Document:

Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Executive Employment Agreement (the “Agreement”)
is made and entered into as of this 17th day of November, 2005 by and between
MonoSol RX, LLC (the “Company”) and Alexander Mark Schobel, an individual (the “Executive”).

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to
employ the Executive as its President and Chief Executive Officer, and
Executive is willing to accept such employment by the Company, on the terms and
subject to the conditions set forth in this Agreement; and

 

WHEREAS, the Company and the
Executive desire that the terms of this Agreement begin at the discretion of
Executive but no later than January 6, 2005 (the “Effective Date”);

 

NOW, THEREFORE, in consideration
of the premises and the mutual covenants herein set forth, and for other good
and valuable consideration, the parties hereto, intending to be legally bound,
hereby agree as follows:

 

1.             Employment. During the term of this
Agreement, the Executive agrees to be employed by and to serve the Company as
its President and Chief Executive Officer, and the Company agrees to employ and
retain Executive in such capacity. The Executive shall report directly to
Monosol Rx, LLC Genpar, the General Partner, as currently controlled by Doug Bratton
(hereafter the “General Partner”). The Executive shall: (i) devote his entire
business time, energy and skill to the affairs of the Company; (ii) faithfully,
loyally, and industriously perform all duties incident to the position of
President and Chief Executive Officer, as well as any other duties consistent
with the stature and responsibility, of the Executive’s position as may from
time to time be assigned by the General Partner of MonoSol RX, LLC; and (iii)
diligently follow and implement all policies, practices, procedures, and rules
of the Company. Notwithstanding any provision herein to the contrary, Executive
shall not be precluded from devoting reasonable periods of time required for
serving as a member of one or more advisory boards or boards of directors of
companies or organizations or engaging in other minor business activities, so
long as such memberships or activities do not interfere with the performance of
Executive’s duties hereunder and are not directly or indirectly competitive
with, nor contrary to, the business or other interests of the Company, subject
to prior approval by the General Partner, which approval shall be granted in
the General Partner’s reasonable sole discretion.

 

2.             Employment Term. The Employment
Term of the Executive under this Agreement shall be for a period of three (3)
years. The Employment Term shall commence on the Effective Date of this
Agreement and shall automatically renew for further successive twelve month
terms (the “Renewal Terms”), provided either party may terminate the Agreement
during the Renewal Terms pursuant to Section 5 of this Agreement.

 

3.             Compensation.

 

A.            Base
Salary. As compensation for services rendered to the Company pursuant to
this Agreement, the Company shall pay to Executive a base salary (the “Base
Salary”) at a rate of $350,000.00 per annum, payable at a rate of $29,166.67
per month. The

 

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Base Salary will be paid in accordance with the
standard payroll policies of the Company as from time to time are in effect,
from which shall be deducted federal and, if applicable, state income taxes,
social security taxes, and such other and similar payroll taxes and charges as
may be required or appropriate under applicable law. The Base Salary shall be
considered by the Board for increase based upon performance and other
considerations as appropriately determined by the Board, including without
limitation performance assessment, market assessment for comparable executive
and employment terms and awards as may be deemed appropriate from time to time.

 

B.            Bonus.

 

(1)           Bonus
Reimbursement. Within thirty (30) days of the Effective Date, the Company
shall reimburse Executive $135,000.00, which represents Executive’s 2005 bonus
earned with his prior employer.

 

(2)           Annual
Bonus. In addition to the Base Salary, at the end of each twelve (12) month
period under the Employment Term, Executive shall be eligible, if then employed
with the Company, for a bonus of fifty percent (50%) of Executive’s Base
Salary, provided Company achieves established performance targets. Executive
must be employed by the Company on the day any bonus payment is due and payable
under this Agreement in order to receive said bonus payment. The bonus shall be
paid fifty percent (50%) in cash and fifty percent (50%) either in cash or in
Performance Units, in the General Partner’s good faith determination and
discretion based on Company’s ability to determine reasonable valuation of the
Performance Units. If the Company exceeds established performance targets, the
Company may, in its sole discretion, increase the amount of the Annual Bonus.

 

C.            Compensation.
The Company shall compensate Executive for those stock options with Executive’s
prior employer. Said compensation shall be made in cash, in the amount of
$88,000.00 within 30 days of the Effective Date.

 

D.            Award
of Performance Units. Executive shall be awarded Performance Units equal to
four percent (4%) of the equity value of the Company struck as of the Effective
Date. It is anticipated that the exercise price of the Performance Units shall
be based on an equity value of twenty million dollars ($20,000,000.00).
Executive shall be eligible for an award of additional Performance Units during
the Employment Term at the times, and in the amounts, as the Company in its
sole discretion shall determine. The award, valuation, vesting, and all other
benefits, terms, and conditions of the Performance Units are governed by the
terms and conditions of the award of Performance Units and by the MonoSol RX,
LLC, Performance Units Plan, established January 22, 2004, and all amendments,
supplements, and revisions thereto, attached hereto as Exhibit A and
incorporated herein by reference as if fully set forth herein (the “Plan”).
Notwithstanding anything to the contrary in the Plan, if during the Employment
Term Company increases the maximum number of Performance Units, or issues
membership interests, options, warrants or any other equity in the Company for
less the “Market Value” of the Company (as currently defined in the Plan) (a “Dilution
Event”), Executive shall be entitled to receive additional Performance Units so
that the equity value of the Performance Units held by the Executive prior to
the Dilution Event is the same as the equity value of the Performance Units
held by the Executive after the Dilution Event. In addition, notwithstanding
anything to the

 

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contrary in the Plan, 1/3 of the Executive’s initial
4% Performance Units shall become for each Target Year of Service.

