Exhibit 10.1

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License Agreement

Between

Adolor Corporation

And

Eli Lilly And Company

Effective As Of September 18, 2009

 

[**] = Certain information in this Agreement has been omitted and filed
separately with the Securities & Exchange Commission. Confidential treatment has
been requested with respect to the omitted portions.

 

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TABLE OF CONTENTS

 

Article 1 Definitions

     5     

1.1

  “Adolor Improvements”      5     

1.2

  “Adolor Technology”      5     

1.3

  “Affiliate”      5     

1.4

  “Alvimopan Agreements”      6     

1.5

  “Application for Marketing Authorization”      6     

1.6

  “Calendar Quarter”      6     

1.7

  “Calendar Year”      6     

1.8

  “Commercially Reasonable Efforts”      6     

1.9

  “cGCP”      6     

1.10

  “cGLP”      6     

1.11

  “cGMP”      6     

1.12

  “Clinical Trials”      7     

1.13

  “Damages”      7     

1.14

  “Data Exclusivity Period”      7     

1.15

  “Effective Date”      7     

1.16

  “FDA”      7     

1.17

  “Field of Use”      7     

1.18

  “First Commercial Sale”      7     

1.19

  “GAAP”      7     

1.20

  “Generic Product”      7     

1.21

  “Generic Competition”      8     

1.22

  “IND”      8     

1.23

  “Licensed Compound”      8     

1.24

  “Licensed Know-How”      8     

1.25

  “Licensed Patents”      8     

1.26

  “Licensed Product”      9     

1.27

  “NDA”      9     

1.28

  “Net Sales”      9     

1.29

  “OpRA II”      10     

1.30

  “OpRA II Termination Event”      11     

1.31

  “OpRA III Termination Event”      11     

1.32

  “Person”      11     

1.33

  “Phase I Clinical Trials”      11     

1.34

  “Phase II Clinical Trials”      11     

1.35

  “Phase II(a) Clinical Trials”      11     

1.36

  “Phase II(b) Clinical Trials”      11     

1.37

  “Phase III Clinical Trials”      11     

1.38

  “Post-Registration Clinical Trial”      12     

1.39

  “Regulatory Approval”      12     

1.40

  “Regulatory Documents”      12     

1.41

  “Royalty Report”      12     

1.42

  “Sublicensee”      12   

 

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1.43

  “Term”      12     

1.44

  “Territory”      12     

1.45

  “Third Person”      12     

1.46

  “Third Person      12     

1.47

  “Toxicology Studies”      12     

1.48

  “Valid Claim”      12   

Article 2 Grant of License

     13     

2.1

  Development and Commercialization License.      13     

2.2

  Sublicensing Rights - Adolor.      13     

2.3

  Sublicensing Rights - Lilly.      13     

2.4

  Nonassertion.      14     

2.5

  Non-Compete.      14     

2.6

  Partnering Notification.      14   

Article 3 Consideration

     14     

3.1

  Payments from Adolor to Lilly.      14     

3.2

  Third Person Milestone Sharing.      15     

3.3

  Royalty Payments from Adolor to Lilly.      16     

3.4

  Royalty Reductions.      16     

3.5

  Record Retention, Royalty Reports, and Royalty Payment Schedule.      16     

3.6

  Exchange Rates.      16     

3.7

  Financial Audits.      17     

3.8

  Taxes and Currency.      17     

3.9

  Late Payment.      17   

Article 4 Transfers of Know-How and Responsibility for Supplying Licensed
Compound

     17     

4.1

  Transfer of Licensed Know-How; Access to Information.      17     

4.2

  Research and Development Material.      18     

4.3

  Regulatory Documents.      18   

Article 5 Development and Commercialization of Licensed Products

     18     

5.1

  Development, Commercialization, and Manufacturing.      18     

5.2

  Progress Reports to Lilly.      19     

5.3

  Adverse Event Reporting.      19   

Article 6 Transfer of Regulatory Documents; License to Lilly

     19     

6.1

  Regulatory Documents.      19     

6.2

  Adolor Improvements and Adolor Technology.      20     

6.3

  Transfer Back on Termination.      20   

Article 7 Intellectual Property

     20     

7.1

  Adolor Improvements and Adolor Technology - Ownership.      20     

7.2

  Lilly Provision of Data or Other Information.      20     

7.3

  Filing, Prosecution and Maintenance of Licensed Patents.      21   

 

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  7.4   Adolor Right to Comment on Lilly’s Proposed Communications with a Patent
Office.      21      7.5   Patent Costs.      21      7.6   Failure to File or
Maintain Applications or Patents.      22      7.7   Patent Term Extensions.   
  22      7.8   Declaratory Judgment Action - Licensed Patents.      22      7.9
  Declaratory Judgment Action - Patents on Adolor Improvements and Adolor
Technology.      23      7.10   Paragraph IV Notice.      23      7.11  
Limitation on Cooperation with Third Parties.      23    Article 8 Infringement
     23      8.1   Notification of Suspected Infringement.      23      8.2  
Infringement of Licensed Patents.      24      8.3   Infringement of Patents
Covering Adolor Improvements or Adolor Technology.      24      8.4   Settlement
of Litigation.      25      8.5   Cooperation.      26    Article 9
Confidentiality      26      9.1   Adolor’s Obligations.      26      9.2  
Lilly’s Obligations.      27      9.3   Use of Confidential Information.      28
     9.4   Release of Other Information.      28      9.5   Publications By
Adolor.      29      9.6   Publications By Lilly.      29    Article 10
Representations, Warranties, Covenants, and Disclaimers      30      10.1   No
Litigation.      30      10.2   Ownership and Encumbrances.      30      10.3  
Licensed Patents.      30      10.4   Licenses-Adolor.      31      10.5   No
Debarment.      31      10.6   Conducting Development Work Under Agreement.     
31      10.7   Corporate Existence.      31      10.8   Authority to Execute and
Perform.      31      10.9   No Approvals or Consents.      32      10.10   No
Conflict.      32      10.11   Cooperation.      32      10.12   OpRA III
Information.      32      10.13   DISCLAIMER OF IMPLIED WARRANTIES.      32     
10.14   DISCLAIMER OF INCIDENTAL AND CONSEQUENTIAL DAMAGES.      33    Article
11 Indemnification      33      11.1   Indemnification.      33      11.2  
Notice and Opportunity to Defend.      34   

 

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  11.3   Indemnification Payment Obligation.      35      11.4   Indemnification
Payment Adjustments.      35      11.5   Indemnification Payment.      36   
Article 12 Term and Termination      36      12.1   Term.      36      12.2  
Termination for Convenience.      36      12.3   Termination for OpRA III
Termination Event.      36      12.4   Material Breach by Adolor.      37     
12.5   Material Breach by Lilly.      37      12.6   Termination for Bankruptcy.
     37      12.7   Residual Rights and Obligations Upon Termination.      38   
  12.8   Further Assurances.      38    Article 13 Limitations On Purchases Of
Equity Securities      39    Article 14 Miscellaneous      40      14.1  
Independent Contractor.      40      14.2   No Benefit to Others.      40     
14.3   Force Majeure.      40      14.5   Amendment.      41      14.6   Entire
Agreement.      41      14.7   Severability.      41      14.8   Waiver.      41
     14.9   Notices.      41      14.10   Governing Law.      42      14.11  
Assignability.      42      14.12   Jointly Prepared.      42      14.13  
Headings, Gender and “Person”.      42      14.14   Counterparts.      42     
14.15   Schedules, Exhibits and Attachments.      43      14.16   Affiliates of
Eli Lilly and Company.      43    Schedule 1.25 Licensed Patents      8   

 

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LICENSE AGREEMENT

This LICENSE AGREEMENT (this “Agreement”) is made and entered into effective as
of September 18, 2009 (the “Effective Date”), by and between Eli Lilly and
Company, a corporation, incorporated under the laws of the State of Indiana,
having its principal place of business at Lilly Corporate Center, Indianapolis,
Indiana, and its Affiliates (hereinafter collectively referred to as “Lilly”),
and Adolor Corporation, a corporation incorporated under the laws of Delaware,
having its principal place of business at 700 Pennsylvania Drive, Exton, PA
(“Adolor,” together with Lilly sometimes hereinafter individually referred to as
a “Party” and collectively referred to as the “Parties”). The Parties agree as
follows:

RECITALS

Adolor desires to license from Lilly, and Lilly now desires to license to
Adolor, on an exclusive basis, all rights to: (a) the Licensed Compound (as
defined below), and (b) the Licensed Products (as defined below).

NOW, THEREFORE, in consideration of the above premises and the mutual covenants
and agreements set forth below, the Parties hereto agree as follows.

Article 1

Definitions

As used in this Agreement, the following words and phrases shall have the
following meanings:

1.1 “Adolor Improvements” means any inventions, patentable or not, information
and/or data, to the extent that they relate to and are necessary to the
manufacture, marketing or sale of any Licensed Compound and/or any Licensed
Product, and limited to that extent, including Toxicology Studies, Clinical
Trial information and data, and Post-Registration Clinical Trial information
and/or data, which are made, conceived, reduced to practice or generated solely
by Adolor’s employees or agents, or acquired by Adolor, during the Term, and
which Adolor has the unrestricted right to assign (or, if Adolor has no such
right of assignment, to license, sublicense or otherwise provide rights of
reference) to Lilly as contemplated hereunder.

1.2 “Adolor Technology” means any know-how or patents (other than Adolor
Improvements) that Adolor (i) owns or controls and has an unrestricted right to
license or sublicense to Lilly as contemplated hereunder, and (ii) uses, to the
extent that it is used, in connection with the manufacture, marketing or sale of
Licensed Compound and/or Licensed Product under this Agreement, and limited to
that extent.

1.3 “Affiliate” means, with respect to a Party, any Person directly or
indirectly controlling, controlled by, or under common control with, such Party.
For purposes of this Agreement, the term “controlled” (including the terms
“controlled by” and “under common control with”) means the direct or indirect
ability or power to direct or cause the

 

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direction of management policies of a Person or otherwise direct the affairs of
such Person, whether through ownership of equity, voting securities, beneficial
interest, by contract or otherwise.

1.4 “Alvimopan Agreements” has the meaning set forth in Section 14.6.

1.5 “Application for Marketing Authorization” means (i) in the United States, a
New Drug Application filed with the FDA pursuant to 21 U.S.C. § 357 and 21
C.F.R. § 314 (“NDA”), and (ii) in any country other than the United States, an
application or set of applications for marketing approval comparable to an NDA
necessary to make and sell a pharmaceutical product in such country.

1.6 “Calendar Quarter” means the three-month period ending on
March 31, June 30, September 30 or December 31. The initial Calendar Quarter
will be deemed to begin on the Effective Date and end on December 31, 2009.

1.7 “Calendar Year” means the annual period ending on December 31. The initial
Calendar Year will be deemed to begin on the Effective Date and end on
December 31, 2009.

1.8 “Commercially Reasonable Efforts” means such level of efforts required to
carry out an obligation in a sustained manner consistent with the efforts
normally used by a pharmaceutical company of comparable size and resources and
at the same stage of development or commercialization, for a product or compound
which is of similar market potential and at a similar stage of development or
commercialization, as applicable, taking into account the existence of other
competitive products in the market place, the proprietary position of the
product, the regulatory structure involved, the anticipated profitability of the
product and other relevant factors.

1.9 “cGCP” or “Good Clinical Practices” means the then-current standards,
practices and procedures promulgated or endorsed by the FDA for the design,
conduct, performance, monitoring, auditing, recording, analyses, and reporting
of Clinical Trials as set forth in the guidelines titled “Guidance for Industry
E6 Good Clinical Practice: Consolidated Guidance,” including related regulatory
requirements imposed by the FDA and comparable regulatory standards, practices
and procedures in jurisdictions outside the U.S., as they may be updated from
time to time, that provide assurance that the data and reported results are
credible and accurate, and that the rights, integrity, and confidentiality of
trial subjects are protected.

1.10 “cGLP” means the then-current good laboratory practice standards
promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58, and
comparable regulatory standards in jurisdictions outside the U.S., as they may
be updated from time to time.

1.11 “cGMP” means the then-current good manufacturing practices required by the
FDA, as defined in 21 C.F.R. Parts 210 and 211 and the regulations promulgated
thereunder, for the manufacture and testing of pharmaceutical materials, and

 

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comparable laws or regulations applicable to the manufacture and testing of
pharmaceutical materials in jurisdictions outside the U.S., as they may be
updated from time to time. GMPs shall include applicable quality guidelines
promulgated under the International Conference on Harmonization.

1.12 “Clinical Trials” means Phase I Clinical Trials, Phase II, II(a), II(b)
Clinical Trials and Phase III Clinical Trials.

1.13 “Damages” means fines, penalties and damages payable to third parties
(other than Affiliates), reasonable expenses, court costs and interest payable
in connection therewith, and reasonable out-of-pocket fees and disbursements
payable to counsel, consultants, and expert witnesses in connection therewith.

