Document:

Exhibit 10.7

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

	
  Confidential treatment
  has been requested for portions of this exhibit. The copy filed herewith
  omits the information subject to the confidentiality request. Omissions are
  designated as [*]. A complete version of this exhibit has been filed
  separately with the Securities and Exchange Commission.

  

 

 

DEVELOPMENT AGREEMENT

 

                This DEVELOPMENT AGREEMENT
(together with the Exhibits hereto, this “Agreement”), dated as of March 15, 2007
(the “Effective
Date”), is made by and among MonoSol Rx, LLC., a Delaware limited
liability corporation (“MonoSol”) and Adams Respiratory Products, Inc., a Delaware
corporation (“Adams”).  MonoSol and Adams are referred to hereinafter
individually as a “Party” and collectively as the “Parties.”

 

R E C I T A L S

                A.            The Parties have entered into a License Agreement of even
date herewith the (“License Agreement”) pursuant to which MonoSol grants
to Adams a license in and to certain know-how and other intellectual property
related to certain MonoSol products on the terms and subject to the conditions
set forth in the License Agreement;

 

                B.            The Parties have also entered into a Finished Product
Supply Agreement of even date herewith (the “Supply Agreement”) pursuant
to which MonoSol has agreed to manufacture and supply to Adams certain finished
products on the terms and subject to the conditions set forth in the Supply
Agreement;

 

                C.            MonoSol has expertise in developing and manufacturing
over the counter and prescription pharmaceutical products; and

 

                D.            Adams desires that MonoSol carry out certain product
development projects to create a line of thin film strip products on behalf of
Adams as described herein.

 

                In consideration of the mutual
representations, warranties and covenants contained herein, the Parties agree
as follows:

 

SECTION 1.       DEFINITIONS

                Capitalized
terms used in this Agreement, but not otherwise defined herein, shall have the
meanings given to them in the Supply Agreement.

 

1.1           “Affiliate”
means, with respect to a Person, (i) any other Person at least fifty percent
(50%) of the issued and voting capital of which is owned or controlled,
directly or indirectly, by said Person, (ii) any other Person that owns or
controls, directly or indirectly, at least fifty percent (50%) of the issued
and voting capital of said Person, or (iii) any other Person 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

at least fifty percent (50%) of the issued and voting capital of which
is owned or controlled, directly or indirectly, by any Person referenced in
clause (i) or (ii) above.

1.2          “FDA”
means the Food and Drug Administration or any successor agency.

1.3          “Indemnified
Parties” means (i) with respect to claims arising under Section 7.1,
MonoSol Indemnified Parties, and (ii) with respect to claims arising under
Section 7.2, Adams Indemnified Parties.

1.4          “Indemnifying
Party” means (i) with respect to claims arising under Section 7.1,
Adams, and (ii) with respect to claims arising under Section 7.2, MonoSol.

1.5          “Knowledge”
with respect to Monosol means the actual knowledge of any executive officer of
MonoSol after reasonable inquiry.

1.6          “Person”
means an individual, a corporation, a general partnership, a limited partnership,
a limited liability company, a limited liability partnership, an association, a
trust or any other entity or organization, including a governmental authority.

1.7          “Project”
means, collectively, the Thin Strip Project and any Future Projects, as such
terms are defined in Section 2.1 below.

1.8          “Territory”
means Mexico, Canada and the United States and its territories and possessions,
including Puerto Rico.

1.9          “Trade
Secrets” means information, including technical and nontechnical data, a
formula, pattern, compilation, program device, method, technique, process or
other information similar to any of the foregoing, that (i) derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other Persons who can derive economic
value from its disclosure or use and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.

SECTION 2.         PRODUCT DEVELOPMENT

2.1          Projects.  MonoSol and
Adams intend to (a) initiate a project to develop a [*]
thin film strip product (the “[*]
Product”) on the terms and subject to the conditions of the Project Plan
attached hereto as Exhibit A (the “Thin Strip Project”), and (b)
enter into discussions from time to time with respect to future projects to
develop other modifications, extensions or variations of the thin strip
technology for use in respiratory care products (each, a “Future Project”,
and together with the Thin Strip Project, the “Projects”), within the
Territory.  Notwithstanding the
foregoing, it is acknowledged and agreed that neither Adams nor MonoSol shall
have any obligation to engage in any Future Projects under this Agreement
unless and until MonoSol and Adams shall reach mutual agreement with respect to
the scope of such Future Project and the terms and conditions of the Project
Plan related thereto.

 

 

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CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

2.2          Project Plans. 
With respect to each Project agreed by MonoSol and Adams, the Parties
shall agree to the terms and conditions of a project plan (each, a “Project
Plan”) and each of MonoSol and Adams shall carry out the work on such
Project, and perform their respective responsibilities with respect to such
Project, according to the Project Plan for such Project.  Each Project Plan shall set forth the agreed
upon terms and conditions of the Project, including without limitation the specifications
mutually agreed by MonoSol and Adams (the “Specifications”) for any
product intended to be developed under such Project (each, a “Product”),
as well as the development work to be carried out by MonoSol in connection with
such Project. For the avoidance of doubt, Exhibit A constitutes the Project
Plan for the Thin Strip Project. Any amendments, modifications or adjustments
to a Project Plan shall require the express written consent of each of the
Parties. The Parties acknowledge and agree that each Project Plan so agreed by
the Parties shall be incorporated and made part of this Agreement.

2.3          Communication.
MonoSol shall advise Adams, in writing if requested, of the progress and status
of each Project hereunder.  MonoSol shall
also advise Adams promptly, in writing if requested, of all significant
developments regarding the Projects.

2.4          Process Development/Validation. 
MonoSol shall be responsible, at its cost and expense, for the
development of, and performance of all validation activities in connection
with, any manufacturing processes and requirements as are necessary or
desirable, as determined in consultation with Adams, in connection with the
development of a Product for commercial production in the Territory, including
(but not limited to) the development and process qualification, assuring
content uniformity, analytical testing, preparation of technical validation
reports, the preparation of equipment qualification and manufacturing
validation procedures, the qualification of equipment and utilities, as well as
the validation of the manufacturing, packaging and cleaning processes in
accordance with such procedures and the manufacture and testing of Validation
Lots (“Process Development/Validation Activities”) and for providing such
information and taking such steps as are necessary in connection with the CMC
or similar portions of any regulatory applications required to obtain
Regulatory Approvals for a Product, and otherwise in connection with the
manufacture of the Product by MonoSol and sale of the  Product to and by or under authority of Adams
hereunder.

2.5          Product for Regulatory Approval. 
MonoSol shall manufacture each Product in an FDA-approved manufacturing
facility that meets GMPs and in accordance with the Specifications for the
Product, shall not supply adulterated Products, and shall otherwise manufacture
and supply the Product to Adams as necessary to obtain Regulatory Approvals and
in a manner that meets applicable regulatory requirements. All supplies of
Product and placebo required to obtain Regulatory Approval shall be supplied at
no charge to Adams.

2.6          Restriction on MonoSol Data Use. 
MonoSol will not use or grant access to any data generated in connection
with the registration of the Product in North America for the benefit of third
parties without obtaining the prior approval of Adams which approval may be
conditioned upon the payment of a reasonable royalty.

2.7          Rights of First Refusal.

 

 

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CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

(a)           During the term of
this Agreement, if MonoSol: (i) develops additional drug products in the
Therapeutic Categories, either in conjunction with Adams or on its own, or (ii)
is presented with a development opportunity for an additional drug product in
the Therapeutic Categories in the United States, utilizing the MonoSol IP
Rights (as such Term is defined in the License Agreement between the parties of
even date herewith (collectively,  the “New
Products”), Adams shall have the first right to market exclusively any New
Products in the United States.  MonoSol
shall submit to Adams a written request for proposal identifying the New
Product, including reasonably prescribed specifications, standards, delivery
and pricing.  Within 30 days of Adams’
receipt of each proposal for a New Product, Adams shall advise MonoSol if it
wishes to pursue development of the New Product.  The parties shall then negotiate in good
faith to reach agreement on applicable pricing for the New Product and such New
Product shall become subject to the remaining terms and conditions of this
Agreement.  If the parties to this
Agreement do not reach agreement on the pricing and terms of any New Product
within 90 days (if the New Product is developed by MonoSol or in conjunction
with Adams) or 30 days (if the New Product is to be developed in conjunction
with a third party) of MonoSol’s receipt of Adams’ notice, Adams shall make a
final offer to MonoSol, prior to the expiration of the applicable negotiation
period, consisting of (i) development milestones and milestone payments
including payments for development costs, (ii) cost of goods and (iii) binding
three (3) year minimum purchase requirements. 
Provided that such offer has been made, MonoSol shall not enter into an
agreement for a New Product on terms where the sum of: (a) the milestone
payments and development costs, and (b) the cost of goods multiplied by the
total of the number of units in the three (3) year minimum purchase
requirements, is lower than in the offer supplied by Adams as set forth above
(the “Lower Offer”).  If MonoSol intends
to accept such Lower Offer, it shall first offer the relevant conditions to
Adams.  If Adams fails to accept these
conditions in writing within 5 business days, MonoSol shall be free to accept
the Lower Offer by the third party.

