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•	commercializing EXPAREL in the United States for postsurgical analgesia by infiltration;

•	building a streamlined commercial organization concentrating on major hospitals and ambulatory surgery centers in the United States and targeting surgeons, anesthesiologists, pharmacists and nurses;

•	demonstrating the economic benefits of EXPAREL, working directly with managed care payers, quality improvement organizations, Key Opinion Leaders, or KOLs, in the field of postsurgical pain management and leading influence hospitals in conducting Phase 4 retrospective and prospective trials and drug utilization evaluations;

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servicing the commercial audiences that are rapidly adopting EXPAREL in local infiltration procedures, including not only the soft tissue surgical audiences that were the focus of the launch, but more recently expanding our education to audiences including the orthopedic, spine, and anesthesia (infiltration into the transverse abdominus plane—iTAP) who require similar education and training to ensure consistent, proper and safe use of the product;

•	obtaining FDA approval for nerve block indication for EXPAREL;

•	leveraging the development success of EXPAREL in the animal health market through our commercial partner for Bupivacaine Liposome Injectable Suspension to serve the companion animal market;

•	manufacturing all our DepoFoam-based products, including EXPAREL, in facilities compliant with current Good Manufacturing Practices, or cGMP;

•	continuing to expand our marketed product portfolio through development of additional DepoFoam-based hospital products utilizing a 505(b)(2) strategy, which permits us to rely upon the FDA's previous findings of safety and effectiveness for an approved product. A 505(b)(2) strategy may not succeed if there are successful challenges to the FDA's interpretation of Section 505(b)(2); and

•	continuing research and development partnerships to provide DepoFoam-based products to enhance the duration of action and patient compliance for partner products.

1)	Replace the use of bupivacaine via elastomeric pumps as the foundation of a multimodal regimen for long-acting postsurgical pain management. Based on our clinical data, EXPAREL:

•	extends postsurgical analgesia for up to 72 hours, from approximately eight hours or less;

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•	utilizes existing postsurgical infiltration administration techniques;

•	dilutes easily with saline to reach desired volume;

•	is a ready-to-use formulation; and

•	facilitates treatment of both small and large surgical sites.

2)	Become the foundation of a long- acting postsurgical pain management regimen in order to reduce and delay opioid usage. Based on the clinical data from our Phase 3 hemorrhoidectomy trial as well as our retrospective health outcomes studies data, EXPAREL:

•	significantly delays and reduces opioid usage while improving postsurgical pain management;

•	delays first opioid usage to approximately 14 hours post-surgery, compared to approximately one hour for placebo;

•	significantly increases the percentage of patients requiring no opioid rescue medication through 72 hours post-surgery, to 28% compared to 10% for placebo;

•	results in 45% less opioid usage at 72 hours post-surgery compared to placebo; and

•	increases the percentage of patients who are pain free at 24 hours post-surgery compared to placebo.

3)	Improve patient satisfaction and outcomes. We believe EXPAREL:

•	provides effective pain control without the need for expensive and difficult-to-use delivery technologies that extend the duration of action for bupivacaine, such as elastomeric bags, or opioids administered through patient-controlled analgesia, or PCA, when considered as part of a multimodal postsurgical pain regimen;

•	reduces the need for patients to be constrained by elastomeric bags and PCA systems, which are clumsy, difficult to use and may introduce catheter-related issues, including infection;

•	promotes maintenance of early postsurgical pain management, which may reduce the time spent in the intensive care unit; and

4)	Develop and seek approval of additional indications for EXPAREL, including for nerve block administration. We believe the nerve block indication for EXPAREL:

•	presents a low-cost opportunity for clinical development; and

•	enables us to fully leverage our manufacturing and sales infrastructure.

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•	Bupivacaine, a well-characterized generic anesthetic/analgesic, has an established safety profile and over 20 years of use in the United States.

•	DepoFoam, modified to meet the requirements of each product, is used to extend the release of the active drug substances in the products DepoCyt(e) and the no-longer marketed DepoDur.

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•	providing publications and abstracts showing the EXPAREL clinical program efficacy and safety, health outcomes program and review articles on pain management;

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working in tandem with hospital staff, such as registered nurses, surgeons, heads of quality, pharmacists and C-level executives, to provide access and resources for drug utilization (DUE) or medication use evaluations (MUE), and Health Outcomes Studies, which provide retrospective and prospective analyses for our hospital customers using their own hospital data to demonstrate the true cost of opioid-based postsurgical pain control;

•	working with KOLs and advisory boards to address topics of best practice techniques as well as guidelines and protocols for the use of EXPAREL, meeting the educational and training needs of our physician, surgeon, anesthesiologist, pharmacist and registered nurse customers; and

•	undertaking education initiatives such as center of excellence programs, preceptorship programs, pain protocols and predictive models for enhanced patient care, interactive discussion forums, web-based training and virtual launch programs.

•	Convenience. Our DepoFoam products are ready to use and do not require reconstitution or mixing with another solution, and can be used with patient-friendly narrow gauge needles and pen systems;

•	Multiple regulatory precedents. Our current and past DepoFoam products, including DepoCyt(e) and DepoDur, have been approved in the United States and Europe, making regulatory authorities familiar with our DepoFoam technology;

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•	Extensive safety history. Our DepoFoam products have over ten years of safety data as DepoCyt(e) has been sold in the United States since 1999;

•	Proven manufacturing capabilities. We make the DepoFoam-based products, EXPAREL and DepoCyt(e) in our cGMP facilities;

•	Flexible time release. Encapsulated drug releases over a desired period of time, from 1 to 30 days;

•	Favorable pharmacokinetics. Decrease in adverse events associated with high peak blood levels, thereby improving the utility of the product;

•	Shortened development timeline. Does not alter the native molecule, potentially enabling the filing of a 505(b)(2) application; and

•	Aseptic manufacturing and filling. Enables use with proteins, peptides, nucleic acids, vaccines and small molecules.

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•	completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s Good Laboratory Practice, or GLP, regulations;

•	submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin in the United States;

•	approval by an independent institutional review board, or IRB, at each clinical trial site before each trial may be initiated;

•	performance of human clinical trials, including adequate and well-controlled clinical trials in accordance with good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each intended use;

•	submission of an NDA to the FDA;

•	satisfactory completion of an FDA pre-approval inspection of the product’s manufacturing facility or facilities to assess compliance with the FDA’s cGMP regulations, and to ensure that the facilities, methods and controls are adequate to preserve the drug’s identity, quality and purity;

•	satisfactory completion of an FDA advisory committee review, if applicable; and

•	approval by the FDA of the NDA.

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•	Phase 1: sponsors initially conduct clinical trials in a limited population to test the product candidate for safety, dose tolerance, absorption, metabolism, distribution and excretion in healthy humans or, on occasion, in patients, such as cancer patients.

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Phase 2: sponsors conduct clinical trials generally in a limited patient population to identify possible adverse effects and safety risks, to determine the efficacy of the product for specific targeted indications and to determine dose tolerance and optimal dosage. Sponsors may conduct multiple Phase 2 clinical trials to obtain information prior to beginning larger and more extensive Phase 3 clinical trials.

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Phase 3: these include expanded controlled and uncontrolled trials, including pivotal clinical trials. When Phase 2 evaluations suggest the effectiveness of a dose range of the product and acceptability of such product’s safety profile, sponsors undertake Phase 3 clinical trials in larger patient populations to obtain additional information needed to evaluate the overall benefit and risk balance of the drug and to provide an adequate basis to develop labeling.

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•	restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

•	fines, warning letters or holds on post-approval clinical trials;

•	refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;

•	product seizure or detention, or refusal to permit the import or export of products; or

•	injunctions or the imposition of civil or criminal penalties.