1.14 “Data Exclusivity Period” means the period during which (i) the FDA (or, in
countries other than the United States, an equivalent regulatory agency)
prohibits reference to or reliance on, without the consent of the owner of an
Application for Marketing Authorization for Licensed Product or Regulatory
Approval package, the clinical and other data that is contained in such
Application for Marketing Authorization for Licensed Product or Regulatory
Approval package, and (ii) such clinical or other data is not published or
publicly available outside of such Application for Marketing Authorization for
Licensed Product or Regulatory Approval package.

1.15 “Effective Date” shall have the meaning ascribed to such term in the
introduction to this Agreement.

1.16 “FDA” means the United States Food and Drug Administration, and any
successor agency or entity that may be established hereafter.

1.17 “Field of Use” means all therapeutic, prognostic and diagnostic indications
and pharmaceutical applications for human and non-human purposes other than,
prior to an OpRA II Termination Event, the treatment of (i) substance abuse
disorders, and (ii) impulse control disorders.

1.18 “First Commercial Sale” means, as the case may be, the first commercial
sale of OpRA II, a Licensed Product, or a Licensed Compound (after approval of
the applicable Application for Marketing Authorization) to a Third Person by
Lilly, Adolor, their respective Affiliates or Sublicensees.

1.19 “GAAP” means United States Generally Applicable Accounting Principles,
consistently applied.

1.20 “Generic Product” means, on a country-by-country basis and Licensed
Product-by-Licensed Product basis, a drug product: (i) independently marketed by
a Third Person, and (ii) that contains the same active pharmaceutical
ingredient(s) as the Licensed Product or has received Regulatory Approval from
the FDA (or its foreign equivalent) as an AB-rated therapeutic equivalent (or
other equivalent rating) designating such drug product as legally substitutable
for the Licensed Product.

 

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1.21 “Generic Competition” means, with respect to a Licensed Product and on a
country-by-country basis: (i) the presence of a Generic Product or Generic
Products that has/have obtained a market share in such country in a Calendar
Quarter of greater than [**] of the combined number of units of such Licensed
Product and Generic Products sold, as such Generic Products sales are evidenced
by independent market data, such as that published by IMS Health Incorporated or
similar services, or (b) in jurisdictions in which no IMS or IMS equivalent data
is available, a decrease of Net Sales in a Calendar Quarter resulting from sales
of a Generic Product from the level of Net Sales of the Calendar Quarter prior
to the first entry of such Generic Product for such Licensed Product in such
country by more than [**]. For clarity, there shall be deemed no Generic
Competition in any Calendar Quarter if: (i) in such Calendar Quarter the market
share of the Generic Products is less than [**] based on the data published by
IMS, or (ii) in jurisdictions in which no IMS or IMS equivalent data is
available, the decrease of quarterly Net Sales, if any, compared to the Calendar
Quarter prior to the first entry of such Generic Product is less than [**].

1.22 “IND” means Investigational New Drug Applications as defined in 21 C.F.R. §
312 (as amended from time to time), and any equivalent of such items in other
countries.

1.23 “Licensed Compound” shall mean the compound known as “OpRA III” or
“LY2136231” and all pharmaceutically acceptable salts, enantiomers, racemates,
diastereomers, or mixtures thereof.

1.24 “Licensed Know-How” means all confidential information, trade secrets or
other proprietary or confidential information that Lilly owns or has an
unrestricted right to license or sublicense to Adolor as contemplated hereunder
that is reasonably useful or necessary for Adolor to engage in the development
and commercialization of Licensed Products.

1.25 “Licensed Patents” shall mean, with respect to the Licensed Compound and
all Licensed Products, those United States and foreign patents and patent
applications as set forth in Schedule 1.25, attached hereto, any other patents
or applications controlled by Lilly that are necessary or useful for the
development, manufacture, commercialization or sale of the Licensed Compound and
all Licensed Products, and shall also include any provisional applications,
divisionals and continuations thereof, any renewals, reissues, extensions (or
other governmental actions that provide exclusive rights to the owner thereof in
the patented subject matter beyond the original expiration date, such as
supplementary protection certificates), as well as any foreign counterparts of
the foregoing.

 

[**] = Certain information on this page has been omitted and filed separately
with the Securities & Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

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1.26 “Licensed Product” means a finished, formulated pharmaceutical product
containing a Licensed Compound, together with all improvements and line
extensions thereon which may be included in any supplement, modification or
addition to the relevant Regulatory Approval to the extent that any such
improvements or line extensions contain a Licensed Compound.

1.27 “NDA” means a new drug application or supplemental new drug application or
any amendments thereto submitted to the FDA in the United States.

1.28 “Net Sales” means with respect to a Licensed Product or Licensed Compound,
the gross amount invoiced by Adolor, its Affiliates and Sublicensees for sales
of such Licensed Product or Licensed Compound to Third Persons (excluding
Adolor’s Affiliates and Sublicensees), less accruals estimated, credits taken,
and actual payments (to the extent not previously accrued) made for:

[**]

Such amounts shall be determined from the books and records of Adolor (including
Adolor’s Affiliates and Sublicensees), maintained in accordance with GAAP or, in
the case of Sublicensees, such similar accounting principles, consistently
applied. Adolor further agrees that in determining such amounts, Adolor will use
its then current standard procedures and methodology, including its then current
standard exchange rate methodology for the translation of foreign currency sales
into United States dollars or, in the case of Sublicensees, such similar
methodology, consistently applied.

In the event that any Licensed Product is sold as part of a Combination Product
(where “Combination Product” means any pharmaceutical product which comprises a
Licensed Product and other active compound(s) and/or ingredients), the Net Sales
of such Licensed Product, for the purposes of determining royalty payments,
shall be determined by multiplying the Net Sales of the Combination Product (as
defined in the standard Net Sales definition) by the fraction, A / (A+B) where A
is the weighted average sale price of the Licensed Product when sold separately
in finished form, and B is the weighted average sale price of the other
product(s) sold separately in finished form.

In the event that the weighted average sale price of Licensed Product can be
determined but the weighted average sale price of the other product(s) cannot be
determined, Net Sales for purposes of determining royalty payments shall be
calculated by multiplying the Net Sales of the Combination Product by the
fraction A / C where A is the weighted average sale price of Licensed Product
when sold separately in finished form and C is the weighted average sale price
of the Combination Product.

 

[**] = Certain information on this page has been omitted and filed separately
with the Securities & Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

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In the event that the weighted average sale price of the other product(s) can be
determined but the weighted average sale price of the Licensed Product cannot be
determined, Net Sales for purposes of determining royalty payments shall be
calculated by multiplying the Net Sales of the Combination Licensed Product by
the following formula: one (1) minus B / C where B is the weighted average sale
price of the other product(s) when sold separately in finished form and C is the
weighted average sale price of the Combination Product.

In the event that the weighted average sale price of both the Licensed Product
and the other product(s) in the Combination Product cannot be determined, the
Net Sales of the Licensed Product shall be deemed to be equal to fifty percent
(50%) of the Net Sales of the Combination Product.

The weighted average sale price for a Licensed Product, other product(s), or
Combination Product shall be calculated once each Calendar Year and such price
shall be used during all applicable royalty reporting periods for the entire
following Calendar Year, subject to reconciliation as set forth below. An
estimated weighted average sale price shall be calculated by dividing the sales
dollars (translated into U.S. dollars) by the units of active ingredient sold
during the twelve (12) months (or the number of months sold in a partial
Calendar Year) of the preceding Calendar Year for the respective Licensed
Product, other product(s), or Combination Product. In the initial Calendar Year,
a forecasted weighted average sale price will be used for the Licensed Product,
other product(s), or Combination Product. Promptly following the end of the
relevant Calendar Year, and in any event, within not more than sixty (60) days,
the Parties shall calculate the actual weighted average sale price for the
Licensed Product, other product(s), or Combination Product. Any over or under
payment due to a difference between forecasted/estimated and actual weighted
average sale prices will be paid or credited in the first royalty payment of the
following Calendar Year.

If a Licensed Product is sold in combination with a device, Net Sales for
purposes of computing royalty payments, shall be determined by multiplying the
net sales of such combination by a fraction, which shall not exceed the unity,
X/Y where X is the selling price of the Licensed Product if sold separately, and
Y is the selling Price of the combination of the Licensed Product and such
device. The term “device” shall mean a delivery system that may represent
proprietary technology developed, licensed or acquired by Adolor, but shall
exclude packaging improvements that do not represent added technology.

1.29 “OpRA II” means a finished, formulated pharmaceutical product containing
the compound known as LY2196044 (which, for the avoidance of doubt, includes all
pharmaceutically acceptable salts, enantiomers, racemates, diastereomers, or
mixtures thereof), together with all improvements and line extensions thereon
which may be included in any supplement, modification or addition to the
relevant Regulatory Approval to the extent that any such improvements or line
extensions contain a LY2196044.

 

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1.30 “OpRA II Termination Event” means in each case on a country-by-country
basis, the withdrawal of OpRA II from commercial sales or, prior to the First
Commercial Sale of a product containing OpRA II, any of the following events:
(i) notification from Lilly to Adolor that Lilly or its sublicensee has
discontinued development of the OpRA II compound, or (ii) a period lasting more
than six (6) months where, (a) Lilly cannot show it or its sublicensee is using
its Commercially Reasonable Efforts to proceed with the Clinical Trial of OpRA
II, (b) OpRA II is not the subject of a clinical hold, and (c) OpRA II is not
the subject of an NDA under review by the FDA.

1.31 “OpRA III Termination Event” means in each case on a country-by-country
basis, the withdrawal of Licensed Product from commercial sales or, prior to the
First Commercial Sale of a Licensed Product, any of the following events:
(i) notification from Adolor to Lilly that Adolor or its sublicensee has
discontinued development of the Licensed Compound, or (ii) a period lasting more
than six (6) months where, (a) Adolor cannot show it or its sublicensee is using
its Commercially Reasonable Efforts to proceed with the Clinical Trial of the
Licensed Compound, (b) the Licensed Compound is not the subject of a clinical
hold, and (c) the Licensed Compound is not the subject of an NDA under review by
the FDA.

1.32 “Person” means a natural person, a corporation, a partnership, a trust, a
joint venture, a limited liability company, any governmental authority, or any
other entity or organization.

1.33 “Phase I Clinical Trials” means human clinical trials conducted anywhere in
the Territory in accordance with cGCPs in a small number of healthy volunteers
or patients to establish an initial safety profile and the pharmacokinetics
and/or pharmacodynamics of a Licensed Product.

1.34 “Phase II Clinical Trials” means Phase II(a) Clinical Trials, Phase II(b)
Clinical Trials, and both Phase II(a) Clinical Trials and Phase II(b) Clinical
Trials.

1.35 “Phase II(a) Clinical Trials” means human clinical trials conducted
anywhere in the Territory in accordance with cGCPs and intended to demonstrate
efficacy and a level of safety in a particular indication tested.

1.36 “Phase II(b) Clinical Trials” means human clinical trials conducted
anywhere in the Territory in accordance with cGCPs and intended to obtain a
preliminary indication of the unit and/or daily dosage regimen required.

1.37 “Phase III Clinical Trials” means large scale human clinical trials
conducted in patients in accordance with cGCPs and intended to demonstrate
efficacy and a level of safety in the particular indication tested sufficient to
obtain Regulatory Approval of Licensed Product. Phase III Clinical Trials
include “bridging studies” which allow submission in a target country of
clinical data generated from Phase III Clinical Trials completed in other
countries to be submitted in lieu of repeating Phase III Clinical Trials in the
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1.38 “Post-Registration Clinical Trial” means all clinical trials conducted
following Regulatory Approval of a Licensed Product having been obtained from
FDA (or, in countries other than the United States, an equivalent regulatory
agency) comprising clinical trials conducted voluntarily by one or both Parties
for enhancing marketing or scientific knowledge of an approved indication and/or
to explore additional indications, and clinical trials due to request or
requirement of FDA (or, in countries other than the United States, an equivalent
regulatory agency).

1.39 “Regulatory Approval” means (i) in the United States, approval of an
Application for Marketing Authorization for Licensed Product and satisfaction of
any related applicable FDA registration and notification requirements (if any),
and (ii) in any country other than the United States, approval by regulatory
authorities having jurisdiction over such country of a single Application for
Marketing Authorization for a Licensed Product or set of Applications for
Marketing Authorization for a Licensed Product, including, if applicable,
approval of pricing or reimbursement.

1.40 “Regulatory Documents” shall mean all INDs, clinical protocols,
Applications for Marketing Authorization and other regulatory filings,
Regulatory Approvals, reports on clinical and non-clinical studies that have
been filed or prepared for filing with the FDA or another regulatory authority,
clinical study databases to the extent readily available in a non-proprietary
format, case report forms for patients enrolled in clinical studies for which no
final reports have been prepared, correspondence with the FDA and other
regulatory authorities and any other items requested by the FDA or other
regulatory authorities.