 

4.             Additional Benefits.

 

A.            Executive
Benefits. During the Employment Term, Executive shall receive such benefits
and participate in such executive benefit plans as set forth in the MonoSol RX,
LLC, Benefit Summary, attached hereto as Exhibit B and incorporated herein by
reference.

 

B.            Vacation;
Sick Leave. The Executive shall, during the Employment Term, be allowed to
take up to four (4) weeks of vacation each year, and shall be eligible for such
sick leave each year as shall be established by the Company for senior
executives of the Company.

 

5.             Termination.

 

A.            Termination
for Cause. Notwithstanding anything to the contrary contained in this
Agreement, Termination for Cause may be effected by the Company at any time
during the term of this Agreement by written notification to the Executive in
accordance with Section 7(A) of this Agreement. For purposes of this Agreement,
“Termination for Cause” shall mean:

 

(1)           the
willful and continued failure of such Executive to perform his duties, including,
without limitation, such Executive’s failure or refusal to follow the
legitimate directions of the Company and/or of any of the persons to whom such
Executive reports (other than any such failure resulting from his death or
permanent disability); or

 

(2)           the
engaging by such Executive in willful, reckless or negligent conduct in
connection with his employment or other relationship which is materially detrimental
to the Company; or,

 

(3)           the
conviction of such Executive of any felony or any crime involving moral turpitude;
or,

 

(4)           such
Executive’s reporting to work impaired by or under the influence of alcohol or
illegal drugs; or,

 

(5)           such
Executive’s engaging in the unlawful use (including being under the influence)
or possession of illegal drugs on the Company’s premises; or,

 

(6)           such
Executive’s engaging in sexual harassment or other violation of any harassment
or discrimination law; or,

 

(7)           Executive’s
commission of fraud in connection with Executive’s employment or theft,
misappropriation or embezzlement of the Company’s funds; or,

 

(8)           the
demonstrated use or disclosure by Executive of any confidential proprietary or
trade secret information of Executive’s former employer or that Executive
learned or obtained through his former employer; or,

 

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(9)           the
demonstrated use or disclosure by the Executive of any confidential information
of the Company except when such disclosure is made pursuant to the directions
of the Company or in accordance with Company policy; or,

 

(10)         such
Executive’s engaging in competitive behavior against the Company, purposely
aiding a competitor of the Company, or misappropriating or aiding in misappropriating
a material opportunity of the Company.

 

All determinations of “Cause” shall be made by the
General Partner. If the Company elects to terminate Executive’s employment for
Cause pursuant to clause (1) of the definition of “Cause” and the action or
inaction prompting such termination is capable of cure, the Company shall first
give Executive written notice thereof, including a description of the evidence
upon which the General Partner has relied to support such finding and a period
of thirty (30) days (the “Cause Notice Period”) from the date of such notice to
cure the action or inaction giving rise to the written notice, If such action
or inaction is not cured by Executive by the end of the Cause Notice Period, as
determined by the General Partner and communicated to the Executive in writing,
such termination shall be effective upon the first day after the expiration of
the Cause Notice Period.

 

B.            Termination
by Reason of Disability. In a manner consistent with the Americans with
Disabilities Act and the Family and Medical Leave Act, this Agreement may be
terminated at the Company’s option immediately upon notice to Executive if
Executive shall suffer a Permanent Disability. For purposes of this Agreement,
the term “Permanent Disability” shall mean the Executive’s inability to perform
the essential functions of his job under this Agreement, with or without
reasonable accommodation, for a period of ninety (90) consecutive days or for
an aggregate of one hundred twenty (120) days, whether or not consecutive, in
any twelve (12) month period, due to illness, accident or other physical or
mental incapacity, as determined by a board certified physician mutually agreed
to by both the Executive and the Company.

 

C.            Termination
by Reason of Death. In the event of the Executive’s death, the Executive’s
employment shall be deemed to have terminated on the date of Executive’s death.

 

D.            Voluntary
Resignation. Executive may terminate this Agreement at any time, subject to
providing sixty (60) days’ written notice to the Company in accordance with
Section 7(B) of this Agreement; provided, however, that Executive’s covenants
and obligations under Section 8 herein shall survive Executive’s voluntary
resignation.

 

E.             Involuntary
Termination. Notwithstanding anything to the contrary contained in this
Agreement, after ninety (90) days of the Employment Term, involuntary
termination may be effected by the Company by giving written notification to
the Executive in accordance with Section 7(A) of this Agreement. For purposes
of this Agreement, the term “Involuntary Termination” shall mean termination by
the Company of the Executive’s employment with the Company other than: (1)
Termination for Cause; (ii) Termination by Reason of Disability; or (iii)
Termination by Reason of Death.

