ongoing basis, you will participate in the annual employee stock option award program, to the extent such awards are granted by the Board of Directors. 50% of the options will be vested immediately upon your joining the company; the remaining 50% will vest per the following schedule:
	25% - September 1, 2008 25% - September 1, 2009
	In order for any unvested options to vest, you must be an employee of the Company in good standing or reach terms that would complete the vesting. The options shall be subject to all the terms and conditions of the Employee Stock Option Program adopted by the Company. Any Shares issued pursuant to these paragraphs shall be subject to a prohibition on transferability until such time as an initial public offering of the Company’s stock is implemented by the Company.
PAID TIME OFF:	Your annual vacation time will be three weeks. You will have eight paid holidays and five personal/sick days. Please note that vacation time unused for the calendar year cannot be carried over. After two years of complete service, four weeks will be approved.
HEALTH INSURANCE:	Effective on the first day following the first full month of employment but subject to any pre-existing condition clauses that may be applicable to you or your family, Company Sponsored group medical and dental health coverage will be provided to you consistent with the Company health insurance benefits plan in place.

BENEFITS:	Effective on the first day of the first full month following the Start Date, long term disability and life insurance at one and one-half (1 1/2) times annual salary to a maximum of $100,000.00, consistent with the Company benefits plan, shall be provided to you. These benefits are to be paid in full by the Company.
RETIREMENT:	Subject to all eligibility and waiting period requirements, you shall be entitled to participate in the 401(k) Plan.
TERMINATION:	Either you or the Company may terminate the “At-Will” employment upon thirty (30) days written notice to the other.
EMPLOYMENT STATUS:	“At Will” Employment; Nothing herein shall be construed to alter your status as an “At-Will” employee.
TECHNOLOGY & INTELLECTUAL PROPERTY:	All intellectual property and technology developed as a result of projects pursued by Insys, whether directly or indirectly, while employed at Insys Therapeutics, Inc. shall belong to the Company.

Accepted:	/s/ Ramesh Acharya	Approved:	/s/ Jon W. McGarity
	Ramesh Acharya, Ph.D.	Date:	President & CEO

EX-10.10

Exhibit 10.10

January 26, 2007

Mr. Troy Ignelzi

14542 North 100th Place

Scottsdale, AZ 85260

Dear Troy:

I am pleased to offer you the position of Vice President of Business Development and Strategic Planning at Insys Therapeutics, Inc. The salary offered for this position is $123,000.00 per year. You are also eligible to receive a bonus potential of up to 35% of your base salary. A 20% bonus is guaranteed. 10% of this years bonus will be paid upfront, however if for any reason your employment is less than 12 months, you will be required to pay this bonus back plus interest. As a full-time employee you will be eligible for health benefits and a 401K retirement plan. The attached “employment statement” summarizes your employment benefits.

On the first day of your employment you will be requested to sign a Confidentiality Agreement. If you are in agreement, please signify your acceptance of this offer of employment by signing and returning this letter and the “offer statement” no later than February 2, 2007.

Troy, you have been offered a key position at Insys and we look forward to your active contribution to the success of our company. It is my hope that you will find your employment at Insys a truly rewarding experience.

I look forward to welcoming you to Insys. Should you have any questions or concerns please do not hesitate to contact me.

Sincerely,

/s/ John Kapoor

Dr. John N. Kapoor

Chairman

I hereby accept Insys Therapeutics Inc.’s offer as described in this letter.

/s/ Troy Ignelzi	1/31/07
Signature of Troy Ignelzi	Date

cc: Kay Armstrong

INSYS THERAPEUTICS, INC. (“COMPANY”)

EMPLOYMENT OFFER STATEMENT (“OFFER STATEMENT”)

TO: Troy Ignelzi

DATE: January 26, 2007

POSITION: Vice President of Business Development and Strategic Planning

START DATE: February 14^th, 2007

COMPENSATION:

SALARY	$123,000.00 per annum, Performance review to be conducted at the end of every calendar year.
BONUS	Up to 35% bonus potential. 20% bonus is guaranteed. 10% of the 20% guaranteed to be paid on start date.
EQUITY	You shall receive 85,000 options. On an ongoing basis, you will participate in the annual employee stock option award program, to the extent such awards are granted by the Board of Directors.
	34% of the options will be vested immediately upon your joining the company; the remaining 66% will vest per the following schedule:
	33% - March 1, 2008
	33% - March 1, 2009
	In order for any invested options to vest, you must be an employee of the Company in good standing or reach terms that would complete the vesting.
	The options shall be subject to all the terms and conditions of the Employee Stock Option Program adopted by the Company. Any Shares issued pursuant to these paragraphs shall be subject to a prohibition on transferability until such time as an initial public offering of the Company’s stock is implemented by the Company.
PAID TIME OFF:	After completion of six months of employment, you are entitled to one week vacation. Your annual vacation time will be two weeks. You will have eight paid holidays and five personal sick days, Please note that vacation time unused for the calendar year cannot be carried over.

HEALTH INSURANCE:	Effective on the first day of the first full month following the Start Date but subject to any pre-existing condition clauses that may be applicable to you or your family, Company Sponsored group medical and dental health coverage will be provided to you consistent with the Company health insurance benefits plan in place.
BENEFITS:	Effective on the first day of the first full month following the Start Date, long term disability and life insurance at one and one-half (1 1/2) times annual salary to a maximum of $100,000,00, consistent with the Company benefits plan, shall be provided to you. These benefits are to be paid in full by the Company.
RETIREMENT:	Subject to all eligibility and waiting period, requirements, you shall be entitled to participate in the 401(k) Plan.
TERMINATION:	Either you or the Company may terminate the “At-Will” employment upon thirty (30) days written notice to the other.
EMPLOYMENT STATUS:	“At Will” Employment; Nothing herein shall be construed to alter your status as an “At-Will” employee.
TECHNOLOGY & INTELLECTUAL PROPERTY:	All intellectual property and technology developed as a result of projects pursued by Insys, whether directly or indirectly, while employed at Insys Therapeutics, Inc. shall belong to the Company.

Accepted: /s/ Troy Ignelzi Approved: /s/ John Kapoor

Its: Chairman

EX-10.11

Exhibit 10.11

May 17th, 2007

Kelly D. Tate, MBA, MS

3548 N. Reynolds Circle

Mesa, AZ 85215

Dear Kelly:

I am pleased to offer you the position of Director, Regulatory Affairs at Insys Therapeutics, Inc. The salary offered for this position is $130,000.00 per year. You are also eligible to receive a bonus potential of up to 10% of your base salary based on performance. As a full-time employee you will be eligible for health benefits and a 401K retirement plan. The attached “employment statement” summarizes your employment benefits.

On the first day of your employment you will be requested to sign a Confidentiality Agreement. If you are in agreement, please signify your acceptance of this offer of employment by signing and returning this letter and the “offer statement” no later than May 21st, 2007. It is understood that the job requires travel from time to time or as needed.

Kelly, you are being offered a key position at Insys and we look forward to your active contribution to the success of our company. It is my hope that you will find your employment at Insys a truly rewarding experience.

I look forward to welcoming you to Insys. Should you have any questions or concerns please do not hesitate to contact me at (602) 910-2617 extension 9018.

Sincerely,

/s/ Jon W. McGarity

Jon W. McGarity

President and CEO

I hereby accept Insys Therapeutics Inc.’s offer as described in this letter.

/s/ Kelly Tate	May 19, 2007
Signature of Kelly D. Tate	Date

INSYS THERAPEUTICS, INC. (“COMPANY”)

EMPLOYMENT OFFER STATEMENT (“OFFER STATEMENT”)

TO: Kelly D. Tate, MBA, MS

DATE: May 17th, 2007

POSITION: Director, Regulatory Affairs

START DATE: June 11^th, 2007

COMPENSATION:

SALARY	$130,000.00 per annum
BONUS	Up to 10% bonus potential.
EQUITY	You shall receive 10,000 options. On an ongoing basis, you will participate in the annual employee stock option award program, to the extent such awards are granted by the Board of Directors.
	50% of the options will be vested immediately upon your joining the company; the remaining 50% will vest per the following schedule:
	25% - June 1, 2008
	25% - June 1, 2009
	In order for any unvested options to vest, you must be an employee of the Company in good standing or reach terms that would complete the vesting.
	The options shall be subject to all the terms and conditions of the Employee Stock Option Program adopted by the Company. Any Shares issued pursuant to these paragraphs shall be subject to a prohibition on transferability until such time as an initial public offering of the Company’s stock is implemented by the Company.
PAID TIME OFF:	Your annual vacation time will be three weeks. You will have eight paid holidays and five personal/sick days. Please note that vacation time unused for the calendar year cannot be carried over. After two years of complete service, four weeks will be approved.
HEALTH INSURANCE:	Effective on the first day following the first full month of employment but subject to any pre-existing condition clauses that may be applicable to you or your family, Company Sponsored group medical and dental health coverage will be provided to you consistent with the Company health insurance benefits plan in place.

BENEFITS:	Effective on the first day of the first full month following the Start Date, long term disability and life insurance at one and one-half (1 1/2) times annual salary to a maximum of $100,000.00, consistent with the Company benefits plan, shall be provided to you. These benefits are to be paid in full by the Company.
RETIREMENT:	Subject to all eligibility and waiting period requirements, you shall be entitled to participate in the 401(k) Plan.
TERMINATION:	Either you or the Company may terminate the “At-Will” employment upon thirty (30) days written notice to the other.
EMPLOYMENT STATUS:	“At Will” Employment; Nothing herein shall be construed to alter your status as an “At-Will” employee.
TECHNOLOGY & INTELLECTUAL PROPERTY:	All intellectual property and technology developed as a result of projects pursued by Insys, whether directly or indirectly, while employed at Insys Therapeutics, Inc. shall belong to the Company.

Accepted: /s/ Kelly Tate Approved: /s/ Jon W. McGarity

Its: President & CEO

EX-10.13

Exhibit 10.13

STANDARD FORM

INDUSTRIAL BUILDING LEASE

(MULTI-TENANT)

1. BASIC TERMS. This Section 1 contains the Basic Terms of this Lease between Landlord and Tenant, named below. Other Sections of the Lease referred to in this Section 1 explain and define the Basic Terms and are to be read in conjunction with the Basic Terms.

1.1 Effective Date of Lease: March 12, 2007

1.2 Landlord: First Industrial, L.P., a Delaware partnership

1.3 Tenant: InSys Therapeutics, Inc., a Delaware corporation

1.4 Premises: Approximately 15,839 rentable square feet in the building commonly known as Phoenix Tech Center located at 10220 S. 51^st Street, Phoenix, Arizona 85044 (the “Building”).

1.5 Property: See Exhibit A.

1.6 Lease Term: Five (5) years, (“Term”), commencing November 1, 2007 (“Rent Commencement Date”) and ending October 31, 2012, subject to Section 5.2 below (“Expiration Date”).

1.7 Permitted Uses: Operation of administrative and sales offices, research and development and testing of therapeutics and related uses thereof.

1.8 Tenant’s Guarantor: None

1.9 Brokers: (See Section 23): (A) Tenant’s Broker: Grubb & Ellis/BRE Commercial, LLC; and (B) Landlord’s Broker: Grubb & Ellis/BRE Commercial, LLC

1.10 Security/Damage Deposit: (See Section 4.4): $26,719.47. Additionally, InSys Therapeutics, Inc. shall secure a letter of credit with Bank of America in accordance with the terms of Section 4.4.2.

1.11 Initial Estimated Additional Rent Payable by Tenant: $3,959.75 per month

1.12 Tenant’s Proportionate Share: 69%

1.13 Exhibits to Lease: The following exhibits are attached to and made a part of this Lease: A (Property); A-1 (Premises); B (Tenant Operations Inquiry Form); C (Tenant’s Work); D (Confirmation of Commencement Date); E (Broom Clean Condition and Repair Requirements); F (Rules and Regulations); and G (Employee Parking Area)

2. LEASE OF PREMISES; RENT.

2.1 Lease of Premises for Lease Term. Landlord hereby leases the Premises to Tenant, and Tenant hereby rents the Premises from Landlord, for the Term and subject to the conditions of this Lease.

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2.2 Types of Rental Payment. Tenant shall pay net base rent to Landlord in monthly installments, in advance, on the first day of each and every calendar month during the Term of this Lease (the “Base Rent”) in the amounts and for the periods as set forth below, together with all rent tax payable with respect thereto, beginning on the Rent Commencement Date:

Rental Payments

Months	Monthly Base Rent		Per Sq. Ft./Per Month
11/01/07 – 06/30/09	$	14,730.27	$	0.93
07/01/09 – 02/28/11	$	15,466.78	$	0.9765
03/01/11 – 10/31/12	$	16,239.73	$	1.0253

Tenant shall also pay (a) Tenant’s Proportionate Share (as set forth in Section 1.12) of Operating Expenses (as hereinafter defined), and (b) any other amounts owed by Tenant hereunder (collectively, “Additional Rent”). In the event any monthly installment of Base Rent or Additional Rent, or both, is not paid within 5 days after the due date thereof, a late charge in an amount equal to 5% of the then delinquent installment of Base Rent and/or Additional Rent (the “Late Charge”) shall be imposed with respect to the then-delinquent Rent (as defined below) payment; provided, however, that with respect to the first late payment of Rent in any twelve (12) month period, Landlord shall provide written notice to Tenant of such late payment and the Late Charge shall not be payable unless Tenant shall fail to cure such late payment within five (5) days after receipt of Landlord’s written notice. For purposes of this Lease, the Late Charge, Default Interest, as defined in Section 22.3 below, Base Rent and Additional Rent shall collectively be referred to as “Rent.” All Rent shall be paid by Tenant to Landlord, c/o First Industrial, L.P., 21125 Network Place, Chicago IL 600673-1211 or if sent by overnight courier, Bank One 7th Floor Mailroom 525 W. Monroe Chicago IL 60661 Attn: First Industrial LP at 21125 Network Place (or such other entity designated as Landlord’s management agent, if any, and if Landlord so appoints such a management agent, the “Agent”), or pursuant to such other directions as Landlord shall designate in this Lease or otherwise in writing to Tenant.

2.3 Covenants Concerning Rental Payments. Commencing on the Rent Commencement Date, Tenant shall pay the Rent promptly when due, without notice or demand, and without any abatement, deduction or setoff, except as otherwise provided herein. No payment by Tenant, or receipt or acceptance by Agent or Landlord, of a lesser amount than the correct Rent shall be deemed to be other than a payment on account, nor shall any endorsement or statement on any check or letter accompanying any payment be deemed an accord or satisfaction, and Agent or Landlord may accept such payment without prejudice to its right to recover the balance due or to pursue any other remedy available to Landlord. If the Rent Commencement Date occurs on a day other than the first day of a calendar month, the Rent due for the first calendar month of the Term shall be prorated on a per diem basis (based on a 360 day, 12 month year) and paid to Landlord on the Rent Commencement Date, and the Term will be extended to terminate on the last day of the calendar month in which the Expiration Date stated in Section 1.6 occurs.

3. OPERATING EXPENSES.

3.1 Definitional Terms Relating to Additional Rent. For purposes of this Section and other relevant provisions of the Lease:

3.1.1 Operating Expenses. The term “Operating Expenses” shall mean all costs and expenses paid or incurred by Landlord with respect to, or in connection with, the ownership,

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repair, restoration, maintenance and operation of the Property. Operating Expenses may include, but are not limited to, any or all of the following: (i) services provided directly by employees of Landlord or Agent in connection with the operation, maintenance or rendition of other services to or for the Property; (ii) to the extent not separately metered, billed, or furnished, all charges for utilities and services furnished to either or both of the Property and the Premises, including, without limitation, the Common Areas (as hereinafter defined), together with any taxes on such utilities; (iii) all market-based premiums for commercial property, casualty, general liability, boiler, flood, earthquake, terrorism and all other types of insurance provided by Landlord and relating to the Property, all reasonable administrative costs incurred in connection with the procurement and implementation of such insurance policies, and all deductibles paid by Landlord pursuant to insurance policies required to be maintained by Landlord under this Lease; (iv) management fees to Landlord or Agent or other persons or management entities actually involved in the management and operation of the Property, which management fee shall not exceed 5% per annum of all Rent, collected from all tenants in the Property; (v) any capital improvements made by, or on behalf of, Landlord to the Property that are either or both (a) designed to reduce Operating Expenses and (b) required to keep the Property in compliance with all governmental laws, rules and regulations applicable thereto, from time to time, the cost of which capital improvements shall be reasonably amortized by Landlord over the useful life of the improvement, in accordance with generally accepted accounting principles; (vi) all professional fees incurred in connection with the operation, management and maintenance of the Property; (vii) Taxes, as hereinafter defined in Section 3.1.3; and (viii) dues, fees or other costs and expenses, of any nature, due and payable to any association or comparable entity to which Landlord, as owner of the Property, is a member or otherwise belongs and that governs or controls any aspect of the ownership and operation of the Property; and (ix) any real estate taxes and common area maintenance expenses levied against, or attributable to, the Property under any declaration of covenants, conditions and restrictions, reciprocal easement agreement or comparable arrangement that encumbers and benefits the Property and other real property (e.g., a business park).