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The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the EMA, and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, and medicinal products containing a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

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National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA (the Reference Member State, or RMS), this National MA can be recognized in other Member States (the Concerned Member States, or CMS) through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. Under the Decentralized Procedure, an identical dossier is submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is selected by the applicant as the RMS. The competent authority of the RMS prepares a draft assessment report, a draft summary of the product characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the CMS for their approval. If the CMS raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a national MA in all the Member States (i.e. in the RMS and the CMS). If one or more CMS raise objections based on a potential serious risk to public health, the application is referred to the Coordination group for Mutual recognition and Decentralized procedure for human medicinal products, or CMDh, which is composed of representatives of the EEA Member States. If a consensus cannot be reached within the CMDh the matters is referred for arbitration to the CHMP, which can reach a final decision binding on all EEA Member States. A similar process applies to disputes between the RMS and the CMS in the Mutual Recognition Procedure.

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•	changing Medicare reimbursement methodologies;

•	fluctuating decisions on which drugs to include in formularies;

•	revising covered outpatient drug rebate calculations under the Medicaid program; and

•	reforming drug importation laws.

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•	create market demand for EXPAREL through our marketing and sales activities and other arrangements established for the promotion of EXPAREL;

•	train, deploy and support a qualified sales force;

•	secure formulary approvals for EXPAREL at a substantial number of targeted hospitals;

•	manufacture EXPAREL in sufficient quantities in compliance with requirements of the FDA and similar foreign regulatory agencies and at acceptable quality and pricing levels in order to meet commercial demand;

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•	implement and maintain agreements with wholesalers, distributors and group purchasing organizations on commercially reasonable terms;

•	receive adequate levels of coverage and reimbursement for EXPAREL from commercial health plans and governmental health programs;

•	maintain compliance with regulatory requirements;

•	obtain regulatory approvals for additional indications for the use of EXPAREL;

•	ensure that our entire supply chain efficiently and consistently delivers EXPAREL to our customers; and

•	maintain and defend our patent protection and regulatory exclusivity for EXPAREL.

•	changes in the standard of care for the targeted indications for EXPAREL, which could reduce the marketing impact of any claims that we can make;

•	the relative efficacy, convenience and ease of administration of EXPAREL;

•	the prevalence and severity of adverse events associated with EXPAREL;

•	cost of treatment versus economic and clinical benefit, both in absolute terms and in relation to alternative treatments;

•	the availability of adequate coverage or reimbursement by third parties, such as insurance companies and other healthcare payers, and by government healthcare programs, including Medicare and Medicaid;

•	the extent and strength of our marketing and distribution of EXPAREL;

•	the safety, efficacy and other potential advantages over, and availability of, alternative treatments, including, in the case of EXPAREL, a number of products already used to treat pain in the hospital setting; and

•	distribution and use restrictions imposed by the FDA or to which we agree as part of a mandatory risk evaluation and mitigation strategy or voluntary risk management plan.

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•	not effectively distribute or support our products;

•	not provide us with accurate or timely information regarding their inventories, the number of accounts using our products or complaints about our products;

•	fail to comply with their obligations to us;

•	fail to comply with laws and regulations to which they are subject, whether in the U.S. or in foreign jurisdictions;

•	reduce or discontinue their efforts to sell or promote our products; or

•	cease operations.

•	continue the hiring and training of an effective commercial organization for the commercialization of EXPAREL, and establish appropriate systems, policies and infrastructure to support that organization;

•	continue to establish and maintain effective relationships with distributors and commercial partners for the promotion and sale of our products;

•	ensure that our distributors, partners, suppliers, consultants and other service providers successfully carry out their contractual obligations, provide high quality results, and meet expected deadlines;

•	manage our development efforts and clinical trials effectively;

•	expand our manufacturing capabilities;

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•	continue to carry out our own contractual obligations to our licensors and other third parties; and

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

•	loss of revenue from decreased demand for our products and/or product candidates;

•	impairment of our business reputation or financial stability;

•	costs of related litigation;

•	substantial monetary awards to patients or other claimants;

•	diversion of management attention;

•	loss of revenues;

•	withdrawal of clinical trial participants and potential termination of clinical trial sites or entire clinical programs; and

•	the inability to commercialize our product candidates.

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•	significant capital expenditures;

•	difficulty or inability to secure financing to fund development activities for such development, acquisition or in-licensed products or technologies;

•	incurrence of substantial debt or dilutive issuances of securities to pay for development, acquisition or in-licensing of new products;

•	disruption of our business and diversion of our management's time and attention;

•	higher than expected development, acquisition or in-license and integration costs;

•	exposure to unknown liabilities;

•	difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;

•	inability to retain key employees of any acquired businesses;

•	difficulty entering markets in which we have limited or no direct experience;

•	difficulty in managing multiple product development programs; and

•	inability to successfully develop new products or clinical failure.

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•	regulatory authorities may require the addition of unfavorable labeling statements, specific warnings or contraindications (including boxed warnings);

•	regulatory authorities may suspend or withdraw their approval of the product, or require it to be removed from the market;

•	regulatory authorities may impose restrictions on the distribution or use of the product;

•	we may be required to change the way the product is administered, conduct additional clinical trials, reformulate the product, change the labeling of the product or change or obtain re-approvals of manufacturing facilities;

•	sales of the product may be significantly decreased from projected sales;

•	we may be subject to government investigations, product liability claims and litigation; and

•	our reputation may suffer.

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the federal Anti-Kickback Statute, which constrains our marketing practices, educational programs, pricing policies and relationships with healthcare providers or other entities, by prohibiting, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under federally funded healthcare programs, such as the Medicare and Medicaid programs;

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federal civil and criminal false claims and false statement laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent or making any materially false statement in connection with the delivery or payment for healthcare benefits, items, or services;

•	the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended, which created federal criminal and civil statutes that prohibit executing a scheme to defraud any healthcare benefit program;

•	federal physician self-referral laws, such as the Stark law, which prohibit a physician from making a referral to a provider of certain health services with which the physician or the physician's family member has a financial interest, and prohibit submission of a claim for reimbursement pursuant to a prohibited referral;

•	HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and

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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

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•	product recall or seizure;

•	suspension or withdrawal of an approved product from the market;

•	interruption of production;

•	operating restrictions;

•	warning letters;

•	injunctions;

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•	refusal to permit import or export of an approved product;

•	refusal to approve pending applications or supplements to approved applications that we submit;

•	denial of permission to file an application or supplement in a jurisdiction;

•	consent decrees;

•	suspension or termination of ongoing clinical trials;

•	fines and other monetary penalties;

•	criminal prosecutions; and

•	unanticipated expenditures.

•	an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, beginning in 2011;

•	an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23.1% and 13.0% of the average manufacturer price for most branded and generic drugs, respectively;

•	a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50.0% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D, beginning in 2011;

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•	extension of manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, effective March 23, 2010;

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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals beginning in April 2010 and by adding new mandatory eligibility categories for certain individuals with income at or below 133.0% of the Federal Poverty Level beginning in 2014, thereby potentially increasing both the volume of sales and manufacturers' Medicaid rebate liability;

•	expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program, effective in January 2010;

•	a new requirement to annually report drug samples that manufacturers and distributors provide to physicians, effective April 1, 2012, subject to federal implementation and enforcement policies;

•	a licensure framework for follow-on biologic products;

•	a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

•	creation of the Independent Payment Advisory Board which, beginning in 2014, will have authority to recommend certain changes to the Medicare program that could result in reduced payments for prescription drugs and those recommendations could have the effect of law even if Congress does not act on the recommendations; and

•	establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending, beginning by January 1, 2011.

•	reauthorizes the Prescription Drug User Fee Act, or PDUFA, increases the amount of associated user fees, and, for certain types of applications, increases the expected time frame for FDA review of the application;

•	permanently reauthorizes and makes some revisions to the Best Pharmaceuticals for Children Act and the Pediatric Research Equity Act, which provides for pediatric exclusivity and mandated pediatric assessments for certain types of applications, respectively;

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•	revises certain standards and requirements for FDA inspections of manufacturing facilities and the importation of drug products from foreign countries;

•	creates incentives for the development of certain antibiotic drug products;

•	modifies the standards for accelerated approval of certain new medical treatments;

•	expands the reporting requirements for potential and actual drug shortages;

•	requires the FDA to issue a report on, among other things, ensuring safe use of prescription drugs that have the potential for abuse;

•	requires the FDA to hold a public meeting regarding the potential rescheduling of drug products containing hydrocodone, which was held in January 2013; and

•	requires electronic submission of certain marketing applications following the issuance of final FDA regulations.