1.41 “Royalty Report” shall have the meaning ascribed to such term in
Section 3.5.

1.42 “Sublicensee” shall have the meaning as set forth in Section 2.2.

1.43 “Term” shall have the meaning as set forth in Section 12.1.

1.44 “Territory” means all countries of the world.

1.45 “Third Person” means Persons other than the Parties or Affiliates thereof,
or employees or directors of the Parties or their Affiliates.

1.46 “Third Person Milestone Trigger Date” shall have the meaning as set forth
in Section 12.1.

1.47 “Toxicology Studies” means all toxicology and absorption, distribution,
metabolism and elimination (“ADME”) studies performed by Adolor in order to
obtain Regulatory Approvals of Licensed Product.

1.48 “Valid Claim” means a claim of an issued and unexpired patent, or a claim
of a pending patent application, which claim has not been held invalid or
unenforceable by a court or other government agency of competent jurisdiction
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which no appeal can be or has been taken, and has not been admitted to be
invalid or unenforceable through re-examination or disclaimer or otherwise.

Capitalized terms and acronyms used in this Agreement, but not defined in this
Agreement, shall have the meaning generally ascribed to such terms by
professionals in the pharmaceutical research industry. Defined capitalized terms
may be used in the singular or plural. Whenever the words “include”, “includes”
or “including” are used in this Agreement, they shall be deemed to be followed
by the words “without limitation”, whether or not they are in fact followed by
those words or words of like import.

Article 2

Grant of License

2.1 Development and Commercialization License. As of the Effective Date, Lilly
grants Adolor an exclusive, (except as to Lilly, but only for research
purposes), royalty-bearing, license under the Licensed Know-How and the Licensed
Patents, to make, have made, use, import, sell, and offer for sale Licensed
Compounds and Licensed Products in the Territory. As used in this Section 2.1,
“research purposes” means experimental uses conducted by Lilly, its Affiliates
or contractors other than those uses involving: (i) Clinical Trials,
(ii) administration to humans, (iii) administration to other primates, or
(iv) delivery of Licensed Compounds or Licensed Products to manufacturers of
Generic Products.

2.2 Sublicensing Rights - Adolor. Adolor shall have the right to sublicense the
rights granted by Lilly to Adolor in Section 2.1, to any Persons (including an
Affiliate of Adolor) (“Sublicensee”); provided, however, that should such
Sublicensee be a Person of equal or lesser size and resources than Adolor in the
territory subject to the sublicense, then such sublicense shall be subject to
Lilly’s pre-approval, which shall not be unreasonably withheld. Adolor, further,
during the term of such sublicense shall assume responsibility for the
performance by its Sublicensees of all terms, conditions, and obligations
imposed on Adolor under the terms of this Agreement as they pertain to the
rights sublicensed to such Sublicensee. Upon any termination of this Agreement,
each sublicense to a Sublicensee will, at the Sublicensee’s option, remain in
effect and shall become a direct license of such rights by Lilly to such
Sublicensee, subject to the Sublicensee agreeing in writing to assume Adolor’s
terms, conditions and obligations to Lilly under this Agreement as they pertain
to the sublicensed rights. If the Sublicensee does not elect to receive such
direct license, then its sublicense shall terminate. Adolor shall notify Lilly
within five (5) business days of executing any such sublicense and shall provide
to Lilly a copy of such sublicense, provided that Adolor may redact from such
copy any confidential information of Adolor or the Sublicensee that is not
relevant to Lilly’s administration of this Agreement.

2.3 Sublicensing Rights - Lilly. With respect to the licenses granted to Lilly
in Sections 6.1, and 6.2, such licenses shall include the right of Lilly to
sublicense so long as such sublicense is consistent with the terms and
conditions of this Agreement. Lilly, further, shall assume responsibility for
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terms, conditions, and obligations imposed on Lilly under the terms of this
Agreement as they pertain to the rights sublicensed to such sublicensee.

2.4 Nonassertion. Lilly hereby agrees that with respect to (i) any patent that,
on the Effective Date, Lilly or its Affiliates own in the Field of Use or under
which it has the right to grant licenses in the Field of Use, and/or (ii) any
patent that may later issue during the Term on an application for patent that
Lilly or its Affiliates own in the Field of Use or under which it has the right
to grant licenses in the Field of Use, and that covers a Licensed Compound or
Licensed Product or its manufacture, use or sale, Lilly and its Affiliates will
not assert against Adolor, its Affiliates or Sublicensees, any claims for
infringement based upon the manufacture, use, sale, offer for sale, or import of
any Licensed Compound or Licensed Product to the extent that such claim of
infringement is based upon any act that occurs after the Effective Date of this
Agreement.

2.5 Non-Compete. During the Term, neither Adolor nor any of its Affiliates
shall, directly or indirectly, by itself or through any Third Person, develop,
commercialize or sublicense any pharmaceutical product containing a Licensed
Compound outside of the Field of Use. During the Term, neither Lilly nor any of
its Affiliates shall, directly or indirectly, by itself or through any Third
Person, develop, commercialize or sublicense OpRA II for the treatment of
disorders relating to gastroenterology or Parkinson’s Disease. Nothing in this
Section 2.5 shall be construed as preventing either Party from conducting
research, provided that such research does not include Clinical Studies or
animal studies in primates.

2.6 Partnering Notification. During the Term: (a) if Adolor desires to
sublicense substantially all of its rights to a Licensed Product or Licensed
Compound, it shall so notify Lilly in writing not less than fourteen (14) days
prior to entering into negotiations with a potential sublicensee, and (b) if
Lilly desires to sublicense substantially all of its rights to OpRA II, it shall
so notify Adolor in writing not less than fourteen (14) days prior to entering
into negotiations with a potential sublicensee. Each Party acknowledges and
agrees that the notification requirements in this Section 2.6 shall not be
construed as creating a first right of refusal, nor any obligation to negotiate
any further agreement with the other Party.

Article 3

Consideration

3.1 Payments from Adolor to Lilly.

In consideration of the licenses set forth in Sections 2.1 and 2.2, Adolor will
pay the following amounts to Lilly:

(a) Adolor Payment on the Effective Date. Within five (5) business days of the
Effective Date, Adolor will pay Lilly the non-refundable sum of Two Million and
No/100 Dollars ($2,000,000.00) by electronic wire transfer in immediately
available funds to an account designated by Lilly.

 

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(b) Milestone Payments for Licensed Products. Within thirty (30) days of Adolor
and/or any Sublicensee achieving a milestone event listed below with respect to
the first Licensed Product to reach such milestone, Adolor will pay the
following specified non-creditable, non-refundable amount by electronic wire
transfer in immediately available funds to an account designated by Lilly:

 

Milestone Event

  

Payment

[**]

For avoidance of doubt, Adolor shall make each milestone payment to Lilly only
for the first Licensed Product to reach such milestone and not for any
subsequent Licensed Product(s) that achieve the same milestone event.
Notwithstanding anything to the contrary herein, in no event shall the aggregate
of all payments due under Section 3.1 exceed [**]. For the avoidance of doubt,
in the event that worldwide Net Sales are less than [**] in a given Calendar
Year, and in the next Calendar Year worldwide Net Sales are greater than [**],
then a milestone payment of [**] would be due to Lilly on account of such Net
Sales in the next Calendar Year.

3.2 Third Person Milestone Sharing. In the event that Adolor and a Third Person
enter into an agreement pursuant to which Adolor sublicenses rights to a
Licensed Product or Licensed Compound in exchange for, among other things,
potential future milestone payments, then Adolor will pay to Lilly [**] of each
such milestone payments, if any, that Adolor actually receives from such Third
Person, provided, however, that the amount payable to Lilly pursuant to this
paragraph shall be reduced by any amounts paid by Adolor to Lilly pursuant to
Section 3.1(b) as of the date the Third Person milestone payment is triggered.
For purposes of this Section 3.2, “milestone payments” means fixed sum payments
that are made to Adolor under such sublicense agreement due to the
accomplishment of development or commercialization milestones that occur after
execution of that agreement.

Solely by way of example, if Adolor receives a milestone payment of [**] under a
Third Person sublicense agreement and, as of the date such milestone payment was
triggered (“Third Person Milestone Trigger Date”), it had previously paid to
Lilly a total of [**] pursuant to Section 3.1(b), then Adolor shall pay to Lilly
a payment of [**] (calculated as [**]. If Adolor subsequently receives an
additional [**] milestone payment under a Third Person sublicense agreement and
if subsequent to the Third Person Milestone Trigger Date noted above it has made
additional payments to Lilly under Section 3.1(b) totaling [**], then Adolor
shall not be obligated to pay to Lilly any portion of the [**] milestone payment
received (i.e., [**]).

 

[**] = Certain information on this page has been omitted and filed separately
with the Securities & Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

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3.3 Royalty Payments from Adolor to Lilly. In consideration for the licenses and
rights granted by Lilly in Sections 2.1 and 2.2, and subject to Section 3.4
below, Adolor shall pay Lilly an [**] royalty on Net Sales of Licensed Products.
Royalties shall be payable with respect to each country and each Licensed
Product or Licensed Compound, and this payment obligation shall continue on a
country-by-country basis until the later of: [**], at which point Adolor’s
licenses under Sections 2.1 and 2.2 with respect to such country shall be fully
paid up. Notwithstanding the foregoing or anything the contrary in this
Agreement, no royalties shall be payable with respect to a country as of the
date on which all claims of all Licensed Patents applicable to such country have
been invalidated. In no event shall Lilly receive more than the above stated
royalties on Net Sales of a Licensed Product or Licensed Compound, regardless of
the number of Licensed Patents covering such Licensed Product or Licensed
Compound.

3.4 Royalty Reductions. On a Licensed Product-by-Licensed Product and
country-by-country basis, if, prior to the expiration of Adolor’s obligation to
pay Royalties in a particular country [**].

3.5 Record Retention, Royalty Reports, and Royalty Payment Schedule. Adolor
shall (and shall require its Affiliates and Sublicensees to) keep complete and
accurate books and records that are necessary to ascertain and verify royalty
payments owed under Section 3.3. Adolor shall keep such records in accordance
with GAAP or, in the case of Sublicensees, such similar accounting principles,
consistently applied. Adolor shall furnish Lilly with a quarterly report
(“Royalty Report”) on Net Sales of Licensed Products within seventy five
(75) days of the end of each Calendar Quarter. The Royalty Report shall include:
(i) Net Sales of each Licensed Product and Licensed Compound on a country by
country basis for the prior Calendar Quarter, (ii) royalty payments due for such
Licensed Product by country, and (iii) the basis for calculating such royalty
payment. Royalties due to Lilly shall be paid by Adolor in United States dollars
concurrently with the remittance of each Royalty Report (i.e., within seventy
five (75) days of the end of each Calendar Quarter).

3.6 Exchange Rates. For those sales of Licensed Product outside the United
States, the royalty shall be calculated on the basis of the local currency sales
figures translated into United States dollars according to Adolor’s then current
standard procedures and methodology. The methodology employed shall be: (i) the
methodology used by Adolor or its Sublicensees in the translation of their
foreign currency operating results for external reporting; (ii) consistent with
GAAP or, in the case of Sublicensees, such similar accounting principles,
consistently applied; and (iii) approved and reviewed by Adolor’s or its
Sublicensees’ independent certified public accountants.

 

[**] = Certain information on this page has been omitted and filed separately
with the Securities & Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

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3.7 Financial Audits. During the Term and within one (1) year after its
termination, Lilly shall, not more than once each year, have the right, at its
expense, to select an independent certified public accountant of Lilly’s choice
(and reasonably acceptable to Adolor) to inspect Adolor’s and Adolor’s
Sublicensee(s)’s records to verify the correctness of the Royalty Reports
furnished by Adolor hereunder for the two (2) preceding years to determine the
accuracy of any royalty payments made hereunder (which may include examination
of Net Sales, and cost of goods). The accountants shall keep confidential any
information obtained during such inspection and shall report to Lilly only the
royalty payments due and payable. The expense of such audit shall be borne by
Lilly, unless the audit establishes that payments for the period examined
exceeded the amount that should have been paid by five percent (5%) or more, in
which case Adolor shall be responsible for the reasonable expenses of such
audit. Within thirty (30) days after both Parties have received an audit report,
Adolor will compensate Lilly for any errors or omissions revealed by the audit.

3.8 Taxes and Currency. All payments made under this Agreement shall be in
United States dollars. Any and all taxes levied on any payments under this
Agreement shall be the liability of and paid by Lilly. If laws or regulations
require the withholding of such taxes, the taxes will be deducted by Adolor from
the payment and remitted by Adolor to the proper tax authority, provided that
Adolor will furnish Lilly with a copy of the official tax receipt on such
withholdings as soon as reasonably practicable after such withholding, and give
Lilly such assistance as may be reasonably necessary to enable or assist Lilly
to claim exemption therefrom. Proof of payment shall be provided to Lilly within
ninety (90) days after payment. Adolor will cooperate in pursuing tax refunds,
if such refund is appropriate in Lilly’s determination.