3.1.2 Notwithstanding the foregoing, Operating Expenses shall not include the following: (i) any costs or expenses for which Landlord is reimbursed or indemnified (whether by an insurer, condemnor, tenant or otherwise); (ii) overhead and administrative costs of Landlord not directly incurred in the operation and/or maintenance of the Property; (iii) depreciation or amortization of the Building or its contents or components; (iv) capital expenditures, except to the extent provided in Section 3.1.1(v) above; (v) expenses for the preparation of space or other work which Landlord performs for any tenant or prospective tenant of the Building; (vi) expenses incurred in leasing or obtaining new tenants or retaining existing tenants, including leasing commissions, legal expenses, advertising or promotion; (vii) legal expenses incurred in enforcing the terms of any lease; (viii) interest, amortization or other costs, including legal fees, associated with any mortgage, loan or refinancing of the Building or the Common Areas; (ix) expenses incurred for any necessary replacement of any item to the extent that it is covered under warranty; (x) the cost of any item or service which Tenant separately reimburses Landlord or pays to third parties, or that Landlord provides selectively to one or more tenants of the Building, other than Tenant, whether or not Landlord is reimbursed by such other tenant(s), including the actual cost of any special electrical, heating, ventilation or air conditioning required by any tenant that exceeds normal building standards or is required during times other than the business hours stated in this Lease; (xi) accounting and legal fees relating to the ownership, construction, leasing or sale of the Common Areas; (xii) any interest or penalty incurred due to the late payment of any Operating Expense; (xiii) the cost of correcting defects in the construction of the Building or the Common Areas; provided, however, that repairs resulting from ordinary wear and tear shall not be deemed to be defects; (xiv) the initial cost of tools and small equipment used in the operation and maintenance of the Building, and the Common Areas which do not exceed the cost of $1,000 per year in the aggregate; (xv) the initial cost or the replacement cost of any permanent landscaping or the regular landscaping maintenance for any property other than the Property, unless associated with fees or charges arising from or in connection with any governing association or the vested owners for the Building; (xvi) the cost of correcting any applicable

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building or fire code violation(s) of any other applicable law relating to the Building, or the Common Areas, or the cost of any penalty or fine incurred for noncompliance with the same; (xvii) any costs incurred to test, survey, cleanup, contain, abate or remove any environmental or hazardous waste or materials, including asbestos containing materials from the Building or the Common Areas or to remedy any breach or violation of any environmental laws; (xviii) any personal property taxes of the Landlord for equipment or items not used directly in the operation or maintenance of the Building, nor connected therewith; (xix) all expenditures pertaining to administration of the Building or the Common Areas including payroll and payroll-related expenses associated with administrative and clerical personnel except to the extent attributable based on time actually spent on the operation and maintenance of the Property; general office expenditures; other administrative expenditures (including expenditures for travel, entertainment, dues, subscriptions, donations, data processing, errors and omissions insurance, automobile allowances, political donations and professional fees of any kind) unless specifically enumerated as Operating Expenses; (xx) rentals and other related expenses, if any, incurred in leasing capital items; (xxi) any costs or expenses for sculpture, paintings, or other works of art, including, costs incurred with respect to the purchase, ownership, leasing, repair, and/or maintenance of such works of art; (xxii) contributions to Operating Expense reserves; (xxiii) the cost of overtime or other expense to Landlord in performing work expressly provided in this Lease to be borne at Landlord’s expense; (xxiv) all expenses directly resulting from the negligence or willful misconduct of the Landlord, its agents, servants or other employees; (xxv) all bad debt loss, rent loss, or reserve for bad debt or rent loss; and (xxvi) any amount paid to an entity related to Landlord which exceeds the amount that would be paid for similar goods or services on an arms-length basis between unrelated parties.

3.1.3 Taxes. The term “Taxes,” as referred to in Section 3.1.1(vii) above shall mean (i) all governmental taxes, assessments, fees and charges of every kind or nature (other than Landlord’s income taxes), whether general, special, ordinary or extraordinary, due at any time or from time to time, during the Term and any extensions thereof, in connection with the ownership, leasing, or operation of the Property, or of the personal property and equipment located therein or used in connection therewith; and (ii) any reasonable expenses incurred by Landlord in contesting such taxes or assessments and/or the assessed value of the Property. For purposes hereof, Tenant shall be responsible for any Taxes that are due and payable at any time or from time to time during the Term and for any Taxes that are assessed, become a lien, or accrue during any Operating Year (defined in Section 3.1.4 below), which obligation shall survive the termination or expiration of this Lease.

3.1.4 Operating Year. The term “Operating Year” shall mean the calendar year commencing January 1st of each year (including the calendar year within which the Rent Commencement Date occurs) during the Term.

3.2 Payment of Operating Expenses. Tenant shall pay, as Additional Rent and in accordance with the requirements of Section 3.3, Tenant’s Proportionate Share of the Operating Expenses as set forth in Section 3.3. Additional Rent commences to accrue upon the Commencement Date. The Tenant’s Proportionate Share of Operating Expenses payable hereunder for the Operating Years in which the Term begins and ends shall be prorated to correspond to that portion of said Operating Years occurring within the Term. Tenant’s Proportionate Share of Operating Expenses and any other sums due and payable under this Lease shall be adjusted upon receipt of the actual bills therefor, and the obligations of this Section 3 shall survive the termination or expiration of the Lease.

3.3 Payment of Additional Rent. Landlord shall have the right to reasonably estimate the Operating Expenses for each Operating Year. Upon Landlord’s or Agent’s written notice to Tenant of such estimated amount, Tenant shall pay, on the first day of each month during that Operating Year, an amount (the “Estimated Additional Rent”) equal to the estimate of the Tenant’s Proportionate Share of Operating Expenses divided by 12 (or the fractional portion of the Operating Year remaining at

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the time Landlord delivers its notice of the estimated amounts due from Tenant for that Operating Year). If the aggregate amount of Estimated Additional Rent actually paid by Tenant during any Operating Year is less than Tenant’s actual ultimate liability for Operating Expenses for that particular Operating Year, Tenant shall pay the deficiency within 30 days of Landlord’s written demand therefor. If the aggregate amount of Estimated Additional Rent actually paid by Tenant during a given Operating Year exceeds Tenant’s actual liability for such Operating Year, the excess shall be credited against the Estimated Additional Rent next due from Tenant during the immediately subsequent Operating Year, except that in the event that such excess is paid by Tenant during the final Lease Year, then upon the expiration of the Term, Landlord or Agent shall pay Tenant the then-applicable excess promptly after determination thereof. Landlord’s accounting to Tenant shall be accompanied by an itemized written statement setting forth: (a) a reconciliation of Tenant’s impound accounts of monies collected in advance by Landlord based on Landlord’s estimate of Tenant’s Pro Rata Share, and (b) the actual Operating Expenses for the subject year broken down by component expenses.

3.4 Inspection Rights. Tenant, at Tenant’s sole cost and expense, shall have the right upon fifteen (15) days’ prior written notice to Landlord (a “Review Notice”), to be given only within sixty (60) days after Tenant receives Landlord’s determination of Tenant’s actual ultimate liability for Operating Expenses for any particular Operating Year, to review Landlord’s books and records relating to such determination for such immediately preceding Operating Year with respect to any specific charge or charges disputed in writing by Tenant, subject to the further terms and provisions of this Section 3.4: (a) no review shall be conducted at any time that Tenant is in breach or default of any of the terms, covenants or provisions of this Lease; (b) any review shall be conducted only by independent certified public accountants practicing for an accounting firm of national or regional prominence, employed by Tenant on an hourly or fixed fee basis, and not on a contingency fee basis; and (c) Tenant shall not review Landlord’s books and records more than one (1) time for any Operating Year. Tenant acknowledges that Tenant’s right to review Landlord’s books and records with respect to Operating Expenses for the preceding Operating Year is for the exclusive purpose of determining whether Landlord has complied with the terms of this Lease with respect to Operating Expenses. Tenant shall have sixty (60) days after Tenant’s Review Notice to complete Tenant’s review of Landlord’s books and records concerning Operating Expenses at Landlord’s accounting office. During its review, Tenant agrees to request, in writing, all pertinent documents relating to the review. If in Landlord’s possession, Landlord will provide such documents to Tenant within ten (10) days after Landlord’s receipt of Tenant’s request and Tenant shall not remove such records from Landlord’s accounting office, but Tenant shall have the right to make copies of the relevant documents at Tenant’s sole cost and expense. Tenant shall deliver to Landlord a copy of the results of such review within fifteen (15) days after receipt by Tenant. The nature and content of any review are strictly confidential. Tenant, for itself and on behalf of Tenant’s Parties (defined in Section 9.2), shall not disclose the information obtained from the review to any other person or entity including, without limitation, any other tenant of the Property or any representative of any such tenant of the Property. A breach of this confidentiality agreement shall constitute a Default under this Lease. No assignee or other transferee of Tenant shall conduct a review for any period during which such transferee was not in possession of the Premises. In the event Tenant’s review shall disclose that Landlord has overstated Tenant’s actual liability for Operating Expenses for such Operating Year by seven percent (7%) or more and Tenant has paid such overstated amounts, then Landlord shall pay for the reasonable costs of the review, not to exceed, however, Four Thousand and No/100 Dollars ($4,000.00).

4. USE OF PREMISES AND COMMON AREAS; SECURITY DEPOSIT.

4.1 Use of Premises and Property.

4.1.1 The Premises shall be used by the Tenant for the purpose(s) set forth in Section 1.7 above and for no other purpose whatsoever, without the prior written consent of Landlord

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which shall not be unreasonably withheld or delayed. Tenant shall not, at any time, use or occupy, or suffer or permit anyone to use or occupy, the Premises, or do or permit anything to be done in the Premises or the Property, in any manner that may (a) violate any Certificate of Occupancy for the Premises or the Property, provided that a copy of the same has been provided by Landlord to Tenant; (b) cause, or be liable to cause, injury to, or in any way impair the value or proper utilization of, all or any portion of the Property (including, but not limited to, the structural elements of the Property) or any equipment, facilities or systems therein; (c) constitute a violation of the laws and requirements of any public authority or the requirements of insurance bodies or the rules and regulations of the Property, including any covenant, condition or restriction affecting the Property, provided that copies of the same have been provided by Landlord to Tenant; (d) exceed the load bearing capacity of the floor of the Premises; (e) impair or tend to impair the character, reputation or appearance of the Property; or (f) unreasonably annoy, inconvenience or disrupt the operations or tenancies of other tenants or users of the Property. On or prior to the date hereof, Tenant has completed and delivered for the benefit of Landlord a “Tenant Operations Inquiry Form” in the form attached hereto as Exhibit B describing the nature of Tenant’s proposed business operations at the Premises, which form is intended to, and shall be, relied upon by Landlord. From time to time during the Term (but no more often than once in any twelve month period unless Tenant is in default hereunder or unless Tenant assigns this Lease or subleases all or any portion of the accordance with Section 8), Tenant shall provide an updated and current Tenant Operations Inquiry following receipt of Landlord’s written request therefor.

4.1.2 Notwithstanding any provision of this Lease to the contrary, materials of in connection with Tenant’s research, development and testing of therapeutics shall be subject to consent, which consent shall not be unreasonably withheld or delayed, and (b) all applicable laws.

4.2 Use of Common Areas. As used herein, “Common Areas” shall mean all areas within the Property that are available for the common use of tenants of the Property and that are not leased or held for the exclusive use of Tenant or other tenants or licensees, including, but not limited to, parking areas, driveways, sidewalks, loading areas, access roads, corridors landscaping and planted areas. Tenant shall have the nonexclusive right to use the Common Areas for the purposes intended, subject to such reasonable, non-discriminatory rules and regulations as Landlord may uniformly establish from time to time provided the same do not conflict with the terms of this Lease. Tenant shall not unreasonably interfere with the rights of any or all of Landlord, other tenants or licensees, or any other person entitled to use the Common Areas. Without limitation of the foregoing, Tenant shall not park or store any vehicles or trailers on, or conduct truck loading and unloading activities in, the Common Areas in a manner that unreasonably disturbs, disrupts or prevents the use of the Common Areas by Landlord, other tenants or licensees or other persons entitled to use the Common Areas. Landlord, from time to time, may change any or all of the size, location, nature and use of any of the Common Areas although such changes may result in inconvenience to Tenant, so long as such changes do not materially and adversely affect Tenant’s use of, or access to, the Premises. In addition to the foregoing, Landlord may, at any time, close or suspend access to any Common Areas to perform any acts in the Common Areas as, in Landlord’s reasonable judgment, are desirable to improve or maintain either or both of the Premises and the Property, or are required in order to satisfy Landlord’s obligations under this Lease; provided, however, that Landlord shall use reasonable efforts to limit any disruption of Tenant’s use and operation of the Premises in connection therewith, and so long as such acts do not materially and adversely affect Tenant’s use of, or access to, the Premises. Landlord shall, at no cost to Tenant, provide Tenant with forty-eight (48) surface parking spaces, of which eleven (11) shall be covered, in the location identified on Exhibit G attached hereto. Notwithstanding anything contained in this Lease to the contrary, if at any time, Landlord determines, in its sole discretion, that the parking areas at the Property are or have become overburdened, Landlord may allocate parking on a proportionate basis or assign parking spaces among all tenants at the Property, provided that the number of spaces allocated to Tenant shall not be reduced below the amount of spaces identified above or changed from the type of spaces identified above.

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4.3 Signage. Tenant shall not affix any sign of any size or character to any portion of the Property, without prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed. Tenant shall remove all signs of Tenant upon the expiration or earlier termination of this Lease and immediately repair any damage to either or both of the Property and the Premises caused by, or resulting from, such removal.

4.4 Security/Damage Deposit; Letter of Credit.

4.4.1 Deposit. Simultaneously with the execution and delivery of this Lease, Tenant shall deposit with Landlord or Agent the sum set forth in Section 1.10 above, in cash (the “Security”), representing security for the performance by Tenant of the covenants and obligations hereunder. The Security shall be held by Landlord or Agent, without interest, in favor of Tenant; provided, however, that no trust relationship shall be deemed created thereby; the Security may be commingled with other assets of Landlord; and Landlord shall not be required to pay any interest on the Security. If Tenant defaults in the performance of any of its covenants hereunder, Landlord or Agent may, without notice to Tenant, apply all or any part of the Security to the cure of such default or the payment of any sums then due from Tenant under this Lease (including, but not limited to, amounts due under Section 22.2 of this Lease as a consequence of termination of this Lease or Tenant’s right to possession), in addition to any other remedies available to Landlord. In the event the Security is so applied, Tenant shall, upon demand, immediately deposit with Landlord or Agent a sum equal to the amount so used. If Tenant fully and faithfully complies with all the covenants and obligations hereunder, the Security (or any balance thereof) shall be returned to Tenant within thirty (30) days after the last to occur of (i) the date the Term expires or terminates or (ii) delivery to Landlord of possession of the Premises. Landlord may deliver the Security to any lender with a mortgage lien encumbering the Property or to any Successor Landlord (defined below), and thereupon Landlord and Agent shall be discharged from any further liability with respect to the Security.