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

•	we may not have been the first to file patent applications for these inventions;

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

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

•	the issued patents covering our product candidates may not provide a basis for commercially viable active products, may not provide us with any competitive advantages, may not have sufficient scope or strength to protect the technologies they were intended to protect or may be challenged by third parties;

•	others may design around our patent claims to produce competitive products that fall outside the scope of our patents;

•	we may not develop or in-license additional proprietary technologies that are patentable;

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

•	competitors may infringe our patents and we may not have adequate resources to enforce our patents.

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

•	substantial damages for past infringement which we may have to pay if a court decides that our product infringes on a competitor's patent;

•	a court prohibiting us from selling or licensing our product unless the patent holder licenses the patent to us, which it would not be required to do;

•	if a license is available from a patent holder, we may have to pay substantial royalties or grant cross licenses to our patents; and

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

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•	manufacture commercial quantities of EXPAREL, at acceptable cost levels; and

•	continue to develop a commercial organization and the supporting infrastructure required to successfully market and sell EXPAREL.

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•	continue to fund our operations;

•	continue our efforts to hire additional personnel and build a commercial infrastructure to commercialize EXPAREL;

•	qualify and outsource the commercial-scale manufacturing of our products under cGMP; and

•	in-license and develop additional product candidates.

•	the costs of maintaining a commercial organization to sell, market and distribute EXPAREL;

•	the success of the commercialization of EXPAREL;

•	the cost and timing of manufacturing sufficient supplies of EXPAREL to meet customer demand, including the cost of expanding our manufacturing facilities to produce EXPAREL;

•	the rate of progress and costs of our efforts to prepare for the submission of an NDA for any product candidates that we may in-license or acquire in the future, and the potential that we may need to conduct additional clinical trials to support applications for regulatory approval;

•	the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with our product candidates, including any such costs we may be required to expend if our licensors are unwilling or unable to do so;

•	the effect of competing technological and market developments;

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

•	the potential that we may be required to file a lawsuit to defend our patent rights or regulatory exclusivities from challenges by companies seeking to market generic versions of extended-release liposome injection of bupivacaine.

•	our ability to establish and maintain the necessary commercial infrastructure to sell EXPAREL without substantial delays, including engaging additional sales and marketing personnel and contracting with third parties for warehousing, distribution, cash collection and related commercial activities;

•	maintaining our existing manufacturing facilities and expanding our manufacturing capacity, including installing specialized processing equipment for the manufacturing of EXPAREL;

•	our execution of other collaborative, licensing, distribution, manufacturing or similar arrangements and the timing of payments we may make or receive under these arrangements;

•	variations in the level of expenses related to our future development programs;

•	any product liability or intellectual property infringement lawsuit in which we may become involved;

•	regulatory developments affecting EXPAREL or the product candidates of our competitors; and

•	the level of underlying hospital demand for EXPAREL and wholesaler buying patterns.

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•	the commercial success of EXPAREL;

•	results of clinical trials of our product candidates or those of our competitors;

•	changes or developments in laws or regulations applicable to our product candidates;

•	introduction of competitive products or technologies;

•	failure to meet or exceed financial projections we provide to the public;

•	actual or anticipated variations in quarterly operating results;

•	failure to meet or exceed the estimates and projections of the investment community;

•	the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;

•	general economic and market conditions and overall fluctuations in U.S. equity markets;

•	developments concerning our sources of manufacturing supply;

•	disputes or other developments relating to patents or other proprietary rights;

•	additions or departures of key scientific or management personnel;

•	issuances of debt, equity or convertible securities;

•	changes in the market valuations of similar companies; and

•	the other factors described in this "Risk Factors" section.

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•	authorizing the issuance of "blank check" preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

•	prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;

•	eliminating the ability of stockholders to call a special meeting of stockholders; and

•	establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

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EXPAREL is a liposome injection of bupivacaine, an amide-type local anesthetic, indicated for administration into the surgical site to produce postsurgical analgesia and was approved by the FDA on October 28, 2011. We commercially launched EXPAREL in April 2012. We ship EXPAREL directly to the end user based on orders placed to wholesalers or directly to us and have no product held by wholesalers.

•	DepoCyt(e) is a sustained release liposomal formulation of the chemotherapeutic agent cytarabine and is indicated for the intrathecal treatment of lymphomatous meningitis. DepoCyt(e) was granted accelerated approval by the FDA in 1999 and full approval in 2007. We sell DepoCyt(e) to our commercial partners located in the U.S. and Europe.

•	Since the commercial launch of EXPAREL in April 2012 through December 31, 2013, 2,106 accounts have ordered EXPAREL, and during the year ended December 31, 2013, we added 1,287 new accounts. We believe the strong demand for EXPAREL has continued due to major hospital formulary wins and orders from orthopedic centers.

•	Total revenues increased $46.5 million, or 119%, in the year ended December 31, 2013, as compared to 2012, primarily driven by product sales of EXPAREL of $76.2 million, net of allowances for sales returns, prompt payment discounts, volume rebates and distribution service fees payable to wholesalers, for the year ended December 31, 2013.

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In January 2013, we completed a private placement of $120.0 million in aggregate principal amount of 3.25% convertible senior notes, or Notes. The net proceeds from the offering, including net proceeds from the exercise in full by the initial purchasers of their option to purchase an additional $10.0 million in aggregate principal amount of the Notes, were $115.3 million, after deducting the initial purchasers' discounts and commissions and the offering expenses payable by us.

•	We internalized the approximately 60-person sales force previously employed by Quintiles Commercial US, Inc., or Quintiles, and further developed a sales and marketing team entirely dedicated to commercializing EXPAREL.

•	In May 2013, we reported positive findings from the first part of our femoral nerve block study comparing the effect of EXPAREL versus placebo for total knee arthroplasty, which was initiated in 2012. The final part of this study is still ongoing and we expect to have final data in March 2014.

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In August 2013, we reported that the intercostal nerve block study for posterolateral thoracotomy, which was also initiated in 2012, did not achieve its primary endpoint. However, the FDA has previously indicated to us at its end of Phase 2 meeting that a single pivotal trial meeting its primary endpoint would be sufficient to gain approval for the nerve block indication, assuming demonstration of adequate safety. We plan to submit data from the ongoing

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•	Following a pilot program, effective October 1, 2013, we appointed CrossLink BioScience, LLC, or CrossLink, for a term of five years as the exclusive third-party distributor to promote and sell EXPAREL for orthopedic and spine surgeries in the United States, with the exception of certain geographical areas and accounts.

•	We continued the expansion of our manufacturing facility located in San Diego, California, and we anticipate receiving FDA approval for our newly installed manufacturing facility, referred to as Suite C, in the second quarter of 2014. Combined with our current facility, we expect this facility to significantly increase our manufacturing capacity and ability to meet the growing demand for EXPAREL.

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Research and development expenses increased by $11.6 million, or 117%, for the year ended December 31, 2013, as compared to 2012, driven by, among other things, an increase in clinical development expenses relating to our nerve block trials, described above. We expect to incur additional research and development expenses as we accelerate the development of EXPAREL in additional indications, including nerve block and the pediatric trials required by the FDA for EXPAREL.

•	manufacturing overhead and fixed costs associated with running two current Good Manufacturing Practices, or cGMP, manufacturing facilities, including allocated rent, utilities, insurance, depreciation and salaries and related costs of personnel, including stock-based compensation, involved with our manufacturing activities;

•	cost of active pharmaceutical ingredients;

•	royalties due to third parties on our revenues;

•	packaging, testing and freight;

•	amortization of our intangible assets;

•	regulatory and pharmacovigilance costs; and

•	cost associated with excess manufacturing capacity and any non-routine shutdown of our facilities, which are charged to cost of revenue as incurred.

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•	expenses associated with regulatory submissions, clinical trials and manufacturing, including additional expenses to prepare for the commercial manufacture of EXPAREL prior to FDA approval;

•	payments to third-party contract research organizations, contract laboratories and independent contractors;

•	payments made to consultants who perform research and development on our behalf and assist us in the preparation of regulatory filings;

•	personnel related expenses, such as salaries, benefits, travel and other related expenses, including stock-based compensation;

•	payments made to third-party investigators who perform research and development on our behalf and clinical sites where such research and development is conducted; and

•	allocated rent and utilities, depreciation and amortization, and other related expenses.