 

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F.             Termination
for Good Reason. The Executive may terminate this Agreement for “Good
Reason” at any time during the term of this Agreement by providing written
notification to the Company in accordance with Section 7(B) of this Agreement.
For purposes of this Agreement, “Good Reason” shall mean (1) any action by the
Company which results in a substantial diminution in Executive’s position,
authority, duties or responsibilities (including status, offices, titles and
reporting requirements contemplated by this Agreement), or (2) material breach
by the Company of its obligations under this Agreement or (3) the Company’s
requiring the Executive to be based at any office or location other than the
Company’s offices in New Jersey, except for travel reasonably required in
connection with the performance of the Executive’s responsibilities hereunder,
or (4) the request or dictate by the General Partner for the Executive to
contemplate, direct or engage in any illegal activities on behalf of the
Company or any subsidiary or affiliate of the Company.

 

6.             Obligations of the Company Upon Termination.

 

A.            Termination
for Cause. In the event that the Executive’s employment under this
Agreement is terminated for Cause, the Company shall have no obligation to pay
the salary or any other compensation provided under this Agreement, to or for
the benefit of the Executive for any period after the date of such termination,
or to pay any bonus for the fiscal year in which such termination occurs;
provided, however, that the Company shall promptly pay: (1) all base salary
earned by the Executive prior to the date of such termination; and (ii) any
benefits under any plans of the Company in which the Executive is a
participant, to the full extent of the Executive’s rights under such plan.

 

B.            Termination
by Reason of Disability. In the event that the Executive’s employment under
this Agreement is terminated in a Termination by Reason of Disability, the
Company shall have no obligation to pay the Base Salary provided under this
Agreement to or for the benefit of the Executive for any period after the date
of such termination; provided, however, that the Company shall promptly pay:
(i) all base salary earned by the Executive prior to the date of such
termination; (ii) any benefits under any plans of the Company in which the
Executive is a participant, to the full extent of the Executive’s rights under
such plan; (iii) a cash payment equal to the Annual Bonus received by the
Executive for the previous year, pro-rated for the number of days employed
during the year of termination up to the date of termination; and (iv) accrued,
unused vacation pay. In addition, notwithstanding anything to the contrary in
the Plan, any Performance Units held by the Executive shall vest on a pro rata
basis up to the date of termination and, at the option of the Executive, shall
not be subject to repurchase.

 

C.            Termination
by Reason of Death. If the employment of the Executive hereunder shall
terminate because of death of the Executive, the Company shall have no
obligation to pay the Base Salary provided under this Agreement to or for the
benefit of the Executive for any period after the date of such termination;
provided, however, that the Company shall promptly pay: (1) all base salary
earned by the Executive prior to the date of such termination; (ii) any
benefits under any plans of the Company in which the Executive was a
participant to the full extent of the Executive’s rights under such plans;
(iii) accrued, unused vacation pay; and (iv) a cash payment equal to the Annual
Bonus received by the Executive for the previous year, pro rated for the number
of days employed during the year of termination up to the date of termination.
In addition, notwithstanding anything to the contrary in the Plan, any 

 

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Performance Units held by the Executive shall vest on
a pro rata basis up to the date of termination and, at the option of the
Executive, shall not be subject to repurchase.

 

D.            Voluntary
Resignation. In the event that the Executive voluntarily resigns from his
employment with the Company, the Company may, at its discretion, continue the
Executive’s employment with the Company for the full amount of the notice
period. In the event of said termination, the Company shall have no obligation
to pay the base salary provided under this Agreement to or for the benefit of
the Executive for any period after the end of said notice; provided, however,
that the Company shall promptly pay: (i) all salary earned by the Executive
prior to the date of such termination; and (ii) any benefits under any plans of
the Company in which Executive is a participant, to the full extent of the Executive's
rights under such plans (with the exception of any bonus and/or incentive
compensation).

 

E.             Involuntary
Termination or Termination for Good Reason. In the event that the Executive’s
employment under this Agreement is involuntarily terminated as defined in
Section 5(E) of this Agreement or Executive terminates this Agreement for Good
Reason as defined in Section 5(F) of this Agreement, the Company shall: (i)
continue to pay the Executive the Base Salary for the greater of (a) the twelve
(12) month period following termination; or (b) the remainder of the Employment
Term (for purposes of subparagraph 6.E. the time period described in either
6.E.(i)(a) or 6.E shall be known as the “Severance Period”), at such intervals
as the same would have been paid had the Executive remained in the active
service of the Company; and, (ii) pay any benefits under any plans of the Company
in which the Executive is a participant, to the full extent of the Executive’s
rights under such plans for the remainder of the Severance Period; and (iii)
reimburse Executive for his cost of purchasing medical benefits solely for
Executive under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, provided COBRA is available and is elected, during the Severance
Period but no longer than eighteen months or until such time as Executive is
eligible to receive medical benefits from another person or entity comparable
to those provided by Company immediately prior to his termination, If, during
the Severance Period, the Executive materially breaches his obligations under
Section 8 of this Agreement, the Company may, upon written notice to the
Executive, terminate the Severance Period and cease to make any further
payments to Executive. If Executive terminates this Agreement for Good Cause as
defined in Section 5 of this Agreement, the Company shall pay a cash payment
equal to the Annual Bonus received by the Executive for the previous year,
pro-rated for the number of days employed during the year of termination up to
the date of termination. In addition, notwithstanding anything to the contrary
in the Plan, any Performance Units held by the Executive shall vest on a pro
rata basis up to the date of termination and, at the option of the Executive,
shall not be subject to repurchase.