4.4.2 Letter of Credit.

4.4.2.1 Within three (3) weeks after complete execution of this Lease, Tenant shall deliver to Landlord, as protection for the full and faithful performance by Tenant of all its obligations under this Lease and for all losses and damages Landlord may suffer (or which Landlord reasonably estimates that it may suffer) as a result of any breach or default by Tenant under this Lease, an irrevocable and unconditional negotiable clean standby letter of credit (the “Letter of Credit”), in form and substance acceptable to Landlord in its sole discretion, containing the terms required herein, payable in the City of Phoenix, Arizona, running in favor of Landlord and issued by Bank of America (the “Bank”), in the amount of $100,000.00 (the “Letter of Credit Amount”). On or before the Commencement Date, Tenant shall provide to Landlord, for Landlord’s approval, a draft of the proposed form of the Letter of Credit. After Landlord approves the draft, Tenant shall provide to Landlord the original Letter of Credit by the deadline set forth above. The Letter of Credit shall (i) be “callable” at sight, irrevocable and unconditional, (ii) be maintained in effect, whether through automatic renewal or extension, for the period from the Commencement Date and continuing until the date (the “LC Expiration Date”) that is one hundred twenty (120) days after the expiration of the Lease Term, and Tenant shall deliver a new Letter of Credit or certificate of renewal or extension to Landlord at least sixty (60) days prior to the expiration of the Letter of Credit then held by Landlord, without any action whatsoever on the part of Landlord, (iii) be fully assignable by Landlord, its successors and assigns, (iv) permit partial draws and multiple presentations and drawings, and (v) be otherwise subject to the Uniform Customs and Practices for Documentary Credits (1993-Rev), International Chamber of Commerce Publication #500, or the International Standby Practices-ISP 98, International Chamber of Commerce Publication #590. In addition to the foregoing, the form and terms of the Letter of Credit shall be acceptable to Landlord, in Landlord’s sole discretion. Landlord, or its then managing agent, shall have

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the right to draw down an amount up to the face amount of the Letter of Credit if any of the following shall have occurred or be applicable: (1) such amount is due to Landlord under the terms and conditions of this Lease, or (2) Tenant has filed a voluntary petition under the U.S. Bankruptcy Code or any state bankruptcy code (collectively, “Bankruptcy Code”), or (3) an involuntary petition has been filed against Tenant under the Bankruptcy Code, or (4) the Bank has notified Landlord that the Letter of Credit will not be renewed or extended through the LC Expiration Date. The Letter of Credit will be honored by the Bank regardless of whether Tenant disputes Landlord’s rights to draw upon the Letter of Credit. Within thirty (30) days after the expiration or earlier termination of this Lease and provided Tenant has fully complied with all of its obligations under this Lease, Landlord shall promptly return the Letter of Credit to Tenant.

4.4.2.2 The Letter of Credit shall also provide that Landlord, its successors and assigns, may, at any time and without notice to Tenant and without first obtaining Tenant’s consent thereto, transfer (one or more times) all or any portion of its interest in and to the Letter of Credit to another party, person or entity in connection with a sale, transfer or financing of Landlord’s interest in the Building; provided, however, if such transfer of Landlord’s interest in and to the Letter of Credit is made in connection with a financing, such transfer may be made separate from or as a part of the assignment by Landlord of its rights and interests in and to this Lease. In the event of a transfer of Landlord’s interest in the Building, Landlord shall transfer the Letter of Credit, in whole or in part, to the transferee and thereupon Landlord shall, without any further agreement between the parties, be released by Tenant from all liability therefor, and it is agreed that the provisions hereof shall apply to every transfer or assignment of the whole or any portion of said Letter of Credit to a new landlord. In connection with any such transfer of the Letter of Credit by Landlord. Tenant shall, at Tenant’s sole cost and expense, execute and submit to the Bank such applications, documents and instruments as may be necessary to effectuate such transfer, and Tenant shall be responsible for paying the Bank’s transfer and processing fees in connection therewith and, if Landlord advances any such fees (without having any obligation to do so), Tenant shall reimburse Landlord for all such fees as Additional Rent within ten (10) days after Landlord’s written request therefor.

4.4.2.3 If, as a result of any drawing by Landlord on the Letter of Credit, the amount of the Letter of Credit shall be less than the Letter of Credit Amount, Tenant shall, within five (5) days thereafter, provide Landlord with additional letter(s) of credit in an amount equal to the deficiency, and any such additional letter(s) of credit shall comply with all of the provisions of this Section 4.4.2, and if Tenant fails to comply with the foregoing, notwithstanding anything to the contrary contained in Section 22 below, the same shall constitute an incurable event of default by Tenant. Tenant further covenants and warrants that it will neither assign nor encumber the Letter of Credit or any part thereof and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. Without limiting the generality of the foregoing, if the Letter of Credit expires earlier than the LC Expiration Date, Landlord will accept a renewal thereof (such renewal letter of credit to be in effect and delivered to Landlord, as applicable, not later than sixty [60] days prior to the expiration of the Letter of Credit), which shall be irrevocable and automatically renewable as above provided through the LC Expiration Date upon the same terms as the expiring Letter of Credit or such other terms as may be acceptable to Landlord in its sole discretion. However, if the Letter of Credit is not timely renewed, or if Tenant fails to maintain the Letter of Credit in the amount and in accordance with the terms set forth in this Section 4.4.2, Landlord shall have the right to present the Letter of Credit to the Bank in accordance with the terms of this Section 4.4.2, and the proceeds of the Letter of Credit may be applied by Landlord against any Base Rent, Additional Rent and other charges payable by Tenant under this Lease that are not paid when due and/or to pay for all losses and damages that Landlord has suffered or that Landlord reasonably estimates that it will suffer as a result of any breach or default by Tenant under this Lease. Any unused proceeds shall constitute the property of Landlord and need not be segregated from Landlord’s other assets. Landlord agrees to pay to Tenant

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within thirty (30) days after the LC Expiration Date the amount of any proceeds of the Letter of Credit received by Landlord and not applied against any Base Rent, Additional Rent and other charges payable by Tenant under this Lease that were not paid when due or used to pay for any losses and/or damages suffered by Landlord (or reasonably estimated by Landlord that it will suffer) as a result of any breach or default by Tenant under this Lease; provided, however, that if prior to the LC Expiration Date a voluntary petition is filed by Tenant, or an involuntary petition is filed against Tenant by any of Tenant’s creditors, under the Bankruptcy Code, then Landlord shall not be obligated to make such payment in the amount of the unused Letter of Credit proceeds until either all preference issues relating to payments under this Lease have been resolved in such bankruptcy or reorganization case or such bankruptcy or reorganization case has been dismissed, in each case pursuant to a final court order not subject to appeal or any stay pending appeal.

4.4.2.4 Tenant hereby acknowledges and agrees that Landlord is entering into this Lease in material reliance upon the ability of Landlord to draw upon the Letter of Credit upon the occurrence of any breach or default on the part of Tenant under this Lease. If Tenant shall breach any provision of this Lease or otherwise be in default hereunder, or if a voluntary petition is filed by Tenant, or an involuntary petition is filed against Tenant by any of Tenant’s creditors, under the Bankruptcy Code, Landlord may, but without obligation to do so, and without notice to Tenant, draw upon the Letter of Credit, in part or in whole, to cure any breach or default of Tenant and/or to compensate Landlord for any and all damages of any kind or nature sustained or which Landlord reasonably estimates that it will sustain resulting from Tenant’s breach or default. If for any reason the Letter of Credit does not permit partial draws, Landlord shall have the right to make a full draw on the Letter of Credit, notwithstanding that the full amount may not be required to cure any default by Tenant. In order to draw upon the Letter of Credit, Landlord shall submit a statement, signed by Landlord or Landlord’s managing agent or legal counsel, bearing the clause “Drawn under [name of Bank] Letter of Credit No. _____”, which statement shall be accompanied by the original Letter of Credit. The use, application or retention of the Letter of Credit, or any portion thereof, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by this Lease or by any applicable law, it being intended that Landlord shall not first be required to proceed against the Letter of Credit, and shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled. Tenant agrees not to interfere in any way with payment to Landlord of the proceeds of the Letter of Credit, either prior to or following a “draw” by Landlord of any portion of the Letter of Credit, regardless of whether any dispute exists between Tenant and Landlord as to Landlord’s right to draw upon the Letter of Credit. No condition or term of this Lease shall be deemed to render the Letter of Credit conditional to justify the issuer of the Letter of Credit in failing to honor a drawing upon such Letter of Credit in a timely manner. Tenant agrees and acknowledges that (a) the Letter of Credit constitutes a separate and independent contract between Landlord and the Bank, (b) Tenant is not a third party beneficiary of such contract, (c) Tenant has no property interest whatsoever in the Letter of Credit or the proceeds thereof, and (d) in the event Tenant becomes a debtor under any chapter of the Bankruptcy Code, neither Tenant, any trustee, nor Tenant’s bankruptcy estate shall have any right to restrict or limit Landlord’s claim and/or rights to the Letter of Credit and/or the proceeds thereof by application of Section 502(b)(6) of the U.S. Bankruptcy Code or otherwise.

4.4.2.5 Landlord and Tenant acknowledge and agree that in no event or circumstance shall the Letter of Credit or any renewal thereof or substitute therefor or any proceeds thereof be deemed to be or treated as a “security deposit”. The parties hereto (A) recite that the Letter of Credit is not intended to serve as a security deposit and any and all laws, rules and regulations applicable to security deposits in the commercial context (“Security Deposit Laws”) shall have no applicability or relevancy thereto and (B) waive any and all rights, duties and obligations either party may now or, in the future, will have relating to or arising from the Security Deposit Laws. Tenant hereby waives the provisions of any Security Deposit Laws, now or hereafter in effect, which (i) establish the time frame by

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which Landlord must refund a security deposit under a lease, and/or (ii) provide that Landlord may claim from the security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums specified in this Section 4.4.2 and/or those sums reasonably necessary to compensate Landlord for any loss or damage caused by Tenant’s breach of this Lease or the acts or omissions of Tenant, including any damages Landlord suffers following termination of this Lease.

5. CONDITION AND DELIVERY OF PREMISES.

5.1 Condition of Premises. Tenant agrees that Tenant is familiar with the condition of both the Premises and the Property, and Tenant hereby accepts the foregoing on an “AS-IS,” “WHERE-IS” basis, except as is otherwise expressly and specifically described on Exhibit C attached hereto and incorporated herein by this reference, it being understood that, if Landlord has agreed to perform any tenant improvements in or to the Premises in consideration of Tenant’s entry into this Lease (collectively, “Landlord’s Work”), all of Landlord’s Work shall be described on Exhibit C. Tenant acknowledges that neither Landlord nor Agent, nor any representative of Landlord, has made any representation as to the condition of the foregoing or the suitability of the foregoing for Tenant’s intended use. Tenant represents and warrants that Tenant has made its own inspection of the foregoing. Neither Landlord nor Agent shall be obligated to make any repairs, replacements or improvements (whether structural or otherwise) of any kind or nature to the foregoing in connection with, or in consideration of, this Lease, except as expressly and specifically set forth in this Lease, including, but not limited to, Exhibit C.

5.2 Delivery of Premises. Landlord shall deliver to Tenant, and Tenant shall accept from Landlord, possession of the Premises on or before the later of (a) the date Tenant shall have delivered to Landlord (i) the Security, (ii) all Tenant Policies or Certificates of Insurance and applicable endorsements (as required by Section 10.2), and (iii) the draft Letter of Credit required by Section 4.4.2 above (collectively, the “Pre-Commencement Deliveries”), and (b) March 19, 2007 (the “Commencement Date”). Notwithstanding the foregoing, if Tenant shall have delivered to Landlord the Pre-Commencement Deliveries on or before March 19, 2007, and Landlord has not delivered or attempted to deliver possession of the Premises to Tenant on or before March 19, 2007, Tenant shall have the right to terminate this Lease by written notice to Landlord on or before March 19, 2007, in which event any amounts previously paid by Tenant to Landlord shall be returned to Tenant and the parties shall have no further obligations hereunder.

5.3 Confirmation of Commencement Date. Upon Landlord’s delivery of possession, and as a condition precedent to such delivery, of the Premises to Tenant, and Tenant shall deliver to Landlord a Confirmation of Commencement Date in substantially the form attached hereto as Exhibit D.

6. SUBORDINATION; ESTOPPEL CERTIFICATES; ATTORNMENT.

6.1 Subordination and Attornment. This Lease is and shall be subject and subordinate at all times to (a) all ground leases or underlying leases that may now exist or hereafter be executed affecting either or both of the Premises and the Property and (b) any mortgage or deed of trust that may now exist or hereafter be placed upon, and encumber, any or all of (x) the Property; (y) any ground leases or underlying leases for the benefit of the Property; and (z) all or any portion of Landlord’s interest or estate in any of said items. Tenant shall execute and deliver, within ten (10) days of Landlord’s request, and in the form reasonably requested by Landlord (or its lender), any documents evidencing the subordination of this Lease. Tenant hereby covenants and agrees that Tenant shall attorn to any successor to Landlord. Notwithstanding the foregoing, upon the written request of Tenant,

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Landlord shall use commercially reasonable efforts to cause a future lessor, mortgagee, trustee, or holder of any such mortgage or deed of trust (collectively, a “Lender”), if any, to deliver to Tenant such Lender’s customary subordination, non-disturbance and attornment agreement (“SNDA”) in form and substance reasonably suitable to said Lender, which provides, among other things, that Tenant’s right to possession of the Premises shall not be disturbed on account of such subordination so long as Tenant has not committed a default under this Lease; provided, however, it shall not be a default by Landlord or a defense to the enforceability of this Lease in favor of Tenant if Landlord is unable to obtain delivery of such an SNDA to Tenant, and further provided that Tenant shall agree to pay all actual and reasonable fees and costs incurred by Landlord and/or its Lender in connection with procuring or attempting to procure any such SNDA.

6.2 Estoppel Certificate. Tenant agrees, from time to time and within 10 days after request by Landlord, to deliver to Landlord, or Landlord’s designee, an estoppel certificate stating such matters pertaining to this Lease as may be reasonably requested by Landlord. Failure by Tenant to timely execute and deliver such certificate shall constitute an acceptance of the Premises and acknowledgment by Tenant that the statements included therein are true and correct without exception. Notwithstanding anything to the contrary contained in this Section 6.2, any estoppel agreement executed by Tenant pursuant to this Section 6.2 shall not include provisions which modify the provisions of this Lease, nor which result in any increase of Tenant’s obligations or decrease any of Tenant’s rights under this Lease.

6.3 Transfer by Landlord. In the event of a sale or conveyance by Landlord of the Property, the same shall operate to release Landlord from any future liability for any of the covenants or conditions, express or implied, herein contained in favor of Tenant, and in such event Tenant agrees to look solely to Landlord’s successor in interest (“Successor Landlord”) with respect thereto and agrees to attorn to such successor.

7. QUIET ENJOYMENT. Subject to the provisions of this Lease, so long as no Event of Default (as defined in Section 21.1) has occurred and is continuing, Tenant pays all of the Rent and performs all of its other obligations hereunder, Tenant shall not be disturbed in its possession of the Premises by Landlord, Agent or any other person lawfully claiming through or under Landlord; provided, however, in addition to Landlord’s rights under Section 16 and elsewhere in this Lease, Landlord and Landlord’s agents, employees, contractors and representatives shall be provided reasonable access to the Premises such that Landlord and Landlord’s agents, employees, contractors and representatives may perform the General Maintenance Services (as hereinafter defined) without undue interruption, delay or hindrance. This covenant shall be construed as a covenant running with the Property and is not a personal covenant of Landlord. Tenant shall not unreasonably interrupt, delay, prevent or hinder the performance of the General Maintenance Services by or on behalf of Landlord. Notwithstanding the foregoing, however, Tenant acknowledges and agrees that Landlord shall have the unfettered and unilateral right to use portions of the Common Areas (inclusive of the roof of the Building) for such purposes and uses as Landlord may desire; provided, however, that in all events and under all circumstances, Landlord’s use of any portion of the Common Areas shall not interfere, in any material respect, with any or all of (a) Tenant’s rights to occupy and use the Common Areas (in the manner and for the purposes contemplated hereunder); (b) Tenant’s right to utilize the vehicular parking areas located on the Common Areas; and (c) Tenant’s right of access, ingress and egress to and from the Common Areas.

8. ASSIGNMENT AND SUBLETTING. Tenant shall not (a) assign (whether directly or indirectly), in whole or in part, this Lease, or (b) allow this Lease to be assigned, in whole or in part, by operation of law or otherwise, including, without limitation, by transfer of 49% or more of stock, membership interests or partnership interests, or by dissolution, which transfer of a controlling interest, or dissolution shall be deemed an assignment for purposes of this Lease, or (c) mortgage or pledge the Lease, or (d) sublet the Premises, in whole or in part, without (in the case of any or all of (a) through (d)

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above) the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed. Notwithstanding the provisions of this Section 8, Landlord hereby acknowledges and consents to Tenant’s right, without further approval from Landlord, but only after written notice to Landlord, to sublease the Premises or assign its interest in this Lease (i) to a person or entity that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with Tenant; (ii) in the event of the merger or consolidation of Tenant with another entity; (iii) in the event of a sale or transfer of all or substantially all of the stock of Tenant or all or substantially all of Tenant’s assets; or (iv) in the event Tenant has an initial public offering of its shares pursuant to the Security and Exchange Act of 1933 or any other comparable federal or state securities acts; provided that immediately following the events enumerated in clauses (i) to (iv) above, the tangible net worth of Tenant, calculated in accordance with generally accepted accounting principles, consistently applied, and the credit standing of Tenant is not less than the tangible net worth, calculated in accordance with generally accepted accounting principles, consistently applied, and credit standing of Tenant immediately prior to the events described in clauses (i) through (iv) above; and provided further that Tenant advises Landlord, in writing, in advance, and otherwise complies with the succeeding provisions of this Section 8. In no event shall any assignment or sublease ever release Tenant or any guarantor from any obligation or liability hereunder; and in the case of any assignment, Landlord shall retain all rights with respect to the Security. Any purported assignment, mortgage, transfer, pledge or sublease made without the prior written consent of Landlord shall be absolutely null and void. No assignment of this Lease shall be effective and valid unless and until the assignee executes and delivers to Landlord any and all documentation reasonably required by Landlord in order to evidence assignee’s assumption of all obligations of Tenant hereunder. Regardless of whether or not an assignee or sublessee executes and delivers any documentation to Landlord pursuant to the preceding sentence, any assignee or sublessee shall be deemed to have automatically attorned to Landlord in the event of any termination of this Lease. If this Lease is assigned, or if the Premises (or any part thereof) are sublet or used or occupied by anyone other than Tenant, whether or not in violation of this Lease, Landlord or Agent may (without prejudice to, or waiver of its rights), collect Rent from the assignee, subtenant or occupant. In the event of an assignment of this Lease and the payment of consideration from the assignee to the Tenant in connection therewith, 50% of such consideration shall be paid to Landlord. With respect to the allocable portion of the Premises sublet, in the event that the total rent and any other considerations received under any sublease by Tenant is greater than the total Rent required to be paid, from time to time, under this Lease, Tenant shall pay to Landlord fifty percent (50%) of such excess as received from any subtenant and such amount shall he deemed a component of the Additional Rent.