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Expected Volatility—The expected volatility rate used to value stock option grants is based on volatilities of a peer group of similar companies whose share prices are publicly available. Since our initial public offering, we have utilized our available historic volatility data combined with the publicly traded peer historic volatility to determine expected volatility over the expected option term. The peer group was developed based on companies in the pharmaceutical and biotechnology industry in a similar stage of development.

•	Expected Term—We elected to utilize the "simplified" method for "plain vanilla" options to estimate the expected term of stock option grants. Under this approach, the weighted average expected life is presumed to be the average of the vesting term and the contractual term of the option.

•	Risk-Free Interest Rate—The risk-free interest rate assumption was based on zero coupon U.S. Department of the Treasury instruments that had terms consistent with the expected term of our stock option grants.

•	Expected Dividend Yield—We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.

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•	Salaries and benefits increased by $3.6 million driven by a $3.2 million increase in stock-based compensation expense;

•	Clinical development expenses increased by $6.2 million relating to our Phase 2/3 pivotal trial of EXPAREL administered as a femoral nerve block for total knee arthroplasty and our Phase 3 pivotal trial of EXPAREL as an intercostal nerve block for thoracotomy;

•	Product development expenses increased by $0.8 million related to a potential new manufacturing process for EXPAREL; and

•	Pre-clinical expenses increased by $0.7 million related to toxicity studies in animals.

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Sales and marketing expenses increased by $11.2 million to $41.5 million in the year ended December 31, 2013, as compared to $30.3 million in the year ended December 31, 2012, due to a $8.0 million increase in project spend for EXPAREL, which included educational initiatives and programs to create product awareness in the orthopedic market, commission based payments to CrossLink, our Phase 4 trial for infiltration into iTAP, along with other selling initiatives and promotional activities to support the growth of EXPAREL, and a $3.2 million increase in salaries and benefits driven by an increase in the number of our field-based medical health science personnel; and

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General and administrative expenses increased by $5.0 million to $21.0 million in the year ended December 31, 2013, as compared to $16.0 million in the year ended December 31, 2012, primarily due to increases in salaries and benefits, including $1.4 million of stock-based compensation expense, associated with our increased headcount, as well as infrastructure costs and outside services in areas such as information technology, human resources and finance to support the commercial and manufacturing growth of EXPAREL.

•

Sales and marketing expenses increased by $20.2 million to $30.3 million in the year ended December 31, 2012, as compared to $10.1 million in the year ended December 31, 2011, due to a $12.4 million increase in salaries and benefits associated with our sales force entirely dedicated to commercializing EXPAREL, which was comprised of approximately 60 hospital specialists, seven regional directors and a national sales director; and a $4.6 million increase in project spending of which $3.0 million was promotional costs to support the launch of EXPAREL, including simulcasts, speaker trainings, educational programs, publications, promotional materials and health outcomes collaboratives; and

•	General and administrative expenses increased by $5.9 million to $16.0 million in the year ended December 31, 2012, as compared to $10.0 million in the year ended December 31, 2011, due to increases of $3.1 million in salaries and benefits associated with our increased headcount, and $2.0 million in consulting costs primarily to support our information technology structure and recruiting efforts.

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•	$1.7 million impairment of intangible assets and certain property, plant and equipment relating to DepoDur due to the notification by EKR in December 2011 of its intent to terminate our licensing, distribution and marketing agreement; and

•	$1.3 million impairment of property, plant and equipment due to our decision made during the fourth quarter of 2011 to change the automation technology process in our EXPAREL production line to expand capacity resulting in certain software and equipment that were no longer utilizable.

•	$3.5 million increase driven by the amortization of the debt discount related to the equity component of the Notes;

•	$1.0 million increase related to interest expense on higher debt balances; and

•	$0.9 million decrease in capitalized interest related to our Suite C manufacturing expansion project due to a lower interest rate on our Notes as compared to our term loan under the Oxford Credit Facility, which we repaid with the proceeds from the Notes offering.

•	$1.2 million increase in capitalized interest mostly related to our Suite C manufacturing expansion project;

•	$1.1 million decrease in warrant expense recognized during the first quarter of 2011 in connection with the conversion of these warrants upon our initial public offering; and

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•	$0.3 million decrease in interest expense associated with our 2009 and 2010 convertible and secured debt facilities which were converted to common shares in connection with our initial public offering in February 2011.

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•	our ability to successfully commercialize EXPAREL;

•	the costs of our commercialization activities for EXPAREL;

•	the cost and timing of expanding our manufacturing facilities and purchasing manufacturing and other capital equipment for EXPAREL and our other product candidates;

•	the costs of performing additional clinical trials for EXPAREL, including the pediatric trials required by the FDA as a condition of approval and the pivotal nerve block trials;

•	the scope, progress, results and costs of development for additional indications for EXPAREL and for our other product candidates;

•	the cost, timing and outcome of regulatory reviews of our other product candidates;

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

•	the extent to which we choose to establish collaboration, co-promotion, distribution or other similar agreements for our product candidates; and

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•	the costs of preparing, submitting and prosecuting patent applications and maintaining, enforcing and defending intellectual property claims.

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(a)	Documents filed as part of Form 10-K.

(1)	Financial Statements

(2)	Schedules

(3)	Exhibits

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•	Expected term of the option

•	Expected volatility

•	Expected dividends

•	Risk-free interest rate

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(a)	$10.0 million upon first commercial sale in the United States;

(b)	$4.0 million upon first commercial sale in a major EU country (United Kingdom, France, Germany, Italy and Spain);

(c)	$8.0 million when annual net sales collected reach $100.0 million;

(d)	$8.0 million when annual net sales collected reach $250.0 million; and

(e)	$32.0 million when annual net sales collected reach $500.0 million.

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•	Level 1:  Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

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•	Level 2:  Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

•	Level 3:  Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

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(1)	Incorporated by reference to the registrant's Current Report on Form 8-K, filed on February 11, 2011.

(2)	Incorporated by reference to the exhibits to the registrant's Registration Statement on Form S-1 (SEC File 333-170245).

(3)	Incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K, filed on January 23, 2013.

(4)	Incorporated by reference to the exhibits to the registrant’s Current Report on Form 8-K, filed on March 18, 2013.

(5)	Incorporated by reference to the exhibits to the registrant's Quarterly Report on Form 10-Q, filed on October 31, 2011.

(6)	Incorporated by reference to the exhibits to the registrant's Current Report on Form 8-K, filed on December 9, 2011.

(7)	Incorporated by reference to the exhibits to the registrant's Quarterly Report on Form 10-Q, filed on May 9, 2012.

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(8)	Incorporated by reference to the exhibits to the registrant’s Quarterly Report on Form 10-Q, filed on October 31, 2013.

(9)	Incorporated by reference to the exhibits to the registrant's Current Report on Form 8-K, filed on June 7, 2012.

(10)	Incorporated by reference to the exhibits to the registrant's Quarterly Report on Form 10-Q, filed on August 9, 2012.

(11)	Incorporated by reference to the exhibits to the registrant's Quarterly Report on Form 10-Q, filed on November 1, 2012

(12)	Incorporated by reference to the exhibits to the registrant's Current Report on Form 8-K, filed on December 4, 2012.

(13)	Incorporated by reference to the exhibits to the registrant’s Annual Report on Form 10-K, filed on March 7, 2013.

*	Filed herewith.

**	Furnished herewith.

***	Denotes management contract or compensatory plan or arrangement.

†	Confidential treatment requested as to certain portions, which portions were omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Request.

1.	APPOINTMENT OF MASTER DISTRIBUTOR

1.01

For the Term (as hereinafter defined) of this Agreement, Pacira appoints Master Distributor as its exclusive distributor (except as outlined in Exhibit A) for the sale of the Product (including without limitation any enhancements and improvements thereto) for all orthopedic and spine surgeries in the geographical area described in Exhibit A attached hereto (the “Territory”) and Master Distributor accepts this appointment, all subject to the terms and conditions of this Agreement. The Parties acknowledge and agree that the foregoing surgery cases shall include, without limitation, all surgical procedures involving total hip, total knee, total shoulder, total ankle, trauma, upper and lower extremities, sports medicine, foot, ankle and spine.