(b)           During the term of
this Agreement, if Adams desires to:  (i)
develop additional drug products in the Therapeutic Categories, either in
conjunction with MonoSol or on its own, or (ii) is presented with a development
opportunity for an additional drug product in the Therapeutic Categories in the
United States, which can utilize the MonoSol IP Rights (collectively, “New Products”), MonoSol shall have a
right of first refusal on the rights to develop and manufacture any Adams New
Products in the United States which are consistent with the limitations of the MonoSol
IP Rights.  Adams shall submit to MonoSol
a written request for proposal identifying the New Product, including
reasonably prescribed specifications, standards, delivery and pricing.  Within 30 days of MonoSol’s receipt of each
proposal for a New Product, MonoSol shall advise Adams if it wishes to pursue
development of the New Product.  The
parties shall then negotiate in good faith to reach agreement on applicable
pricing for the New Product and such New Product shall become subject to the
remaining terms and conditions of this Agreement.  If the parties to this Agreement do not reach
agreement on the pricing and terms of any New Product within 90 days (if the New
Product is developed by MonoSol or in conjunction with a third party) of
MonoSol’s receipt of Adams notice, MonoSol shall make a final offer to Adams,
prior to the expiration of the applicable negotiation period, consisting of (i)
development milestones and milestone payments including payments for
development costs, (ii) 

 

 

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CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

cost of goods and
(iii) binding three (3) year minimum purchase requirements.  Provided that such offer has been made, Adams
shall not enter into an agreement for the development and manufacturing of a
New Product on terms where the sum of: 
(a) the milestone payments and development costs, and (b) the cost of
goods multiplied by the total of the number of units in the three (3) year
minimum purchase requirements, is higher than in the offer supplied by MonoSol
as set forth above (the “Higher Offer”). 
If Adams intends to accept such Higher Offer, it shall first offer the
relevant conditions to MonoSol.  If
MonoSol fails to accept these conditions in writing within 5 business days,
Adams shall be free to accept the Higher Offer by the third party.

(c)           For purposes of this
Section 2.7, the term “Therapeutic Categories” shall mean [*].

(d)           The rights of both
Adams and MonoSol under this Section 2.7 shall terminate immediately in the
event that the parties fail to enter into agreements to develop and
commercialize a second prescription product within 180 days of the completion
of the proof of principal study referred to in Section 4(a) hereof, provided
that such 180 day period shall not be deemed to occur prior to January 1, 2008.

 

SECTION 3.         REGULATORY APPROVAL

3.1          NDAs.  Adams will have sole responsibility for
filing an NDA for each of the Products (the “Product NDAs”) with the FDA, as
well as for all other comparable filings and interactions with all appropriate
Regulatory Authorities.

3.2          Cooperation.  Adams shall use commercially reasonable
efforts to obtain approval for each of the Products in the Territory.  Adams and MonoSol shall cooperate and consult
with respect to the design and execution of all clinical studies, and MonoSol
shall provide Adams commercially reasonable regulatory affairs support and guidance
with respect to all matters concerning NDA filings and each of the Products.

3.3          Ownership
of Data Developed by Adams.  Other
than information obtained from MonoSol, Adams shall retain sole ownership of
all data created or obtained by Adams during the course of Adams seeking
Regulatory Approval for a Product (“Adams Data”).  For purposes of this Agreement, Adams Data
shall not include information in the public domain, including but not limited
to summary basis of approvals as published by the FDA.

3.4          Other
Regulatory Matters.  (a)  Provided that Adams obtains Regulatory
Approval for a Product NDA in the United States, Adams or its designee shall be
responsible, during the Term, at its own cost and expense, for filing and
maintaining all documentation and other information required by any state,
territory or possession in the Territory for the purpose of listing a Product
on each such state’s or territory’s or possession’s formulary, and obtaining
such other approvals as may be necessary to market the Product in each state,
territory or possession.

 

 

5

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

                (b)           At
the request of Adams, one or more representatives of MonoSol will assist Adams
with all correspondence with the FDA or other Regulatory Authority relating to
the Regulatory Approval of each of the Products, and participate in all
meetings with the FDA or other Regulatory Authority regarding each of the
Products.

SECTION 4.         MILESTONE PAYMENTS

In consideration for the
development work MonoSol shall carry out on the Thin Strip Project conducted
under the terms of this Agreement, unless otherwise provided in the fee
schedule set forth in the applicable Project Plan, Adams shall pay MonoSol the
following product development milestone payments:

a)             Within 30 days of completion of the
prototype development and stability for the proof of principal clinical study,
as described further in Exhibit A, Adams will pay to MonoSol Five Hundred
Thousand ($500,000) dollars; provided, however, that in the event
the prototype device and stability for the proof of principal clinical study
have not been completed by [July 1, 2007]. 
Adams may notify MonoSol in writing that Adams no longer wishes to
pursue the Thin Strip Project, in which event this Agreement shall terminate and
the Parties shall no longer have any obligations to each other under this
Agreement, including any obligation by Adams to make any payments to MonoSol.

b)             Within 30 days of successful completion of the pivotal
clinical study, as described further in Exhibit A, Adams will pay to MonoSol
Five Hundred Thousand ($500,000) dollars; provided, however, that
in the event the pivotal clinical study has not been completed by [December 1,
2007,] Adams may notify MonoSol in writing that Adams no longer wishes to
pursue the Thin Strip Project, in which event this Agreement shall terminate
and the Parties shall no longer have any obligations to each other, including
any obligation by Adams to make any payments to MonoSol under this Section 4(b).

 

c)              Within 30 days of delivery of the chemistry
manufacturing controls (“CMC”), as described further in Exhibit A, Adams will
(i) pay to MonoSol Two Hundred Fifty Thousand ($250,000) dollars; provided,
however, that if the CMC have not been completed by [October 1, 2008,]
Adams may notify MonoSol in writing that Adams no longer wishes to pursue the
Thin Strip Project, in which event this Agreement shall terminate and the
Parties shall no longer have any obligations to each other, including any
obligation by Adams to make any payments to MonoSol under this Section 4(c).

 

d)             Within 30 days of the acceptance by the FDA of the [*] Product NDA, Adams will pay to MonoSol Two Hundred Fifty
Thousand ($250,000) dollars; provided, however, that in the event
the FDA has not accepted the [*] Product NDA
by [October 1, 2008,] Adams may notify MonoSol in writing that Adams no longer
wishes to pursue the Thin Strip Project, in which event this Agreement shall
terminate and the Parties shall no longer have any obligations to each other,
including any obligation by Adams to make any payments to MonoSol under this
Section 4(d).

 

 

6

 

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

e)              Within 30 days of each of the second, third and fourth
anniversaries of the Commercial Launch Date of the [*]
Product, Adams shall pay to MonoSol One Hundred Sixty Seven Thousand ($167,000)
dollars.

 

Adams will not be liable for, and shall not owe to
MonoSol, any of MonoSol’s out-of-pocket expenses related to any Project. The
Parties shall negotiate, in good faith, the fee schedule for any Future Project
and such fees shall be included in the Project Plan.

 

SECTION 5.         INTELLECTUAL PROPERTY

5.1          Thin Strip Project. Upon development of any product as a
result of the Thin Strip Project, MonoSol shall grant a license to Adams under
the MonoSol IP Rights (as such term is defined in the License Agreement) in the
Territory to make, have made, use, sell and offer for sale such product in the
Territory, on the terms and subject to the conditions of the  License Agreement. 
Any IP Rights that MonoSol or Adams conceive, develop or reduce to
practice (“Developments”) in the course of performing the Thin Strip
Project shall be owned solely by the Party which conceived, developed or
reduced it to practice.

5.2          Future Projects. With respect to any Future Projects,
the Parties shall discuss intellectual property matters related to such Future
Projects and, if applicable, shall include in the Project Plan for such Future
Project any agreed upon terms and conditions with respect to (i) any license to
be granted by MonoSol to Adams under the MonoSol IP Rights with respect to any
Products developed under such Future Project, and (ii) the ownership of any
Developments that the Parties conceive, develop or reduce to practice in the
course of performing such Future Project.

5.3          Data and Records. 
MonoSol agrees to and shall use reasonable care in inventorying,
handling and safeguarding all property of Adams entrusted to its care.  MonoSol shall not discard or destroy any raw
data, laboratory work sheets, other original records or documentation created
in connection with the performance of a Project hereunder, without prior
written permission from Adams, except in the ordinary course of business
consistent with MonoSol’s policies and past practice.

5.4          Intellectual
Property Applications.  Each Party
shall, at the reasonable request of the other, cooperate in the making of
applications for letters patent or for copyright registration on any
Developments owned by such requesting Party under the terms of this Agreement
and the applicable Project Plan.

 

SECTION 6.         CONFIDENTIALITY

6.1          General. Pursuant to the terms of this Agreement, each of
MonoSol and Adams (in such capacity, the “Disclosing Party”) has
disclosed and will be disclosing to the other Party, 

 

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CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

and to the
officers, directors, employees, agents and/or representatives of each (in such
capacity, the “Receiving Party”) certain secret, confidential or
proprietary data, Trade Secrets, know-how, intellectual property and related
information, including without limitation operating methods and procedures,
marketing, manufacturing, distribution and sales methods and systems, sales
figures, pricing policies and price lists and other business information (“Confidential
Information”).  For clarity and
notwithstanding Section 5.2, Developments shall be the Confidential Information
of the Party that owns such Developments under the terms and conditions of this
Agreement and the applicable Project Plan. 
The Receiving Party shall make no use of any Confidential Information of
the Disclosing Party except in the exercise of its rights and the performance
of its obligations set forth in this Agreement or any other agreements between
the parties referenced in this Agreement (the “Ancillary Agreements”).  The Receiving Party (i) shall keep and hold
as confidential, and shall cause its officers, directors, employees, agents and
representatives to keep and hold as confidential, all Confidential Information
of the Disclosing Party, and (ii) shall not disclose, and shall cause its
officers, directors, employees, agents and representatives not to disclose, any
Confidential Information of the Disclosing Party. Confidential Information
disclosed by the Disclosing Party shall remain the sole and absolute property
of the Disclosing Party, subject to the rights granted in this Agreement or the
Ancillary Agreements.