9. COMPLIANCE WITH LAWS.

9.1 Compliance with Laws. Tenant shall, at its sole reasonable expense (regardless of the cost thereof), comply with all local, state and federal laws, rules, regulations and requirements now or hereafter in force and all judicial and administrative decisions in connection with the enforcement thereof (collectively, “Laws”), pertaining to either or both of the Premises and Tenant’s use and occupancy thereof, and including, but not limited to, all Laws concerning or addressing matters of an environmental nature. If any license or permit is required for the conduct of Tenant’s business in the Premises, Tenant, at its sole expense, shall procure such license prior to the Commencement Date, and shall maintain such license or permit in good standing throughout the Term. Tenant shall give prompt notice to Landlord of any written notice it receives of the alleged violation of any Law or requirement of any governmental or administrative authority with respect to either or both of the Premises and the use or occupation thereof.

9.2 Hazardous Materials. If, at any time or from time to time during the Term (or any extension thereof), any Hazardous Material (defined below) is generated, transported, stored, used, treated or disposed of at, to, from, on or in either or both of the Premises and the Property by, or as a

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result of any act or omission of, any or all of Tenant and any or all of Tenant’s Parties (defined below): (i) Tenant shall, at its own cost, at all times comply (and cause all others to comply) with all Laws relating to Hazardous Materials, and Tenant shall further, at its own cost, obtain and maintain in full force and effect at all times all permits and other approvals required in connection therewith; (ii) Tenant shall promptly provide Landlord or Agent with complete copies of all communications, permits or agreements with, from or issued by any governmental authority or agency (federal, state or local) or any private entity relating in any way to the presence, release, threat of release, or placement of Hazardous Materials on or in the Premises or any portion of the Property, or the generation, transportation, storage, use, treatment, or disposal at, on, in or from the Premises, of any Hazardous Materials; (iii) Landlord, Agent and their respective agents and employees shall have the right to either or both (x) enter the Premises upon reasonable prior written notice to Tenant and (y) conduct appropriate tests for the purposes of ascertaining Tenant’s compliance with all applicable Laws or permits relating in any way to the generation, transport, storage, use, treatment, disposal or presence of Hazardous Materials on, at, in or from all or any portion of either or both of the Premises and the Property; and (iv) upon written request by Landlord or Agent, Tenant shall provide Landlord with the results of reasonably appropriate tests of air, water or soil to demonstrate that Tenant complies with all applicable Laws or permits relating in any way to the generation, transport, storage, use, treatment, disposal or presence of Hazardous Materials on, at, in or from all or any portion of either or both of the Premises and the Property. This Section 9.1 does not authorize the generation, transportation, storage, use, treatment or disposal of any Hazardous Materials at, to, from, on or in the Premises in contravention of this Section 9. Tenant covenants to investigate, clean up and otherwise remediate, at Tenant’s sole expense, any release of Hazardous Materials caused, contributed to, or created by any or all of (A) Tenant and (B) any or all of Tenant’s officers, directors, members, managers, partners, invitees, agents, employees, contractors or representatives (“Tenant Parties”) during the Term. Such investigation and remediation shall be performed only after Tenant has obtained Landlord’s prior written consent; provided, however, that Tenant shall be entitled to respond immediately to an emergency without first obtaining such consent. All remediation shall be performed in strict compliance with Laws and to the reasonable satisfaction of Landlord. Tenant shall not enter into any settlement agreement, consent decree or other compromise with respect to any claims relating to any Hazardous Materials in any way connected to the Premises without first obtaining Landlord’s written consent (which consent may be given or withheld in Landlord’s sole, but reasonable, discretion) and affording Landlord the reasonable opportunity to participate in any such proceedings. As used herein, the term, “Hazardous Materials,” shall mean any waste, material or substance (whether in the form of liquids, solids or gases, and whether or not airborne) that is or may be deemed to be or include a pesticide, petroleum, asbestos, polychlorinated biphenyl, radioactive material, urea formaldehyde or any other pollutant or contaminant that is or may be deemed to be hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or injurious, or that presents a risk to public health or to the environment, and that is or becomes regulated by any Law. The undertakings, covenants and obligations imposed on Tenant under this Section 9.1 shall survive the termination or expiration of this Lease.

10. INSURANCE.

10.1 Insurance to be Maintained by Landlord. Landlord shall maintain: (a) a commercial property insurance policy covering the Property (at its full replacement cost), but excluding Tenant’s personal property; (b) commercial general public liability insurance covering Landlord for claims arising out of liability for bodily injury, death, personal injury, advertising injury and property damage occurring in and about the Property and otherwise resulting from any acts and operations of Landlord, its agents and employees; (c) rent loss insurance; and (d) any other insurance coverage deemed appropriate by Landlord or required by Landlord’s lender. All of the coverages described in (a) through (d) shall be determined from time to time by Landlord, in its sole discretion. All insurance maintained by Landlord shall he in addition to and not in lieu of the insurance required to be maintained by the Tenant.

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10.2 Insurance to be Maintained by Tenant. Tenant shall purchase, at its own expense, and keep in force at all times during this Lease the policies of insurance set forth below (collectively, “Tenant’s Policies”). All Tenant’s Policies shall (a) be issued by an insurance company with a Best rating of A or better and otherwise reasonably acceptable to Landlord and shall be licensed to do business in the state in which the Property is located; (b) provide that said insurance shall not be canceled or materially modified unless 30 days’ prior written notice shall have been given to Landlord; (c) provide for deductible amounts that are reasonably acceptable to Landlord (and its lender, if applicable) and (d) otherwise be in such form, and include such coverages, as Landlord may reasonably require. The Tenant’s Policies described in (i) and (ii) below shall (1) provide coverage on an occurrence basis; (2) name First Industrial, L.P. (and its lender, if applicable) as additional insured; (3) provide coverage, to the extent insurable, for the indemnity obligations of Tenant under this Lease; (4) contain a separation of insured parties provision; (5) be primary, not contributing with, and not in excess of, coverage that Landlord may carry; and (6) provide coverage with no exclusion for a pollution incident arising from a hostile fire, All Tenant’s Policies (or, at Landlord’s option, Certificates of Insurance and applicable endorsements, including, without limitation, an “Additional Insured-Managers or Landlords of Premises” endorsement) shall be delivered to Landlord prior to the Commencement Date and renewals thereof shall be delivered to Landlord’s Corporate and Regional Notice Addresses at least 30 days prior to the applicable expiration date of each Tenant’s Policy. In the event that Tenant fails, at any time or from time to time, to comply with the requirements of the preceding sentence, Landlord may (i) order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant to Landlord upon demand, as Additional Rent or (ii) impose on Tenant, as Additional Rent, a monthly delinquency fee, for each month during which Tenant fails to comply with the foregoing obligation, in an amount equal to five percent (5%) of the Base Rent then in effect. Tenant shall give prompt notice to Landlord and Agent of any bodily injury, death, personal injury, advertising injury or property damage occurring in and about the Property.

Tenant shall purchase and maintain, throughout the Term, a Tenant’s Policy(ies) of (i) commercial general or excess liability insurance, including personal injury and property damage, in the amount of not less than $2,000,000.00 per occurrence, and $5,000,000.00 annual general aggregate, per location; (ii) comprehensive automobile liability insurance covering Tenant, against any personal injuries or deaths of persons and property damage based upon or arising out of the ownership, use, occupancy or maintenance of a motor vehicle at the Premises and all areas appurtenant thereto in the amount of not less than $1,000,000, combined single limit; (iii) commercial property insurance covering Tenant’s personal property (at its full replacement cost); and (iv) workers’ compensation insurance per the applicable state statutes covering all employees of Tenant; and if Tenant handles, stores or utilizes Hazardous Materials in its business operations, (v) pollution legal liability insurance.

10.3 Waiver of Subrogation. Notwithstanding anything to the contrary in this Lease, Landlord and Tenant mutually waive their respective rights of recovery against each other and each other’s officers, directors, constituent partners, members, agents and employees, and Tenant further waives such rights against (a) each lessor under any ground or underlying lease encumbering the Property and (b) each lender under any mortgage or deed of trust or other lien encumbering the Property (or any portion thereof or interest therein), to the extent any loss is insured against or required to be insured against under this Lease, including, but not limited to, losses, deductibles or self insured retentions covered by Landlord’s or Tenant’s commercial property, general liability, automobile liability or workers’ compensation policies described above, This provision is intended to waive, fully and for the benefit of each party to this Lease, any and all rights and claims that might give rise to a right of subrogation by any insurance carrier. Each party shall cause its respective insurance policy(ies) to be endorsed to evidence compliance with such waiver.

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11. ALTERATIONS. Tenant may, from time to time, at its expense, make alterations or improvements in and to the Premises (hereinafter collectively referred to as “Alterations”), provided that Tenant first obtains the written consent of Landlord, which consent shall not be unreasonably withheld or delayed. All of the following shall apply with respect to all Alterations: (a) the Alterations are non-structural and the structural integrity of the Property shall not be affected; (b) the Alterations are to the interior of the Premises; (c) subject to the modifications approved by Landlord in writing to the mechanical, electrical, heating, ventilating, air-conditioning (“HVAC”) which are part of the Tenant Improvements, the proper functioning of the HVAC, sanitary and other service systems of the Property shall not be affected and the usage of such systems by Tenant shall not be increased; (d) Tenant shall have appropriate insurance coverage, reasonably satisfactory to Landlord, regarding the performance and installation of the Alterations; and (e) Tenant shall have provided Landlord with reasonably detailed plans for such Alterations in advance of requesting Landlord’s consent. Additionally, before proceeding with any Alterations, Tenant shall (i) at Tenant’s reasonable expense, obtain all necessary governmental permits and certificates for the commencement and prosecution of Alterations; (ii) if Landlord’s consent is required for the planned Alteration, submit to Landlord, for its written approval, working drawings, plans and specifications and all permits for the work to be done and Tenant shall not proceed with such Alterations until it has received Landlord’s approval (if required), which approval shall not be unreasonably withheld or delayed; and (iii) cause those contractors, materialmen and suppliers engaged to perform the Alterations to deliver to Landlord certificates of insurance (in a form reasonably acceptable to Landlord) evidencing policies of commercial general liability insurance (providing the same coverages as required in Section 10.2 above) and workers’ compensation insurance. Such insurance policies shall satisfy the obligations imposed under Section 10.2. Tenant shall cause the Alterations to be performed in compliance with all applicable permits, Laws and requirements of public authorities, and with Landlord’s reasonable, non-discriminatory rules and regulations or any other reasonable restrictions that Landlord may impose on the Alterations. Tenant shall cause the Alterations to he diligently performed in a good and workmanlike manner, using new materials and equipment at least equal in quality and class to the standards for the Property reasonably established by Landlord. Tenant shall provide Landlord with “as built” plans, copies of all construction contracts, governmental permits and certificates and proof of payment for all labor and materials, including, without limitation, copies of paid invoices and final lien waivers. If Landlord’s consent to any Alterations is required, and Landlord provides that consent, then at the time Landlord so consents, Landlord shall also advise Tenant whether or not Landlord shall require that Tenant remove such Alterations at the expiration or termination of this Lease. If Landlord requires Tenant to remove the Alterations, then, during the remainder of the Term, Tenant shall be responsible for the maintenance of appropriate commercial property insurance (pursuant to Section 10.2) therefor; however, if Landlord shall not require that Tenant remove the Alterations, such Alterations shall constitute Landlord’s Property and Landlord shall be responsible for the insurance thereof, pursuant to Section 10.1.

12. LANDLORD’S AND TENANT’S PROPERTY. All fixtures, machinery, equipment, improvements and appurtenances attached to, or built into, the Premises at the commencement of, or during the Term, whether or not placed there by or at the expense of Tenant, shall become and remain a part of the Premises; shall be deemed the property of Landlord (the “Landlord’s Property”), without compensation or credit to Tenant; and shall not be removed by Tenant at the Expiration Date unless Landlord requires their removal (including, but not limited to, Alterations pursuant to Section 11). Further, any personal property in the Premises on the Commencement Date, movable or otherwise, unless installed and paid for by Tenant, shall also constitute Landlord’s Property and shall not be removed by Tenant. In no event shall Tenant remove any of the following materials or equipment without Landlord’s prior written consent (which consent may be given or withheld in Landlord’s sole discretion): any power wiring or power panels, lighting or lighting fixtures, wall or window coverings, carpets or other floor coverings, heaters, air conditioners or any other HVAC equipment, fencing or security gates, or other similar building operating equipment and decorations. At or before the Expiration Date, or the date of

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any earlier termination, Tenant, at its expense, shall remove from the Premises all of Tenant’s personal property and any Alterations that Landlord requires be removed pursuant to Section 11, and Tenant shall repair (to Landlord’s reasonable satisfaction) any damage to the Premises or the Property resulting from such installation and/or removal. Any other items of Tenant’s personal property that shall remain in the Premises after the Expiration Date, or following an earlier termination date, may, at the option of Landlord, be deemed to have been abandoned, and in such case, such items may be retained by Landlord as its property or be disposed of by Landlord, in Landlord’s sole and absolute discretion and without accountability, at Tenant’s expense. Notwithstanding the foregoing, upon the occurrence and continuance of an Event of Default, Tenant may remove Tenant’s personal property from the Premises only upon the express written consent of Landlord.

13. REPAIRS AND MAINTENANCE.

13.1 Tenant Repairs and Maintenance.

13.1.1 Tenant Responsibilities. Except for events of damage, destruction or casualty to the Premises or Property (which are addressed in Section 18), throughout the Term, Tenant shall, at its sole cost and expense: (i) both (x) maintain and preserve the Premises, subject to normal and customary wear and tear (as is attributable to deterioration by reason of time and use, in spite of Tenant’s reasonable care) and such damage or destruction as Landlord is required to repair or restore under this Lease (the “Same Condition”), and (y) perform any and all repairs and replacements required in order to so maintain and preserve, in the Same Condition, the Premises and the fixtures and appurtenances therein (including, but not limited to, the Premises’ plumbing and HVAC systems, all doors, overhead or otherwise, glass and levelers located in the Premises or otherwise available in the Property for Tenant’s sole use; and excluding, however, only those specific components of the Premises for which Landlord is expressly responsible under Section Error!; and (ii) except to the extent Landlord elects to repair and maintain the HVAC systems as part of General Maintenance Services, maintain, in full force and effect, a preventative maintenance and service contract with a reputable service provider for maintenance of the HVAC systems of the Premises (the “HVAC Maintenance Contract”). In addition to Tenant’s obligations under (i) and (ii) above, Tenant shall also be responsible for all costs and expenses incurred to perform any and all repairs and replacements (whether structural or non-structural; interior or exterior; and ordinary or extraordinary), in and to the Premises and the Property and the facilities and systems thereof, if and to the extent that the need for such repairs or replacements arises directly or indirectly from any act, omission, misuse, or neglect of any or all of Tenant, any of its subtenants, Tenant’s Parties, or others entering into, or utilizing, all or any portion of the Premises for any reason or purpose whatsoever, including, but not limited to (a) the performance or existence of any Alterations, (b) the installation, use or operation of Tenant’s personal property in the Premises; and (c) the moving of Tenant’s personal property in or out of the Property (collectively, “Tenant-Related Repairs”). All such repairs or replacements required under this Section 13.1.1 shall be subject to the supervision and control of Landlord, and all repairs and replacements shall be made with materials of equal or better quality than the items being repaired or replaced.