2.	MASTER DISTRIBUTOR’S RESPONSIBILITIES

2.01

Master Distributor agrees to act, through itself and its Sub-Distributors (as defined in Section 2.02 below), as the exclusive distributor (except as provided in Exhibit A) of the Product within the Territory; to diligently pursue a sales program to promote the Product; and to develop and increase the demand for the Product. Master Distributor also agrees to (i) meet with Pacira following the expiration of the Pilot Period as provided on Exhibit A hereto (ii) prepare an annual business and promotion plan for discussion, review, coordination and approval by Pacira  [**] prior to start of each annual period commencing on October 1, 2014 (iii) provide periodic information updates on market conditions and trends relating to the Product and forecasts on potential business opportunities, (iv) participate with Pacira in trade shows in the Territory, and (v) provide for transmission of sales bulletins, advertising literature and other information (as provided by Pacira) to actual or potential customers of Pacira. Such responsibilities shall be accomplished through prompt and efficient customer and potential customer services, the provision of adequate and timely sales effort, and the maintenance of a close working relationship with Pacira’s management.

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2.02

Master Distributor shall be permitted to engage the services of independent contractors (“Sub-Distributors”) to promote the sale of the Product with respect to portions of the Territory, but only after each such Sub-Distributor has been presented to Pacira for review and approval, which approval shall not be unreasonably withheld. In facilitating Pacira’s review of any potential Sub-Distributor, Master Distributor shall provide Pacira with the proposed form of contract between Master Distributor and Sub-Distributor containing, among other things, all material economic terms between Master Distributor and the potential Sub-Distributor. Unless Master Distributor and Pacira agree otherwise in writing, Master Distributor shall remain exclusively responsible for the servicing of all Sub-Distributor accounts and for all of the actions of each such Sub-Distributor; provided, however, notwithstanding any provision in this Agreement to the contrary, Master Distributor may cure any potential breach of this Agreement resulting directly from the actions of a Sub-Distributor by either terminating its agreement with such Sub-Distributor within [**] of receiving notice of such breach from Pacira or taking such other action with such Sub-Distributor as is acceptable to Pacira to avoid breach or termination of this Agreement. Master Distributor shall remain exclusively responsible for compensating any such Sub-Distributor.

2.03

Master Distributor shall be responsible for all aspects of the management of any sales representatives retained by Master Distributor, including, without limitation, all matters relating to the recruiting, hiring, supervising, training (except as otherwise provided herein), equipping/outfitting (including vehicle leasing, laptops, sample bags and similar equipment), reimbursement for expenses and compensating (including compensation, incentives, benefits, supplies, discretionary spending funds, equipment, travel, food and lodging) such sales representatives. All employees and agents of Master Distributor are its sole employees and agents and nothing contained herein shall be construed to make them the employees or agents of Pacira. Notwithstanding the designation of “Master Distributor”, it is understood that Master Distributor is an independent contractor and not an employee or agent of Pacira and that nothing herein contained shall be deemed to constitute the parties as partners or joint venturers and that there are no rights conferred upon Master Distributor by this Agreement to contract for, or on behalf of, or otherwise obligate Pacira, in any manner.

2.04

Master Distributor will and shall require any Sub-Distributor to maintain complete and accurate records of all activities carried out by Master Distributor or Sub-Distributor, as the case may be, and each of their respective employees and representatives relating to the performance of Master Distributor’s hereunder for the duration of Term and for three (3) years thereafter. Pacira shall have the right to audit such records upon reasonable notice to Master Distributor. Master Distributor shall, and shall cause its employees, agents and representatives to, comply, in all material respects, with all applicable laws, rules and regulations in connection with the promotion of the Product in the Territory. Without limiting the generality of the foregoing, Master Distributor shall in the course of its promotion of the Product and performance of its obligations hereunder, (a) limit claims of efficacy and safety for the Product to those which are consistent with Pacira’s then approved promotional materials for the Product or as otherwise approved by Pacira,

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2.05

Neither Master Distributor nor any Sub Distributor or any of their employees, agents or representatives will make any false or misleading representations to customers or others regarding Pacira or the Product and will not make any representations, warranties or guarantees with respect to the specifications, features or capabilities of the Product that are not consistent with the applicable current FDA approved labeling, package insert or other documentation accompanying or describing the Product, including Pacira’s (or any applicable Third Party’s) standard limited warranty and disclaimers, and that has been provided to Master Distributor by Pacira. Master Distributor shall not enlarge, modify or amend Pacira’s guarantees, warranties, prices or other conditions of sales, shall have no authority to do so, and shall not hold itself out as having authority to do so. All correspondence and negotiations pertaining to any sale or prospective sale of the Product shall be conducted by Master Distributor to clearly indicate that the Product is that of Pacira.

2.06

Information concerning any complaints, medical inquiries and/or drug information requests from consumers, physicians or other Third Parties received by Master Distributor regarding the Product in the Territory shall be forwarded to Pacira within forty eight (48) hours of Master Distributor’s receipt of the request and in accordance with Pacira’s policies and procedures as in effect and provided to Master Distributor from time to time and applicable laws, rules and regulations. As between Pacira and Master Distributor, Pacira shall respond to all medical inquiries received from Master Distributor in the manner Pacira deems appropriate. Pacira shall have sole responsibility for responding to any medical issues relating to the Product. The necessary contact information and procedures will be provided by Pacira.

2.07

Master Distributor shall promptly notify Pacira upon being contacted by the FDA or any other Governmental Authority in the Territory for any regulatory purpose pertaining to this Agreement or to the Product. Master Distributor shall not respond to the FDA or such other Governmental Authority before consulting with Pacira, unless under the circumstances pursuant to which FDA or such other Governmental Authority contacts Master Distributor, it is not practical or lawful for Company to give Pacira advance notice, in which event Master Distributor shall inform Pacira of such contact as soon as practical and lawful.

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2.08

Master Distributor shall advise Pacira within forty eight (48) hours of any complaint, adverse reaction, injury or death in the Territory including name, contact information, product and lot number (if available) resulting from the use of any Product of which it becomes aware. Master Distributor shall within five (5) days thereafter provide Pacira with a report stating the full facts known to it and cooperate fully with Pacira in its investigation of the facts.

2.09

Master Distributor (through itself and its Sub-Distributors) shall carry on such activities within the Territory and maintain such offices and other facilities as are reasonably necessary and appropriate for the promotion and sale of the Product in the Territory, including making its representatives, employees, management and other personnel performing services hereunder available during normal business hours.

2.10

Unless this Agreement is terminated (as provided in Section 8.01 below) following the conclusion of the Pilot Period (as defined in Section 8.01 below), Master Distributor shall attain the Minimum Annual Performance Goals. The performance goals for the [**] of the Subsequent Period (as defined in Section 8.01 below) are defined and set forth in Exhibit B attached hereto (the “Minimum Annual Performance Goals”).

2.11	Master Distributor shall be responsible for obtaining inquiries and/or requests for orders from customers and potential customers of Pacira and turning them into Pacira. Inquiries and/or requests for orders will be processed by Pacira and filled using Pacira’s established distribution system.

2.12

Master Distributor shall indemnify, defend and hold harmless Pacira, its directors, officers, employees, and agents and its successors and assigns (the “Pacira Indemnitee(s)”) from and against all third party claims, losses, costs, and liabilities (including, without limitation, payment of reasonable attorneys' fees and other reasonable expenses of litigation), and shall pay any damages (including settlement amounts) finally awarded, with respect to claims, suits or proceedings brought by third parties against a Pacira Indemnitee, arising out of or relating to (a) a breach by Master Distributor (or any Distributor Indemnitee as defined in Section 3.03), (b) the negligence or willful misconduct of Master Distributor except, in each case to the extent caused by the negligence or willful misconduct of a Pacira Indemnitee or (c) damage to property, or injury to, or death of persons, occasioned by, or in connection with, the acts or omissions, of Master Distributor, or its agents, employees, or Sub-Distributors.