3.9 Late Payment. In the event a payment is past due as described in this
Article 3, any unpaid balance shall accrue interest at the lesser of: (i) a rate
equal to the United States prime interest rate (as reported in the Wall Street
Journal, or comparable publication if the Wall Street Journal no longer reports
such rate, published on the date closest to the date payment was due) plus six
percent (6%), or (ii) the maximum interest allowed by law. Such interest shall
be calculated from the date payment was due until the date Adolor sends the
payment to Lilly. The late payment fees described in this Section, shall be in
addition to any other remedies available to Lilly under applicable law.

Article 4

Transfers of Know-How and Responsibility for Supplying Licensed Compound

4.1 Transfer of Licensed Know-How; Access to Information. Within fifteen
(15) business days of the Effective Date, Lilly shall supply Adolor with the
Licensed Know-How, as is, in the form of copies of electronic data, relevant
documents, and where reasonably necessary, raw data (as defined in the cGLP) and
access to Persons with knowledge of such Licensed Know-How. For a period of one
year following the Effective Date, and upon reasonable notice to Lilly, Adolor
and its representatives shall be afforded reasonable access during normal
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such other hours as are reasonable under the circumstances, to examine records
and documents in Lilly’s possession that are reasonably required or useful for
Adolor to complete its development activities under the Agreement.

4.2 Research and Development Material. Within ten (10) days of Adolor’s request
for the same, Lilly shall provide Adolor with all or substantially all of the
Licensed Compound and Licensed Products that it has control over; provided, that
Lilly may retain de minimis quantities of Licensed Compound and Licensed
Products for “research purposes” to the extent permitted under Section 2.1; and
provided further, that thereafter, Lilly shall have no obligation to provide
Adolor with any quantities of Licensed Compounds that Adolor needs to
accommodate its research and development, and commercialization efforts under
this Agreement.

4.3 Regulatory Documents. Within fifteen (15) business days of the Effective
Date, Lilly shall: (a) notify the FDA that it is transferring ownership of the
IND for OpRA III to Adolor, (b) otherwise use its best efforts to transfer to
Adolor any foreign IND counterparts for the Licensed Compound and the Licensed
Products, and (c) identify Third Person manufacturers of API starting materials
and intermediates. As soon as practicable but in no event more than thirty
(30) days after the Effective Date, Lilly, to the extent it has the right to do
so, shall deliver to Adolor, and shall use reasonable best efforts to cause its
contractors to promptly deliver to Adolor, all Regulatory Documents related to
Licensed Compounds or Licensed Products, and that are reasonably required to
commercialize such Licensed Compounds or Licensed Products, that Lilly or such
contractors own or control, subject to Adolor’s payment of the reasonable costs
and expenses incurred by Lilly or its contractors in connection with
facilitating the delivery of such items. To the extent it has the right to do
so, Lilly shall assign to Adolor, and shall use reasonable best efforts to cause
its contractors to assign to Adolor, ownership of all Regulatory Documents that
relate solely to Licensed Compounds or Licensed Products. With respect to any
Regulatory Documents that relate to both Licensed Compounds or Licensed Products
and other compounds or products, Lilly shall, to the extent it has the right to
do so, permit Adolor, and shall use reasonable best efforts to cause its
contractors to permit Adolor, to reference such Regulatory Documents as
necessary solely in connection with Adolor’s development, manufacturing and/or
commercialization of Licensed Compounds or Licensed Products. Should Adolor
elect to sublicense, or to co-market or co-promote any Licensed Product with a
Third Person, Adolor shall have the right to provide appropriate access to such
Regulatory Documents to such Third Person. Adolor shall be responsible for
paying all transfer costs to Lilly’s contractors, if any, in connection with the
foregoing activities.

Article 5

Development and Commercialization of Licensed Products

5.1 Development, Commercialization, and Manufacturing. As of the Effective Date
and except as expressly provided in this Agreement, Adolor shall become
responsible for, and Lilly shall have no further responsibility (financially and
otherwise) for Licensed Compounds or Licensed Products, including: any aspects
of developing (including pre-clinical and clinical); filing INDs, Applications
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Authorization (and clinical protocols developed in support thereof); or
obtaining Regulatory Approvals; manufacturing; or commercializing. Subject to
Adolor’s obligations under Article 12, Adolor or its Sublicensees also shall
hold legal title to INDs and Applications for Marketing Authorization. Except in
accordance with this Agreement, Lilly shall have no financial obligation
relating to Licensed Compounds or Licensed Products.

5.2 Progress Reports to Lilly. After Lilly has transferred the Know-How under
Article 4, Adolor shall provide to the attention of Lilly’s Executive Vice
President, Science and Technology, reports demonstrating the progress made to
develop and commercialize the Licensed Compound or Licensed Product, as
applicable, within thirty (30) days of the end of each Calendar Year.

5.3 Adverse Event Reporting. Upon the transfer of the INDs to Adolor, Lilly will
provide Adolor any reported adverse event(s) and serious adverse event(s)
related to the Licensed Product or Licensed Compound. (The term “serious adverse
events” means any untoward medical event or reaction that at any dose: results
in death, is life-threatening; requires inpatient hospitalization or
prolongation of present hospitalization; results in persistent or significant
disability/incapacity; is a congenital anomaly/birth defect; is a medically
important event or reactions for other reasons serious.) Adolor agrees to report
adverse events and serious adverse events that occur during the development and
marketing of Licensed Products to the relevant regulatory authorities promptly
according to the applicable regulations. All appropriate records will be
retained as per Adolor’s internal retention process. If this Agreement is
terminated under Sections 12.2 or 12.4, Adolor will, upon Lilly’s request,
supply Lilly with relevant safety information with respect to Licensed Products
in either a MedWatch or CIOMS I format or other such form as is in general
international use.

Article 6

Transfer of Regulatory Documents; License to Lilly

6.1 Regulatory Documents. If this Agreement is terminated by Lilly as permitted
under Section 12.4, as soon as practicable but in no event more than ninety
(90) days after the effective date of such termination, Adolor, to the extent it
has the right to do so, shall deliver to Lilly, and shall use reasonable best
efforts to cause its Sublicensees and contractors to promptly deliver to Lilly,
all Regulatory Documents related to Licensed Compounds or Licensed Products, and
that are reasonably required to commercialize such Licensed Compounds or
Licensed Products, that Adolor or such Sublicensees or contractors own or
control, subject to Lilly’s payment of the reasonable costs and expenses
incurred by Adolor or its Sublicensees or contractors in connection with
facilitating the delivery of such items. To the extent it has the right to do
so, Adolor shall assign to Lilly, and shall use reasonable best efforts to cause
its Sublicensees and contractors to assign to Lilly, ownership of all Regulatory
Documents that relate solely to Licensed Compounds or Licensed Products. With
respect to any Regulatory Documents that relate to both Licensed Compounds or
Licensed Products and other compounds or products, Adolor shall, to the extent
it has the right to do so, permit Lilly, and shall use reasonable best efforts
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permit Lilly, to reference such Regulatory Documents as necessary solely in
connection with Lilly’s development, manufacturing and/or commercialization of
Licensed Compounds or Licensed Products. Should Lilly elect to sublicense, or to
co-market or co-promote any Licensed Product with a Third Person, Lilly shall
have the right to provide appropriate access to such Regulatory Documents to
such Third Person. Lilly shall be responsible for paying all transfer costs,
royalties, and similar payments to Adolor’s Sublicensees and contractors, if
any, in connection with the foregoing activities.

6.2 Adolor Improvements and Adolor Technology. If this Agreement is terminated
by Lilly as permitted under Section 12.4, as soon as practicable but in no event
more than ninety (90) days after the effective date of such termination, Adolor
shall, to the extent it has the right to do so, provide Lilly with access to all
Adolor Improvements and Adolor Technology related to Licensed Compounds or
Licensed Products that are in Adolor’s possession or control (including by
delivering copies of all relevant documentation), which items Lilly shall have
the right to use only in connection with making, having made, using, selling,
offering for sale and importing, Licensed Compounds and Licensed Products. Lilly
shall reimburse Adolor for the reasonable costs and expenses incurred by Adolor
in connection with the transfer of such items, including any such amounts
payable to Adolor’s Sublicensees or contractors. If this Agreement is terminated
by Lilly as permitted under Section 12.4, Adolor shall grant and hereby does
grant to Lilly, to the extent it has the right to do so, a royalty-free,
exclusive license solely to make, have made, use, sell, offer for sale, and
import Licensed Compounds and Licensed Products using all Adolor Improvements
and Adolor Technology. Lilly shall be responsible for payment of any royalties
or other amounts due from Adolor to any Third Person on account of Lilly’s
exercise of such license rights.

6.3 Transfer Back on Termination. If this Agreement is terminated under Sections
12.2 or 12.3 then Adolor shall return to Lilly the Regulatory Documents,
Licensed Compounds and Licensed Products. The Parties shall negotiate in good
faith a license to Lilly of any Adolor Technology or Improvements that are
reasonably required for the continued development, use or sale of the Licensed
Compounds or Licensed Products.

Article 7

Intellectual Property

7.1 Adolor Improvements and Adolor Technology - Ownership. Except as expressly
set forth in this Agreement, Lilly shall have no rights, title or interest in or
to any Adolor Improvements or Adolor Technology. Nothing herein shall obligate
Adolor to file, prosecute, defend or maintain any applications or patents
covering Adolor Improvements or Adolor Technology.

7.2 Lilly Provision of Data or Other Information. Upon Adolor’s request, Lilly
shall provide all data or other information in Lilly’s possession that is
reasonably necessary for the preparation, filing, prosecution, exploitation or
enforcement of patents or patent applications relating to the Adolor
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data and other information shall be delivered by Lilly to Adolor promptly, but
in no event more than fifteen (15) days after Adolor’s request. Except as
provided in Section 9.1(vii) with respect to Lilly Confidential Information,
Adolor shall not require written approval from Lilly to use data or other
information in connection with the preparation, filing, prosecution,
exploitation or enforcement of patents or patent applications relating to the
Adolor Improvements or Adolor Technology.

7.3 Filing, Prosecution and Maintenance of Licensed Patents. During the Term,
Lilly will file, prosecute and maintain the Licensed Patents using patent
counsel of its choice, but reasonably acceptable to Adolor (Adolor’s consent not
to be unreasonably withheld or delayed); provided, however, that upon an OpRA II
Termination Event and thereafter during the Term: (i) Adolor will file,
prosecute and maintain the Licensed Patents using patent counsel of its choice,
but reasonably acceptable to Lilly (Lilly’s consent not to be unreasonably
withheld or delayed), and (ii) Lilly shall transfer to Adolor in a timely manner
all documents and other materials in Lilly’s possession or control that are
reasonably required for Adolor to perform said activities.

7.4 Adolor Right to Comment on Lilly’s Proposed Communications with a Patent
Office. Before submission by Lilly of any communication to any Patent Office
(including the U.S. Patent and Trademark Office) that may affect a pending or
granted claim of the Licensed Patents encompassing the Licensed Compound,
methods of making the Licensed Compound or methods of using the Licensed
Compound, Adolor shall have the right to review the communication and provide
comments to Lilly. Lilly shall submit to Adolor a copy of any such proposed
communication at least thirty (30) days in advance of the due date of said
proposed communication for Adolor’s comment. Adolor shall promptly communicate
any comments to Lilly within fifteen (15) days of its receipt of such
communication and Lilly shall consider such comments in good faith and shall not
unreasonably reject any such comments.

7.5 Patent Costs. Lilly shall bear all expenses incurred in preparing, filing,
prosecuting, defending and maintaining all patent applications and patents under
the Licensed Patents; provided, however, that upon an OpRA II Termination Event
and thereafter during the Term Adolor shall bear all expenses incurred in
preparing, filing, prosecuting, defending and maintaining all patent
applications and patents under the Licensed Patents. Each Party shall treat any
patent applications under Licensed Patents as Confidential Information of the
other Party in accordance with the provisions of Section 9.1. Each Party shall
keep the other reasonably informed of the status of its preparation, filing,
prosecution, defense and maintenance of all patent applications and patents
under the Licensed Patents. Upon receipt of written requests from the other
Party, each Party also shall provide the other Party with written reports of all
such patent applications and patents and the status thereof, and any other
information in its possession that is reasonably necessary for the other Party
to evaluate the scope of patent protection provided by the Licensed Patents.
Should an official action rejecting any of the pending claims within the
Licensed Patents require that an amendment be made or action be taken which
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license rights granted to Adolor hereunder, the controlling Party will timely
inform the other thereof, will consult with the other Party with respect thereto
and allow the other Party to reasonably assist in formulating a response in
connection therewith.