13.1.2 General Maintenance Services. Notwithstanding any of the foregoing, however, from time to time during the Term, Landlord may elect, in its sole discretion and by delivery of not less than five (5) days’ prior written notice to Tenant, to perform on behalf of Tenant, all or some portion of the repairs, maintenance, restoration and replacement in and to the Premises required to be performed by Tenant under this Lease (any such repairs, maintenance, restoration and/or replacement activities that Landlord elects to perform on behalf of Tenant are herein collectively referred to as “General Maintenance Services”). Tenant shall reimburse Landlord for the reasonable cost or value of all General Maintenance Services provided by Landlord as Additional Rent, simultaneously with the payment of Operating Expenses as part of Estimated Additional Rent (on a monthly estimated basis

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subject to annual reconciliation, as described in Section 3.3 above). Unless and until Landlord affirmatively elects to provide General Maintenance Services, nothing contained herein shall be construed to obligate Landlord to perform any General Maintenance Services or, except as otherwise expressly provided in Section Error!, to repair, maintain, restore or replace any portion of the Premises. Landlord may from time to time, in its sole discretion, (x) reduce or expand the scope of the General Maintenance Services that Landlord has elected to provide or (y) revoke its election to provide any or all of the General Maintenance Services, in either event, upon delivery of not less than thirty (30) days’ prior written notice to Tenant.

13.1.3 HVAC Maintenance Contract. The terms and provisions of any HVAC Maintenance Contract required by the terms of this Section 13.1.3 shall require that the service provider maintain the Premises’ HVAC system in accordance with the manufacturer’s recommendations and otherwise in accordance with normal, customary and reasonable practices in the geographic area in which the Premises is located and for HVAC systems comparable to the Premises’ HVAC system. If Landlord does not elect to repair and maintain the HVAC systems as part of General Maintenance Services, or revokes such election at any time after having made such election, then, within thirty (30) days following either (a) the Commencement Date or (b) the date on which Landlord advises Tenant that Landlord will no longer provide General Maintenance Services for the HVAC system, whichever date is applicable, Tenant shall procure and deliver to Landlord an HVAC Maintenance Contract. Thereafter, Tenant shall provide to Landlord a copy of renewals or replacements of such HVAC Maintenance Contract no later than 30 days prior to the then-applicable expiry date of the existing HVAC Maintenance Contract. If Tenant fails to timely deliver to Landlord the HVAC Maintenance Contract (or any applicable renewal or replacement thereof), then Landlord shall have the right to contract directly for the periodic maintenance of the HVAC systems in the Premises and to charge the reasonable cost thereof back to Tenant as Additional Rent.

13.2 Landlord Repairs. Notwithstanding anything contrary herein, Landlord shall repair, replace and restore the foundation, exterior and interior load-bearing walls, roof structure and roof covering of the Property; provided, however, that (i) all reasonable costs and expenses so incurred by Landlord to repair, replace and restore the above items shall constitute Operating Expenses; provided, however, that with respect to any costs incurred in the replacement context, those costs shall not constitute an Operating Expense except to the extent that such costs so qualify under Section 3.1.1(v); and (ii) notwithstanding (i) above, in the event that any such repair, replacement or restoration is a Tenant-Related Repair, then Tenant shall be required to reimburse Landlord for all reasonable costs and expenses that Landlord incurs in order to perform such Tenant-Related Repair, and such reimbursement shall be paid, in full, within 10 days after receipt by Tenant of Landlord’s delivery of demand therefor.

14. UTILITIES. Tenant shall purchase all utility services and shall provide for scavenger, cleaning and extermination services. As provided in Section 3.1.1 above, utility charges may be included within Operating Expenses; nevertheless, at Landlord’s election or with Landlord’s consent, which shall not be unreasonably withheld or delayed (a) Tenant may pay the utility charges for its Premises directly to the utility or municipality providing such service, and in that event all charges shall be paid by Tenant before they become delinquent; and (b) Landlord may directly bill Tenant for its Proportionate Share of utility expenses when and as such expenses are incurred. Tenant shall be solely responsible for the repair and maintenance of any meters necessary in connection with such services. Tenant’s use of electrical energy in the Premises shall not, at any time, exceed the capacity of either or both of (x) any of the electrical conductors and equipment in or otherwise servicing the Premises; and (y) the HVAC systems of either or both of the Premises and the Property. Notwithstanding any provision of this Lease to the contrary, the electricity used and the operation of any special air conditioning systems which may be required in connection with Tenant’s research, development and testing of therapeutics or for other special equipment or machinery installed by Tenant, shall be paid for by Tenant.

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15. INVOLUNTARY CESSATION OF SERVICES. Landlord reserves the right, without any liability to Tenant and without affecting Tenant’s covenants and obligations hereunder, to stop service of any or all of the HVAC, electric, sanitary, elevator (if any), and other systems serving the Premises, or to stop any other services required by Landlord under this Lease, whenever and for so long as may be necessary by reason of (i) accidents, emergencies, strikes, or the making of repairs or changes which Landlord or Agent, in good faith, deems necessary or (it) any other cause beyond Landlord’s reasonable control. Further, it is also understood and agreed that Landlord or Agent shall have no liability or responsibility for a cessation of services to the Premises or to the Property that occurs as a result of causes beyond Landlord’s or Agent’s reasonable control. No such interruption of service shall be deemed an eviction or disturbance of Tenant’s use and possession of the Premises or any part thereof, or render Landlord or Agent liable to Tenant for damages, or relieve Tenant from performance of Tenant’s obligations under this Lease, including, but not limited to, the obligation to pay Rent; provided, however, that if any interruption of services persists for a period in excess of seventy-two (72) consecutive hours Tenant shall, as Tenant’s sole remedy, be entitled to a proportionate abatement of Rent to the extent, if any, of any actual loss of use of the Premises by Tenant.

16. LANDLORD’S RIGHTS. Landlord, Agent and their respective agents, employees and representatives shall have the right to enter and/or pass through the Premises at any time or times upon reasonable prior notice (except in the event of emergency): (a) to examine and inspect the Premises and to show them to actual and prospective lenders, prospective purchasers or mortgagees of the Property or providers of capital to Landlord and its affiliates; and in connection with the foregoing, to install a sign at or on the Property to advertise the Property for lease or sale; (b) to make such repairs, alterations, additions and improvements in or to all or any portion of either or both of the Premises and the Property, or the Property’s facilities and equipment as Landlord is required or desires to make. During the period of nine (9) months prior to the Expiration Date (or at any time, if Tenant has vacated or abandoned the Premises or is otherwise in default under this Lease), Landlord and its agents may exhibit the Premises to prospective tenants. Additionally, Landlord and Agent shall have the following rights with respect to the Premises, exercisable without notice to Tenant, without liability to Tenant, and without being deemed an eviction or disturbance of Tenant’s use or possession of the Premises or giving rise to any claim for setoff or abatement of Rent: (i) to have pass keys, access cards, or both, to the Premises; and (ii) to decorate, remodel, repair, alter or otherwise prepare the Premises for reoccupancy at any time after Tenant vacates or abandons the Premises for more than 30 consecutive days or without notice to Landlord of Tenant’s intention to reoccupy the Premises. Landlord shall use its diligent, good faith efforts not to unreasonably interfere with Tenant’s use and occupancy of the Premises in connection with the exercise by Landlord of its rights under this Section 16. Notwithstanding anything to the contrary contained herein, if in the exercise of Landlord’s rights pursuant to the terms of this Section 16, Tenant’s use of the Premises is interrupted and if any such interruption persists for a period in excess of seventy-two (72) consecutive hours, Tenant shall, as Tenant’s sole remedy, be entitled to a proportionate abatement of Rent to the extent, if any, of any actual loss of use of the Premises by Tenant.

17. NON-LIABILITY AND INDEMNIFICATION.

17.1 Non-Liability. Except as a result of the gross negligence, sole negligence or willful misconduct of such parties (subject to Section 10.3), none of Landlord, Agent, any other managing agent, or their respective affiliates, owners, partners, directors, officers, agents and employees (“Landlord Parties”) shall be liable to Tenant for any loss, injury, or damage, to Tenant or to any other person, or to its or their property, irrespective of the cause of such injury, damage or loss. Further, except as a result of the gross negligence, sole negligence or willful misconduct of Landlord Parties, none of Landlord, Agent, any other managing agent, or their respective affiliates, owners, partners, directors, officers, agents and employees shall be liable to Tenant (a) for any damage caused by other tenants or persons in, upon or about the Property, or caused by operations in construction of any public or quasi-

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public work; (b) with respect to matters for which Landlord is liable, for consequential or indirect damages purportedly arising out of any loss of use of the Premises or any equipment or facilities therein by Tenant or any person claiming through or under Tenant; (c) for any defect in the Premises or the Property; (d) for injury or damage to person or property caused by fire, or theft, or resulting from the operation of heating or air conditioning or lighting apparatus, or from falling plaster, or from steam, gas, electricity, water, rain, snow, ice, or dampness, that may leak or flow from any part of the Property, or from the pipes, appliances or plumbing work of the same.

17.2 Tenant Indemnification. Except for the gross negligence, sole negligence or willful misconduct of Landlord Parties, Tenant hereby indemnifies, defends, and holds Landlord, Agent and their respective affiliates, owners, partners, members, directors, officers, agents and employees (collectively, “Landlord Indemnified Parties”) harmless from and against any and all Losses (defined below) arising from or in connection with any or all of: (a) the conduct or management of either or both the Property and the Premises or any business therein, or any work or Alterations done, or any condition created by any or all of Tenant and Tenant’s Parties in or about the Premises from and after the Commencement Date; (b) any act, omission or negligence of any or all of Tenant and Tenant’s Parties; (c) any accident, injury or damage whatsoever occurring in, at or upon either or both of the Property and the Premises and caused by any or all of Tenant and Tenant’s Parties; (d) any breach by Tenant of any or all of its warranties, representations and covenants under this Lease; (e) any actions necessary to protect Landlord’s interest under this Lease in a bankruptcy proceeding or other proceeding under the Bankruptcy Code; (t) the creation or existence of any Hazardous Materials in, at, on or under the Premises or the Property, if and to the extent brought to the Premises or the Property or caused by Tenant or any party within Tenant’s control; and (g) any violation or alleged violation by any or all of Tenant and Tenant’s Parties of any Law (collectively, “Tenant’s Indemnified Matters”). In case any action or proceeding is brought against any or all of Landlord and the Landlord Indemnified Parties by reason of any of Tenant’s Indemnified Matters, Tenant, upon notice from any or all of Landlord, Agent or any Superior Party (defined below), shall resist and defend such action or proceeding by counsel reasonably satisfactory to, or selected by, Landlord. The term “Losses” shall mean all claims, demands, expenses, actions, judgments, damages (actual, but not consequential), penalties, fines, liabilities, losses of every kind and nature, suits, administrative proceedings, costs and fees, including, without limitation, reasonable attorneys’ and consultants’ reasonable fees and expenses, and the costs of cleanup, remediation, removal and restoration, that are in any way related to any matter covered by the foregoing indemnity. The provisions of this Section 17.2 shall survive the expiration or termination of this Lease.

17.3 Landlord Indemnification. Landlord hereby indemnifies, defends and holds Tenant harmless from and against any and all Losses actually suffered or incurred by Tenant as the sole and direct result of any negligent, willful or intentional acts or omissions of any or all of Landlord, Agent and any parties within the direct and sole control of either or both of Landlord and Agent. Notwithstanding anything to the contrary set forth in this Lease, however, in all events and under all circumstances, the liability of Landlord to Tenant, whether under this Section 17.3 or any other provision of this Lease, shall be limited to the interest of Landlord in the Property, and Tenant agrees to look solely to Landlord’s interest in the Property for the recovery of any judgment or award against Landlord, it being intended that Landlord shall not be personally liable for any judgment or deficiency. Notwithstanding anything contained in this Section 17.3 to the contrary, the foregoing provision shall not limit Tenant’s ability to seek injunctive relief or specific performance of this Lease or Tenant’s right to recover any insurance or condemnation proceeds. The provisions of this Section 17.3 shall survive the expiration or termination of this Lease.

17.4 Force Majeure. Neither the obligations of Tenant (except the obligation to pay Rent and the obligation to maintain insurance, and provide evidence thereof, in accordance with Section 10.2) nor Landlord shall be affected, impaired or excused, and neither Landlord nor Tenant shall

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have any liability whatsoever to the other, with respect to any act, event or circumstance arising out of (a) Landlord’s or Tenant’s, as the case may be, failure to fulfill, or delay in fulfilling any of its obligations under this Lease by reason of labor dispute, governmental preemption of property in connection with a public emergency or shortages of fuel, supplies, or labor, or any other cause, whether similar or dissimilar, beyond Landlord’s or Tenant’s, as the case may be, reasonable control; or (b) any failure or defect in the supply, quantity or character of utilities furnished to the Premises, or by reason of any requirement, act or omission of any public utility or others serving the Property, beyond Landlord’s or Tenant’s, as the case may be, reasonable control.

18. DAMAGE OR DESTRUCTION.

18.1 Notification and Repair; Rent Abatement. Tenant shall give prompt notice to Landlord and Agent of (a) any fire or other casualty to the Premises or the Property, and (b) any damage to, or defect in, any part or appurtenance of the Property’s sanitary, electrical, HVAC, elevator or other systems located in or passing through the Premises or any part thereof. In the event that, as a result of Tenant’s failure to promptly notify Landlord pursuant to the preceding sentence, Landlord’s insurance coverage is compromised or adversely affected, then Tenant is and shall be responsible for the payment to Landlord of any insurance proceeds that Landlord’s insurer fails or refuses to pay to Landlord as a result of the delayed notification. Subject to the provisions of Section 18.2 below, if either or both of the Property and the Premises is damaged by fire or other insured casualty, Landlord shall repair (or cause Agent to repair) the damage and restore and rebuild the Property and/or the Premises (except Tenant’s personal property) with reasonable dispatch after the adjustment of the insurance proceeds attributable to such damage. Landlord (or Agent, as the case may be) shall use its diligent, good faith efforts to make such repair or restoration promptly and in such manner as not to unreasonably interfere with Tenant’s use and occupancy of the Premises, but Landlord or Agent shall not be required to do such repair or restoration work except during normal business hours of business days. Provided that any damage to either or both of the Property and the Premises is not caused by, or is not the result of acts or omissions by, any or all of Tenant and Tenant’s Parties, if (i) the Property is damaged by fire or other casualty thereby causing the Premises to be inaccessible or (ii) the Premises are partially damaged by fire or other casualty, the Rent shall be proportionally abated to the extent of any actual loss of use of the Premises by Tenant. Notwithstanding anything to the contrary contained herein, if neither party has elected to terminate this Lease pursuant to the terms of this Section 18.1, and the Premises have not been restored to their condition existing immediately prior to the casualty within one hundred twenty (120) days following the date Landlord receives all necessary permits for Landlord’s repair work, Tenant shall have the right to terminate this Lease upon written notice to Landlord given within ten (10) days immediately after the expiration of said 120`h day. In the event of a termination, the termination shall be effective as of the date upon which Landlord receives timely written notice from Tenant terminating this Lease pursuant to the preceding sentence. If Tenant fails to timely deliver a termination notice, this Lease shall remain in full force and effect and Tenant shall be deemed to have waived its right to terminate this Lease pursuant to this Section 18.1.