2.13

Master Distributor shall maintain Commercial General Liability insurance (excluding Products and Completed Operations insurance) in an amount not less than [**] per occurrence and [**] annual aggregate coverage, Automobile Liability of not less than [**] Combined Single Limit, Worker’s Compensation insurance as required by applicable statute including Employer’s Liability with limits no less than [**] by bodily injury by accident/each accident; [**] by bodily injury by disease/policy limit; [**] by bodily injury by disease/policy/each employee.

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2.14	Master Distributor will comply in all material respects with all policies and procedures of Pacira as provided by Pacira to Master Distributor in writing from time to time.

2.15

Master Distributor will be responsible for providing all required information for Pacira to completely and accurately prepare all schedules and documentation required under the Physician Payment Sunshine Act (“PPSA”). Any failure to comply with the requirements of the PPSA by Master Distributor, in which Pacira is fined for failure to properly report, will be the responsibility of Master Distributor and Pacira will require full reimbursement for any and all fines and costs.

2.16

Master Distributor’s sales personnel shall be familiar in all material respects with the Product, and Master Distributor shall conduct any training of its personnel which may be reasonably necessary to accomplish the foregoing. To that end, Master Distributor shall, and shall cause its employees, sales representatives and each of the Sub-Distributors and their employees and sales representatives to, participate in, and conduct their operations in accordance with, all of Pacira’s sales representative training and certification programs, as reasonably required by Pacira from time to time.

2.17

Master Distributor shall bear all the costs and expenses incurred in performing any and all of its responsibilities in this Section 2 including the cost of any requested printed promotional materials or reprints of publications with such expenses being [**]. Notwithstanding the foregoing, the cost for set up and additional licenses on Pacira’s Learning Management System shall be [**] and billed to Master Distributor by Pacira as incurred and payable within [**] of Pacira invoice.

3.	PACIRA’S RESPONSIBILITIES

3.01

Pacira shall provide training to all of Master Distributor’s (and each Sub-Distributor’s) sales personnel involved in the promotion and sale of the Product during the Term of this Agreement. In addition, Pacira will furnish to Master Distributor (and each Sub-Distributor) reasonable sales training and subject to Section 2.17 above, other information which Master Distributor (or any Sub-Distributor) may reasonably need for promotion and sale of the Product.

3.02

Nothing contained herein shall be deemed to prevent Pacira from employing or utilizing, at its own expense, its own personnel for the purpose of advertising and promoting the sale of Product in the Territory; provided, however, Master Distributor shall receive [**] as set forth on Exhibit C on any sale of Product in the Territory during the Term related to the surgical cases described in Section 1.01.

3.03

Pacira shall indemnify, defend and hold harmless Master Distributor, the directors, officers, employees, agents and any Sub-Distributors of Master Distributor and its successors and assigns (the “Distributor Indemnitee(s)”) from and against all third party claims, losses, costs, and liabilities (including, without limitation, payment of reasonable attorneys' fees and other reasonable expenses of litigation), and shall pay any damages (including settlement amounts) finally awarded, with respect to claims, suits or

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3.04

During the Term of this Agreement, Pacira shall carry and continue in force a policy of product liability insurance for the Product promoted hereunder by Master Distributor (including, without limitation, its Sub-Distributors) with limits of not less than [**] per occurrence and [**] aggregate. Such policy shall name Master Distributor (including, without limitation, its Sub-Distributors) as an additional insured, and Pacira shall provide Master Distributor with proof of insurance, in the form of a certificate of insurance, within [**] of the Effective Date of this Agreement. Pacira shall provide Master Distributor with notice of any cancellation of such policy of insurance

4.	COMPENSATION

4.01	Pacira shall pay to Master Distributor as its entire compensation [**] as set forth and described in Exhibit C attached hereto.

5.	SELLING TERMS

5.01

Subject to the provisions of this Agreement, the Product promoted by Master Distributor shall be sold or offered for sale only at prices and upon the terms fixed by Pacira. All orders and contracts for the purchase of the Product shall be processed by Pacira through its established distribution systems. For the avoidance of doubt, Pacira shall book all sales of the Product in the Territory and shall be responsible for the pricing of the Product (including, the timing of pricing changes) and any discounting shall be at Pacira’s sole discretion. Nothing in this Section 5.01 shall be construed to limit Pacira’s ability to set prices for the Product or engage in such pricing strategies as it considers appropriate under the circumstances. Pacira shall timely advise Master Distributor of any Product price changes.

5.02

All orders and contracts for the purchase of the Product are subject to acceptance or rejection by Pacira and not binding until such acceptance by Pacira. Pacira reserves the right to refuse any business originated by Master Distributor in the Territory for any reason which in the judgment of Pacira is sufficient grounds for refusal, and Master Distributor shall not be entitled to any commission thereon.

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5.03	Master Distributor shall not acquire Product from Pacira. Title to the Product sold by Master Distributor hereunder shall pass directly from Pacira to the customer and shall not pass to Master Distributor.

6.	CONFIDENTIALITY AND NONCOMPETITION COVENANT

6.01

Pacira may, and the parties expect that it will, provide Proprietary Information to Master Distributor. Master Distributor agrees, and will require each of its Sub-Distributors to agree, that it, or such Sub-Distributor, as the case may be, will hold confidential and will not disclose, make known, divulge or communicate Proprietary Information to third parties and will not use Proprietary Information, except in furtherance of and pursuant to this Agreement. The term “Proprietary Information”, as that term is used herein, shall mean all drawings, designs, specifications, technical and manufacturing data, quality and performance standards, customer lists, and pricing strategies of Pacira, whether conveyed verbally or in writing. Proprietary Information does not include, and the restrictions related thereto shall not apply to, information in the public domain prior to the date of disclosure. Upon termination of this Agreement, Master Distributor shall surrender to Pacira all Proprietary Information of Pacira in the possession of Master Distributor and its Sub-Distributors.

6.02

Master Distributor covenants and agrees, and will require each of its Sub-Distributors to covenant and agree, that, during the term of this Agreement it, or such Sub-Distributor, as the case may be, will not, without the express written consent of Pacira: (a) promote, sell or distribute any products of any other person, corporation or other entity which are in competition with the Product it is representing hereunder, (b) act as a distributor or agent for any other person, corporation, or other entity with respect to products which are in competition with the Product it is representing hereunder or (c) intentionally promote the Product to any Carved Out Accounts as defined on Exhibit A. The foregoing limitation shall apply to products delivered to, or performed in, the Territory. Notwithstanding the prohibition contained in Section 6.02(c) above, nothing herein shall prevent Master Distributor from promoting products which would not otherwise violate the prohibitions contained in Sections 6.02 (a) or 6.02(b) to Carved Out Accounts.

6.03	Master Distributor agrees that damages may be difficult to calculate and specifically agrees that the provisions of this section may be enforced by injunctive relief; provided, however, nothing herein shall be construed as prohibiting Pacira from pursuing any other remedies available to it for breach, including the recovery of damages.

7.	TRADEMARKS

7.01

Pacira hereby grants to Master Distributor and each of its Sub-Distributors, a non-exclusive right and nontransferable right and license, without the right to grant sublicenses to any party, to use the trademarks and trade names of Pacira (the “Trademarks”) during the Term of this Agreement in connection with the promotion and advertising of the Product and the solicitation of orders for the Product in the Territory, provided that (a) Master Distributor submits to Pacira for its prior written approval examples of any

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7.02

Master Distributor shall promptly notify Pacira of any use by any third party of the Trademarks or any use by such third parties of similar marks which may constitute an infringement or passing off of the Trademarks. Pacira reserves the right, in its sole discretion, to institute any proceedings against such third party infringers and Master Distributor shall refrain from doing so. Master Distributor agrees to cooperate fully with Pacira in any action taken by Pacira against such third parties, provided that all expenses of such action shall be borne by Pacira and all damages which may be awarded or agreed upon in settlement of such action shall accrue to Pacira.