6.2          Exceptions.  Confidential
Information shall not include any information which (i) is already known to the
Receiving Party at the time of disclosure by the Disclosing Party, as
demonstrated by competent proof (other than as a result of prior disclosure
under any agreement between the Parties with respect to confidentiality), (ii)
is or becomes generally available to the public other than through any act or
omission of the Receiving Party in breach of this Agreement or the Ancillary
Agreements, (iii) is acquired by the Receiving Party from a third party who is
not, directly or indirectly, under an obligation of confidentiality to the Disclosing
Party with respect to same, or (iv) is developed independently by the Receiving
Party without use, direct or indirect, of information that is required to be
held confidential under this Agreement or the Ancillary Agreements.  In addition, nothing in this Section 5 shall
be interpreted to limit the ability of either Party to disclose its own
Confidential Information to or any other Person on such terms and subject to
such conditions as it deems advisable or appropriate.

6.3          Permitted Disclosures. It shall not be a breach of Section 5.1
if a Receiving Party discloses Confidential Information of a Disclosing Party
(i) pursuant to applicable law, including securities laws applicable to a
public company, to any Regulatory Authority or other governmental authority, or
(ii) in a judicial, administrative or arbitration proceeding to enforce such
Party’s rights under this Agreement; provided, however, the
Receiving Party may only make such disclosure if (A) it provides the Disclosing
Party with as much advance written notice as possible of the required
disclosure, (B) reasonably cooperates with the Disclosing Party in any attempt
to prevent, limit or seek confidential treatment for the disclosure, and (C)
limits the disclosure, if any, to the specific purpose at issue.

6.4          Confidential Terms. Each Party acknowledges and agrees that
the terms and conditions of this Agreement shall be considered Confidential
Information of each Party and shall be treated accordingly.  Notwithstanding the foregoing, each Party
acknowledges and agrees that the other may be required to disclose some or all
of the information included in this 

 

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CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

Agreement in order
to comply with its obligations under securities laws, and hereby consents to
such disclosure to the extent deemed advisable or appropriate by its respective
counsel (but only after consulting with the other to the extent practicable).
The Parties may also disclose the existence of this Agreement and terms thereof
to their directors, investors, officers, employees, attorneys, accountants and
other advisers on a need to know basis and may, upon obtaining a written
confidentiality agreement, further disclose the existence and terms of this
Agreement to third parties to whom it may be relevant in connection with
financings, acquisitions and similar transactions.

6.5          Equitable Remedies. 
Each Party specifically recognizes that any breach by it of this Section
5 may cause irreparable injury to the other Parties and that actual damages may
be difficult to ascertain, and in any event, may be inadequate.  Accordingly (and without limiting the
availability of legal or equitable, including injunctive, remedies under any
other provisions of this Agreement), each Party agrees that in the event of any
such breach, the other Parties shall be entitled to seek injunctive relief and
such other legal and equitable remedies as may be available.

SECTION 7.         REPRESENTATIONS AND WARRANTIES AND COVENANTS

7.1          Covenants. Each of MonoSol and Adams hereby
covenants to the other that:

(a)           it
shall use its reasonable commercial efforts to perform the services required to
be performed by it under this Agreement in a professional and competent manner
and in accordance with the terms and conditions of the Project Plans;

(b)           all
services and goods rendered shall be provided in material compliance with
current good laboratory practices and current GMP of the FDA and in material
compliance with any other applicable federal, state or local laws, regulations,
guidelines and procedures;

(c)           as of the Effective
Date all necessary consents, approvals and authorizations of all governmental
or Regulatory Authorities and other persons required to be obtained by such
Party in connection with the entry into this Agreement have been obtained, and
such Party has obtained, or will exercise commercially reasonable and diligent
efforts to obtain, all such consents, approvals and authorizations required for
its performance hereunder.

(d)           it has, and during
the term of this Agreement will maintain, products liability insurance coverage
of not less than One Million ($1,000,000) dollars per occurrence and not less
than Five Million ($5,000,000) dollars in the aggregate, upon the request of
the other Party, shall furnish such other Party with a certificate of insurance
evidencing such coverage and that such insurance shall not be cancelled,
materially amended or allowed to lapse without at least 30 days prior written
notice to the other Party.

 

9

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

7.2          MonoSol
Representations and Warranties. MonoSol hereby represents and warrants that:

(a)           it is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation;

(b)           it has the corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder;

(c)           the execution, delivery and performance
of this Agreement have been duly authorized by all necessary actions on its
part, and this Agreement has been duly executed and delivered by, and is a
legal, valid and binding obligation of, MonoSol, enforceable against MonoSol in
accordance with its terms, except as such enforcement may be limited by
generally applicable laws relating to bankruptcy, insolvency or creditors’
rights or by principles of equity affecting the availability of remedies;

(d)           its
performance under this Agreement will not interfere with, infringe upon,
misappropriate, or otherwise conflict with any intellectual property rights of
a third party. MonoSol has not received any past or current written charge,
complaint, claim, demand, or notice either within the past two (2) years or
prior to the past two (2) years, alleging any interference, infringement,
misappropriation, or violation (including any claim that MonoSol or MonoSol
Affiliates must license or refrain from using any of its IP Rights under this
Agreement) of any intellectual property right;

(e)           to
the Knowledge of MonoSol, no third party currently interferes or has interfered
with, currently infringes or has infringed upon, has misappropriated, or has
otherwise come into conflict with, MonoSol’s IP Rights;

(f)            it
has expertise in developing and manufacturing over-the-counter and prescription
pharmaceutical products and has facilities that are generally suitable for the
type of development and production contemplated hereunder.

(g)           it
has not to the best of its knowledge made to any Regulatory Authority an untrue
statement of or regarding, or failed to disclose to any Regulatory Authority, a
material fact with respect to the Product;

(h)           it’s not aware of
any pending or threatened litigation, and has not received any communication,
that alleges that such Party’s intellectual property, assets or activities
related to this Agreement have violated, or that by conducting the activities
as contemplated herein such Party would violate, any of the intellectual property,
proprietary or other rights of any third party;

7.3          Adams
Representations and Warranties. Adams hereby represents and warrants that:

(a)           it is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation;

 

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CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

(b)           it has the corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder;

(c)           the execution, delivery and performance
of this Agreement have been duly authorized by all necessary actions on its
part, and this Agreement has been duly executed and delivered by, and is a
legal, valid and binding obligation of, Adams, enforceable against Adams in
accordance with its terms, except as such enforcement may be limited by
generally applicable laws relating to bankruptcy, insolvency or creditors’
rights or by principles of equity affecting the availability of remedies;

(d)           its
performance under this Agreement will not interfere with, infringe upon,
misappropriate, or otherwise conflict with any intellectual property rights of
a third party. Adams has not received any past or current written charge,
complaint, claim, demand, or notice either within the past two (2) years or
prior to the past two (2) years, alleging any interference, infringement,
misappropriation, or violation (including any claim that Adams or its
Affiliates must license or refrain from using any of its IP Rights under this
Agreement); and

SECTION 8.         INDEMNIFICATION; LIMITATION OF LIABILITY

8.1          Indemnification by Adams. Adams will defend, indemnify and hold
harmless MonoSol, and the representatives and affiliates of MonoSol (each, a “MonoSol
Indemnified Party”), from, against and in respect of any and all actions,
liabilities, governmental orders, encumbrances, losses, damages, bonds, dues,
assessments, fines, penalties, taxes, fees, costs (including costs of
investigation, defense and enforcement of this Agreement), expenses or amounts
paid in settlement (in each case, including attorneys’ and experts’ fees and
expenses), involving a Third Party Claim (collectively, “Losses”),
incurred or suffered by the MonoSol Indemnified Parties or any of them as a
result of, arising out of, or directly or indirectly relating to any breach by
Adams of any of its representations, warranties or covenants set forth herein.

8.2          Indemnification by MonoSol. MonoSol will defend, indemnify and hold
harmless Adams, and the representatives and affiliates of Adams (each, an “Adams
Indemnified Party”) from, against and in respect of any and all Losses
incurred or suffered by the Adams Indemnified Parties or any of them as a
result of, arising out of, or directly or indirectly relating to any breach by
MonoSol of any of its representations, warranties or covenants set forth
herein.

8.3          Third Party Claims.

(a)           If any third party
notifies an Indemnified Party with respect to any matter (a “Third Party
Claim”) which may give rise to any claim against the Indemnifying Party
under this Section 7, then the Indemnified Party will promptly give
written notice to the Indemnifying Party; provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party will relieve the Indemnifying Party from any
obligation under this Section 7, except to the extent such delay actually
prejudices the Indemnifying Party.

 

11

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

(b)           The Indemnifying
Party will have the right to defend the Indemnified Party against the Third
Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as the Indemnifying Party promptly assumes such defense.  The Indemnified Party may retain separate
co-counsel at its own cost and expense and participate in the defense of the
Third Party Claim.  Notwithstanding
anything to the contrary contained herein, assumption of the defense of any
Third Party Claim hereunder by the Indemnifying Party shall not constitute a
presumption or omission with respect to whether the Losses related to such
Third Party Claim are, in fact, subject to indemnification hereunder.  The Indemnified Party’s right to an indemnity
is conditioned upon it providing reasonable support and access to the
Indemnifying Party.

(c)           The Indemnifying
Party will not consent to the entry of any judgment or enter into any
compromise or settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party, which shall not be unreasonably
withheld, unless such judgment, compromise or settlement (i) provides for
the payment by the Indemnifying Party of money as sole relief for the claimant
(or otherwise does require any limitations, covenants or other agreements of
the Indemnified Parties), (ii) results in the full and general release of
the Indemnified Parties from all liabilities arising or relating to, or in
connection with, the Third Party Claim and (iii) involves no finding or
admission of any violation of legal requirements or the rights of any Person and
no effect on any other claims that may be made against any Indemnified Party.