7.6 Failure to File or Maintain Applications or Patents. Lilly shall prosecute
all patent applications in good faith and use commercially reasonable efforts,
and in no event shall Lilly dedicate lesser efforts than those exercised for its
other patent applications not directly related to the Licensed Compound or
Licensed Product. Notwithstanding the foregoing provisions of this Article 7,
either Party may decide not to file or to abandon its prosecution, defense or
maintenance of any applications or patents encompassed within the Licensed
Patents, as the case may be, (or any claims therein). The abandoning Party shall
give the other Party reasonable written notice to this effect, said notice to be
given at least thirty (30) days in advance of the date such filing is due or
such abandonment will occur to the extent reasonably possible. The notified
Party may, at its expense and in the other Party’s name, if necessary, file,
prosecute, defend and/or maintain any such applications or patents (or any
claims therein).

If this Agreement has been terminated by Lilly as permitted under Section 12.4
and Adolor decides not to file or to abandon the prosecution, defense or
maintenance of any applications or patents encompassing Adolor Improvements or
Adolor Technology, it shall give Lilly reasonable written notice to this effect,
said notice to be given at least thirty (30) days in advance of the date such
filing is due or such abandonment will occur to the extent reasonably possible.
After such notice, Lilly may, at its expense and to the extent Adolor has the
right to permit Lilly to do so, file, prosecute, defend and/or maintain such
applications or patents.

7.7 Patent Term Extensions. For Licensed Patents, Lilly is under no obligation
to apply for term extensions, supplemental protection certificates, or
functional equivalents thereof; provided, however, that upon an OpRA II
Termination Event and thereafter during the Term Adolor may apply for (in
Lilly’s name and on Lilly’s behalf where reasonably necessary) term extensions,
supplemental protection certificates, or functional equivalents thereof. Lilly
will provide Adolor with all material, information and data in its possession
reasonably necessary or reasonably useful to prepare such items.

7.8 Declaratory Judgment Action - Licensed Patents. In the event that a
declaratory judgment action alleging invalidity, unenforceability or
noninfringement of any patent under the Licensed Patents is brought against
Adolor and Adolor chooses not to defend against such action, Lilly may within
thirty (30) days after commencement of such declaratory action elect to
intervene in such action and take over the defense thereof at Lilly’s own
expense.

Notwithstanding anything to the contrary in this Article, or in Article 8, in
the event that a declaratory judgment action alleging invalidity,
unenforceability or noninfringement of any patent under the Licensed Patents is
brought against Lilly and Lilly chooses not to defend against such action,
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commencement of such declaratory action elect to intervene in such action and
take over the defense thereof at Adolor’s own expense.

7.9 Declaratory Judgment Action - Patents on Adolor Improvements and Adolor
Technology. After an OpRA III Termination Event, if a declaratory judgment
action alleging invalidity, unenforceability or noninfringement of any patents
that cover Adolor Improvements or Adolor Technology shall be brought against
Lilly, Adolor may within thirty (30) days after commencement of such declaratory
action elect to intervene in such action and take over the defense thereof at
Adolor’s own expense.

7.10 Paragraph IV Notice. If either Party receives a notice under 21 U.S.C.
§355(b)(2)(A)(iv) or 355(j)(2)(A)(vii)(IV) concerning a Licensed Patent (a
“Paragraph IV Notice”), then it shall provide a copy of such notice to the other
Party within two (2) Business Days after its receipt thereof. Adolor shall have
the only right, but no obligation, to initiate patent infringement litigation
based on a Paragraph IV Notice concerning a Licensed Product, at its own
expense. Upon request of Adolor, Lilly agrees to timely join as party-plaintiff
in any such litigation, and in any event to cooperate with Adolor in connection
with such infringement action, including timely filing such action in Lilly’s
name if required.

7.11 Limitation on Cooperation with Third Parties. Adolor agrees to not
cooperate with any Third Person beyond what cooperation Adolor may be required
to provide by law, in any action or proceeding to render any patent (or any
claim therein) under the Licensed Patents invalid, unenforceable, or not
infringed, and will not lodge or cooperate with any Third Person beyond what
cooperation Adolor may be required to provide by law, in lodging any opposition
against any pending patent application relating to the Licensed Patents.

Conversely, if this Agreement has been terminated by Lilly as permitted under
Section 12.4, Lilly agrees to not cooperate with any Third Person beyond what
cooperation Lilly may be required to provide by law, in any action or proceeding
to render any patent (or any claim therein) that cover Adolor Improvements or
Adolor Technology invalid, unenforceable, or not infringed, and will not lodge
or cooperate with any Third Person beyond what cooperation Lilly may be required
to provide by law, in lodging any opposition against any pending patent
application relating to Adolor Improvements or Adolor Technology.

Article 8

Infringement

8.1 Notification of Suspected Infringement. Each Party shall promptly notify the
other in writing of any actual, potential or suspected infringement
(collectively, “alleged infringement”) of any Licensed Patents of which such
Party becomes aware, and shall promptly provide the other Party with all
reasonably available evidence of such alleged infringement. Promptly after such
notification regarding any such alleged infringement, Adolor and Lilly shall
consult and cooperate fully to determine a course of action, if possible, to
terminate such alleged infringement without litigation.

 

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8.2 Infringement of Licensed Patents. Adolor shall have the right, but not the
obligation, to prosecute at its own expense and through counsel of its own
choice all actions for infringement of patents under the Licensed Patents to the
extent relating to Licensed Compounds or Licensed Products. In furtherance of
such right, Lilly understands and agrees that Adolor may join Lilly as a party
plaintiff in any such action without expense to Lilly. The total out-of-pocket
cost to Adolor of any such infringement action commenced by Adolor shall be
borne by Adolor. The recovery award shall be divided as follows: Adolor shall
apply any recovery of costs or damages derived from such action as follows:
[**].

Lilly shall have the right to request that Adolor take legal action against any
infringement of the Licensed Patents with respect to any Licensed Compound or
Licensed Product, as the case may be. Such request shall be by written notice.
The notice shall set forth the facts of such alleged infringement in reasonable
detail, and shall be accompanied by reasonable evidence of such infringement. If
the infringing activity is not abated within three (3) months of the time Lilly
requests that Adolor take legal action, and either Adolor has not commenced an
infringement action, or Adolor shall have notified Lilly of its intention not to
commence an infringement action, or Adolor shall have ceased its prosecution of
an infringement action, then and only then, shall Lilly have the right, but not
the obligation, to prosecute at its own expense and through counsel of its own
choice an action for infringement (including any related counterclaim for
invalidity) of such Licensed Patents with respect to Licensed Compound or
Licensed Product. In furtherance of such right, Adolor understands and agrees
that Lilly may join Adolor as a party plaintiff in any such action without
expense to Adolor. The total out-of-pocket cost to Lilly of any such
infringement action commenced by Lilly shall be borne by it. The recovery award
shall be divided as follows: Lilly shall apply any recovery of costs or damages
derived from such action as follows: [**].

8.3 Infringement of Patents Covering Adolor Improvements or Adolor Technology.
Adolor shall have the right, but not the obligation, to prosecute at its own
expense and through counsel of its own choice all actions for infringement of
any patents that cover Adolor Improvements or Adolor Technology. Adolor shall
retain the entirety of any recovery from such infringement action; provided,
however, that if this Agreement has been terminated by Lilly as permitted under
Section 12.4, Adolor, after reimbursing itself for its out-of-pocket expenses,
including reasonable attorneys’ fees, incurred in prosecuting such infringement
action, shall pay to Lilly any remaining portion of such recovery that relates
solely and directly to a Licensed Compound, or a Licensed Product.

 

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If this Agreement has been terminated by Lilly as permitted under Section 12.4,
Lilly shall have the right to request that Adolor take legal action against
infringement of the patents that cover Adolor Improvements or Adolor Technology
that relate to any Licensed Compound, or any Licensed Product. Such request
shall be by written notice and shall be accompanied by reasonable evidence of
such infringement. If within three (3) months of the time Lilly requests that
Adolor take legal action the infringing activity shall not have been abated, and
either Adolor has not commenced an infringement action or Adolor has notified
Lilly of Adolor’s intention not to commence an infringement action, or Adolor
shall have ceased its prosecution of an infringement action, then and only then,
shall Lilly have the right, but not the obligation, to prosecute at Lilly’s own
expense and through counsel of its own choice an action for infringement of such
patents, provided such infringement relates directly to a Licensed Compound, or
a Licensed Product. The right for Lilly to prosecute infringers shall include
the right for Lilly to prosecute such suits in Adolor’s name, and Adolor
consents to be a party plaintiff in any such action. The recovery award shall be
divided as follows: Lilly shall apply any recovery of costs or damages derived
from such action as follows: [**].

8.4 Settlement of Litigation. No settlement, consent judgment or other final
disposition of an action for infringement or validity may be entered into as to
any patent (or claim therein) under the Licensed Patents without Lilly’s prior
written consent, which consent shall not be unreasonably withheld. No
settlement, consent judgment or other final disposition of an action for
infringement or validity that is inconsistent with the rights and licenses
granted to Adolor under this Agreement may be entered into as to any patent (or
claim therein) under the Licensed Patents without Adolor’s prior written
consent, which consent shall, also, not be unreasonably withheld. Furthermore,
if this Agreement has been terminated by Lilly as permitted under Section 12.4,
no settlement, consent judgment or other final disposition of an action for
infringement or validity that is inconsistent with the rights and licenses
granted to Lilly under this Agreement may be entered into as to any patent
covering Adolor Improvements or Adolor Technology without Lilly’s written
consent, which consent shall not be unreasonably withheld. It is recognized by
both Parties that what is reasonable will differ depending on whether the owner
of the intellectual property is the Party conducting the action or whether it is
the licensee who is conducting the action due to a failure to act by the owner.

 

[**] = Certain information on this page has been omitted and filed separately
with the Securities & Exchange Commission. Confidential treatment has been
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8.5 Cooperation. In any declaratory or Paragraph IV action conducted pursuant to
Article 7 or any infringement or declaratory action conducted pursuant to this
Article, both Parties shall cooperate in all respects and have their employees
testify and shall make available relevant records, papers, information, samples,
specimens and the like without compensation except for out-of-pocket expenses,
which shall be borne by the Party initiating or defending such action. In the
event the Parties disagree on the choice of counsel, the conduct of litigation
in the aforementioned actions, for so long as Lilly is proceeding with the
development or commercialization of OpRA II, Lilly shall, in good faith, have
final decision authority.

Article 9

Confidentiality

9.1 Adolor’s Obligations. Adolor will maintain the Licensed Know-How and other
proprietary or trade secret information of Lilly which has been designated to
Adolor as such (“Lilly Confidential Information”) as confidential during the
Term and for a period of ten (10) years after the expiration or earlier
termination of this Agreement, unless Lilly agrees that disclosure will not
adversely affect Lilly’s proprietary interests, such agreement not to be
unreasonably withheld. However, such obligation of confidentiality and the use
restrictions in Section 9.3 shall not apply to any Lilly Confidential
Information which:

(i) is, as of the Effective Date, in the public domain, or subsequently enters
the public domain through no fault of Adolor, it employees or agents;

(ii) was known by Adolor prior to disclosure by Lilly hereunder as demonstrated
by written documentation;

(iii) is disclosed to Adolor by a Third Person lawfully in possession of same
and having the right to disclose same;

(iv) is independently developed by Adolor as demonstrated by written evidence
without reference to information disclosed to Adolor by Lilly;

(v) is disclosed pursuant to Lilly’s prior written approval;

(vi) is required to be disclosed to (or by) a governmental authority provided
reasonable notice of the impending disclosure is provided to Lilly and Adolor
provides reasonable assistance to Lilly in order to permit Lilly to contest such
disclosure;

(vii) is required to be disclosed in order to allow Adolor to (a) defend against
litigation with a Third Person, (b) file, prosecute or enforce patents and
patent applications, provided Adolor shall not use such information in any
patent application without Lilly’s prior written approval, such approval not to
be unreasonably withheld or delayed, (c) comply with governmental regulations,
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(d) file or support an IND or an Application for Market Authorization for a
Licensed Product;

(viii) is required to be disclosed in order to allow Adolor to develop or obtain
Regulatory Approval of a Licensed Product;

(ix) is disclosed to a Third Person in connection with developing, testing,
evaluating or applying for or securing Regulatory Approval of a Licensed Product
or a Licensed Compound, or for commercializing a Licensed Product, provided such
Third Person has agreed to be bound by confidentiality and non-use terms at
least as stringent as those in this Agreement; or

(x) is disclosed to a potential Sublicensee who has entered into, or is
contemplating entering into, a written agreement with Adolor regarding the
commercialization of Licensed Product, provided such potential Sublicensee has
agreed to be bound by confidentiality and non-use terms at least as stringent as
those in this Agreement.