 

7.             Notice of Termination.

 

A.            The
Company may effect a termination of this Agreement pursuant to the provisions
of Section 5 of this Agreement upon giving thirty (30) days’ written notice to
the Executive of such termination; provided, however, that a Termination for
Cause under Section 5(A) shall take effect immediately, at the option of the
General Partner.

 

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B.            The
Executive may effect a termination of this Agreement pursuant to the provisions
of Section 5(D) or 5(F) of this Agreement upon giving sixty (60) days’ written
notice to the Company.

 

8.             Covenants of the Executive.

 

In order to induce the Company to enter into this
Agreement and employ the Executive hereunder, the Executive hereby covenants
and agrees as follows. For all purposes under this Section 8 herein, the
Company’s “business” shall mean film based delivery systems to deliver drug
actives, nutraceuticals, cosmaceuticals or flavors, and soluble film based
packaging systems.

 

A.            Non-Competition.
During the Employment Term, Executive shall not, without the prior written
consent of Company, which consent may be withheld at the sole discretion of
Company, engage in or in any manner be connected or concerned, directly or
indirectly, whether as an officer, director, stockholder, partner, owner,
employee, advisor, creditor, or otherwise, with the operation, management, or
conduct of any business that competes with Company. Executive shall not in any
manner disrupt or attempt to disrupt any relationships which Company may have
with any of its employees, suppliers, customers, lessors, banks, consultants, or
other persons or entities with whom business dealings or ongoing relationships
exist, nor induce any such parties to terminate or otherwise alter the manner
in which such relationships are being conducted with Company.

 

B.            Confidentiality.
During the Employment Term, and following the termination of this Agreement for
any reason for as long as the information remains confidential, Executive shall
not make any use, for his own benefit or for the benefit of a business or
entity other than Company, of any verbal or written secret or confidential
information. Such confidential information shall include, but not be limited
to, customer lists, trade secrets, sales, marketing or consignment information,
vendor lists or operational resource information, forms, processes or procedures,
budget and financial statements or information, files, records, documents,
compilation of data, engineering drawings, computer print-outs, or any other
data of or pertaining to Company, its business, customers and financial
affairs, or its services not generally known within Company’s trade and which
was acquired by him during his affiliation with Company. Executive shall not
remove from Company premises or retain without the Company’s written consent
any of Company’s confidential information as defined herein, or copies of or
extracts therefrom. Executive shall hold in a fiduciary capacity for the
benefit of Company all secret or confidential information, knowledge, or data
of Company or its business or production operations obtained by Executive
during his employment by Company, which shall not be generally known to the
public or recognized as standard practice (whether or not developed by
Executive) and shall not, during his employment hereunder or after the
termination of such employment, communicate or divulge any such information,
knowledge or data to any person, firm or corporation other than Company or
persons, firms or corporations designated by Company. Executive acknowledges
that this information is treated as confidential by Company, that Company takes
meaningful steps to protect the confidentiality of this information, and that
Company has at all times directed Executive to maintain the confidentiality of
this information. Immediately upon termination of this Agreement, Executive
shall return all of Company’s property to it, including any and all copies of
said property.

 

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C.            Ownership
of Work Product. Executive agrees that Company shall own all intellectual
property including trade secrets, patents, patentable inventions, discoveries
and improvements that relate to Company’s business that Executive conceives,
develops during the Employment Term or delivers to the Company while performing
services pursuant to this Agreement (“Work Product”). Executive further agrees
to deliver to the Company, and that the Company shall thereafter own for all
purposes, all Work Product conceived or developed by the Executive relating to
the business of the Company which does not otherwise belong to Employee’s
former employer or to which the former employer has no legal right or claim.
Executive hereby irrevocably extinguishes for the benefit of the Company and
its assigns any moral right to the Work Product recognized by applicable law.
All Work Product shall be considered a work made for hire by Executive and
owned by Company. If any of the Work Product may not, by operation of law, be
considered work made for hire by Executive for Company, or if ownership of all right,
title and interest of the intellectual property rights therein shall not
otherwise vest exclusively in the Company, Executive agrees to assign, and upon
creation thereof automatically assign, without further consideration, the
ownership of all trade secrets, copyrights, patentable inventions, and other
intellectual property rights therein to Company, its successors and assigns.
Company, its successors, and assigns, shall have the right to obtain and hold
in its or their own name copyrights, patents, registrations and any other
protection available in the foregoing. For purposes hereof, a “trade secret”
shall mean any information, including, but not limited to, technical or
nontechnical data, formulae, patterns, compilations, programs, devices,
methods, techniques, drawings, processes, financial data, financial plans,
product plans or lists of actual or potential customers or suppliers that
derive economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from their disclosure or use and are the subject of
efforts that are reasonable under the circumstances to maintain their secrecy.
Executive agrees to perform, upon the reasonable request of Company and at no
cost to the Company (other than travel out of pocket costs where applicable),
during or after the period(s) that this Agreement remains in effect, such
further acts as may be necessary or desirable to transfer, perfect and defend
the Company’s ownership of Work Product, or to enforce the Company’s Work
Product against third parties. When requested, Executive shall promptly and at
no cost to the Company (other than travel out of pocket costs, where
applicable): (a) execute, acknowledge and deliver any requested affidavits and
documents of assignment and conveyance; (b) obtain and aid in the enforcement
of copyright and, if applicable, patents with respect to the Work Product in
any countries; (c) provide testimony in connection with any enforcement
proceeding or any proceeding affecting the right, title or interest of Company
in any Work Product; and (d) perform any other acts deemed necessary or
desirable to carry out the purposes of this Agreement.