18.2 Total Destruction. If the Property or the Premises shall be totally destroyed by fire or other casualty, or if the Property shall be so damaged by fire or other casualty that (in the reasonable opinion of a reputable contractor or architect designated by Landlord): (i) its repair or restoration of the Premises requires more than 180 days or (ii) such repair or restoration requires the expenditure of more than (a) 80% of the full insurable value of the Premises immediately prior to the casualty or (b) 50% of the full insurable value of the Property immediately prior to the casualty, Landlord and Tenant shall each have the option to terminate this Lease (by so advising the other, in writing) within 10 days after said contractor or architect delivers written notice of its opinion to Landlord and Tenant, but in all events prior to the commencement of any restoration of the Premises or the Property by Landlord. Additionally, if the damage (x) is less than the amount stated in (ii) above, but more than 10% of the full

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insurable value of the Property; and (y) occurs during the last two years of Lease Term, then Landlord, but not Tenant, shall have the option to terminate this Lease pursuant to the notice and within the time period established pursuant to the immediately preceding sentence. In the event of a termination pursuant to either of the preceding two (2) sentences, the termination shall be effective as of the date upon which either Landlord or Tenant, as the case may be, receives timely written notice from the other terminating this Lease pursuant to the preceding sentence. If neither Landlord nor Tenant timely delivers a termination notice, this Lease shall remain in full force and effect. Notwithstanding the foregoing, if (A) any holder of a mortgage or deed of trust encumbering the Property or landlord pursuant to a ground lease encumbering the Property (collectively, “Superior Parties”) or other party entitled to the insurance proceeds fails to make such proceeds available to Landlord in an amount sufficient for restoration of the Premises or the Property, or (B) the issuer of any commercial property insurance policies on the Property fails to make available to Landlord sufficient proceeds for restoration of the Premises or the Property, then Landlord may, at Landlord’s sole option, terminate this Lease by giving Tenant written notice to such effect within 30 days after Landlord receives notice from the Superior Party or insurance company, as the case may be, that such proceeds shall not be made available, in which event the termination of this Lease shall be effective as of the date Tenant receives written notice from Landlord of Landlord’s election to terminate this Lease. Landlord shall have no liability to Tenant, and Tenant shall not be entitled to terminate this Lease by virtue of any delays in completion of repairs and restoration. For purposes of this Section 18.2 only, “full insurable value” shall mean replacement cost, less the cost of footings, foundations and other structures below grade. Notwithstanding anything to the contrary contained herein, if neither party has elected to terminate this Lease pursuant to the terms of this Section 18.2 and the Premises have not been restored to their condition existing immediately prior to the casualty within one hundred twenty (120) days following the date Landlord receives all necessary permits for Landlord’s repair work, Tenant shall have the right to terminate this Lease upon written notice to Landlord given within ten (10) days immediately after the expiration of said 120 x day. In the event of a termination, the termination shall be effective as of the date upon which Landlord receives timely written notice from Tenant terminating this Lease pursuant to the preceding sentence. If Tenant fails to timely deliver a termination notice, this Lease shall remain in full force and effect and Tenant shall be deemed to have waived its right to terminate this Lease pursuant to this Section 18.2.

19. EMINENT DOMAIN. If the whole, or any substantial (as reasonably determined by Landlord) portion, of the Property is taken or condemned for any public use under any Law or by right of eminent domain, or by private purchase in lieu thereof, and such taking would prevent or materially interfere with the Permitted Use of the Premises, this Lease shall terminate effective when the physical taking of said Premises occurs. If less than a substantial portion of the Property is so taken or condemned, or if the taking or condemnation is temporary (regardless of the portion of the Property affected), this Lease shall not terminate, but the Rent payable hereunder shall be proportionally abated to the extent of any actual loss of use of the Premises by Tenant. Landlord shall be entitled to any and all payment, income, rent or award, or any interest therein whatsoever, which may be paid or made in connection with such a taking or conveyance, and Tenant shall have no claim against Landlord for the value of any unexpired portion of this Lease. Notwithstanding the foregoing, any compensation specifically and independently awarded to Tenant for loss of business or goodwill, or for its personal property, shall be the property of Tenant.

20. SURRENDER AND HOLDOVER. On the last day of the Term, or upon any earlier termination of this Lease, or upon any re-entry by Landlord upon the Premises in accordance with the terms of Section 22.2.1: (a) Tenant shall quit and surrender the Premises to Landlord “broom-clean” (as defined by Exhibit E, attached hereto and incorporated herein by reference), and in a condition that would reasonably be expected with normal and customary use in accordance with prudent operating practices and in accordance with the covenants and requirements imposed under this Lease, subject only to ordinary wear and tear (as is attributable to deterioration by reason of time and use, in spite of Tenant’s

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reasonable care) and such damage or destruction as Landlord is required to repair or restore under this Lease; (b) Tenant shall remove all of Tenant’s personal property therefrom, except as otherwise expressly provided in this Lease; and (c) Tenant shall surrender to Landlord any and all keys, access cards, computer codes or any other items used to access the Premises. Landlord shall be permitted to inspect the Premises in order to verify compliance with this Section 20 at any time prior to (x) the Expiration Date, (y) the effective date of any earlier termination of this Lease, or (z) the surrender date otherwise agreed to in writing by Landlord and Tenant. The obligations imposed under the first sentence of this Section 20 shall survive the termination or expiration of this Lease. If Tenant remains in possession after the Expiration Date hereof or after any earlier termination date of this Lease or of Tenant’s right to possession: (i) Tenant shall be deemed a tenant-at-will; (ii) Tenant shall pay 150% of the aggregate of all Rent last prevailing hereunder, and also shall pay all actual damages sustained by Landlord, directly by reason of Tenant’s remaining in possession after the expiration or termination of this Lease; (iii) there shall be no renewal or extension of this Lease by operation of law; and (iv) the tenancy-at-will may be terminated by either party hereto upon 30 days’ prior written notice given by the terminating party to the non-terminating party. The provisions of this Section 20 shall not constitute a waiver by Landlord of any re-entry rights of Landlord provided hereunder or by law.

21. EVENTS OF DEFAULT.

21.1 Bankruptcy of Tenant or Guarantor. It shall be a default by Tenant under this Lease (“Default” or “Event of Default”) if either or both of Guarantor (defined in Section 21.2) and Tenant makes an assignment for the benefit of creditors, or files a voluntary petition under any state or federal bankruptcy (including the United States Bankruptcy Code) or insolvency law, or an involuntary petition is filed against Tenant or Guarantor as the case may be under any state or federal bankruptcy (including the United States Bankruptcy Code) or insolvency law that is not dismissed within 90 days after filing, or whenever a receiver of Tenant or Guarantor as the case may be, or of, or for, the property of Tenant shall be appointed, or Tenant or Guarantor as the case may be admits it is insolvent or is not able to pay its debts as they mature.

21.2 Default Provisions. In addition to any Default arising under Section 21.1 above, each of the following shall constitute a Default: (a) if Tenant fails to pay Rent or any other payment when due hereunder within five days after written notice from Landlord of such failure to pay on the due date; provided, however, that if in any consecutive 12 month period, Tenant shall, on two (2) separate occasions, fail to pay any installment of Rent on the date such installment of Rent is due, then, on the third such occasion and on each occasion thereafter on which Tenant shall fail to pay an installment of Rent on the date such installment of Rent is due, Landlord shall be relieved from any obligation to provide notice to Tenant, and Tenant shall then no longer have a five day period in which to cure any such failure; (b) if Tenant fails, whether by action or inaction, to timely comply with, or satisfy, any or all of the obligations imposed on Tenant under this Lease (other than the obligation to pay Rent) for a period of 30 days after Landlord’s delivery to Tenant of written notice of such default under this Section 21.2(b); provided, however, that if the default cannot, by its nature, be cured within such 30 day period, but Tenant commences and diligently pursues a cure of such default promptly within the initial 30 day cure period, then Landlord shall not exercise its remedies under Section 22 unless such default remains uncured for more than 60 days after the initial delivery of Landlord’s original default notice; and, at Landlord’s election, or (c) if Tenant vacates or abandons the Premises during the Term.

22. RIGHTS AND REMEDIES.

22.1 Landlord’s Cure Rights Upon Default of Tenant. If a Default occurs, then Landlord may (but shall not be obligated to) cure or remedy the Default for the account of, and at the reasonable expense of, Tenant, but without waiving such Default.

22.

22.2 Landlord’s Remedies. In the event of any Default by Tenant under this Lease, Landlord, at its option, may, in addition to any and all other rights and remedies provided in this Lease or otherwise at law or in equity do or perform any or all of the following:

22.2.1 Terminate Tenant’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession to Landlord. In such event, Landlord shall be entitled to recover from Tenant all of: (i) the unpaid Rent that is accrued and unpaid as of the date on which this Lease is terminated; (ii) the worth, at the time of award, of the amount by which (x) the unpaid Rent that would otherwise be due and payable under this Lease (had this Lease not been terminated) for the period of time from the date on which this Lease is terminated through the Expiration Date exceeds (y) the amount of such rental loss that the Tenant proves could have been reasonably avoided; and (iii) any other amount necessary to compensate Landlord for all the detriment proximately caused by the Tenant’s failure to perform its obligations under this Lease or which, in the ordinary course of events, would be likely to result therefrom, including but not limited to, the cost of recovering possession of the Premises, expenses of reletting, including renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Landlord in connection with this Lease applicable to the unexpired Term (as of the date on which this Lease is terminated). The worth, at the time of award, of the amount referred to in provision (ii) of the immediately preceding sentence shall be computed by discounting such amount at the per annum discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award, plus one percent per annum. Efforts by Landlord to mitigate damages caused by Tenant’s Default shall not waive Landlord’s right to recover damages under this Section 22.2. If this Lease is terminated through any unlawful entry and detainer action, Landlord shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable in such action, or Landlord may reserve the right to recover all or any part of such Rent and damages in a separate suit; or

22.2.2 Continue the Lease and Tenant’s right to possession and recover the Rent as it becomes due. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Landlord’s interests shall not constitute a termination of the Tenant’s right to possession; or

22.2.3 Pursue any other remedy now or hereafter available under the laws of the state in which the Premises are located.

22.2.4 Without limitation of any of Landlord’s rights in the event of a Default by Tenant, Landlord may also exercise its rights and remedies with respect to any Security under Section 4.4 above.

Any and all personal property of Tenant that may be removed from the Premises by Landlord pursuant to the authority of this Lease or of law may be handled, removed or stored by Landlord at the sole risk, reasonable cost and expense of Tenant, and in no event or circumstance shall Landlord be responsible for the value, preservation or safekeeping thereof. Tenant shall pay to Landlord, within ten (10) days following receipt of written demand from Landlord, any and all reasonable expenses incurred in such removal and all storage charges for such property of Tenant so long as the same shall be in Landlord’s possession or under Landlord’s control. Any such property of Tenant not removed from the Premises as of the Expiration Date or any other earlier date on which this Lease is terminated shall be conclusively presumed to have been conveyed by Tenant to Landlord under this Lease as in a bill of sale, without further payment or credit by Landlord to Tenant. Neither expiration or termination of this Lease nor the termination of Tenant’s right to possession shall relieve Tenant from its liability under the indemnity provisions of this Lease.

23.

22.3 Additional Rights of Landlord. All sums advanced by Landlord or Agent on account of Tenant under this Section, or pursuant to any other provision of this Lease, and all Base Rent and Additional Rent, if delinquent or not paid by Tenant and received by Landlord when due hereunder, shall bear interest at the rate of 5% per annum above the “prime” or “reference” or “base” rate (on a per annum basis) of interest publicly announced as such, from time to time, by the JPMorgan Chase Bank, or its successor (“Default Interest”), from the due date thereof until paid, and such interest shall be and constitute Additional Rent and be due and payable upon Landlord’s or Agent’s submission of an invoice therefor. The various rights, remedies and elections of Landlord reserved, expressed or contained herein are cumulative and no one of them shall be deemed to be exclusive of the others or of such other rights, remedies, options or elections as are now or may hereafter be conferred upon Landlord by law.

22.4 Event of Bankruptcy. In addition to, and in no way limiting the other remedies set forth herein, Landlord and Tenant agree that if Tenant ever becomes the subject of a voluntary or involuntary bankruptcy, reorganization, composition, or other similar type proceeding under the federal bankruptcy laws, as now enacted or hereinafter amended, then: (a) “adequate assurance of future performance” by Tenant pursuant to Bankruptcy Code Section 365 will include (but not be limited to) payment of an additional/new security deposit in the amount of three times the then current Base Rent payable hereunder; (b) any person or entity to which this Lease is assigned, pursuant to the provisions of the Bankruptcy Code, shall be deemed, without further act or deed, to have assumed all of the obligations of Tenant arising under this Lease on and after the effective date of such assignment, and any such assignee shall, upon demand by Landlord, execute and deliver to Landlord an instrument confirming such assumption of liability; (c) notwithstanding anything in this Lease to the contrary, all amounts payable by Tenant to or on behalf of Landlord under this Lease, whether or not expressly denominated as “Rent”, shall constitute “rent” for the purposes of Section 502(b)(6) of the Bankruptcy Code; and (d) if this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other considerations payable or otherwise to be delivered to Landlord or Agent (including Base Rent, Additional Rent and other amounts hereunder), shall be and remain the exclusive property of Landlord and shall not constitute property of Tenant or of the bankruptcy estate of Tenant. Any and all monies or other considerations constituting Landlord’s property under the preceding sentence not paid or delivered to Landlord or Agent shall be held in trust by Tenant or Tenant’s bankruptcy estate for the benefit of Landlord and shall be promptly paid to or turned over to Landlord.

22.5 Tenant’s Right to Cure. If Landlord shall fail to pay any amount or perform any act on its part to be paid or performed under this Lease and such failure (i) is not corrected within thirty (30) days after notice thereof by Tenant (except in the event of an emergency) (provided, however, that if the failure cannot, by its nature, be cured within such thirty (30) day period, but Landlord commences and diligently pursues a cure of such default within the initial thirty (30) day cure period, then Tenant shall not have the right to exercise its remedies under this Section 22.5 so long as Landlord is diligently pursuing such cure), and (ii) has a material adverse effect on Tenant’s ability to use the Premises for the Permitted Uses of the Premises, then Tenant may, without obligation to do so, and without waiving or releasing Landlord from any obligations of Landlord or limiting any other remedies Tenant may have pursuant to this Lease, make any such payment or perform any such other act on Landlord’s part to be made or performed under this Lease. All sums so paid by Tenant and all necessary and reasonable costs and expenses actually incurred by Tenant may be deducted by Tenant from the next installments of Rent due hereunder. Notwithstanding the foregoing, Tenant’s right of offset under the immediately preceding sentence shall be limited to twenty percent (20%) of each installment of Rent next becoming due unless insufficient Lease Term remains to fully recoup the amounts owed by Landlord to Tenant on the amounts expended by Tenant, in which event the amount of Tenant’s offset shall be increased so that Tenant is able to fully recoup all such amounts expended by Tenant prior to the expiration of the Lease Term.

24.

23. BROKER. Tenant covenants, warrants and represents that the broker set forth in Section 1.8(A) was the only broker to represent Tenant in the negotiation of this Lease (“Tenant’s Broker”). Landlord covenants, warrants and represents that the broker set forth in Section 1.8(B) was the only broker to represent Landlord in the negotiation of this Lease (“Landlord’s Broker”). Landlord shall be solely responsible for paying the commission of both Tenant’s Broker and Landlord’s Broker. Each party agrees to and hereby does defend, indemnify and hold the other harmless against and from any brokerage commissions or finder’s fees or claims therefor by a party claiming to have dealt with the indemnifying party and all costs, expenses and liabilities in connection therewith, including, without limitation, reasonable attorneys’ fees and expenses, for any breach of the foregoing. The foregoing indemnification shall survive the termination or expiration of this Lease.

24. MISCELLANEOUS.

24.1 Merger. All prior understandings and agreements between the parties are merged in this Lease, which alone fully and completely expresses the agreement of the parties. No agreement shall be effective to modify this Lease, in whole or in part, unless such agreement is in writing, and is signed by the party against whom enforcement of said change or modification is sought.

24.2 Notices. Any notice required to be given by either party pursuant to this Lease, shall be in writing and shall be deemed to have been properly given, rendered or made only if personally delivered, or if sent by Federal Express or other comparable commercial overnight delivery service, addressed to the other party at the addresses set forth below each party’s respective signature block (or to such other address as Landlord or Tenant may designate to each other from time to time by written notice); and shall be deemed to have been given, rendered or made on the day so delivered or on the first business day after having been deposited with the courier service.

24.3 Non-Waiver. The failure of either party to insist, in any one or more instances, upon the strict performance of any one or more of the obligations of this Lease, or to exercise any election herein contained, shall not be construed as a waiver or relinquishment for the future of the performance of such one or more obligations of this Lease or of the right to exercise such election, but the Lease shall continue and remain in full force and effect with respect to any subsequent breach, act or omission. The receipt and acceptance by Landlord or Agent of Base Rent or Additional Rent with knowledge of breach by Tenant of any obligation of this Lease shall not be deemed a waiver of such breach.

24.4 Legal Costs. If any action is brought by Landlord or Tenant with respect to its rights under this Lease, the prevailing party shall be entitled to reasonable attorneys’ fees and court costs, as determined by the court. Tenant shall pay Landlord’s reasonable attorneys’ fees not to exceed One Thousand and No/100 Dollars ($1,000.00) incurred in connection with Tenant’s request for Landlord’s consent under provisions of this Lease governing assignment and subletting, or in connection with any other act which Tenant proposes to do and which requires Landlord’s consent.

24.5 Parties Bound. Except as otherwise expressly provided for in this Lease, this Lease shall be binding upon, and inure to the benefit of, the successors and assignees of the parties hereto. Tenant hereby releases Landlord named herein from any obligations of Landlord for any period subsequent to the conveyance and transfer of Landlord’s ownership interest in the Property provided Landlord’s transferee has assumed in writing all of Landlord’s obligations hereunder. In the event of such conveyance and transfer, Landlord’s obligations shall thereafter be binding upon each transferee (whether Successor Landlord or otherwise). No obligation of Landlord shall arise under this Lease until the instrument is signed by, and delivered to, both Landlord and Tenant.

25.