(d)           The Indemnified
Party may not consent to the entry of any judgment or enter into any compromise
or settlement with respect to a Third Party Claim with respect to which
indemnification is being sought hereunder without the prior written consent of
the Indemnifying Party, which shall not be unreasonably withheld.  If the Indemnifying Party does not assume the
control and defense of a Third Party Claim under Section 7.3(a), the
Indemnified Party may defend such Third Party Claim and seek indemnification
hereunder from the Indemnifying Party for any Losses associated therewith.

(e)           The Indemnifying
Party or the Indemnified Party, as the case may be, shall at all times use
reasonable efforts to keep the other reasonably apprised of the status of the
defense of any Third Party Claim and to cooperate in good faith with each other
with respect to the defense of any such matter.

8.4          Exclusive Remedy. 
Except as otherwise provided in Section 5.5, the sole and exclusive
remedy with respect to any breach of any representation, warranty, covenant or
agreement contained herein this Agreement (other than (i) with respect to a
breach of the terms of a covenant or agreement, as to which MonoSol or Adams,
as the case may be, also shall be entitled to seek specific performance or
other equitable relief if permitted under applicable law and (ii) with respect
to claims for fraud) shall be a claim for Losses (whether by contract, in tort
or otherwise, and whether in law, in equity or both) made pursuant to
Section 7.1 or 7.2, as the case may be.

 

12

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

8.5          DISCLAIMER. MONOSOL HEREBY DISCLAIMS, AND ADAMS HEREBY WAIVES,
RELEASES AND RENOUNCES, ALL WARRANTIES, EXPRESS OR IMPLIED, ARISING BY LAW OR
OTHERWISE, WITH RESPECT TO ANY DEFECT IN ANY OF THE SERVICES PROVIDED HEREUNDER
OR THE FAILURE TO ACHIEVE THE OBJECTIVES OF ANY PROJECT, INCLUDING BUT NOT
LIMITED TO (I) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS, OR (II) ANY
IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE
OF TRADE.

SECTION 9.         TERM AND TERMINATION

9.1          Term.
The initial term of this Agreement shall begin as of the Effective Date and
shall remain in effect for a period of seven (7) years, provided that Adams may
renew this Agreement for three successive three (3) year periods, in its sole
discretion, by notice to MonoSol at least six (6) months prior to the end of
the then current term.

9.2          Termination.

(a)           Adams shall at its
sole discretion have the right to terminate this Agreement: (i) if a Product
developed by MonoSol under a Project Plan hereunder fails to meet the
Specifications applicable to such Project Plan, (ii) if MonoSol fails to meet
Project milestones, subject to applicable grace periods (as set forth in the
applicable Project Plan), as a result of MonoSol’s breach of its obligations
under such Project Plan, or (iii) if MonoSol has failed to achieve acceptable
stability for the Product(s) as set forth in the applicable Project Plan as a
result of MonoSol’s breach of its obligations under such Project Plan.

(b)           If, at any time
during the term of this Agreement, Adams, directly or indirectly, takes any
action or assists or supports any third party in taking any action challenging
any of MonoSol’s IP Rights, including any action in connection with an
opposition, reexamination, revocation or invalidation proceeding, or requests a
declaration of an interference against or otherwise attacks the validity or
enforceability of any of MonoSol’s IP Rights, or contests or disputes MonoSol’s
entitlement to or ownership of the of MonoSol’s IP Rights, MonoSol shall have
the right to terminate this Agreement immediately.

(c)           MonoSol shall at its
sole discretion have the right to terminate this Agreement if Adams commits any
continuing and material breach of any of the provisions of this Agreement and
(in the case of a breach that is capable of remedy) fails to remedy the same
within thirty (30) days of receipt of written notice of such breach.

(d)           Either Party shall
be entitled to immediately terminate this Agreement upon the filing or
institution of bankruptcy, reorganization (in connection with any insolvency),
liquidation or receivership proceedings, or upon an assignment of a substantial
portion of the assets for the benefit of creditors by the other Party, or in
the event a receiver or custodian is appointed for such other Party’s business,
or if a substantial portion of such other Party’s business is subject to
attachment or similar process; provided, however, that in the case of any 

 

 

13

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

involuntary
bankruptcy proceeding or the attachment of a substantial portion of a Party’s
assets, such right to terminate shall only become effective if the proceeding
or attachment is not dismissed within 180 days after the filing thereof.

                (e)
          This Agreement shall
automatically terminate at any time when there are no Project Plans in effect
or under active negotiation for a period of over one year.

 

9.3          Rights
Upon Termination.

(a)           In the event of
termination of this Agreement by Adams pursuant to Section 9.2(a) or 9.2(d),
MonoSol shall disclose in writing and deliver to Adams such data and results
from the conduct of the applicable Project Plans and any Developments to be
owned by Adams with respect thereto conceived or developed prior to the
effective date of termination and shall deliver to Adams a copy of the complete
records (including, without limitation, laboratory records) regarding such
Project Plans; provided that MonoSol shall not have any obligation to
deliver to Adams any MonoSol Confidential Information or any Developments to be
owned by MonoSol under this Agreement or any Project Plan.

(b)           In the event of
termination of this Agreement by MonoSol pursuant to Section 4 or Section
9.2(b), 9.2(c) or 9.2(d), MonoSol shall retain any data and results from the
conduct of any ongoing Project Plans and any Developments with respect thereto
conceived or developed prior to the effective date of termination and Adams
shall have no rights or interest with respect thereto.

9.4          Survival.

(a)           Any claim that
arises prior to the effective date of termination of this Agreement shall
survive such termination.

(b)           Sections 3.3, 4, 5.4,
6, 8 and 9 shall survive termination of this Agreement for any reason.

9.5          Return of Confidential Information. Within thirty (30) days of any
termination of this Agreement, (i) Adams shall cease to use and shall deliver
to MonoSol, upon written request, all Confidential Information of MonoSol,
except for any documents or records that Adams is required to retain by
applicable law, and (ii) MonoSol shall cease to use and shall deliver to Adams,
upon written request, all Confidential Information of Adams except for any
documents or records that MonoSol is required to retain by applicable law.

SECTION 10.       MISCELLANEOUS

10.1        Independent Contractor. 
Neither MonoSol nor Adams, together in each case with their respective
employees or representatives, are under any circumstances to be considered as
employees or agents or representatives of the other by virtue of this
Agreement, and neither shall have the authority or power to bind the other or
contract in the other’s name.

 

14

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

10.2        Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed given when so
delivered in person, by reputable overnight courier, by facsimile transmission
(with receipt confirmed by automatic transmission report) or two Business Days
after being sent by registered or certified mail (postage prepaid, return
receipt requested), as follows:

If to Adams:                                                                          Adams
Respiratory Products, Inc.

4 Mill Ridge Lane

Chester, New Jersey  07930

Attn:  General Counsel

Facsimile No.:  (908) 879-9784

 

With
a copy to:

 

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree
Street

Atlanta, Georgia  30309

Attn:  J. Vaughan Curtis

Facsimile:  (404) 253-8247

 

 

If to MonoSol:                                                               MonoSol Rx,
LLC.

30
Technology Drive

Warren, New Jersey 07059

Attn:       A. Mark Schobel

Facsimile
No.:  908.561.1209

 

With a
copy to:

 

MonoSolRx LLC

1100 Connecticut Ave

Suite 440

Washington DC 20036

Attn: Joe Fuisz

Facsimile: 202.223.9069

 

 

Any Party may by notice given in accordance with this
Section 9.2 to the other Parties designate another address or person for
receipt of notices hereunder.

 

15

 

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

10.3        Binding Effect; No Assignment; No Third
Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns.  Neither MonoSol nor Adams may assign any of
its rights or delegate any of its liabilities or obligations hereunder without
the prior written consent of the other; provided that either Party may
assign its rights under this Agreement without the other Party’s prior written
consent upon written notice to the other Party in connection with the transfer
or sale of all or substantially all of the assets or business of such Party or
any of its Affiliates or the merger or consolidation with another Person of
such Party or any of its Affiliates. 
Nothing in this Agreement, express or implied, is intended to or shall
confer upon any person other than Adams and MonoSol and their respective
successors and permitted assigns any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except for affiliates or
representatives entitled to indemnification pursuant to Section 7.

10.4        No Implied Waivers; Rights Cumulative. No failure on the part of MonoSol or
Adams to exercise and no delay in exercising any right, power, remedy or
privilege under this Agreement, or provided by statute or at law or in equity
or otherwise, including the right or power to terminate this Agreement, shall
impair, prejudice or constitute a waiver of any such right, power, remedy or
privilege or be construed as a waiver of any breach of this Agreement or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, remedy or privilege.

10.5        Severability. If any provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement shall remain in full force and effect.  Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable. 
The Parties further agree to replace such invalid or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such invalid or unenforceable provision.

10.6        Force Majeure. Neither Party shall be held in breach
of this Agreement for failure to perform any of its obligations hereunder
(except the payment of money) and the time required for performance shall be
extended for a period equal to the period of such delay, provided that such
delay has been caused by or is the result of circumstances beyond the
reasonable control of the Party so affected, including without limitation any
acts of God; acts of the public enemy; civil strife; wars declared or
undeclared; embargoes; labor disputes, including strikes, lockouts, job actions
or boycotts; fires; explosion; and floods. 
A governmental or regulatory inspection or order directed at either
Party shall not be considered to be a force majeure event for the purpose of
this Agreement.  The Party so affected
shall: (a) give prompt written notice to the other Party of the nature and date
of commencement of the force majeure event and its expected duration; and (b)
use commercially reasonable efforts to relieve the effect of such cause as
rapidly as possible.