9.2 Lilly’s Obligations. Lilly will maintain all Adolor Improvements, Adolor
Technology, Royalty Reports and any other proprietary or trade secret
information of Adolor which has been designated to Lilly as such (“Adolor
Confidential Information”) as confidential during the Term and for a period of
ten (10) years after the expiration or earlier termination of this Agreement,
unless Adolor agrees that disclosure will not adversely affect Adolor’s
proprietary interests, such agreement not to be unreasonably withheld. However,
such obligation of confidentiality and the use restrictions in Section 9.3 shall
not apply to any Adolor Confidential Information which:

(i) is, as of the Effective Date, in the public domain, or subsequently enters
the public domain through no fault of Lilly, it employees or agents;

(ii) was known by Lilly prior to disclosure by Adolor hereunder as demonstrated
by written documentation;

(iii) is disclosed to Lilly by a Third Person lawfully in possession of same and
having the right to disclose same;

(iv) is independently developed by Lilly as demonstrated by written evidence
without reference to information disclosed to Lilly by Adolor;

(v) is disclosed pursuant to Adolor’s prior written approval;

(vi) is required to be disclosed to (or by) a governmental authority provided
reasonable notice of the impending disclosure is provided to Adolor and Lilly
provides reasonable assistance to Adolor in order to permit Adolor to contest
such disclosure;

(vii) is required to be disclosed in order to allow Lilly to (a) defend against
litigation with a Third Person, (b) file, prosecute or enforce patents and
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applications, provided Lilly shall not use such information in any patent
application without Adolor’s prior written approval, such approval not to be
unreasonably withheld, (c) comply with governmental regulations, or
(d) following any termination of this Agreement by Lilly as permitted under
Section 12.4, file or support an IND or an Application for Market Authorization
for a Licensed Product;

(viii) following any termination of this Agreement by Lilly as permitted under
Section 12.4, is required to be disclosed in order to allow Lilly to develop or
obtain Regulatory Approval of a Licensed Product;

(ix) following any termination of this Agreement by Lilly as permitted under
Section 12.4, is disclosed to a Third Person in connection with developing,
testing, evaluating or applying for or securing Regulatory Approval of a
Licensed Product or a Licensed Compound, or for commercializing a Licensed
Product, provided such Third Person has agreed to be bound by confidentiality
and non-use terms at least as stringent as those in this Agreement; or

(x) following any termination of this Agreement by Lilly as permitted under
Section 12.4, is disclosed to a potential sublicensee who has entered into, or
is contemplating entering into, a written agreement with Lilly regarding the
commercialization of Licensed Product, provided such potential sublicensee has
agreed to be bound by confidentiality and non-use terms at least as stringent as
those in this Agreement.

9.3 Use of Confidential Information. Other than to perform its obligations or
exercise its rights under this Agreement, neither Party shall use for any
purpose any Confidential Information of the other Party received under this
Agreement.

9.4 Release of Other Information. Neither Party shall use the name of the other
Party in any publication or announcement of this Agreement (other than to its
employees) without the prior written approval of the other Party. Without
limitation, this prohibition applies to press releases, annual reports,
prospectuses, public statements, educational and scientific conferences,
promotional materials, governmental filings and discussions with public
officials, securities analysts, investors and the media. However, subject to the
requirements for review and approval that follow, this provision does not apply
to a disclosure regarding this Agreement, which counsel to a Party has advised
is required by law or regulation, to regulatory agencies such as the FDA,
Securities and Exchange Commission (“SEC”), Federal Trade Commission and/or
Department of Justice. This includes requests for a copy of this Agreement or
related information by tax authorities. If any Party to this Agreement
determines a release of information regarding the existence or terms of this
Agreement is required by law or regulation, prior to any release of such
information, that Party will notify the other Party as soon as practical and
provide reasonably appropriate detail in relation to the disclosure required and
will endeavor in good faith to provide the other Party with a minimum of five
(5) business days to review the proposed public statement. The Parties will then
discuss what information, if any, will actually be released and, unless required
by law, no such release shall be made unless both Parties consent to the
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disclosed, such consent not to be unreasonably withheld. In addition, Lilly
shall have ten (10) business days to review and comment on any redacted version
of this Agreement to be filed with the SEC or other agencies, and Adolor shall
use all reasonable efforts to redact therefrom any such information that Lilly
shall reasonably request within such ten (10) business day period. Nothing
herein shall prohibit Adolor or Lilly from disclosing this Agreement or its
terms to a potential Sublicensee who has entered into, or is contemplating
entering into, a written agreement with Adolor or Lilly regarding the
commercialization of a Licensed Product or OpRA II, respectively, provided such
potential Sublicensee has agreed to be bound by confidentiality at least as
stringent as Adolor’s confidentiality obligation to Lilly under this Agreement.

Each Party shall submit to the other all press releases concerning this
Agreement and shall not release such press releases without the other Party’s
prior approval (which shall not be unreasonably withheld).

9.5 Publications By Adolor. Provided that the First Commercial Sale of a
Licensed Product or Licensed Compound has not yet occurred, and provided that an
OpRA II Termination Event has not yet occurred, then, at least forty-five
(45) days prior to its intended submission for publication, Adolor shall provide
Lilly the opportunity to review and comment on the impact that any proposed
publication regarding Licensed Compound or Licensed Product (whether oral,
written, or otherwise), including any abstracts or manuscripts, might have on
the Lilly Confidential Information or Lilly’s intellectual property rights. At
Lilly’s request, Adolor shall delay submission for a period sufficient to permit
adequate steps to be taken to secure patent protection for any patentable
subject matter referred to therein, which will not be for a period longer than
60 days beyond the initial 45-day review period. Adolor or Lilly, as the case
may be, shall take reasonable steps to secure such protection on inventions in
accordance with the appropriate provisions of Article 7 of this Agreement. At
Lilly’s request, confidential information shall be removed from such proposed
publication.

9.6 Publications By Lilly. Provided that the First Commercial Sale of OpRA II
has not yet occurred, and at least forty-five (45) days prior to its intended
submission for publication, Lilly shall provide Adolor the opportunity to review
and comment on the impact that any proposed publication regarding Licensed
Compound or Licensed Product (whether oral, written, or otherwise), including
any abstracts or manuscripts, might have on the Adolor Confidential Information
or Adolor’s intellectual property rights. At Adolor’s request, Lilly shall delay
submission for a period sufficient to permit adequate steps to be taken to
secure patent protection for any patentable subject matter referred to therein,
which will not be for a period longer than 60 days beyond the initial 45-day
review period. Lilly or Adolor, as the case may be, shall take reasonable steps
to secure such protection on inventions in accordance with the appropriate
provisions of Article 7 of this Agreement. At Adolor’s request, confidential
information shall be removed from such proposed publication.

 

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Article 10

Representations, Warranties, Covenants, and Disclaimers

10.1 No Litigation. Each Party represents that there is no litigation or
proceeding pending or, to the best of such Party’s knowledge, threatened against
or involving such Party in any court or before any agency or regulatory body
that is reasonably expected to result in a judgment or liability against such
Party that would adversely affect its ability or right to carry on its business
as now conducted or to perform its obligations under this Agreement.

10.2 Ownership and Encumbrances. Lilly hereby represents that it is the owner of
the Licensed Patents and the Licensed Know-How and that it has and shall
maintain for the Term the full right and power to grant the licenses set forth
in Sections 2.1, and 2.2 in the manner and to the extent set forth herein, free
and clear of any adverse assignment or other similar encumbrances inconsistent
with such commitments and grants, subject to the provisions of Article 7 and
Article 8 above.

10.3 Licensed Patents. To the best of Lilly’s knowledge as of the Effective
Date, there is no claim or demand of any Person pertaining to, or any proceeding
which is pending or threatened, that challenges or opposes the rights of Lilly
in respect of any of the Licensed Patents or Licensed Know-How, or that asserts
the invalidity, misuse, unregisterability or unenforceability of any of the
Licensed Patents, or requests the reexamination of any of the Licensed Patents
or through the institution or written threat of institution of interference,
nullity or similar invalidity proceedings before the United States Patent and
Trademark Office or any analogous foreign entity, and there is no colorable
basis for any such claims.

(i) To the best of Lilly’s knowledge (with the exception of U.S. Patents [**]
and any foreign equivalents of which Lilly is aware but has made no
determination of validity or infringement) as of the Effective Date, the
manufacture, use or sale of Licensed Compound or Licensed Product as
contemplated hereunder will not infringe or constitute misappropriation of or
otherwise violate any valid and enforceable patent or other proprietary rights
of any Third Person. Neither Lilly nor any of its Affiliates have received any
verbal or written notice or claim that such manufacture, use or sale will
constitute the infringement or misappropriation or otherwise violate any patent
or other proprietary rights of any Third Person.

(ii) To the best of Lilly’s knowledge as of the Effective Date, Lilly has
obtained assignments of the Licensed Patents listed in Schedule 1.25 from the
inventors named therein, and all such assignments of inventorship rights are
valid and enforceable; and there is no claim of any Person pertaining to, or any
proceeding which is pending or threatened, that challenges the inventorship of
the Licensed Patents;

 

[**] = Certain information on this page has been omitted and filed separately
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(iii) To the best of Lilly’s knowledge as of the Effective Date, there is no
pending patent application of any Third Person or entity that discloses subject
matter that may potentially interfere under 35 U.S.C. § 135 with the subject
matter of the Licensed Patents;

(iv) To the best of Lilly’s knowledge as of the Effective Date, Lilly has
complied with all applicable Laws in all material respects, including any
disclosure and duty of candor requirements, in connection with the filing,
prosecution and maintenance of the Licensed Patents in the Territory;

(v) Lilly hereby represents that the Licensed Know-How provided to Adolor
hereunder and the Licensed Patents as defined in Schedule 1.25 are as of the
Effective Date all of the intellectual property rights owned or controlled by
Lilly or its Affiliates, and to the best of Lilly’s knowledge any Third Party,
that are necessary or desirable for the use, sale, offer for sale, import,
manufacture, or the having manufactured of the Licensed Compounds and the
Licensed Products in the Field of Use in the Territory.

10.4 Licenses-Adolor. Adolor hereby warrants that it has and shall maintain for
the Term, the full right and power to satisfy its commitments to Lilly under
Section 6.1, and to grant the licenses set forth in Sections 6.2 and 2.3 in the
manner and to the extent set forth, free and clear of any adverse assignment,
grant or other encumbrances inconsistent with such commitments and grants,
subject to the provisions of Articles 7 and 8 above.

10.5 No Debarment. Each Party represents and warrants to the other that it will
comply at all times with the provisions of the Generic Drug Enforcement Act of
1992 and upon request each Party will certify in writing to the other Party that
neither such Party, its employees, nor any Person providing services for such
Party under this Agreement has been debarred under the provisions of such Act.

10.6 Conducting Development Work Under Agreement. All work carried out by Adolor
with respect to Licensed Compounds or Licensed Products shall be carried out in
material compliance with applicable laws at the site where such work is being
conducted, including, without limitation, international, foreign, federal,
state, and local laws, statutes, regulations, guidelines or orders and any
relevant cGMP, cGLP and cGCP requirements.

10.7 Corporate Existence. As of the Effective Date, each Party represents to the
other that it is a company duly organized, validly existing, and, if relevant in
its jurisdiction of formation, in good standing under the laws of the
jurisdiction in which it is formed.

10.8 Authority to Execute and Perform. As of the Effective Date, each Party
represents to the other that it:

 

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(i) has the power and authority and the legal right to enter into this Agreement
and perform its obligations hereunder;

(ii) has taken all necessary corporate action on its part required to authorize
the execution and delivery of this Agreement; and

(iii) has duly executed and delivered the Agreement, which constitutes a legal,
valid, and binding obligation of it and which is enforceable against it in
accordance with the terms of this Agreement.

10.9 No Approvals or Consents. Each Party, as of the Effective Date, represents
to the other Party that all necessary consents, approvals and authorizations of
all governmental authorities and Third Persons required to be obtained by such
Party in connection with its execution of this Agreement and the transfer of
rights described in this Agreement have been obtained.

10.10 No Conflict. Each Party represents to the other that its execution and
delivery of the Agreement and its performance of its obligations hereunder:

(i) do not conflict with or violate any requirement of applicable law or
regulation or any provision of its company governance documents in any material
way, and

(ii) do not conflict with, violate, breach, or constitute a default under any
contractual obligation or court or administrative order by which such Party is
bound.

10.11 Cooperation. The Parties agree to cooperate with each other in determining
whether any filings are required to be made or consents required to be obtained
in the jurisdictions in connections with the transactions contemplated hereby
and in making or causing to be made any such filings promptly and in seeking to
obtain in a timely manner any such consents. The Parties shall furnish to each
other all information as may be reasonably required in order to effectuate the
foregoing.