7.03

Upon the termination or expiration of this Agreement, Master Distributor shall cease and desist, and cause each of its Sub-Distributors to cease and desist, from the use of the Trademarks in any manner, including but not limited to any use in connection with Master Distributor’s corporate or trade name. In addition, Master Distributor hereby empowers Pacira and agrees to assist Pacira, if requested, to cancel, revoke or withdraw any governmental registration or authorization permitting Master Distributor to use the Trademarks.

8.	TERM AND TERMINATION

8.01

The term of this Agreement (the “Term”) shall be for an initial period of six (6) months (the “Pilot Period”), commencing April 1, 2013 and ending September 30, 2013. Upon expiration of the Pilot Period, this Agreement shall automatically continue for an additional term of five (5) years, commencing October 1, 2013 and ending September 30, 2018 (such additional five (5) year period hereinafter referred to as the “Subsequent Period”), unless either party elects to terminate this Agreement by delivering notice to the other party within fifteen (15) days prior to expiration of the Pilot Period.

8.02	This Agreement may be terminated at any time during the Term as follows (the effective date of any such termination referred to herein as the “Termination Date”):

(a)	by the non-breaching Party, in the event of a material breach by either Party, which breach (if capable of being cured) remains uncured within [**] of written notice of such breach;

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(b)	by either Party effective immediately upon written notice if any representation or warranty made herein by the other Party proves to be materially false and/or misleading when made;

(c)	by either Party effective immediately if toxicity or safety findings or side effects of the Product actually causes the discontinuation of the commercialization of the Product;

(d)	by either Party effective immediately upon written notice if the Product is withdrawn from the market for any reason (other than due to any act or omission of the terminating Party or any of its subsidiaries, or any of their respective employees, agents or representatives);

(e)

by either Party effective immediately upon written notice in the event (i) a court of competent jurisdiction enters a decree or order of relief appointing a receiver, liquidator, assignee, trustee or similar official of the other Party or any substantial part of its assets and such decree or order is consented to by the other Party or continues unstayed and in effect for a period of [**], (ii) the other Party files a voluntary petition or acquiesces in or fails to contest an involuntary petition under any bankruptcy, insolvency or similar law, (iii) an insolvency petition is filed against the other Party under any bankruptcy, insolvency or similar law which is not dismissed within [**], or (iv) the other Party makes a general assignment for the benefit of its creditors; and

(f)	upon the mutual written agreement of the Parties.

8.03	In addition to those termination rights set forth in Section 8.02, Pacira may terminate this Agreement upon the occurrence of any of the following:

(a)	actual or threatened material regulatory or other action by the FDA or any other Governmental Authority relating to the Product;

(b)

Pacira is enjoined, prohibited or restricted from granting Master Distributor the rights granted to it by Pacira hereunder, in any such case, pursuant to a final, non-appealable award, judgment, decree or other order of any court or other Governmental Authority; provided that such injunction, prohibition or restriction does not result from any action or inaction of or caused by Pacira or any of its subsidiaries, or any of their respective employees, agents or representatives;

(c)	Master Distributor is enjoined, prohibited or restricted from Promoting the Product in the Territory in accordance with the terms hereof; provided that such injunction, prohibition or restriction does not result from any action or inaction of or caused by Pacira or any of its subsidiaries, or any of their respective employees, agents or representatives;

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(d)	In the event that Master Distributor fails to meet the Minimum Annual Performance Goal for any of the Measurement Periods set forth on Exhibit B unless such failure is reasonably attributable to the inability of Pacira to provide sufficient quantities of Product to Master Distributor’s customers in the Territory during the applicable Measurement Period.

(e)	Voluntary abandonment of the business by Master Distributor as determined by a totality of the circumstances;

(f)	Conviction or a plea of guilty or no contest to a felony charge of violating any law relating to Master Distributor’s business;

(g)	Any act of Master Distributor which materially impairs the goodwill associated with Pacira’s name, trademark, trade name, service mark, logotype, or other commercial symbol;

(h)	Any material change of senior management, sales personnel or ownership of Master Distributor which in the reasonable opinion of Pacira adversely impacts the performance of Master Distributor’s obligations hereunder; or

(i)	Failure of Master Distributor to materially comply with Pacira’s sales policies and procedures, as provided to Master Distributor in writing; provided, however, this right of Pacira to terminate the Agreement shall only apply if Master Distributor does not cure such failure within [**] following notice thereof from Pacira.

8.04	Pacira shall have the right to terminate this Agreement without cause effective September 30, 2016 provided that Pacira delivers written notice of such election to terminate on or before [**].

8.05	Notice of termination of this Agreement, or election not to renew, shall be in writing and shall be sent to the other party:

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8.06	Upon termination of this Agreement all promotional material, sales bulletins, advertising literature and other written information relating to the Product in possession of Master Distributor and any Sub-Distributor shall at such time be returned to Pacira.

8.07	[**]

8.08

Upon the expiration or termination of this Agreement, each Party shall (i) return to the other Party all Confidential Information of the other Party that is in its possession; (ii) Master Distributor shall cease the promotion of the Product and return all Promotional Materials to Pacira; (iii) Pacira shall pay to Master Distributor any Performance based Payments earned up throughout the date of termination or expiration and (iv) the mutual rights and obligations of the Parties hereunder shall forthwith terminate; provided however, that the provisions of Sections 2.06, 2.07, 2.08, 2.12, 2.13, 2.15, 3.03,3.04, 4.01,6, 7.03,8.06,8.07,8.08, 11.01,11.02,11.08,11.09, 11.10 and Exhibit C shall survive any such expiration or termination of this Agreement as necessary to give full force and effect hereto or thereto, and such termination or expiration shall not terminate or otherwise affect any right or obligation accruing hereunder prior to such expiration or termination, or accruing thereafter in respect of any event occurring prior thereto.

9.	REPRESENTATIONS AND WARRANTIES; COVENANTS

9.01	Each Party hereby represents and warrants to the other Party as follows:

9.01.2	Such Party has all requisite corporate or company power and authority to enter into this Agreement and to perform the services contemplated hereunder (including, in the case of Master Distributor, the promotion of the Product hereunder).

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9.01.3

All actions on the part of such Party, the board of directors or managers of such Party and the equity holders or members of such Party necessary for (i) the authorization, execution, delivery and performance by such Party of this Agreement, and (ii) the consummation of the transactions contemplated hereby, having been duly taken. This Agreement is legally valid and binding obligations of such Party, enforceable against such Party in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).

9.01.4

None of the execution and delivery of this Agreement, the consummation of the transactions provided for herein or contemplated hereby, or the fulfillment by such Party of the terms hereof or thereof, will (with or without notice or passage of time or both): (i) conflict with or result in a breach of any provision of the certificate of incorporation, by-laws, operating agreement or other governing documents of such Party, (ii) result in a default, constitute a default under, give rise to any right of termination, cancellation or acceleration, or require any consent or approval (other than approvals that have been obtained) under any of the terms, conditions, or provision of any material note, bond, mortgage, indenture, loan, arrangement, license, agreement, lease or other instrument or obligation to which such Party is a party or by which its assets may be bound, or (iii) violate any law or regulation applicable to such part or any of its assets.

9.01.5

There is no action, suit, proceeding or investigation pending or, to such Party’s knowledge, currently threatened, against such Party that questions the validity of this Agreement or the right of such Party to enter into this Agreement, or to consummate the transactions contemplated hereby, nor does such Party have knowledge that there is any basis for the foregoing. Such Party is not a Party or subject to the provisions of any order, writ, injunction, judgment or decree of any Governmental Authority, which would adversely affect its rights or obligations hereunder or the transactions contemplated hereby. All consents, approvals, qualifications, orders or authorizations of, filings with, or notices to any Governmental Authority or any other third party required in connection with (i) such Party’s valid execution, delivery or performance of this Agreement, and (ii) the consummation of any other transaction contemplated on the part of such Party hereby have been obtained, made or given.

9.01.6	Such Party is not in violation of any law or regulation, which violation could reasonably be expected to affect such Party’s performance of its obligations hereunder, and, without limiting the generality of the foregoing, such Party holds each of the licenses, permits, approvals or authorizations necessary with respect to its current business and operations (and its right and obligations

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9.01.7	Such Party has not retained any finder, broker, agent, financial advisor or other intermediary in connection with the transactions contemplated by this Agreement.