10.7        Governing Law. 
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York.

 

16

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

10.8        Section Headings; Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation.  All
references to “Section” or “Sections” refer to the corresponding Section or
Sections of this Agreement.  All words
used in this Agreement will be construed to be of such gender or number as the
circumstances require.  Unless otherwise
expressly provided, the word “including” does not limit the preceding words or
terms.

10.9        Entire Agreement. This Agreement and the Ancillary
Agreements contain the entire agreement among the Parties with respect to the
subject matter hereof and supersede all prior agreements, written or oral,
among the Parties thereto.

10.10      Amendment; Waiver. This Agreement may not be amended except
by an instrument signed by each of the Parties hereto.  Any Party hereto may (a) extend the time for
the performance of any of the obligations or other acts of another Party hereto
or (b) waive compliance with any of the agreements of another Party or any
conditions to its own obligations, in each case only to the extent such
obligations, agreements, or conditions are intended for its benefit; provided, however, that any such
extension or waiver shall be binding upon a Party only if such extension or waiver
is set forth in a writing executed by such Party.

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

10.12      Submission to Jurisdiction; Waiver. In the event any action shall be
brought to enforce or interpret the terms of this Agreement, the Parties agree
that such action will be brought in the U.S. District Court for the Southern District
of New York.  Each of MonoSol and Adams
hereby irrevocably submits with regard to any action or proceeding for itself
and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts.  Each of MonoSol and Adams hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Agreement, (a)
any claim that it is not personally subject to the jurisdiction of the
above-named courts for any reason other than the failure to lawfully serve
process, (b) that it or its property is exempt or immune from jurisdiction of
any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and (c) to the
fullest extent permitted by applicable law, that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii) the venue
of such suit, action or proceeding is improper, and (iii) this Agreement,
or the subject matter hereof, may not be enforced in or by such courts.

10.13      Rules of Construction. The Parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or ruling of construction providing that ambiguities in an agreement or other
document will be construed against the Party drafting such agreement or
document.

 

17

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

10.14      Waiver of Jury Trial. EACH OF ADAMS AND MONOSOL HEREBY
IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENT OR ACTION RELATED HERETO
OR THERETO.

10.15      Publication. MonoSol and Adams agree not to issue
any press relate or other public statement disclosing the existence of or
relating to this Development Agreement or Ancillary Agreements without the
express written consent of the other Party; provided, however,
that neither Party shall be prevented from complying with any duty of
disclosure it may have pursuant to law, including securities laws applicable to
a public company, subject to notifying the other Party in writing and giving
such other Party reasonable time to comment on the same prior to disclosure.

10.16      Debarment
Certification. Neither MonoSol nor any Person employed thereby directly in
the performance of the Projects has been debarred under section 306(a) or (b)
of the Federal Food, Drug and Cosmetic Act and no debarred Person shall in the
future be employed by MonoSol in connection with any work to be performed for
or on behalf of Adams which may later become part of any application for
approval of a drug by the FDA.  If at any
time after execution of this contract, MonoSol becomes aware that MonoSol or
any Person employed thereby directly in the performance of the Projects is, or
is in the process of being, debarred, MonoSol hereby certifies that it shall so
notify Adams at once.

 

[Remainder
of Page Intentionally Left Blank]

 

 

18

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

                IN WITNESS
WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives, effective as of the date first above
written.

 

 

	
  MONOSOL Rx, LLC

  	
  ADAMS RESPIRATORY
  PRODUCTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Alexander M. Schobel

  	
   

  	
  By: 

  	
  /s/ 

  	
  Robert Casale

  	
   

  
	
  Name:

  	
  Alexander M. Schobel

  	
   

  	
   

  	
  Name: 

  	
  Robert Casale

  	
   

  
	
  Title:

  	
  Pres. & CEO

  	
   

  	
   

  	
  Title:

  	
   

  
									

 

 

 

[Signature Page to Development Agreement]

 

 

 

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

 

Exhibit A

Project Plan for Thin Strip Project 

 

 

[*]Exhibit 10.8

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

	
  Confidential treatment has
  been requested for portions of this exhibit. The copy filed herewith omits
  the information subject to the confidentiality request. Omissions are
  designated as [*]. A complete version of this exhibit has been filed
  separately with the Securities and Exchange Commission.

  

 

LICENSE
AGREEMENT

This LICENSE
AGREEMENT (this “Agreement”) is entered
into as of March 15, 2007, (the “Effective Date”) by and between MonoSol Rx, LLC, a Delaware limited liability company (“MonoSol”),
and  Adams Respiratory Operations, Inc., a
Delaware corporation and/or its affiliates (collectively, “Adams”).  MonoSol and Adams are referred to hereinafter
individually as a “Party” and collectively as the “Parties.”

RECITALS

A.            Simultaneously with the execution of this Agreement, the Parties are
entering into a Supply Agreement pursuant to which MonoSol has
agreed to manufacture and supply to Adams certain finished products on the
terms and subject to the conditions set forth in the Supply Agreement (“Supply
Agreement”).

B.            Simultaneously
with the execution of this Agreement, the Parties are entering into a
Development Agreement pursuant to which MonoSol agrees to use the MonoSol IP
Rights to develop for Adams the [*] Product;

C.            Pursuant
to the Development Agreement, once the [*] Product has
been developed, Adams and MonoSol will work together to obtain Regulatory
Approvals of the [*] Product.  Once Regulatory Approval has been obtained,
Adams wishes MonoSol to manufacture and supply to Adams the Finished Product,
and MonoSol is willing to perform such services on the terms and subject to the
conditions set forth in this Agreement and the Quality Agreement.

C.            MonoSol
owns or controls the MonoSol IP Rights and is willing to grant certain rights
under and to the MonoSol IP Rights to Adams on the terms set forth herein.

In consideration of the mutual
representations, warranties and covenants contained herein, the Parties agree
as follows:

SECTION
1.                            DEFINITIONS

Capitalized terms used in this Agreement, but not otherwise defined
herein, shall have the meanings given to them in the Supply Agreement.

1.1.         “Agreement”
has the meaning set forth in the preamble.

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

1.2.         “Business
Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to
close.

1.3.         “Adams”
has the meaning set forth in the preamble.

1.4.          “Adams
Indemnified Party” has the meaning set forth in Section 6.2.

1.5.         “Adams
Territory” means Mexico, Canada, and the United States and its territories
and possessions, including Puerto Rico.

1.6.         “Confidential
Information” has the meaning set forth in Section 4.1.

1.7.          “Disclosing
Party” has the meaning set forth in Section 4.1.

1.8.         “Development
Agreement” means the Development Agreement of even date herewith by and
between the Parties, as such agreement may
be amended, supplemented or otherwise modified from time to time.

1.9.         “Effective
Date” has the meaning set forth in the preamble.

1.10.        “Indemnified
Parties” means (i) with respect to claims arising under Section 6.1,
MonoSol Indemnified Parties, and (ii) with respect to claims arising under
Section 6.2, Adams Indemnified Parties.

1.11.       “Indemnifying
Party” means (i) with respect to claims arising under Section 6.1, the
Adams, and (ii) with respect to claims arising under Section 6.2, MonoSol.

1.12.        “Losses”
has the meaning set forth in Section 6.1.

1.13.        “MonoSol”
has the meaning set forth in the preamble.

1.14.       “MonoSol
Indemnified Party” has the meaning set forth in Section 6.1.

1.15.       “MonoSol
IP Rights” means the MonoSol Patent Rights and the MonoSol Know-How. Trade
Secrets?

1.16.       “MonoSol
Know-How” means technology, manufacturing processes, and testing and
analytical know-how owned by MonoSol or otherwise  used by it in making, testing and distribution
of  the thin strips.

1.17.       “MonoSol
Patent Rights” means claims of the patents and patent applications listed
on Schedule 1.19; any patent or patent application owned by MonoSol that claims
priority through a patent or patent application listed on Schedule 1.19; all
reissues, reexaminations, extensions, continuations, continuations in part,
continuing prosecution applications and divisions of a patent or patent
application listed on Schedule 1.19.

 

2

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

1.18.       “MonoSol
Territory” means all territory worldwide, other than the Adams Territory.

1.19.       “Net
Sales” means, for any period of determination, the aggregate amount
invoiced   by Adams (or any affiliate, permitted
successor, permitted assignee, or agent of Adams) to a third party distributor,
agent, contractor or user for the sale of the [*]
Product during such period less (a) credits, refunds and allowances accrued for
spoiled, damaged, outdated and returned products, (b) accrued trade volume and
cash discounts and rebates (including coupons and government charge-backs) in
amounts customary to the trade, and (c) sales, excise, value added, turnover,
use, and other like taxes and customs duties accrued, excluding net income tax.  The amounts of any deductions accrued
pursuant to clauses (a) — (c) shall be determined from books and records
maintained in accordance with GAAP, consistently applied.  “Net Sales” shall not include revenue
received by Adams (or any of its affiliates) from transactions with an
affiliate, where the [*] Product
in question will be resold to an independent third party distributor, agent or
end user by the affiliate where such revenue received by the affiliate from
such resale is included in Net Sales.

1.20.        “Party”
or “Parties” has the meaning set forth in the preamble.

1.21.       “Person”
means an individual, a corporation, a general partnership, a limited
partnership, a limited liability company, a limited liability partnership, an
association, a trust or any other entity or organization, including a
governmental authority.

1.22.       “[*] Product” shall have that
meaning ascribed to it in the Development Agreement.