10.12 OpRA III Information. Lilly represents to Adolor that Lilly has given
Adolor access to all clinical and pre-clinical data and information about the
Licensed Compound and the Licensed Product that is in Lilly’s or its Affiliates’
possession, including access to all INDs, the NDA and related filings with the
FDA for the Licensed Compound and the Licensed Product and all material
correspondence to and from the FDA relating to the foregoing matters.

10.13 DISCLAIMER OF IMPLIED WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN THIS
Article 10, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER AS
TO THE LICENSED PATENTS, KNOW-HOW, LICENSED COMPOUNDS, LICENSED PRODUCTS,
REGULATORY DOCUMENTS, ADOLOR IMPROVEMENTS OR ADOLOR TECHNOLOGY, EXPRESS OR
IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTE, OR OTHERWISE, AND

 

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EACH PARTY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES
INCLUDING WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.
Without limiting the foregoing, each Party acknowledges that it has not and is
not relying upon any implied warranty of merchantability or of fitness for a
particular purpose or otherwise, or upon any representation or warranty
whatsoever as to the prospects (financial, regulatory or otherwise), validity,
or likelihood of success of Licensed Compounds, or Licensed Products after the
Effective Date.

10.14 DISCLAIMER OF INCIDENTAL AND CONSEQUENTIAL DAMAGES. NEITHER PARTY WILL BE
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL
DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS ARISING FROM OR RELATING TO
ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF
SUCH DAMAGES. NOTHING IN THIS SECTION IS INTENDED TO LIMIT OR RESTRICT THE
INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY.

Article 11

Indemnification

11.1 Indemnification.

(a) Adolor’s Obligation. Except to the extent an action as described below
involves gross negligence or willful misconduct by Lilly, its officers,
directors, employees and/or agents, Adolor shall defend Lilly, its officers,
directors, employees and/or agents against any and all third-party claims,
suits, actions or proceedings (including claims alleging personal injury
(including death) to any Person or damage to tangible property) resulting from
or arising out of: [**]. In addition, Adolor shall indemnify and hold harmless
Lilly, its officers, directors, employees and/or agents from and against any and
all Damages arising out of any such claims.

(b) Lilly’s Obligation. Except to the extent an action as described below
involves gross negligence or willful misconduct by Adolor, its officers,
directors, employees and/or agents, Lilly shall defend Adolor, its officers,
directors, employees and/or agents against any and all third-party claims,
suits, actions or proceedings (including claims alleging personal injury
(including death) to any Person or damage to tangible property) resulting from
or arising out of: [**]. In addition, Lilly shall indemnify and hold harmless
Adolor, its officers, directors, employees and/or agents from and against any
and all Damages arising out of any such claims.

 

[**] = Certain information on this page has been omitted and filed separately
with the Securities & Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

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(c) Limitation. Adolor acknowledges and agrees that Lilly’s development and
commercialization of OpRA II may adversely affect, or reveal information that
adversely affects, Adolor’s development and commercialization of OpRA III.
Likewise, Lilly acknowledges and agrees that Adolor’s development and
commercialization of OpRA III may adversely affect, or reveal information that
adversely affects, Lilly’s development and commercialization of OpRA II.
Accordingly, Adolor acknowledges and agrees that Lilly’s actions or failures to
act in the development or commercialization of OpRA II, and Lilly acknowledges
and agrees that Adolor’s actions or failures to act in the development or
commercialization of OpRA III, shall not give rise to a claim hereunder for
indemnification, Damages, or damages payable to a Party unless such actions or
failures to act are the result of gross negligence, willful misconduct, or a
material breach of this Agreement.

11.2 Notice and Opportunity to Defend.

(a) Notice. Promptly after receiving notice of a claim for which indemnification
may be sought pursuant to Section 11.1, a Party (the “Indemnified Party”) will
give the other Party (the “Indemnifying Party”) written notice describing the
claim in reasonable detail. The failure of an Indemnified Party to give notice
in the manner provided herein will not relieve the Indemnifying Party of its
obligations under this Article, except to the extent that such failure to give
notice materially prejudices the Indemnifying Party’s ability to defend such
claim.

(b) Indemnifying Party’s Duty to Proceed. Upon receipt of notice under
Subsection (a) from the Indemnified Party, the Indemnifying Party will have the
duty to either to compromise or defend, at its own expense and by its own
counsel, such matter, except as provided in Subsection (c). The Indemnifying
Party will promptly (and in any event not more than twenty (20) days after
receipt of the Indemnified Party’s original notice) notify the Indemnified Party
in writing of its intention to either compromise or defend such matter, and the
Indemnified Party agrees to cooperate fully with the Indemnifying Party and its
counsel in the compromise or defense against any such asserted liability,
including making available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such defense
subject to Indemnifying Party’s obligation to maintain as confidential,
information deemed confidential to the Indemnified Party under this Agreement.
All reasonable costs and expenses incurred in connection with the Indemnified
Party’s cooperation will be borne by the Indemnifying Party. In addition, the
Indemnifying Party will not cease to defend any claim (except pursuant to a
permitted settlement or compromise thereof) without the prior written consent of
the Indemnified Party, which consent will not be unreasonably withheld.

(c) Indemnified Party’s Right to Proceed. At its option, the Indemnified Party
will have the right to compromise or defend, by its own counsel, a claim that
could give rise to its right to indemnification pursuant to Section 11.1 if:

(i) the Indemnifying Party elects in writing not to compromise or defend the
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(ii) the Indemnifying Party fails to notify the Indemnified Party of its
election to compromise or defend the asserted claim as herein provided;

(iii) the Indemnifying Party fails to admit its obligation under this Agreement
with respect to the claim following a written request of the Indemnified Party;
or

(iv) in the reasonable opinion of counsel to the Indemnified Party, the claim is
reasonably likely to result in the Indemnified Party becoming subject to
injunctive relief or relief other than the payment of Damages that would have a
materially adverse effect on the ongoing business of the Indemnified Party.

In these situations, the reasonable costs and expenses incurred by the
Indemnified Party in compromising or defending the asserted claim will be
included as part of the indemnification obligation of the Indemnifying Party.

In the event the Indemnified Party intends to compromise or settle a claim under
this Subsection, the Indemnified Party will provide at least ten (10) business
days prior written notice to the Indemnifying Party describing the proposed
compromise or settlement in order that the Indemnifying Party may comment and/or
object.

(d) Settlement. Notwithstanding the foregoing, neither the Indemnifying Party
nor the Indemnified Party may settle or compromise any claim under this Section
over the written objection of the other Party if such settlement or compromise
could reasonably result in a material adverse effect on the other Party or
otherwise alter, diminish, or derogate the other Party’s rights under this
Agreement.

(e) Other Obligations. The Party conducting the defense of a claim under this
Section will (i) keep the other Party informed on a reasonable and timely basis
as to the status of the defense of such claim (but only to the extent such other
Party is not participating jointly in the defense of such claim), and
(ii) conduct the defense of such claim in a reasonably prudent manner.

11.3 Indemnification Payment Obligation. Neither Party will incur any
indemnification obligations under this Article until the aggregate amount of
Damages incurred or suffered by the Indemnified Party (or which likely would be
incurred or suffered if the relevant claim were successful) for which the
Indemnifying Party is otherwise subject to under this Agreement exceeds
$100,000, at which time the entire cumulative aggregate amount of such Damages
will be covered. The provisions of this Section will not limit or otherwise
affect the obligations of any Indemnifying Party under any other Section.

11.4 Indemnification Payment Adjustments.

(a) Net Tax Effects. The amount of any Damages for which indemnification is
provided under this Article will be reduced to take account of any net tax
benefit to the Indemnified Party and will be increased to take account of any
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Indemnified Party arising from incurring or paying such Damages or from
receiving any indemnification payment.

(b) Insurance Proceeds or Other Recovery. The amount of any Damages for which
indemnification is provided under this Article will be reduced by the insurance
proceeds received and any other amount recovered, if any, by the Indemnified
Party with respect to any Damages. However, an Indemnified Party does not have
an obligation to pursue an insurance claim relating to any Damages for which
indemnification is sought hereunder.

(c) Refund. If an Indemnified Party receives a payment pursuant to this Article
and subsequently receives insurance proceeds or other amounts with respect to
the same Damages, the Indemnified Party will pay to the Indemnifying Party an
amount equal to the difference (if any) between: (i) the sum of the insurance
proceeds received, other amounts received, and the indemnification amount
received from the Indemnifying Party pursuant to this Article and (ii) the
amount necessary to fully and completely indemnify and hold harmless the
Indemnified Party from and against such Damages. However, in no event will such
refund ever exceed the Indemnifying Party’s payment to the Indemnified Party
under this Article.

11.5 Indemnification Payment. Upon the final determination of liability and the
amount of the indemnification payment under this Article, the Indemnifying Party
will pay such amount to the Indemnified Party in immediately available funds
within thirty (30) business days after such determination.

Article 12

Term and Termination

12.1 Term. The term of this Agreement (the “Term”) shall commence as of the
Effective Date and, unless sooner terminated as hereinafter provided, shall
continue in full force and effect on a country-by-country basis until all
royalty payment obligations of Adolor to Lilly with respect to such country are
terminated pursuant to the applicable provisions of Article 3. Upon the
expiration of the Term with respect to any country, Adolor’s license rights
under Section 2.1 and Section 2.2 with respect to such country shall become
fully paid-up and irrevocable.

12.2 Termination for Convenience. This Agreement may be terminated at any time
by Adolor for its business convenience upon written notice to Lilly. Termination
under this Section 12.2 shall become effective on such date as set forth in
Adolor’s notice.

12.3 Termination for OpRA III Termination Event. Upon any OpRA III Termination
Event, Lilly may, at its option, terminate this Agreement upon six (6) months
written notice detailing the substance of the alleged OpRA III Termination
Event. Such termination shall become effective at the end of such six (6) month
period, unless Adolor can show: (a) it or its sublicensee has resumed using its
Commercially Reasonable Efforts to proceed with the Clinical Trial of the
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Licensed Compound is the subject of a clinical hold, or (c) the Licensed
Compound is the subject of an NDA under review by the FDA. As of the effective
date of such termination and subject to the provisions of Section 2.2 respecting
Sublicensees, Adolor shall irrevocably lose, with respect to the territories
subject to the OpRA III Termination Event, (i) any and all licenses granted to
Adolor by Lilly pursuant to Sections 2.1 and 2.2; and (ii) the right to
commercialize a Licensed Product.

12.4 Material Breach by Adolor. Upon any material breach or material default of
any payment provision under this Agreement or upon a willful and continuing
uncured material breach or default of any other provision of this Agreement,
Lilly may, at its option, terminate this Agreement upon thirty (30) days written
notice detailing the substance of the alleged breach, default or other defect of
performance. Such termination shall become effective at the end of such thirty
(30) day period, unless (a) Adolor cures such breach, default or other defect of
performance during such thirty (30) day period. As of the effective date of such
termination and subject to the provisions of Section 2.2 respecting
Sublicensees, Adolor shall irrevocably lose (i) any and all licenses granted to
Adolor by Lilly pursuant to Sections 2.1 and 2.2; and (ii) the right to
commercialize Licensed Product. Termination under this Section will not be an
exclusive remedy and will not be in lieu of any other remedies available to
Lilly for any breach hereunder by Adolor.

12.5 Material Breach by Lilly. Upon (a) any material breach, material default or
other material defect of performance of this Agreement, or (b) any warranty or
covenant, or representation made by Lilly in this Agreement proving to have been
false or misleading in any material respect when made, or (c) any schedule,
attachments, exhibits, certificate, report, notice or other writing furnished by
Lilly to Adolor proving to have been false or misleading in any material respect
when made or delivered by Lilly, Adolor may, at its option and subject to the
remainder of this Article, terminate this Agreement upon ninety (90) days
written notice detailing the substance of the alleged breach, default or other
defect of performance. Such termination shall become effective at the end of
such ninety (90) day period, unless Lilly cures such breach, default or other
defect of performance during such ninety (90) day period, or (b) if such breach
is curable but not within such ninety (90) day period, Lilly initiates and
diligently pursues a cure for such breach. As of the effective date of such
termination, Lilly shall irrevocably lose any and all licenses granted to Lilly
by Adolor pursuant to Sections 6.1 and 6.2. Termination under this Section will
not be an exclusive remedy and will not be in lieu of any other remedies
available to Adolor for any breach hereunder by Lilly.

12.6 Termination for Bankruptcy. Notwithstanding any other provision of this
Article, this Agreement may be terminated in its entirety with immediate effect
upon receipt by a Party of written notice from the other Party if the notified
Party:

(i) makes a general assignment for the benefit of creditors;

(ii) petitions for or acquiesces in the appointment of any receiver, trustee or
similar officer to liquidate or conserve its business or any substantial part of
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(iii) commences under the laws of any jurisdiction any proceeding for relief
under the Bankruptcy Code of 1986, as amended or similar bankruptcy laws in
other jurisdictions, involving its insolvency, reorganization, adjustment of
debt, dissolution, liquidation or any other similar proceeding for the release
of financially distressed debtors; or

(iv) becomes a party to any proceeding or action of the type described above in
(ii) or (iii), and such proceeding or action remains undismissed or unstayed for
a period of more than sixty (60) days.