9.02	In addition to those representations and warranties of Master Distributor set forth above, Master Distributor further represents, warrants and covenants to Pacira as follows:

9.02.2

Master Distributor has, and will at all times during the term of this Agreement have, in all material respects, the requisite expertise, experience and skill to Promote the Product and that it shall cause the services to be performed hereunder by all affiliates, employees and/or agents or Sub-Distributors of Master Distributor to be performed, in all material respects, in a competent, efficient and professional manner.

9.02.3

Neither Master Distributor nor any person employed or retained by Master Distributor or any Sub Distributor in connection with any work to be performed for or on behalf of Pacira has been debarred under Section 306(a) or (b) of the Food Drug and Cosmetic Act, 21 U.S.C.§ 301 et seq. as it may be amended from time to time and no debarred person will in the future be employed by Master Distributor or any Sub Distributor in connection with any work to be performed for or on behalf of Pacira. If at any time after execution of this Agreement, Master Distributor becomes aware that Master Distributor or any person employed by Master Distributor or any Sub Distributor in connection with any work to be performed for or on behalf of Pacira shall become or shall be in the process of being debarred, Master Distributor hereby agrees to so notify Pacira immediately in writing and immediately take steps to prevent such person from performing any of the services contemplated by this Agreement, it being understood that if appropriate and prompt disciplinary action is taken and there is no material adverse effect on Pacira or its operations as a result of such person’s actions, then Master Distributor shall be deemed to have cured any potential breach of this Agreement caused by such person’s actions.

9.03	EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NO PARTY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, INCLUDING FITNESS FOR PURPOSE INTENDED OR MERCHANTABILITY, WHETHER EXPRESS OR IMPLIED.

9.04	The representations and warranties of each Party set forth in this Section 9 shall survive until the expiration of the Term.

10.	DISPUTES

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10.01

The Parties recognize that a bona fide dispute as to certain matters may from time to time arise during the Term that relates to either Party’s rights and/or obligations hereunder. In the event of the occurrence of such a dispute, either Party may, by written notice to the other Party, have such dispute referred to their respective senior officials designated below or their successors, for attempted resolution by good faith negotiations within [**] after such notice is received. Said designated senior officials are as follows:

10.02

Subject to Section 10.1, any dispute, controversy or claim initiated by either Party arising out of, resulting from or relating to this Agreement, or the performance by either Party of its obligations under this Agreement (other than bona fide Third Party actions or proceedings filed or instituted in an action or proceeding by a Third Party against a Party), whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other Party. Any such arbitration shall be conducted under the Commercial Arbitration Rules of the American Arbitration Association by a panel of three arbitrators appointed in accordance with such rules with the arbitration taking place in New Jersey. The method and manner of discovery in any such arbitration proceeding shall be governed by the laws of the State of New Jersey. The arbitrators shall have the authority to grant injunctions and/or specific performance and to allocate between the parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date when institution of a legal or equitable proceeding based upon such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Notwithstanding the foregoing, either Party shall have the right, without waiving any right or remedy available to such Party under this Agreement or otherwise, to seek and obtain from any court of competent jurisdiction any interim or provisional relief that is necessary or desirable to protect the rights or property of such Party, pending the selection of the arbitrators hereunder or pending the arbitrators’ determination of any dispute, controversy or claim hereunder.

11.	GENERAL PROVISIONS

11.01	The failure of either party to exercise any of the provisions of this Agreement shall not be construed as a waiver of such provisions, at any future time, during the Term of this Agreement.

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11.02	This Agreement shall be binding upon the parties hereto and their respective representatives, heirs, successors and assigns.

11.03

It is expressly recognized by Pacira and Master Distributor that this Agreement is based upon Pacira’s reliance on senior management of Master Distributor and, therefore, this Agreement may not be assigned or transferred without prior written approval of Pacira. Any change of control or merger of Master Distributor shall constitute an assignment for purposes of this Section 11.03. Notwithstanding the foregoing and except as otherwise stated in Section 2.02, Master Distributor may engage the services of independent contractors to promote the sale of Product with respect to portions of the Territory, but only after each such independent contractor has been presented to Pacira for approval, which approval shall not be unreasonably withheld.

11.04

THIS AGREEMENT, INCLUDING EXHIBITS A, B AND C ATTACHED HERETO AND INCORPORATED HEREIN AS AN INTEGRAL PART OF THIS AGREEMENT, CONSTITUTES THE ENTIRE AGREEMENT OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND SUPERSEDES ALL PREVIOUS AGREEMENTS BY AND BETWEEN PACIRA AND MASTER DISTRIBUTOR AS WELL AS ALL PROPOSALS, ORAL OR WRITTEN, AND ALL NEGOTIATIONS, CONVERSATIONS OR DISCUSSIONS HERETOFORE HAD BETWEEN THE PARTIES RELATED TO THIS AGREEMENT. MASTER DISTRIBUTOR ACKNOWLEDGES THAT IT HAS NOT BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY ANY REPRESENTATIONS OR STATEMENTS, ORAL OR WRITTEN, NOT EXPRESSLY CONTAINED HEREIN.

11.05	No modification of this Agreement shall be binding on either party unless it is in writing and signed by both parties.

11.06

No liability shall result from delay in performance or nonperformance caused by Force Majeure or circumstances beyond the reasonable control of the party affected, including, but not limited to, acts of God, fire, flood, war, embargo, terrorism, any United States government regulation, director or request, accident, labor trouble or shortage thereof or inability to obtain material equipment or transport.

11.07

Neither Party may publicly disclose the existence or terms or any other matter of fact regarding this Agreement and any ancillary agreements without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that either Party may make such a disclosure and provide a copy of this Agreement and any ancillary agreements to the extent required by applicable Law or by the requirements of any nationally recognized securities exchange, quotation system or over-the-counter market on which such Party has its securities listed or traded. In the event that such disclosure is required as aforesaid, the disclosing Party shall make reasonable efforts to provide the other Party with notice beforehand and to coordinate with the other Party with respect to the wording and timing of any such disclosure. Notwithstanding the foregoing, either Party may disclose to a third party the existence or terms or any other matter of fact regarding this Agreement and any ancillary agreements

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11.08

The parties intend that this Agreement be construed consistently with the laws of the State of New Jersey. If there is a provision herein which is invalid under applicable law or inconsistent with applicable law, it shall either not be enforced or shall be enforced as if amended so as to be consistent with applicable law; but the remainder of the Agreement shall be fully enforceable as written. All disputes shall be resolved in accordance with New Jersey State law.

11.09	The Parties do not intend this Agreement to create any third party beneficiaries.

11.10

Neither Pacira nor Master Distributor (which for the purposes of this Section 11 shall include their respective affiliates, directors, managers, officers, employees, consultants, equity holders, representatives and agents) shall have any liability to the other for any punitive damages, special, incidental, consequential or indirect damages, relating to or arising from the loss of commercial or business opportunity, revenue or profit, in connection with or arising out of this Agreement, even if such damages may have been foreseeable; provided that such limitation shall not apply in the case of (a) fraud, (b) intentional misconduct and (c) any damages (including, without limitation, the types enumerated in this Section 11.10) claimed by or paid to a third party in connection with a third party claim.

11.11	This Agreement may be executed in any number of counterparts each of which will be deemed an original and all of which taken together will be deemed to constitute one and the same instrument.

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5.	If this Agreement is terminated, Pacira shall pay Master Distributor all Performance Based Payments to which Master Distributor is entitled hereunder by reason of sales made prior to the Termination Date.

6.

A “sale” made prior to the Termination Date means a binding contract created by a specific offer to purchase, which has been accepted by Pacira by the actual shipment of Product prior to the Termination Date. Pacira, from time to time, enters into supply agreements which call for issuance of blanket purchase orders or otherwise contemplate Pacira supplying Product, but which do not obligate the purchaser to purchase any particular Product or guaranty of Products and which does not release Product for delivery. Such agreements even if entered into prior to the Termination Date or prior to the end of the notification period

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

(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

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

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

(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

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

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