1.23.       “Quarterly
Royalty Reports” has the meaning set forth in Section 3.2.

1.24.       “Receiving
Party” has the meaning set forth in Section 4.1.

1.25.       “Regulatory
Approval” means, with respect to a product, all approvals (including price
and reimbursement approvals), licenses, registrations or authorizations based
on determinations of quality, safety and efficacy of any Regulatory Authority,
necessary for the use, storage, import, transport and sale of such product in
the Adams Territory.

1.26.       “Regulatory
Authority” means any governmental or regulatory body, court or arbitrator,
including the Food and Drug Administration or any successor agency.

1.27.       “Royalty
Term” means the period beginning on the Effective Date and ending upon the
termination or expiration of this Agreement.

1.28.       “Supply
Agreement” means the Supply Agreement of even date herewith by and between
the Parties, as such agreement may be
amended, supplemented or otherwise modified from time to time.

 

3

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

1.29.       “Third
Party Claim” has the meaning set forth in Section 6.3.

1.30.       “Trade
Secrets” means information, including technical and nontechnical data, a
formula, pattern, compilation, program device, method, technique, process or
other information similar to any of the foregoing, that (i) derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other Persons who can derive economic
value from its disclosure or use and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.

SECTION
2.                            LICENSE GRANTS

2.1          License to Adams.  Subject to the terms and conditions of this
Agreement, MonoSol hereby grants to Adams non-exclusive, royalty-bearing,
non-transferable license under and to the MonoSol IP Rights to (i) make and
have made the [*] Product anywhere
in the world for import into the Adams Territory, (ii) import the [*] Product into the Adams Territory and
(iii) use, sell and offer for sale the [*]
Product in the Adams Territory; provided, however, that so long
as MonoSol has not breached any of its obligations under the Supply Agreement
Adams has no license to make or have made except pursuant to Sections 11 and
12.5 thereof.  MonoSol covenants and
agrees with Adams that during the term of this Agreement it will not grant any
license or similar right with respect to the MonoSol IP Rights to make or have
made the [*] Product for import or
sale into the Adams Territory.

2.2          Retained Rights of
MonoSol.  All rights not expressly
granted to Adams under this Agreement are retained by MonoSol.  

2.3          Delivery of
MonoSol Know-How.  In the event that
MonoSol is unable to meet its supply obligations under the Supply Agreement,
MonoSol shall, upon the request of Adams provide Adams with reasonable access
to (i) any documents in MonoSol’s control and (ii) then current employees with
know-how, in each case to the extent relevant to the production of the [*] Product, subject to any pre-existing
confidentiality obligations, and with respect to employees, their availability
given MonoSol’s then-current staffing and other obligations.

SECTION
3.                            ROYALTIES

3.1          Royalties.

(a)           Royalty
Calculations Prior to Approval of Generic. 
Except as provided in Section 3.1(b), within thirty (30) days of the end
of each calendar quarter during the Royalty Term, Adams shall pay to MonoSol
royalties on Net Sales of the [*] Product
at  the royalty rates as specified in
this Section 3.1(a).  The royalty on Net
Sales to be paid by Adams to 

 

4

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

MonoSol during the first and subsequent non-overlapping twelve month
periods of the Royalty Term (each such twelve (12) month period a “Royalty Year”)
will be dependent upon Net Sales during such Royalty Year (specifically
excluding Net Sales of prior Royalty Years) and will be based upon the  following royalty scale:

For the first $15 million
in Net Sales of a Royalty Year— 5% royalty;

For Net Sales between $15 million
and $25 million in a Royalty Year— 6% royalty;

For Net Sales between $25 million
and $35 million in a Royalty Year — 7% royalty; and

For Net Sales over $35 million
in a Royalty Year — 7.5% royalty.

Net
Sales in different quarters of a Royalty Year may be subject to different
royalty rates depending upon the total Net Sales accrued in such Royalty Year.

(b)           Royalty
Calculations Subsequent to Approval of Generic.  In the event an abbreviated new drug
application based upon the [*] Product shall
be approved by the FDA for sale in the Adams Territory with respect to an A/B
rated product bioequivalent to the [*] Product
(the “Generic”) then within thirty (30) days of the end of each non-overlapping
twelve month period during the Royalty Term starting at the beginning of the
next month immediately following approval of the Generic, Adams shall pay to
MonoSol royalties on Net Sales of the [*] Product
made during such non-overlapping twelve (12) month period at the royalty rates
specified in this Section 3.1(b) instead of Section 3.1(a).

(i)            The royalty rate
applicable to the Net Sales during the twelve month period starting at the
beginning of the month immediately following approval of the Generic (a “Generic
Royalty Period”), shall be calculated by: 
(i) dividing the Net Sales of such Generic Royalty Period by the Net
Sales made in the corresponding Royalty Period in the twelve (12) month period
immediately preceding such Generic Royalty Period and multiplying the result by
the highest royalty rate applicable if calculated under Section 3.1(a) based on
the total Net Sales made in such Generic Royalty Period; and (ii) multiplying
the result of (i) by the total Net Sales made in such Generic Royalty Period.

(ii)           For each twelve
(12) month non-overlapping Generic Royalty Period subsequent to the first
Generic Royalty Period the royalty rates applicable to Net Sales made in such
Generic Royalty Period will be determined by (i) dividing the Net Sales of that
Generic Royalty Period by the Net Sales of the Generic Royalty Period
immediately preceding such Generic Royalty Period and multiplying the result by
the royalty rate applicable to the immediately preceding Generic Royalty
Period; and (ii) multiplying the result of (i) by the total Net Sales made in such
Generic Royalty Period.  

 

5

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

3.2          Royalty Reports
and Payments.  During the Royalty
Term, Adams shall make quarterly royalty payment reports (“Quarterly Royalty
Reports”) to MonoSol on or before the thirtieth (30th) day following the
end of the preceding calendar quarter. 
Each Quarterly Royalty Report shall cover the most recently completed
calendar quarter and shall show (a) the Net Sales of the [*] Product during the most recently
completed calendar quarter including reasonable detail with respect to the
calculation of Net Sales such as units sold, discounts, credits and other
components in the calculation of Net Sales and (b) the royalties, in U.S.
dollars, payable with respect to such Net Sales.  Each Quarterly Royalty Report shall be
accompanied by the payment shown as due on such Quarterly Royalty Report.

3.3          Currency.  All amounts payable and calculations
hereunder shall be in United States dollars. 
With respect to any sales which are not made in United States dollars,
the amount received by Adams will be converted into United States dollars
[based on the closing buy exchange rate for such currency for the date on which
such currency is received in the U.S. by Adams as reported by the Wall Street
Journal].

3.4          Taxes and
Withholding.  All payments under this
Agreement will be made without any deduction or withholding for or on account
of any Tax, duties, levies, or other charges unless such deduction or
withholding is required by applicable laws or regulations to be assessed
against MonoSol.  If Adams is so required
to deduct or withhold, Adams will (i) notify MonoSol of such requirement in
writing, (ii) pay to the relevant authorities the full amount required to be
deducted or withheld promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such amount has
been assessed against MonoSol, and (iii) forward to MonoSol an official receipt
(or certified copy) or other documentation reasonably acceptable to MonoSol
evidencing such payment to such authorities.

3.5          Record Keeping;
Audits.  Adams and its affiliates and
sublicensees shall keep books and accounts of record in connection with Net
Sales of the [*] Product in
sufficient detail to permit accurate determination of all figures necessary for
verification of royalties to be paid hereunder. 
Adams and its affiliates and sublicensees shall maintain such records
for a period of at least five (5) years  after the end
of the calendar quarter in which they were generated; provided,
however, that if any records are in dispute and Adams has received
written notice from MonoSol of the records which are in dispute, Adams and its
affiliates and sublicensees shall keep such records until the later of one (1)
year or until such dispute is resolved. 
Upon reasonable notice to Adams, MonoSol shall have the right to examine
Adams’s (or its affiliate’s or sublicensee’s) records to determine the correctness
of the amount of royalties paid to MonoSol under the terms of this Agreement.

3.6          Underpayments.  If an audit conducted by MonoSol pursuant to
Section 3.5 reveals that additional royalties were due to MonoSol under
this Agreement, Adams shall pay to 

 

6

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

MonoSol
the additional royalties within forty-five (45) days of the date Adams receives
written notice of such underpayment.

3.7          Confidentiality.  All records, reports and information of Adams
which are subject to review under this Section 3 shall be deemed to be
Adams’s Confidential Information subject to the provisions of Section 4
hereof, and MonoSol shall not disclose any such Confidential Information of
Adams to any third party or use such Confidential Information of Adams for any
purpose other than reviewing progress made or verifying payments to be made by
Adams to MonoSol hereunder.

SECTION
4.                            CONFIDENTIAL
INFORMATION

4.1          General.  Pursuant to the terms of this Agreement, each
of MonoSol and Adams (in such capacity, the “Disclosing Party”) has
disclosed and will be disclosing to the other Party, and to the officers,
directors, employees, agents and/or representatives of each (in such capacity,
the “Receiving Party”) certain secret, confidential or proprietary data,
Trade Secrets, know-how, intellectual property and related information,
including operating methods and procedures, marketing, manufacturing,
distribution and sales methods and systems, sales figures, pricing policies and
price lists and other business information (“Confidential Information”).  Without limiting the foregoing, it is
acknowledged that the MonoSol Know-How shall constitute the Confidential Information
of MonoSol (subject to Section 4.2) for purposes of this Agreement.  The Receiving Party (i) shall keep and hold
as confidential, and shall cause its officers, directors, employees, agents and
representatives to keep and hold as confidential, all Confidential Information
of the Disclosing Party, and (ii) shall not disclose, and shall cause its
officers, directors, employees, agents and representatives not to disclose, any
Confidential Information of the Disclosing Party.  The Receiving Party may (i) use the
Confidential Information of the Disclosing Party only in the exercise of its
rights and the performance of its obligations set forth in this Agreement and
(ii) disclose the Confidential Information of the Disclosing Party only in
the exercise of its rights and the performance of its obligations set forth in
this Agreement; provided any such disclosure requires the recipient to maintain
the Confidentiality of the Confidential Information.  Confidential Information disclosed by the
Disclosing Party shall remain the sole and absolute property of the Disclosing
Party, subject to the rights granted in this Agreement.