24.6 Recordation of Lease. Tenant shall not record or file this Lease (or any memorandum hereof) in the public records of any county or state.

24.7 Governing Law; Construction. This Lease shall be governed by and construed in accordance with the laws of the state in which the Property is located. If any provision of this Lease shall be invalid or unenforceable, the remainder of this Lease shall not be affected but shall be enforced to the extent permitted by law. The captions, headings and titles in this Lease arc solely for convenience of reference and shall not affect its interpretation. This Lease shall be construed without regard to any presumption or other rule requiring construction against the party causing this Lease to be drafted. Each covenant, agreement, obligation, or other provision of this Lease to be performed by Tenant, shall be construed as a separate and independent covenant of Tenant, not dependent on any other provision of this Lease. All terms and words used in this Lease, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require. This Lease may be executed in counterpart and, when all counterpart documents are executed, the counterparts shall constitute a single binding instrument.

24.8 Time. Time is of the essence for this Lease. If the time for performance hereunder falls on a Saturday, Sunday or a day that is recognized as a holiday in the state in which the Property is located, then such time shall be deemed extended to the next day that is not a Saturday, Sunday or holiday in said state.

24.9 Authority of Tenant. Tenant and the person(s) executing this Lease on behalf of Tenant hereby represent, warrant, and covenant with and to Landlord as follows: the individual(s) acting as signatory on behalf of Tenant is(are) duly authorized to execute this Lease; Tenant has procured (whether from its members, partners or board of directors, as the case may be), the requisite authority to enter into this Lease; this Lease is and shall be fully and completely binding upon Tenant; and Tenant shall timely and completely perform all of its obligations hereunder.

24.10 WAIVER OF TRIAL BY JURY. THE LANDLORD AND THE TENANT, TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY ANY PARTY TO THIS LEASE WITH RESPECT TO THIS LEASE, THE PREMISES, OR ANY OTHER MATTER RELATED TO THIS LEASE OR THE PREMISES.

24.11 Financial Information. From time to time during the Term, Tenant shall deliver to Landlord information and documentation describing and concerning Tenant’s financial condition, and in form and substance reasonably acceptable to Landlord, within ten (10) days following Landlord’s written request therefor. Upon Landlord’s request, Tenant shall provide to Landlord the most currently available audited financial statement of Tenant; and if no such audited financial statement is available, then Tenant shall instead deliver to Landlord its most currently available balance sheet and income statement. Furthermore, upon the delivery of any such financial information from time to time during the Term, Tenant shall be deemed to automatically represent and warrant to Landlord that the financial information delivered to Landlord is true, accurate and complete, and that there has been no adverse change in the financial condition of Tenant since the date of the then-applicable financial information.

24.12 Confidential Information. Tenant agrees to maintain in strict confidence the economic terms of this Lease and any or all other materials, data and information delivered to or received by any or all of Tenant and Tenants’ Parties either prior to or during the Term in connection with the negotiation and execution hereof. The provisions of this Section 24.12 shall survive the termination of this Lease.

26.

24.13 Submission of Lease. Submission of this Lease to Tenant for signature does not constitute a reservation of space or an option to lease. This Lease is not effective until execution by and delivery to both Landlord and Tenant.

24.14 Lien Prohibition. Tenant shall not permit any mechanics or materialmen’s liens to attach to the Premises or the Property. Tenant, at its expense, shall procure the satisfaction or discharge of record of all such liens and encumbrances within 30 days after the filing thereof; or, within such thirty (30) day period, Tenant shall provide Landlord, at Tenant’s sole expense, with endorsements (satisfactory, both in form and substance, to Landlord and the holder of any mortgage or deed of trust) to the existing title insurance policies of Landlord and the holder of any mortgage or deed of trust, insuring against the existence of, and any attempted enforcement of, such lien or encumbrance. In the event Tenant has not so performed, Landlord may, at its option, pay and discharge such liens and Tenant shall be responsible to reimburse Landlord, on demand and as Additional Rent under this Lease, for all reasonable costs and expenses incurred in connection therewith, together with Default Interest thereon, which reasonable expenses shall include reasonable fees of attorneys of Landlord’s choosing, and any actual costs in posting bond to effect discharge or release of the lien as an encumbrance against the Premises or the Property.

24.15 Counterparts. This Lease may be executed in multiple counterparts, but all such counterparts shall together constitute a single, complete and fully-executed document.

25. EARLY OCCUPANCY. Occupancy shall be granted to Tenant upon mutual execution of lease documents and any approvals required by the City of Phoenix. Tenant shall have no obligation to pay Base Rent or NNN charges during Early Occupancy. Notwithstanding the foregoing, Tenant shall be subject to all other terms and conditions of this Lease during Early Occupancy.

26. OPTION TO RENEW. Provided Tenant is not then in default under any term(s) or provision(s) of this Lease beyond the expiration of any applicable notice and cure period, Tenant shall have Options to Renew this Lease for one (1) additional period of five (5) years each at the Rental Rates outlined below; and under the same terms and conditions as provided in the Original Terms of this Lease. Tenant must provide notice in writing to Landlord of its intention to exercise this Option to Renew, One Hundred and Twenty (120) days prior to the Expiration Date of current Lease Term.

Months	Monthly Rent		Per Square Foot
61-80	$	17,052.13 NNN	$	1.0766
81-100	$	17,904.74 NNN	$	1.1304
101-120	$	18,799.97 NNN	$	1.1869

27. RIGHT OF FIRST OFFER TO PURCHASE. Landlord hereby covenants and agrees that, during the Term of the Lease (but not any extensions of renewals thereof), Tenant shall have a one time “Right of First Offer” to purchase the Property on and subject to the following terms and conditions:

27.1 Landlord shall first offer to Tenant the opportunity to purchase fee simple title to the entire Property by advising Tenant, in writing, (the “Offer Notice”) of Landlord’s desire to sell, and intent to market, the Property.

27.2 In the Offer Notice, Landlord shall describe, with reasonable specificity, the purchase price and other relevant terms and conditions upon which Landlord is prepared to sell its fee

27.

simple interest in the entire Property (the “Offer Terms”). The “Offer Terms” shall include conveyance of the Property on an “AS-IS, WHERE-IS” basis.

27.3 Upon Landlord’s delivery of the Offer Notice and Offer Terms, Tenant shall have ten (10) business days (“Tenant’s Response Period”) in which to advise Landlord, in writing, (the “Offer Response”) whether or not Tenant desires to exercise its Right of First Offer and acquire fee simple title to the entire Property on all of the Offer Terms.

28. All Riders and Exhibits attached hereto and executed (or initialed) both by Landlord and Tenant shall be deemed to be a part hereof and hereby incorporated herein.

[Signature Page Follows]

28.

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of the day and year first above written.

LANDLORD:

First Industrial, L.P., a Delaware limited partnership

By:

Its:

TENANT:

InSys Therapeutics, Inc., a Delaware corporation

By:

Its:

Landlord’s Addresses for Notices:	Tenant’s Addresses for Notices:
First Industrial, L.P. 311 South Wacker Drive, Suite 4000 Chicago, Illinois 60606 Attn: Executive Vice President-Operations	EJ Financial 225 E. Deerpath, Suite 250 Lake Forest, IL 60045 Attn: Mike Babich
With a copy to:	With a copy to:
First Industrial Realty Trust, Inc. 2425 E. Camelback Road, Suite 785 Phoenix, Arizona 85016-4262 Attn: Property Manager
With a copy to:
Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP 333 West Wacker Drive Suite 2700 Chicago, Illinois 60606 Attn: Suzanne Bessette-Smith
With a copy to:
With a copy to: Brier, Irish, Hubbard & Erhart, P.L.C. 2400 East Arizona Biltmore Circle Suite 1300 Phoenix, Arizona 85016 Attn: Robert N. Brier

29.

LEASE EXHIBIT A

Property

10220 S. 5151 Street, Phoenix, Arizona 85044

A

LEASE EXHIBIT A-1

Premises

NOTE: Notwithstanding the location of the dotted line below, the Premises do not include any portion of the shaded area below.

A-1

LEASE EXHIBIT B

TENANT OPERATIONS INQUIRY FORM

1.    Name of Company/Contact                                                                                                                                                                                                         

2.    Address/Phone                                                                                                                                                                                                                                 

3.    Provide a brief description of your business and operations:

4. Will you be required to make filings and notices or obtain permits as required by Federal and/or State regulations for the operations at the proposed facility? Specifically:

a.      SARA Title III Section 312 (Tier II) reports	YES	NO
(> 10,000 lbs. of hazardous materials STORED at any one time)
b.      SARA Title III Section 313 (Tier III) Form R reports	YES	NO
(> 10,000 lbs. of hazardous materials USED per year)
c.      NPDES or SPDES Stormwater Discharge permit	YES	NO
(answer “No” if “No-Exposure Certification” filed)
d.      EPA Hazardous Waste Generator ID Number	YES	NO

5. Provide a list of chemicals and wastes that will be used and/or generated at the proposed location. Routine office and cleaning supplies are not included. Make additional copies if required.

Chemical Waste Approximate Annual
Quantity Used or
Generated Storage Container(s) (i.e. Drums, Cartons, Totes,
Bags, ASTs, USTs, etc)

B-1

Chemical Waste Approximate Annual
Quantity Used or
Generated Storage Container(s) (i.e. Drums, Cartons, Totes,
Bags, ASTs, USTs, etc)

B-2

LEASE EXHIBIT C

TENANT’S WORK

This Exhibit C sets forth the rights and obligations of Landlord and Tenant with respect to construction of the Work (defined below). Capitalized terms used herein, unless otherwise defined in this Exhibit, shall have the meanings ascribed to such terms in the Lease.

1. Work. Tenant desires the Work to be constructed in the Premises in substantial accordance with the Final Plan (defined below) prepared by The Smith Group, or such other space planner as may be selected by Tenant and approved by Landlord, which approval shall not be unreasonably withheld or delayed (“Space Planner”). The tenant improvement work to be constructed in the Premises as shown in the Final Plan and as more fully detailed in the Working Drawings (defined below) and the Supplemental Materials (defined below), shall be hereinafter referred to as the “Work”.

2. Initial Plan and Final Plan; Working Drawings; Supplemental Materials.

(a) Initial Plan and Final Plan. Tenant shall cause an initial plan for the Work (the “Initial Plan”) to be prepared by Space Planner and shall submit the Initial Plan to Landlord within 14 _days following execution of the Lease by Landlord and Tenant. Landlord shall have 14 days following receipt of the Initial Plan to review and provide any reasonable comments Landlord may have to Tenant in connection therewith. In the event Landlord requires any reasonable changes or modifications to the Initial Plan, Tenant shall cause the Initial Plan to be revised and shall resubmit the revised Initial Plan to Landlord for approval, which approval shall not be unreasonably withheld or delayed. The same time periods set forth above shall apply to Tenant’s re-submittal to Landlord of the revised Initial Plan and Landlord’s review of and comment in connection with the revised Initial Plan. The foregoing procedure shall be repeated until the Initial Plan has been reasonably mutually approved by Landlord and Tenant. No Work shall commence in the Premises until Landlord gives its final written approval of the revised Initial Plan (the “Final Plan”), which approval shall not be unreasonably withheld or delayed.

(b) Working Drawings. If necessary for the performance of the Work and not included as part of the Final Plan, Tenant shall prepare or cause to be prepared final working drawings and specifications for the Work (collectively, the “Working Drawings”). So long as the Working Drawings are consistent with the Final Plan, Landlord shall approve the Working Drawings within three (3) days after receipt of same from Tenant or from Contractor (as defined below) by initialing and returning to Tenant each sheet of the Working Drawings. In the event that the Working Drawings are included as part of the Final Plan, or in the event Tenant performs the Work without the necessity of preparing Working Drawings, then whenever the term “Working Drawings” is used in this Exhibit, such term shall be deemed to refer to the Final Plan.

(c) Supplemental Materials. If necessary for the performance of the Work and not included as part of the Working Drawings, Tenant shall prepare or cause to be prepared other plans, drawings, specifications, finish details and other information relating to the Work (the “Supplemental Materials”). So long as the Supplemental Materials are consistent with the Final Plan and the Working Drawings, Landlord shall approve the Supplemental Materials within three (3) days after receipt of same from Tenant or from Contractor by initialing and returning to Tenant each sheet of the Supplemental Materials. In the event that the Supplemental Materials are included as part of the Final Plan or the Working Drawings, or in the event Tenant performs the Work without the necessity of preparing Supplemental Materials, then whenever the term “Supplemental Materials” is used in this Exhibit, such term shall be deemed to refer to the Final Plan or the Working Drawings, as applicable.

C-1

(d) Landlord’s Approval.

i) Landlord shall not be deemed to have acted unreasonably under the terms of this Exhibit C if it withholds its approval of the Initial Plan, the Final Plan, the Working Drawings or the Supplemental Materials, because, in Landlord’s reasonable opinion, the Work, as described in any such item: (A) would materially adversely affect any or all of the Building systems, the structure of the Building and either or both of the safety of the Building and its occupants, (B) would materially, adversely impair Landlord’s ability to furnish services to Tenant or other tenants in the Building; (C) would materially increase the cost of operating the Building; (D) would violate any Laws, (E) contains or uses Hazardous Materials; (F) would materially, adversely affect the appearance of the Building; (G) would materially, adversely affect another tenant’s premises; (H) is prohibited by any ground lease affecting the Building or by any mortgage, trust deed or other instrument encumbering the Property; or (I) will be substantially delayed because of unavailability or shortage of labor or materials necessary to perform the Work or the difficulties or unusual nature of such Work. The foregoing reasons, however, shall not be the only reasons for which Landlord may withhold its approval, whether or not such other reasons are similar or dissimilar to the foregoing.

ii) Neither the approval by Landlord of the Work, the Final Plan, the Working Drawings and/or the Supplemental Materials, nor any execution by Landlord’s of the contract for the Work with DPR], or such other contractor as may be selected by Tenant and approved by Landlord, which approval shall not be unreasonably withheld or delayed (the “Contractor”), nor any supervision or monitoring by Landlord of the Work, shall constitute a warranty by Landlord to Tenant of the adequacy of the design of the Work for Tenant’s intended use of the Premises. Landlord and Tenant hereby acknowledge and agree that although Landlord may consent to the contract for the performance of the Work with Contractor after a contract reasonably acceptable to Landlord is presented by Tenant (the “Contract”), Tenant has selected Contractor, Tenant shall negotiate with Contractor and Tenant shall be solely responsible for ensuring that the Work is performed in accordance with the Final Plans, the Working Drawings and the Supplemental Materials and Landlord shall have no responsibility or liability therefor.

(e) Termination. Notwithstanding anything to the contrary contained in this Exhibit C, provided that Tenant timely submitted to Landlord all required documents, if Landlord has not approved the Space Planner, Contractor, the Contract, the Final Plan, the Working Drawings and the Supplemental Materials such that Tenant may (provided that Tenant has obtained the necessary permits therefor) commence construction of the Work on or before April 1_, 2007 (the “Approval Date”), Tenant shall have the right to terminate the Lease by written notice to Landlord on or before the Approval Date, in which event any amounts previously paid by Tenant to Landlord shall be returned to Tenant and the parties shall have no further obligations under the Lease.

3. Performance of the Work. Except as hereinafter provided to the contrary, Tenant shall cause the performance of the Work using (except as may be otherwise stated or shown otherwise in the Final Plan, the Working Drawings and/or the Supplemental Materials) materials, quantities and procedures then in use by Landlord, provided that Tenant has received a detailed written summary of the same prior to commencement of the Work (“Building Standards”).

4. Allowance. Landlord shall pay for that portion of the Cost of the Work (defined below) in an amount not to exceed $110,873.00 (such amount being $7.00 per rentable square foot of the Premises which is to be improved, as described in the Working Drawings) (the “Allowance”), and Tenant shall pay for the entire Cost of the Work in excess of the Allowance. Tenant shall not be entitled to any credit, abatement or payment from Landlord in the event that the amount of the Cost of the Work exceeds the Allowance.

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5. Cost of the Work. For purposes of this Exhibit, the term “Cost of the Work” shall mean and include any and all costs and expenses of the Work, including, without limitation, the cost to prepare and revise the Initial Plan, the Final Plan, the Working Drawings, and the Supplemental Materials, the fees and expenses of Space Planner, Contractor and Architect (as defined below), all permit and inspection fees, management and supervision fees, taxes, amounts paid to contractors, subcontractors, and suppliers, architects’ fees, engineering costs, premiums for insurance, utilities, equipment rental, demolition, labor, materials, and supplies, and any other development costs related to the Lease and the opening for business in the Premises. The Cost of the Work does not include, and Landlord may not charge Tenant, any review, management, supervision or similar fee in connection with Tenant’s Work.