12.7 Residual Rights and Obligations Upon Termination. Subject to the other
provisions of this Article, termination of this Agreement for any reason
whatsoever will not release or discharge Lilly or Adolor from the performance of
any obligation, the payment of any debt or responsibility for any liability
which may have previously accrued and remains to be performed, paid or
discharged at the date of such termination, their respective obligations to
transfer know-how, licenses and improvements hereunder, and the obligations and
rights of Adolor and Lilly which may accrue after termination of this Agreement
as expressly set forth herein; provided, however, the non-breaching Party may
set-off amounts that the non-breaching Party is entitled to recover under this
Agreement that were incurred because of the breach of the breaching Party.
However, upon termination, neither Lilly nor Adolor shall incur any additional
obligation to the other under this Agreement, except that Adolor, its Affiliates
and Sublicensees may, for up to one hundred eighty (180) days following any
termination of this Agreement, sell all Licensed Products and Licensed Compounds
then in inventory, and may complete the manufacture of and sell all Licensed
Products then in production, subject to Adolor’s continuing obligation to pay to
Lilly royalties on account of such sales as required hereunder. Moreover,
termination of this Agreement shall not release either Party of the obligations
of confidentiality and non-use as set forth in Sections 9.1 and 9.2, the
obligations of indemnification as set forth in Article 11, and such other
obligations expressly set forth in relevant provision of this Agreement.

12.8 Further Assurances. Adolor covenants and agrees that if this Agreement is
terminated by Lilly as permitted under Section 12.4, and any Adolor Improvement,
Adolor Technology or Regulatory Document cannot be transferred to Lilly in
accordance with the provisions of Article 6 without the consent of or notice to
a Third Person and in respect of which any necessary consent or notice has not
been obtained or given to transfer the Adolor Improvement, Adolor Technology or
Regulatory Document, or the subject Adolor Improvement, Adolor Technology or
Regulatory Document is non-assignable by its nature, then Adolor will, to the
extent required under Article 6 and provided Adolor has the right to do so, use
reasonable best efforts to cause the beneficial interest in and to the same to
pass to Lilly and hold such Adolor Technology, Adolor Improvement and/or
Regulatory Document in trust for, and for the benefit of, Lilly.

 

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Article 13

Limitations On Purchases Of Equity Securities

13.1 Purchases of Equity Securities. Lilly hereby represents and warrants that
as of the Effective Date, Lilly does not own, directly or indirectly, any
interest in any securities or direct or indirect rights, warrants or options to
acquire, or securities convertible into or exchangeable for, any securities of
Adolor. Upon the Effective Date and for a period lasting two (2) years after the
First Commercial Sale of the first Licensed Product, except as permitted by
Section 13.2, Lilly and its Affiliates will not (and will not assist or
encourage others to) directly or indirectly in any manner:

(a) acquire, or agree to acquire, directly or indirectly, alone or in concert
with others, by purchase, gift or otherwise, any direct or indirect beneficial
ownership (within the meaning of Rule l3d-3 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) or interest in any securities or direct
or indirect rights, warrants or options to acquire, or securities convertible
into or exchangeable for, any securities of Adolor;

(b) make, or in any way participate in, directly or indirectly, alone or in
concert with others, any “solicitation” of “proxies” to vote (as such terms are
used in the proxy rules of the Securities and Exchange Commission (the “SEC”)
promulgated pursuant to Section 14 of the Exchange Act); provided, however, that
the prohibition in this Section (a) shall not apply to solicitations exempted
from the proxy solicitation rules by Rule 14a-2 under the Exchange Act as such
Rule 14a-2 is in effect as of the date hereof;

(c) form, join or in any way participate in a “group” within the meaning of
Section 13(d)(3) of the Exchange Act with respect to any voting securities of
Adolor;

(d) acquire or agree to acquire, directly or indirectly, alone or in concert
with others, by purchase, exchange or otherwise: (i) any of the assets, tangible
or intangible, of Adolor, or (ii) direct or indirect rights, warrants or options
to acquire any assets of Adolor, except for such assets as are then being
offered for sale by Adolor;

(e) enter into any arrangement or understanding with others to do any of the
actions restricted or prohibited under parts (a) (b) or (c) of this
Section 13.1; or

(f) otherwise act in concert with others, to seek to offer to Adolor or any of
its stockholders any business combination, restructuring, recapitalization or
similar transaction to or with Adolor or otherwise seek in concert with others,
to control, change or influence the management, board of directors or policies
of Adolor or nominate any person as a director of Adolor who is not nominated by
the then incumbent directors, or propose any matter to be voted upon by the
stockholders of Adolor.

13.2 Exceptions for Purchasing Securities of Adolor. Nothing herein shall
prevent:

 

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(a) Lilly or Lilly’s employees from purchasing securities of Adolor pursuant to:
(i) a pension plan established for the benefit of Lilly’s employees, (ii) any
employee benefit plan of Lilly, or (c) any stock portfolios not controlled by
Lilly or any of its Affiliates that invest in Adolor among other companies.

(b) Lilly from acquiring securities of another biotechnology or pharmaceutical
company that beneficially owns any of Adolor’s securities.

Article 14

Miscellaneous

14.1 Independent Contractor. It is understood and agreed that the Parties shall
have the status of independent contractors under this Agreement and that nothing
in this Agreement shall be construed as authorization for either Adolor or Lilly
to act as agent for the other.

14.2 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the Parties
and their legal representatives, successors and assigns, and they shall not be
construed as conferring any rights to any Third Person.

14.3 Force Majeure. Except as expressly set forth above, both Parties to the
Agreement shall be excused from the performance of their obligations under this
Agreement if such performance is prevented by force majeure and the
nonperforming Party promptly provides notice of the prevention to the other
Party. Such excuse shall be continued so long as the condition constituting
force majeure continues and the nonperforming Party takes reasonable efforts to
remove the condition. For purposes of this Agreement, force majeure shall
include conditions beyond the control of the Parties, including an act of God,
war, terrorism, civil commotion, epidemic, failure or default of public
utilities or common carriers, destruction of production facilities or materials
by fire, earthquake, storm or like catastrophe, governmental action or
prohibition, or the inability to obtain required supplies or raw materials.

14.4 Rights in Bankruptcy. All rights and licenses granted under or pursuant to
this Agreement by Lilly and Adolor are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the United States Bankruptcy Code, licenses of
right to “intellectual property” as defined under Section 101 of the United
States Bankruptcy Code. The Parties agree that each Party, as licensee of
certain rights under this Agreement, shall retain and may fully exercise all of
its rights and elections under the United States Bankruptcy Code. The Parties
further agree that, in the event of the commencement a bankruptcy proceeding by
or against a Party (such Party, the “Bankrupt Party”) under the United States
Bankruptcy Code, the other Party shall be entitled to a complete duplicate of
(or complete access to, as appropriate) any intellectual property licensed to
such other Party and all embodiments of such intellectual property, which, if
not already in such other Party’s possession, shall be promptly delivered to it
(a) upon any such commencement of a bankruptcy proceeding upon such other
Party’s written request therefor, unless the Bankrupt Party elects to

 

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continue to perform all of its obligations under this Agreement or (b) if not
delivered under clause (a), following the rejection of this Agreement by the
Bankrupt Party upon written request therefor by the other Party.

14.5 Amendment. This Agreement may not be amended, supplemented, or otherwise
modified except by an instrument in writing signed by an authorized
representative of both Parties.

14.6 Entire Agreement. The Parties acknowledge and agree that this Agreement
constitutes the entire agreement and understanding relating to the subject
matter of this Agreement. As such, this Agreement supersedes all previous
communications, proposals, representations and agreements, whether oral or
written, relating to the subject matter of this Agreement, including, for the
avoidance of doubt, that certain Confidentiality and Non-Use Agreement set forth
in a letter dated on or about September 21, 2007 from Lilly to Adolor and that
certain Material Transfer Agreement dated on or about June 4, 2008 as amended on
or about May 14, 2009. Notwithstanding the foregoing, nothing in this Agreement
shall change, modify, amend or revise the terms, conditions and/or provisions of
those certain agreements regarding the compound known as “alvimopan” (as
sublicensed from Shire as successor to Roberts) nor that certain license
agreement by and between the Parties effective on or about August 8, 2002
(collectively, the “Alvimopan Agreements”) (or the Parties’ rights and
obligations derived therefrom). Lilly and Adolor each hereby confirm and ratify
the Alvimopan Agreements and all of the terms, conditions and provisions of the
Alvimopan Agreements (and the Parties’ rights and obligations derived
therefrom).

14.7 Severability. Each Party agrees that, should any provision of this
Agreement be determined by a court of competent jurisdiction to violate or
contravene any applicable law or policy, such provision will be severed or
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect.

14.8 Waiver. The waiver of a breach or a Party’s obligation hereunder may be
effected only by a writing signed by the waiving Party and shall not constitute
a waiver of any other breach or the same or similar obligations of such Party.

14.9 Notices. Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been sufficiently given for all
purposes if mailed by first class certified or registered mail, postage prepaid,
sent by overnight mail with a nationally-recognized overnight carrier, or, other
than with respect to notices under Article 12, sent by facsimile with confirmed
receipt of transmission. Receipt of such notices sent in this manner shall be
deemed to have occurred five (5) business days after dispatch by first class
mail or one (1) business day after dispatch by overnight carrier, unless a
provision of this Agreement specifically provides otherwise relative to a
particular provision of this Agreement. Unless otherwise specified in writing,
the mailing addresses of the Parties shall be as described below.

 

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For Adolor:    Adolor Corporation    700 Pennsylvania Drive    Exton, PA 19341
   Attention: General Counsel For Lilly:    Eli Lilly and Company    Lilly
Corporate Center    Indianapolis, Indiana 46285    Attention: General Counsel

14.10 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, United States, excluding any
choice of law rules that may direct the application of the law of any other
jurisdiction. However, the scope, validity and enforceability of any patents
encompassed within the scope of this Agreement shall be determined in accordance
with the applicable laws of the countries in which such patents have issued.

14.11 Assignability. During the Term, except as provided in this Section and
other provisions of this Agreement, neither Party shall assign or transfer this
Agreement without the prior written consent of the other Party, and any
attempted assignment or transfer of this Agreement without such written consent
shall be of no force or effect. Notwithstanding the foregoing sentence, either
Party may assign or transfer this Agreement without the other Party’s consent to
an Affiliate of Adolor Corporation or Eli Lilly and Company, as the case may be,
or to any Person acquiring all or substantially all of the assets or stock of
Adolor Corporation or Eli Lilly and Company, as the case may be, to which this
Agreement relates. In addition, Eli Lilly and Company shall be permitted to
assign or transfer any revenue stream under this Agreement to an Affiliate or
Third Party. Subject to the restrictions contained in the preceding provisions
of this Section, this Agreement shall be binding upon the successors and assigns
of the Parties.

14.12 Jointly Prepared. This Agreement has been prepared jointly and shall not
be strictly construed against either Party.

14.13 Headings, Gender and “Person”. The captions or headings of the Sections
are inserted only as a matter of convenience or for reference and shall have no
effect on the meaning of the provisions hereof. Words used herein, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and other gender, masculine,
feminine, or neuter, as the context requires.

14.14 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be an original, but all of which taken together shall
constitute one and the same agreement. It shall not be necessary in making proof
of this Agreement or any counterpart hereof to produce or account for any of the
other counterparts.

 

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14.15 Schedules, Exhibits and Attachments. All schedules, exhibits and
attachments referred to herein are intended to be and hereby are specifically
made part of this Agreement.

14.16 Affiliates of Eli Lilly and Company. As the Affiliates of Eli Lilly and
Company, being included within the definition of “Lilly” set forth above, are
entitled to exercise the rights and receive the benefits afforded to Lilly under
this Agreement, but are not signatories to and therefor are not directly bound
by the terms and conditions of this Agreement, Eli Lilly and Company guarantees
that its Affiliates, in exercising such rights and receiving such benefits,
shall comply with the terms and conditions of this Agreement relating thereto,
including the terms and conditions of this Agreement applicable to Lilly’s
handling and use of Adolor Technology, Adolor Improvements and Adolor
Confidential Information.

[signatures on next page]

 

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IN WITNESS WHEREOF, the Parties by their respective authorized officers, have
executed this Agreement.

ELI LILLY AND COMPANY

 

BY:

 

/s/ Steven M. Paul

  Steven M. Paul, M.D.   Executive Vice President, Science and Technology  
President, Lilly Research Laboratories

ADOLOR CORPORATION

 

BY:

 

/s/ Michael R. Dougherty

  Michael R. Dougherty   President & Chief Executive Officer

 

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