 

D.            Inventions.
All discoveries, designs, improvements, ideas and inventions, whether
patentable or not, relating to (or suggested by or resulting from) products,
services, or other technology of Company or relating to (or suggested by or
resulting from) methods or processes used or usable in connection with the
business of Company that have been, or may be, conceived, developed or made by
Executive during the Employment Term (hereinafter “Inventions”), either solely
or jointly with others, shall automatically become the sole property of
Company. Executive shall immediately disclose to Company all such Inventions
and shall, without additional compensation, execute all assignments and other
documents deemed necessary by Company to perfect Company’s title thereto, or to
the patents issued thereon, or to

 

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otherwise secure and protect Company’s property rights
therein. These obligations shall continue beyond the termination of Executive’s
employment with respect to Inventions conceived, developed or made by Executive
during employment with Company. The Company acknowledges and agrees that the
provisions of this paragraph shall not apply to any invention for which no
equipment, supplies, facilities or trade secret (or proprietary) information of
Company is used by Executive and which is developed entirely on Executive’s own
time, unless (a) such invention related to the business of Company or to
Company’s actual or demonstrably anticipated research or development; or (b)
such invention results from any work performed by Executive for Company.

 

E.             Competition
Following Termination. Within the twelve (12) month period immediately
following termination of this Agreement, regardless of the cause therefor,
except as provided herein, Executive shall not, without the prior written
consent of Company, which consent may be withheld at the sole discretion of
Company: (a) engage in or in any manner be connected or concerned, directly or
indirectly, whether as an officer, director, stockholder, partner, owner,
employee, advisor, creditor, or otherwise with the operation, management, or
conduct of any business in the United States that is or was a customer of
Company, or that competes with the business of Company being conducted at the
time of such termination; (b) solicit, contact, interfere with, or divert any
customer served by Company or potential customer identified by Company during
the period of Executive’s employment hereunder; or (c) solicit any person then
or previously employed by Company to join Executive, whether as a partner,
agent, employee, or otherwise, in any enterprise engaged in a business that
competes with business of the Company at the time of such termination,
Provided, however, that Executive shall not be bound by the Covenant set forth
in this paragraph 8(E) in the event that the Company breaches any of its
obligations to the Executive hereunder or in the event of the cessation or
dissolution of the Company’s business. As used herein, “cessation or
dissolution” means total liquidation of the Company and does not include a
cessation of business due to any change in control.

 

F.             Acknowledgment.
Executive acknowledges that all of the restrictions set forth in this Section
entitled “Covenants of the Executive” are reasonable in scope and essential to
the preservation of Company’s business and proprietary properties and that the
enforcement thereof will not in any manner preclude Executive, in the event of
Executive’s termination of employment with Company, from becoming gainfully
employed in such manner and to such extent as to provide a standard of living
for himself, the members of his family, and those dependent upon him of at
least the sort and fashion to which he and they have become accustomed and may
expect.

 

G.            Representations
and Warranties. Executive represents and warrants to the Company as
follows: (a) Executive is under no contractual or other restriction or
obligation which may conflict with or be inconsistent with the execution of
this Agreement or with the performing of any duties for Company, or any other
rights of Company; (b) neither Company nor any of its affiliates nor any of
their respective officers, directors, employees, agents or employees has
requested that Executive communicate or otherwise make available to any such
parties at any time any proprietary information, data, trade secrets, or other
confidential information belonging to Executive’s former employers or others.

 

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H.            Severability.
All of the covenants of Executive contained in this Section entitled “Covenants
of the Executive” shall each be construed as an agreement independent of any
other provision in this Agreement, and the existence of any claim or cause of
action of Executive against Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Company of such
covenants. Both parties hereby expressly agree that it is not the intention of
either party to violate any public policy, statutory or common law. If any
sentence, paragraph, clause or combination of the same of this Agreement is in
violation of the law of any state where applicable, such sentence, paragraph,
clause or combination of the same shall be void in the jurisdictions where it
is unlawful, and the remainder of such paragraph and this Agreement shall
remain binding on the parties to the extent that it may be lawfully done under
existing applicable laws. In the event that any part of any covenant of this
Agreement is determined by a court of law to be overly broad thereby making the
covenant unenforceable, the parties hereto agree, and it is their desire that
such court shall substitute a judicially enforceable limitation in its place,
and that as so modified the covenant shall be binding upon the parties as if
originally set forth herein.

 

I.              Remedies.
The Executive agrees that irreparable harm would result from any breach by
Executive of the covenants of this Section 8 in particular, and this Agreement
in general, and that monetary damages alone would not provide the Company
adequate relief for any such breach. Accordingly, if Executive breaches any
covenant in this Section 8, the parties acknowledge that equitable or
injunctive relief in favor of the Company is a proper remedy, and nothing in
this Agreement shall be construed as precluding the Company from seeking such
equitable or injunctive relief in a court of competent jurisdiction for
Executive’s violations of Section 8. Any award of equitable or injunctive
relief shall not preclude the Company from seeking or recovering any lawful
compensatory damages that may have resulted from a breach of the covenants of
this Agreement. Any waiver or failure to seek enforcement or remedy for any
breach or suspected breach of any covenant of Executive in this Agreement shall
not be deemed a waiver of such provision in the future. Furthermore, the
existence of any claim of Executive against the Company, whether based upon
this Agreement or otherwise, shall not operate as a defense to the Company’s
enforcement of any provision of this Agreement. Proceedings seeking equitable
and injunctive relief to enforce the terms of this Section 8 may be brought in
any court of competent jurisdiction.