6. Payment. Landlord shall disburse the Allowance within thirty (30) business days after Tenant gives notice to Landlord that Tenant has opened for business in the Premises, subject to (a) Landlord’s receipt of: (i) evidence of the insurance required by the terms of the Lease (ACORD Form 25 or other evidence reasonably acceptable to Landlord), (ii) lien waivers and releases from Tenant and all of its contractors, subcontractors and suppliers, (iii) a copy of the certificate of occupancy for the Premises issued by the City of Phoenix, (iv) copies of all applications for payment, preliminary twenty-day notices, records of payments, the contract with the general contractor, all change orders, and an approved schedule of values and unit costs, and (v) copies of all invoices paid by Tenant in connection with the Work, and (b) Landlord’s inspection of the Work, which Landlord shall complete within such thirty (30) business day period, and Landlord’s approval of the Work as being in accordance with the Final Plan, the Working Drawings and the Supplemental Materials, which approval Landlord shall not unreasonably withhold or delay.

7. Substantial Completion. Tenant is solely responsible for causing the Work to be “substantially completed.” The Work shall be deemed to be “substantially completed” for all purposes under this Exhibit C and the Lease as of the date Contractor issues a written certificate to Landlord and Tenant, certifying that the Work has been substantially completed (i.e., completed except for “punchlist” items) in substantial compliance with the Final Plans, the Working Drawings, and the Supplemental Materials, or when Tenant first takes occupancy of the Premises, whichever first occurs. If the Work is not deemed to be substantially completed on or before the Rent Commencement Date, (a) Tenant agrees to use reasonable efforts to complete the Work as soon as practicable thereafter, (b) the Lease shall remain in full force and effect, (c) Landlord shall not be deemed to be in breach or default of the Lease or this Exhibit C as a result thereof and Landlord shall have no liability to Tenant as a result of any delay in occupancy (whether for damages, abatement of Rent or otherwise), and (d) notwithstanding anything contained in the Lease to the contrary, the Rent Commencement Date shall not be extended. Tenant agrees to use reasonable diligence to complete all “punchlist items” listed in the aforesaid contractor certificate promptly after substantial completion.

8. Commencement of Tenant’s Work. Tenant shall only permit Work to be performed for which Tenant, Contractor and/or Architect have obtained all appropriate and necessary permits and shall not permit any Work to commence for which a permit is required without first obtaining any and all necessary permits. It shall be a condition to the grant by Landlord and continued effectiveness of such license that:

(a) Tenant shall give to Landlord not less than five (5) days prior to the date on which the Work will commence, the following items, all in form and substance reasonably acceptable to Landlord: (i) a detailed description of and schedule for the Work; (ii) the names and addresses of all contractors, subcontractors and material suppliers and all other representatives of Tenant who or which will be entering the Premises on behalf of Tenant to perform the Work or will be supplying materials for such Work, and the approximate number of individuals, itemized by trade, who will be present in the Premises; (iii) copies of all contracts, subcontracts and material purchase orders pertaining to the Work;

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(iv) copies of plans and specifications pertaining to the Work; (v) copies of all licenses and permits required in connection with the performance of the Work; and (vi) certificates of insurance (in amounts satisfactory to Landlord and with the parties identified in, or required by, the Lease named as additional insureds) and instruments of indemnification against all losses, which may arise in connection with the Work.

(b) Tenant, Contractor, Architect and the Related Parties shall work in harmony and not interfere with other tenants of the Building, or with Landlord or Landlord’s agents in connection with any Landlord’s work in other premises and in common areas of the Building, or with the general operation of the Building. If at any time any such person shall, as a result of such parties’ gross negligence or willful misconduct, cause or threaten to cause such disharmony or interference, including labor disharmony, and Tenant shall fail, within twenty-four (24) hours of receipt of written notice from Landlord, to institute and maintain such corrective actions as reasonably directed by Landlord to Tenant in writing, then Landlord may withdraw such license upon twenty-four (24) hours’ prior written notice to Tenant.

(c) Any entry into and occupancy of the Premises by Tenant, Contractor, Architect, or any of the Related Parties shall be deemed to be subject to all of the terms, covenants, conditions and provisions of the Lease, specifically including the provisions of Section 11 thereof (regarding Tenant’s improvements and alterations to the Premises), and excluding only the covenant to pay Rent. Except as a result of Landlord’s gross negligence or willful misconduct, Landlord shall not be liable for any injury or death to any person or persons, loss or damage which may occur to any of the Work made in or about the Premises or to property placed therein during the period the Work is being performed, the same being at Tenant’s sole risk and liability. Except in connection with Landlord’s gross negligence or willful misconduct, Tenant agrees to indemnify, defend and hold harmless Landlord from and against all losses, which may be brought or made against Landlord, or which Landlord may pay or incur, by reason of the Tenant’s early access to the Premises pursuant to this Section or due to the Work. Tenant shall be liable to Landlord for any damage to the Premises or to any portion of the Work caused by the gross negligence or willful misconduct of Tenant or any of its Related Parties. In the event that the performance of the Work directly, proximately and reasonably causes extra costs to Landlord or requires the use of other Building services, Tenant shall reimburse Landlord for such direct, proximate and reasonable extra costs within ten (10) days following receipt of written demand from Landlord therefor.

9. Communications with Landlord’s Contractor and Architect. In no event shall Landlord pay for, or be responsible for in any other way, any amount in excess of the Allowance or any work performed by Contractor or any architect that is not first approved in writing by Landlord, which approval shall not be unreasonably withheld or delayed (the “Architect”). If Contractor or Architect performs any work on behalf of Tenant which has not previously been approved in writing by Landlord and included in the Cost of the Work, Tenant shall pay for all such Work. Nothing contained herein shall (a) be construed as consent by Landlord to any Work performed by Contractor or Architect and/or (b) constitute a waiver of, or limit or exclude, any of Landlord’s rights or remedies under the Lease, at law or in equity.

10. Force Majeure. If either party hereto shall be delayed or prevented from the performance of any act required hereunder by reason of acts of God, strikes, lockouts, labor troubles, inability to procure materials, restrictive governmental laws or regulations or other cause without fault and beyond the control of the party obligated (financial inability excepted), performance of such act shall be excused for the period of the delay, and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay.

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LEASE EXHIBIT D

FORM OF CONFIRMATION OF COMMENCEMENT DATE

                            , 2007

InSys Therapeutics

15220 North 51^st St

Phoenix, AZ 85044

RE: 15220 North 51^st Street

Dear Tenant:

This letter shall confirm that the Commencement Date for the above-referenced Lease is                                 , 2007.

InSys Therapeutics, Inc., as Tenant, hereby acknowledges the following: (i) Tenant is in possession of the Premises (as defined in the Lease); (ii) the Lease is in full force and effect; (iii) to the best of Tenant’s knowledge, Landlord is not in default under the Lease; and (iv) possession of the Premises is accepted by Tenant as having been delivered in accordance with the terms and conditions of the Lease.

Our records indicate the following information for the 15,839 square feet of space:

Commencement Date:                                 , 2007

Rent Commencement Date: November 1, 2007

Next Monthly Base Rent due: December 1, 2007

Operating Expense commencement date: November 1, 2007

Lease Expiration Date: October 31, 2012

Please sign two (2) copies of this letter in the space provided below acknowledging your agreement with the above and return them to me at my office. I suggest you attach a copy of this letter to your copy of the Lease.

Thank you again for your cooperation and assistance regarding this matter. Please contact me at any time should you have questions regarding the lease, building, or any related manner.

Sincerely,	Acknowledged and Agreed to this      day of                                 , 2007
Sheila Reed, Operations Manager	InSys Therapeutics, Inc
	By:
	Title:

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LEASE EXHIBIT E

Broom Clean Condition and Repair Requirements

• All lighting is to be placed into good working order. This includes replacement of bulbs, ballasts, and lenses as needed.

• All truck doors and dock levelers should be serviced and placed in good operating order (including, but not limited to, overhead door springs, rollers, tracks and motorized door operator). This would include the necessary (a) replacement of any dented truck door panels, broken panels and cracked lumber, and (b) adjustment of door tension to insure proper operation. All door panels that are replaced shall be painted to match the Building standard.

• All structural steel columns in the warehouse and office should be inspected for damage, and must be repaired. Repairs of this nature shall be pre-approved by the Landlord prior to implementation, which approval shall not be unreasonably withheld or delayed.

• HVAC system shall be in good working order, including the necessary replacement of any parts to return the unit to a well-maintained condition. This includes, but is not limited to, filters, thermostats, warehouse heaters and exhaust fans. Upon move out, Landlord will have an exit inspection performed by a certified mechanical contractor to determine the condition of the HVAC system.

• All holes in the sheet rock walls shall be repaired prior to move-out. All walls shall be clean.

• The carpets and vinyl tiles shall be in a clean condition and shall not have any holes or chips in them. Flooring shall be free of excessive dust, dirt, grease, oil and stains. Cracks in concrete and asphalt shall be acceptable as long as they are ordinary wear and tear, and are not the result of misuse.

• Facilities shall be returned in a clean condition, including, but not limited to, the cleaning of the coffee bar, restroom areas, windows, and other portions of the Premises.

• There shall be no protrusion of anchors from the warehouse floor and all holes shall be appropriately patched. If machinery/equipment is removed, the electrical lines shall be properly terminated at the nearest junction box.

• All exterior windows with cracks or breakage shall be replaced. All windows shall be clean.

• Tenant shall provide keys for all locks on the Premises, including front doors, rear doors, and interior doors.

• All mechanical and electrical systems shall be left in a safe condition that confirms to code. Bare wires and dangerous installations shall be corrected to Landlord’s reasonable satisfaction.

• All plumbing fixtures shall be in good working order, including, but not limited to, the water heater. Faucets and toilets shall not leak.

• All dock bumpers shall be left in place and well-secured.

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• Drop grid ceiling shall be free of excessive dust from lack of changing filters. No ceiling tiles may be missing or damaged.

• All trash shall be removed from both inside and outside of the Building.

• All signs in front of Building and on glass entry door and rear door shall be removed.

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EXHIBIT F

Rules and Regulations

l.         Animals. Tenants shall not bring any animals (except seeing eye and other service provider dogs) into the Building.

2.         Certain Substances. Tenant shall not, except as may be required under the terms of the acceptable use provisions of this Lease, without the prior written consent of Landlord, use, keep, or permit to be used or kept any noxious gas or substance, including without limitation flammable or combustible fluids or substances, in the Premises, or permit or suffer the Lease Premises to be occupied or used in a manner unreasonable to Landlord or other occupants of the Building by reason of noise, odors, and/or vibrations, or unreasonably interfere in any way with other lessees or those having business therein.

3.         Dangerous Activities. Tenant shall not make any use of the Premises which involves unreasonable danger of injury to any person.

4.         Deliveries. Tenant shall ensure that deliveries of material and supplies to the Premises are made through such entrances, elevators and corridors and at such times as may from time to time be reasonably designated in writing to Tenant, and shall promptly pay or cause to be paid to Landlord the reasonable cost or repairing any damage in the Building caused by the negligence or willful misconduct of any person making such deliveries within ten (10) days following receipt of written demand therefor from Landlord.

5.         Fire and Security Regulations. Tenant agrees that it shall comply with all fire and security regulations that may be reasonably issued in writing to Tenant from time to time by Landlord in writing, and Tenant shall also provide Landlord with the name of a designated employee to represent Tenant in all matters pertaining to such fire or security regulations.

6.         Future Changes. Landlord reserves the right, by written notice to Tenant, to rescind, alter or waive any rule or regulation at any time prescribed for the Building when, in Landlord’s reasonable judgment, it is necessary or desirable or proper for the best interests of the Building and its tenants, with thirty (30) days prior written notice, provided that the same shall not result in any rule or regulation becoming unreasonable or discriminating against any tenant in the Building. Landlord reserves the right to make such other reasonable, non-discriminatory rules and regulations as in its reasonable judgment may be necessary or desirable for the safety, care, and cleanliness of said premises and for the preservation of good order therein. Tenant agrees to abide by all such reasonable and non-discriminatory rules and regulations that may be hereafter adopted.

7.         Heavy Articles. Except as a result of the gross negligence or willful misconduct of a Landlord Party, Landlord will not be responsible for the loss or damage to any safe or property from any cause, and all damage done to the Building by moving or maintaining any safe or other property shall be repaired at the reasonable expense of Tenant.

8.         Intoxication. Landlord reserves the right to exclude or expel from the Building any person who, in the reasonable judgment of the Landlord is, intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building.

9.         Loading and Unloading. The delivery and shipping of merchandise, supplies, fixtures and other materials or goods of whatsoever nature to or from the Premises and all loading, unloading and handling

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thereof shall be done only at such times, in such areas, by such means as are reasonably designated in writing to Tenant by Landlord. Landlord may from time to time make and amend regulations for the orderly and efficient operation of delivery facilities to the Property provided the same are reasonable and non-discriminatory among the tenants in the Building.

10.         Locks. Landlord may from time to time install and change locking mechanisms on entrances to the Building and Common areas thereof, and (unless 24-hour security is provided by the Building) shall promptly upon such installation or change provide to Tenant a reasonable number of keys and replacements therefor to need the bona fide requirements of Tenant. In these rules “keys” include any device serving the same purpose. If with Landlord’s prior written consent, which shall not be unreasonably withheld or delayed, Tenant installs lock(s) incompatible with the Building master locking system:

(a)     Tenant shall indemnify Landlord against any reasonable expense as a result of forced entry thereto which may be required in an emergency, and

(b)     Tenant shall at the end of the Term and at Landlord’s request remove such lock(s) at Tenant’s expense.

11.         Obstructions. Tenant shall not obstruct or place anything in or on the sidewalks or driveways outside the Building or in the entrances, lobbies, corridors, stairwells, elevators, or other Common Areas of the Building, or use such locations for any purpose except access to and exit from the Premises without Landlord’s prior written consent. Landlord may remove at Tenant’s expense any such obstruction or thing (unamortized by Landlord without notice or obligation to Tenant).

12.         Personal Use of Leased Premises. The Premises shall not be used or permitted to be used for residential, lodging or sleeping purposes or for the storage of personal effects or property not required for business purposes.

13.         Public Access. The halls, passages, exits, entrances, stairways, balconies, and roof are not for the use of the general public, and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence in the reasonable judgment of Landlord shall be prejudicial to the safety, character, reputation, and interests of the Building and its lessees provided that nothing herein contained shall be construed to prevent such access to persons with whom Tenant normally deals in the ordinary course of the Tenant’s business unless such persons are engaged in illegal activities. Neither Tenant nor Tenant’s employees or invitees shall be permitted on the roof of the Building.

14.         Repair, Maintenance, Alterations, and Improvements. Except in the event of an emergency, Tenant shall carry out Tenant’s repair, maintenance, alteration and improvements in the Premises only during times agreed to in advance in writing by Landlord, which shall not be unreasonably withheld or delayed, in a manner which will not unreasonably interfere with the rights of other tenants in the Building.

15.         Return of Keys. At the end of the term of the Lease, Tenant shall promptly return to Landlord all keys for the Building and Premises which are in possession of Tenant.

16.         Security. Landlord may from time to time adopt reasonable and appropriate systems and procedures for the security or safety of the Building, any persons occupying, using or entering the same, or any equipment, furnishings or contents thereof, and Tenant shall comply with Landlord’s reasonable written requirements relative thereto.

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17.         Shut-Down. Tenant shall cause the doors of the Premises to be closed and securely locked before leaving the Building, and shall observe strict care and caution that all water faucets or water apparatus are entirely shut off before Tenant leaves the Building, and that all electricity shall likewise be carefully shut off, so as to prevent waste or damage.

18.         Windows. Tenant shall observe Landlord’s reasonable, non-discriminatory, written rules with respect to maintaining uniform drapes at all windows in the Premises so that the Building presents a uniform exterior appearance, and shall not install any window shades, screens, drapes, covers or other materials on or at any window in the Premises without Landlord’s prior written consent, which shall not be unreasonably withheld or delayed.

19.         Wiring. Tenant will direct electricians as to the location and manner of placement of telephone and telegraph wires. The installation of significant telephone and other significant office equipment affixed to the Premises, and the installation of electrical outlets in excess of 110 volts, shall be subject to the approval of the Landlord. Landlord reserves the right to enter upon said Premises for the purpose of installing additional electrical wiring and/or other utilities for the benefit of Tenant (with Tenant’s knowledge and written approval thereof} or adjoining lessees, but only after reasonable notice to Tenant and only at times other than during normal business hours.

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EXHIBIT G

Employee Parking Area

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EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

Insys Therapeutics, Inc.

Phoenix, Arizona

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated August 13, 2007, relating to the financial statements of Insys Therapeutics, Inc., which are contained in that Prospectus.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

/s/    BDO Seidman, LLP

Chicago, Illinois

August 16, 2007