4.2          Exceptions.  Confidential Information shall not include
any information which (i) is already known to the Receiving Party at the time of
disclosure by the Disclosing Party, as demonstrated by competent proof (other
than as a result of prior disclosure under any agreement between the Parties
with respect to confidentiality), (ii) is or becomes generally available to the
public other than through any act or omission of the Receiving Party in breach
of this Agreement, (iii) is acquired by the Receiving Party from a third party
where such disclosure does not violate, directly or indirectly, an obligation
of confidentiality to the Disclosing Party with 

 

7

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

respect
to same, or (iv) is developed independently by the Receiving Party without use,
direct or indirect, of Confidential Information.  In addition, nothing in this Section 4 shall
be interpreted to limit the ability of any Party to disclose its own
Confidential Information to any other Person on such terms and subject to such
conditions as it deems advisable or appropriate.

4.3          Permitted
Disclosures.  It shall not be a
breach of Section 4.1 if a Receiving Party discloses Confidential Information
of a Disclosing Party (i) pursuant to applicable law, including securities laws
applicable to a public company, to any Regulatory Authority or other
governmental authority, or (ii) in a judicial, administrative or arbitration
proceeding to enforce such Party’s rights under this Agreement; provided,
however, the Receiving Party may only make such disclosure if it (A)
provides the Disclosing Party with as much advance written notice as possible
of the disclosure, and (B) reasonably cooperate with the Disclosing Party in
any attempt to prevent, limit or seek confidential treatment for the disclosure
to the specific purpose at issue.

4.4          Confidential Terms.  Each Party acknowledges and agrees that the
terms and conditions of this Agreement shall be considered Confidential
Information of each Party and shall be treated accordingly.  Notwithstanding the foregoing, each Party
acknowledges and agrees that the other may be required to disclose some or all
of the information included in this Agreement in order to comply with its
obligations under securities laws, and hereby consents to such disclosure to
the extent deemed advisable or appropriate by its respective counsel (but only
after consulting with the other to the extent practicable).  The Parties may also disclose the existence
of this Agreement and terms thereof to their directors, investors, officers,
employees, attorneys, accountants and other advisers on a need to know basis
and may, upon obtaining a written confidentiality agreement, further disclose
the existence and terms of this Agreement to third parties to whom it may be
relevant in connection with financings, acquisitions and similar transactions.

4.5          Equitable Remedies.  Each Party specifically recognizes that any
breach by it of this Section 4 may cause irreparable injury to the other Party
and that actual damages may be difficult to ascertain, and in any event, may be
inadequate.  Accordingly (and without
limiting the availability of legal or equitable, including injunctive, remedies
under any other provisions of this Agreement), each Party agrees that in the
event of any such breach, the other Party shall be entitled to seek, by way of
private litigation in the first instance, injunctive relief and such other
legal and equitable remedies as may be available.

SECTION 5.         INFRINGEMENT OF MONOSOL IP RIGHTS

5.1          Infringement by
Third Parties.

 

8

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

(a)           If
either Adams or MonoSol becomes aware of an infringement of any MonoSol IP
Rights, it shall give prompt written notice thereof to the other Party.  MonoSol shall have the right, but not the
obligation, to obtain a discontinuance of such infringement or bring suit
against the third party infringer.  If
MonoSol fails to take commercially appropriate actions to stop any infringement
of any MonoSol IP Rights within ninety (90) days of written notice of the
infringement, Adams may, but shall not be obligated to, take such necessary
actions to stop such infringement.   
With respect to any action to enforce the MonoSol IP Rights, no
settlement, consent judgment or other voluntary final disposition of the suit
or action including injunctive relief may be entered into by the Party that
brings the action under this Section 5.1(a) (“Initiating Party”) without
consent to such injunctive relief by the non-Initiating Party, which consent
shall not be unreasonably withheld or delayed.

(b)           The
Initiating Party shall bear the full cost of any enforcement action brought
under Section 5.1(a), and shall retain all damages and recoveries (except as
set forth in Section 5.1(c)). The non-Initiating Party will cooperate with the
Initiating Party, join in any suits as may be brought by or as may be brought
against the Initiating Party as necessary and be available at the Initiating
Party’s reasonable request to assist in such proceedings with the expenses for
such cooperation borne solely by the Initiating Party; provided however, that
the non-Initiating Party may, at its own cost, participate, through attorneys
of its own choosing or otherwise, in the investigation, trial and defense of
such action and any appeal arising therefrom, and provide the Initiating Party
input and advice on strategy for and management of any enforcement action.

(c)           If
an Initiating Party elects to abandon a suit brought under Section 5.1(a), it
shall give timely notice to the non-Initiating Party who may, if it so desires,
continue prosecution of such suit. If the non-Initiating Party desires to
continue prosecution it shall bear the entire cost of continuation of such suit
and shall be entitled to retain the entire amount of any recovery by way of
judgment, award, decree or settlement in such suit.

(d)           If
Adams receives a certification of invalidity or non-infringement directed to
the MonoSol Patent Rights in connection with an abbreviated new drug
application or a Section 502(b)(2) application, Adams shall immediately inform
MonoSol of such certification and Adams may initiate an action to enforce the
MonoSol Patent Rights if MonoSol fails to initiate such an action within
fifteen (15) days of receipt of such certification.

(e)           Neither
Party shall make any statements nor take a position that negates the other
Party’s rights in any MonoSol IP Right.

SECTION 6.                            INDEMNIFICATION

6.1          Indemnification
by Adams.  Adams will defend,
indemnify and hold harmless MonoSol, and the representatives and affiliates of
MonoSol (each, a “MonoSol Indemnified Party”), from, against and in
respect of any and all actions, liabilities, governmental orders, 

 

9

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

encumbrances, losses, damages, bonds, dues, assessments, fines,
penalties, taxes, fees, costs (including costs of investigation, defense and
enforcement of this Agreement), expenses or amounts paid in settlement (in each
case, including attorneys’ and experts’ fees and expenses) (collectively, “Losses”),
incurred or suffered by the MonoSol Indemnified Parties or any of them as a
result of, arising out of, or directly or indirectly relating to any Third
Party Claim of any nature arising out of the use or sale of the [*] Product by, on behalf of, or under the
authority of, Adams after the Effective Date that do not fall within the
indemnification to Adams by MonoSol pursuant to Section 6.3 of the Supply
Agreement.

6.2            Third Party
Claims.

(a)           If
any third party notifies an Indemnified Party with respect to any matter (a “Third
Party Claim”) which may give rise to any claim against the Indemnifying
Party under this Section 6, then the Indemnified Party will promptly give
written notice to the Indemnifying Party; provided, however, that
no delay on the part of the Indemnified Party in notifying the Indemnifying
Party will relieve the Indemnifying Party from any obligation under this
Section 6, except to the extent such delay actually prejudices the Indemnifying
Party.

(b)           The
Indemnifying Party will defend the Indemnified Party against the Third Party
Claim with counsel of its choice reasonably satisfactory to the Indemnified
Party.  The Indemnified Party may retain separate
co-counsel at its own cost and expense and participate in the defense of the
Third Party Claim.  Notwithstanding
anything to the contrary contained herein, assumption of the defense of any
Third Party Claim hereunder by the Indemnifying Party shall not constitute a
presumption or omission with respect to whether the Losses related to such
Third Party Claim are, in fact, subject to indemnification hereunder.

(c)           The
Indemnifying Party will not consent to the entry of any judgment or enter into
any compromise or settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party unless such judgment, compromise
or settlement (i) provides for the payment by the Indemnifying Party of money
as sole relief for the claimant, (ii) results in the full and general release
of the Indemnified Parties from all liabilities arising or relating to, or in
connection with, the Third Party Claim and (iii) involves no finding or
admission of any violation of legal requirements or the rights of any Person
and no effect on any other claims that may be made against any Indemnified
Party.

(d)           The
Indemnified Party may not consent to the entry of any judgment or enter into
any compromise or settlement with respect to a Third Party Claim with respect
to which indemnification is being sought hereunder without the prior written
consent of the Indemnifying Party.

(e)           The
Indemnifying Party or the Indemnified Party, as the case may be, shall at all
times use reasonable efforts to keep the other reasonably apprised of the
status of the defense of any Third Party Claim and to cooperate in good faith
with each other with respect to the defense of any such matter.

 

10

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

(f)            Each
of MonoSol and Adams hereby consents to the non-exclusive jurisdiction of any
court in which any Third Party Claim may be brought against any Indemnified
Party for purposes of any claim which such Indemnified Party may have against
such Party pursuant to this Agreement in connection with such Third Party
Claim.

6.3          Direct
Claims.  In the event an Indemnified
Party claims a right to payment from any Indemnifying Party pursuant to this
Agreement, such Indemnified Party will send written notice of such claim to the
appropriate Indemnifying Party.  Such
notice will specify the basis for such claim. 
As promptly as possible after the Indemnified Party has given such
notice, such Indemnified Party and the appropriate Indemnifying Party will
establish the merits and amount of such claim (by mutual agreement, litigation,
arbitration or otherwise) and, within five Business Days of the final
determination of the merits and amount of such claim, the Indemnifying Party
will pay to the Indemnified Party immediately available funds in an amount
equal to such claim as determined hereunder.