 

9.             Attorneys’ Fees. In any action
brought by any party under this Agreement to enforce any of its terms, or any
appeal therefrom the prevailing party shall be entitled to an award of its
reasonable attorneys’ fees.

 

10.           Executive Offices. The executive
offices for MonoSol Rx LLC shall reside in the state of New Jersey.

 

11.           Executive Employment Agreement Guarantee.
If any time during the initial two year period of the Employment Term the
Company is unable to fulfill its obligations as set forth in this Agreement,
the General Partner (MonoSol Rx, LLC Gen Par) shall guarantee payment of the
Base Salary for a period of one (1) year, payable in twelve equal monthly
installments, less applicable deductions and withholdings.

 

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12.           Travel Restrictions. As is
reasonable, Executive has the right to refuse travel to destinations deemed
politically unstable or otherwise hostile and/or those that may represent a
danger to the Executive’s health and well-being.

 

13.           Notices. Any notices permitted or
required under this Agreement shall be deemed given upon the date of personal
delivery or forty-eight (48) hours after deposit in the United States mail,
postage fully paid, certified mail, return receipt requested, addressed to the
following address:

 

	
   

  	
  If to the
  Company:

  	
  Doug Bratton

  
	
   

  	
   

  	
  201 Main
  Street, Suite 1900

  
	
   

  	
   

  	
  Fort Worth,
  Texas 76102

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy
  to:

  	
  John Cochran

  
	
   

  	
   

  	
  201 Main
  Street, Suite 1900

  
	
   

  	
   

  	
  Fort Worth,
  Texas 76102

  
	
   

  	
   

  	
   

  
	
   

  	
  If to the
  Executive:

  	
  Alexander
  Mark Schobel

  
	
   

  	
   

  	
  6 Demott
  Drive

  
	
   

  	
   

  	
  Whitehouse
  Station, NJ 08889

  

 

Either party nay change the address to which notices
to such party shall be delivered personally or mailed by giving notice thereof
to the other party hereto.

 

14.           Venue; Jurisdiction. Any suit
concerning this Agreement shall be filed solely in the courts of Tarrant
County, Texas. In any action brought concerning or arising from this Agreement,
Executive hereby agrees that he shall be subject to the jurisdiction of the
state and federal courts of Texas.

 

15.           Binding Effect; Assignment. Executive
shall not, without the prior written consent of the Company, assign, transfer,
or otherwise convey this Agreement, or any right or interest herein. This
Agreement, and all rights and obligations of the Company or any of its
successors, may be assigned or otherwise transferred to any of its successors
and shall be binding upon and inure to the benefit of its successors. As used
herein, the term “successor” shall mean any person, corporation or other entity
that, by merger, consolidation, purchase of stock, assets, liquidation,
voluntary or involuntary assignment, or otherwise, acquires all or a
substantial part of the assets of the Company or succeeds to one or more lines
of business of the Company.

 

16.           Entire Agreement. This Agreement,
and the Monosol Rx, LLC, Performance Units Plan, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements, understandings and arrangements, both oral
and written, between the parties hereto with respect to such subject matter.
This Agreement may not be modified, amended, altered or rescinded in any
manner, except by written instrument signed by all of the parties hereto; any
waiver by either party with respect to any provision hereof, or the breach of
any provision hereof by the other party, need be signed only by the party waiving
such provision or breach; provided, further, that the waiver by either party
hereto of a breach or compliance with any provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or compliance.

 

11

 

17.           Severability. In case any one or
more of the provisions of this Agreement shall be held by any court of
competent jurisdiction to be illegal, invalid or unenforceable in any respect,
the remainder of this Agreement, or the application of such provision to
persons or circumstances other than those to which it is held to be illegal,
invalid, or unenforceable, shall not be affected thereby.

 

18.           Section Headings. The section
headings contained in this Agreement are for reference purposes only and shall
not affect in any manner the meaning or interpretation of this Agreement.

 

19.           Counterparts. This Agreement may he
executed in any number of counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.

 

20.           Survival. The provisions of Section
8 of this Agreement shall survive any termination of this Agreement and the
termination of Executive’s employment.

 

21.           Press Release. Any press release or
other public statement regarding Executive’s employment with MonoSol Rx, LLC
shall take place no earlier than January 6, 2006 and shall be subject to the
Executive’s prior review and consent.

 

[Signature Page to Follow]

 

12

 

IN WITNESS WHEREOF the parties hereto have executed
and delivered this Agreement as of the day and year first above written.

 

	
   

  	
   

  	
  MonoSol RX, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
       /s/ Douglas Bratton

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
    11/17/05

  	
   

  	
  Title:

  	
    MANAGER

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Alexander Mark Schobel, Individually

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
    11/19/05

  	
   

  	
  /s/ Alexander Mark Schobel

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MonoSol RX, LLC GenPar   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/ Douglas Bratton 
  

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
    11/17/05

  	
   

  	
  Title:

  	
   PRESIDENT

  	
   

  
										

 

13

EXHIBIT
A

 

Performance
Units Plan

 

 

 

MONOSOL RX, LLC

AMENDED AND RESTATED

PERFORMANCE UNITS PLAN

 

Amended
and Restated Effective September 18, 2006

 

 

 

 

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  ADMINISTRATION

  	
  3

  
	
   

  	
   

  	
   

  
	
  2.01

  	
  Advisory Board; Duties

  	
  3

  
	
  2.02

  	
  Agents

  	
  3

  
	
  2.03

  	
  Binding Effect of
  Decisions

  	
  3

  
	
  2.04

  	
  Indemnity of Advisory
  Board

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  PARTICIPATION

  	
  3

  
	
   

  	
   

  	
   

  
	
  3.01

  	
  Participation

  	
  3

  
	
  3.02

  	
  Performance Units

  	
  4

  
	
  3.03

  	
  Vesting of Performance
  Units

  	
  4

  
	
  3.04

  	
  Dilution and Other
  Adjustments

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  BENEFITS

  	
  5

  
	
   

  	
   

  	
   

  
	
  4.01

  	
  Benefit Payments
  Following Change in Control

  	
  5

  
	
  4.02

  	
  Forfeiture Provisions

  	
  5

  
	
  4.03

  	
  Withholding; Payroll
  Taxes

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  BENEFICIARY DESIGNATION

  	
  6

  
	
   

  	
   

  	
   

  
	
  5.01

  	
  Beneficiary Designation

  	
  6

  
	
  5.02

  	
  Amendments

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  AMENDMENT AND
  TERMINATION

  	
  6

  
	
   

  	
   

  	
   

  
	
  6.01

  	
  Right to Amend

  	
  6

  
	
  6.02

  	
  Termination

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  CLAIMS PROCEDURE AND
  DISPUTES

  	
  7

  
	
   

  	
   

  	
   

  
	
  7.01

  	
  Claim Filing Procedure

  	
  7

  
	
  7.02

  	
  Consideration of Claim;
  Rendering of Decision

  	
  7

  
	
  7.03

  	
  Limitation on Claims
  Procedure

  	
  7

  
	
  7.04

  	
  Dispute over Benefits

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  MISCELLANEOUS

  	
  8

  
	
   

  	
   

  	
   

  
	
  8.01

  	
  Headings and Gender

  	
  8

  
	
  8.02

  	
  No Right to Employment
  or Retention

  	
  8

  
	
  8.03

  	
  Action by Officers

  	
  8

  

 

i

 

	
  8.04

  	
  Assignment of Benefits

  	
  8

  
	
  8.05

  	
  Applicable Law;
  Validity

  	
  8

  
	
  8.06

  	
  Expenses

  	
  9

  
	
  8.07

  	
  Plan Funding

  	
  9

  

 

ii

 

MONOSOL RX, LLC

AMENDED AND RESTATED

PERFORMANCE UNITS PLAN

 

Amended and Restated
Effective September 18, 2006

 

MONOSOL RX, LLC, a Delaware limited liability company (the “Company”),
does hereby amend and restate the Performance Units Plan (hereinafter referred
to as the “Plan”).  The Plan was
established by the Company, effective as of January 22, 2004, for the purpose
of enhancing the long-term growth in earnings of the Company by providing
incentives to key employees and/or other service providers of the Company.  The Plan helps the Company attract and retain
employees and other service providers of exceptional ability.

 

ARTICLE I

DEFINITIONS

For the purposes of this Plan, the following words and phrases shall
have the meanings indicated, unless the context clearly indicates otherwise:

 

“Additional Performance Units Plan” shall mean the other Performance
Units Plan B established by the Company effective as of January 22, 2004.

 

“Advisory Board” shall mean the Advisory Board contemplated by the
Company Agreement which administers the Plan pursuant to Article II.

 

“Base Value” shall mean $12,500,000.00, the Base Value determined by
the Advisory Board on January 22, 2004.

 

“Beneficiary” shall mean the person, persons or entity designated by
the Participant, as provided in Article V, to receive any benefits payable
under the Plan following the death of the Participant.

 

“Cause” shall mean the involuntary termination of a Participant’s
employment or other service-providing relationship with the Company resulting
from (i) willful, reckless or negligent conduct by such Participant in
connection with his employment with, or provision of services to, the Company,
(ii) the conviction of such Participant of any felony or any crime involving
moral turpitude, (iii) such Participant’s reporting to work or performing
services impaired by or under the influence of alcohol or illegal drugs, (iv)
such Participant’s engaging in the unlawful use (including being under the
influence) or possession of illegal drugs on the Company’s premises, (v) such
Participant’s engaging in sexual harassment or otherwise violated any
harassment or discrimination law, or (vi) dishonesty of such Participant.