SECTION
7.                            TERM AND
TERMINATION

7.1          Term.  The term of this Agreement shall commence
upon the Effective Date and continue to be in effect for so long as the Supply
Agreement remains in effect; provided, however, that in the event
that the Supply Agreement is terminated by Adams for breach by MonoSol, this
Agreement shall remain in effect for an additional seven (7) years from such
termination.  Notwithstanding anything
this Agreement to the contrary, no license granted herein with respect to any
patent shall survive beyond the expiration of such patent.  

7.2          Termination.

(a)           Adams
Termination.  This Agreement may be
terminated by Adams, at any time, upon thirty (30) days prior written notice to
MonoSol.

(b)           MonoSol
Termination.  This Agreement may be
terminated by MonoSol (i) in the event Adams fails to obtain Regulatory
Approval of the [*] Product by December 31, 2015; (ii)
within ninety (90) days after the end of any calendar year in which commercial
sales of the [*] Product do not exceed $[*] for a full calendar year after the initial commercial
launch of [*] Product; (iii) upon breach by Adams
of Section 4 hereof or failure by Adams to make payment when due hereunder; or
(iv) after thirty (30) days notice to Adams of any other material breach under
this Agreement.

(c)           No Waiver.  The right of Adams or MonoSol to terminate
this Agreement, as herein above provided, shall not be affected in any way by
Adams’s or MonoSol’s respective waiver or failure to take action with respect
to any prior default or breach.

 

11

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

7.3          Effects of
Termination.

(a)           Effect
of Termination.  On termination of
this Agreement for any reason, except as otherwise expressly provided herein,
all rights and obligations of each Party hereunder shall cease, including all
rights and licenses granted by either Party to the other Party hereunder and
all rights and sublicenses granted by Adams pursuant to Section 2.3.

(b)           Accrued
Rights.  Termination of this
Agreement for any reason shall be without prejudice to any right which shall
have accrued to the benefit of either Party prior to such termination,
including damages arising from any breach under this Agreement.  Termination of this Agreement shall not
relieve either Party from any obligation which is expressly indicated to
survive such termination.

(c)           Disposition
of Inventory.  Adams shall have the
right to continue to sell [*] Product
inventory manufactured prior to the effective date of termination of this
Agreement for a reasonable time after the effective date of such termination
(not to exceed six (6) months).

(d)           Survival.  The following sections of this Agreement, as
well as any other provisions in this Agreement which specifically state they
will survive termination of this Agreement, shall survive termination of this
Agreement for any reason:  Section
1,  Section 3 with respect to any unpaid
royalties, Section 3.5-3.6, Section 4, Section 6, this Section 7.3 and Section
8.

(e)           Return of Confidential Information.  Within
thirty (30) days of any termination of this Agreement, (i) Adams shall cease to
use and shall deliver to MonoSol, upon written request, all Confidential
Information of MonoSol, except for any documents or records that Adams is
required to retain by applicable law, and (ii) MonoSol shall cease to use and
shall deliver to Adams, upon written request, all Confidential Information of
Adams except for any documents or records that MonoSol is required to retain by
applicable law.

(f)            Rights in Bankruptcy.  All licenses granted under this Agreement and
all rights to data, regulatory filings and information, are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of rights to “intellectual property” as defined under
Section 101 of the U.S. Bankruptcy Code. 
The Parties agree that Adams, as a licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections
under the U.S. Bankruptcy Code, subject to the terms of this Agreement.  The Parties further agree that, in the event
of the commencement of a bankruptcy proceeding by or against MonoSol under the
U.S. Bankruptcy Code, Adams shall be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and same, if not already in Adams’s
possession, shall be promptly delivered to Adams’s upon Adams’s written request
(i) upon any such commencement of a bankruptcy proceeding, unless MonoSol
elects to continue to perform all of its obligations under this Agreement, or
(ii) if not delivered under (i) above, following the rejection of this
Agreement by or on behalf of MonoSol.

 

12

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

SECTION 8.                            MISCELLANEOUS

8.1          Notices.  Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed given when so
delivered in person, by reputable overnight courier, by facsimile transmission
(with receipt confirmed by automatic transmission report) or two Business Days
after being sent by registered or certified mail (postage prepaid, return
receipt requested), as follows:

if to Adams, to:

Adams Respiratory Operations, Inc.

14841 Sovereign Road

Ft. Worth, Texas 76155

Attn:  General Counsel

Facsimile No.:  (908) 879-9784

 

with a copy to:

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, Georgia  30309

Attn:  J. Vaughan Curtis

Facsimile:  (404) 253-8247

 

if to MonoSol, to:

MonoSol Rx, LLC 

30 Technology Drive

Warren, New Jersey 07059

Attn: 

Facsimile:

                                Either
Party may by notice given in accordance with this Section 8.1 to the other
Party designate another address or person for receipt of notices hereunder.

8.2          Amendment;
Waiver.  This Agreement may not be
amended except by an instrument signed by each of the Parties hereto.  Any Party hereto may (a) extend the time for
the performance of any of the obligations or other acts of another Party hereto
or (b) waive compliance with any of the agreements of another Party or any
conditions to its own obligations, in each case only to the extent such
obligations, agreements, or conditions are intended for its benefit; provided, however, that any such
extension or waiver shall be binding upon a Party only if such extension or
waiver is set forth in a writing executed by such Party.

 

13

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

8.3          Entire
Agreement.  This Agreement contains
the entire agreement between the Parties with respect to the subject matter
hereof and supersede all prior agreements, written or oral, between the
Parties.

8.4          Governing
Law.  This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York without regarding to its conflict of laws principles.

8.5          Binding Effect; No
Assignment; No Third Party Beneficiaries. 
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns.  Neither MonoSol nor Adams may assign any of
its rights or delegate and of its liabilities or obligations hereunder without
the prior written consent of the other. 
Nothing in this Agreement, express or implied, is intended to or shall
confer upon any Person other than Adams and MonoSol and their respective
successors and permitted assigns any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except for affiliates or
representatives entitled to indemnification pursuant to Section 6.

8.6          Section Headings;
Construction.  The headings of
Sections in this Agreement are provided for convenience only and will not
affect its construction or interpretation. 
All references to “Section” or “Sections” refer to the corresponding
Section or Sections of this Agreement. 
All words used in this Agreement will be construed to be of such gender
or number as the circumstances require. 
Unless otherwise expressly provided, the word “including” does not limit
the preceding words or terms and shall be deemed to be following by the words “without
limitation.”

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

8.8          Severability.  If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement shall remain in full force and effect.  Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable. 
The Parties further agree to replace such invalid or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such invalid or unenforceable provision.

8.9          Submission to
Jurisdiction; Waiver.  In the event
any action shall be brought to enforce or interpret the terms of this
Agreement, the Parties agree that such action will be brought in the U.S.
District Court for the Southern District of New York.  Each of MonoSol and 

 

14

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

Adams
hereby irrevocably submits with regard to any action or proceeding for itself
and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts.  Each of MonoSol and Adams hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Agreement, (a)
any claim that it is not personally subject to the jurisdiction of the
above-named courts for any reason other than the failure to lawfully serve
process, (b) that it or its property is exempt or immune from jurisdiction of
any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and (c) to the
fullest extent permitted by applicable law, that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper, and (iii) this Agreement,
or the subject matter hereof, may not be enforced in or by such courts.

8.10        Rule of
Construction.  The Parties hereto
agree that they have been represented by counsel during the negotiation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or ruling of construction providing that ambiguities in an
agreement or other document will be construed against the Party drafting such
agreement or document.

8.11        Waiver of Jury
Trial.  EACH OF ADAMS AND MONOSOL
HEREBY IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER RELATED
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENT OR ACTION
RELATED HERETO OR THERETO.

8.12        Expenses.  Except as expressly set forth herein, each
Party hereto shall bear all fees and expenses incurred by such Party in
connection with, relating to or arising out of the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including attorneys’, accountants’ and other professional
fees and expenses.

8.13        Independent
Contractor.  Neither MonoSol nor
Adams, together in each case with their respective employees or
representatives, are under any circumstances to be considered as employees or
agents or representatives of the other by virtue of this Agreement, and neither
shall have the authority or power to bind the other or contract in the other’s
name.

8.14        No Implied Waivers;
Rights Cumulative.  No failure on the
part of MonoSol or Adams to exercise and no delay in exercising any right,
power, remedy or privilege under this 

 

15

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

Agreement,
or provided by statute or at law or in equity or otherwise, including the right
or power to terminate this Agreement, shall impair, prejudice or constitute a
waiver of any such right, power, remedy or privilege or be construed as a
waiver of any breach of this Agreement or as an acquiescence therein, nor shall
any single or partial exercise of any such right, power, remedy or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power, remedy or privilege.

 

16

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

IN WITNESS WHEREOF, the Parties hereby have been caused this Agreement to be duly
executed as of the date first above written.

	
   

  	
  ADAMS RESPIRATORY OPERATIONS, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Robert Casale

  	
   

  
	
   

  	
  Name:

  	
  Robert Casale

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MONOSOL RX, LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Alexander M. Schobel

  	
   

  
	
   

  	
  Name:

  	
  Alexander M. Schobel

  
	
   

  	
  Title:

  	
  Pres. & CEO

  
						

 

 

[Signature Page to License
Agreement]

 

 

 

CONFIDENTIAL TREATMENT REQUESTED

Pursuant to 17 C.F.R. §§200.80(b) and 230.406

Schedule 1.19

MonoSol Patent Rights

[*]

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