 

“Change in Control” shall mean the occurrence, after the effective date
of the Plan, in a single transaction or series of transactions, of any one of
the following events or circumstances: (i) merger, consolidation or
reorganization of the Company where the beneficial owners of the

 

 

interests or securities possessing the right to vote
with respect to the Company immediately preceding the merger, consolidation or
reorganization beneficially own less than 20% of the interests or securities
possessing the right to vote with respect to the survivor entity, after giving
effect to such merger, consolidation, or reorganization; (ii) acquisition by
any person or group, as defined for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, of beneficial ownership of interests or
securities possessing the right to vote with respect to the Company where the
beneficial owners of the interests or securities possessing the right to vote
with respect to the Company immediately preceding such acquisition own less
than 20% of the interests or securities possessing the right to vote with
respect to the Company, after giving effect to such acquisition; (iii) approval
by the members of the Company of a plan of liquidation or dissolution with
respect to the Company, provided such liquidation or dissolution is
consummated; (iv) the sale, exchange, or contribution of all or substantially
all the Company’s assets to an entity where the beneficial owners of the interests
or securities possessing the right to vote with respect to the Company
immediately preceding the sale, exchange, or contribution beneficially own less
than 20% of the interests or securities possessing the right to vote with
respect to the acquiring entity; or (v) an initial public offering under the
Securities Act of 1933, as amended, of the business of the Company to the
public which does not otherwise meet the definition of a Change in Control in
clause (i) — (iv) hereof.  In the event
the exact date of a Change in Control cannot be determined, such Change in
Control will be deemed to have occurred on the earliest date on which it could
have occurred.

 

“Claim” shall mean a request by a Claimant in accordance with Article
VII for a benefit under the Plan.

 

“Claimant” shall mean any Participant or Beneficiary who claims to be
entitled to a benefit under the Plan.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).

 

“Company” shall mean Monosol RX, LLC, a Delaware limited liability
company, and any successor to the business thereof.

 

“Company Agreement” shall mean the Limited Liability Operating
Agreement of the Company, as amended from time to time.

 

“Market Value”, at any point in time, shall mean the fair market value
of the Company’s business as of such time. 
The fair market value of the Company’s business shall be the price a
willing buyer would pay to purchase the Company’s entire business, subject to
existing liabilities, in a lump sum, cash payment.  In the case of an actual sale of the
Company’s business or other transaction resulting in a Change in Control, the
sale price or value of consideration given shall be determinative of the fair
market value of the Company’s business.

 

“Outstanding Unit Amount” at any point in time (and subject to
adjustment under Section 3.04) shall mean (i) the maximum number of Performance
Units that may be granted under the Plan as of such time, plus (ii) the number
of Performance Units that, solely for purposes of the

 

2

 

Plan, represents the maximum number of Performance
Units that may be granted under the Additional Performance Units Plan, plus
(iii) the number of Performance Units that, solely for purposes of the Plan,
represents the total outstanding member interests of members of the Company as
of such time (as determined by the Advisory Board).  Based upon adjustments under Section 3.04 since
the establishment of the Plan on January 22, 2004, the Outstanding Unit Amount
as of September 18, 2006, shall be 100,000,000.

 

“Participant” shall mean an individual who
is eligible to participate in the Plan as provided in Article III.

 

“Performance Units” shall mean contractual rights awarded to a
Participant as provided in Article III.

 

“Vested” shall mean the extent to which a Participant has earned a
right to receive benefit payments with respect to his Performance Units
pursuant to Section 3.03, subject to the forfeiture provisions of Section 4.02.

 

ARTICLE II

ADMINISTRATION

 

2.01         Advisory
Board; Duties.  The Plan shall be
administered by the Advisory Board. 
Members of the Advisory Board may be Participants under the Plan.  The Advisory Board shall also have the
authority to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of the Plan and decide or resolve any and
all questions, including interpretations of the Plan, as may arise in
connection with the Plan.

 

2.02         Agents.  In the administration of the Plan, the
Advisory Board may, from time to time, employ agents and delegate to them such
administrative duties as it sees fit and may from time to time consult with
legal counsel who may also be legal counsel to the Company.

 

2.03         Binding
Effect of Decisions.  The decision or
action of the Advisory Board in respect of any question arising out of or in
connection with the administration, interpretation and application of the Plan
and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the Plan.

 

2.04         Indemnity
of Advisory Board.  The Company shall
indemnify and hold harmless the members of the Advisory Board against any and
all claims, loss, damage, expense or liability arising from any action or
failure to act with respect to the Plan, except in the case of gross negligence
or willful misconduct by the Advisory Board.

 

ARTICLE III

PARTICIPATION

 

3

 

3.01         Participation.  Participation in the Plan shall be limited to
the following individuals: Richard C. Fuisz, Joe Fuisz, Garry Myers and Robert
Yang.

 

3.02         Performance
Units.  On January 22, 2004,
Performance Units were granted under this Plan to the Participants as follows:

 

	
  Individual

  	
   

  	
  Performance Units

  	
   

  
	
  Richard C. Fuisz

  	
   

  	
  1,000,000

  	
   

  
	
  Joe Fuisz

  	
   

  	
  750,000

  	
   

  
	
  Garry Myers

  	
   

  	
  625,000

  	
   

  
	
  Robert Yang

  	
   

  	
  125,000

  	
   

  

 

The grant of Performance Units to a Participant does
not entitle the Participant to voting or any other rights belonging to a member
of the Company.  All rights of a
Participant are set forth herein.  The
2,500,000 Performance Units granted to the Participants listed above equaled
the maximum number of Performance Units available under the Plan on January 22,
2004 (with such number subject to adjustment pursuant to the provisions of
Section 3.04).  If any Performance Units
granted under the Plan are forfeited or cancelled, such Performance Units may
not be granted again under the Plan.

 

3.03         Vesting
of Performance Units.  A Participant
shall have no right to receive benefit payments on account of any specified
part of his Performance Units except to the extent the Participant is Vested in
his Performance Units.  Based upon the
number of Performance Units granted on January 22, 2004, the Participants hold
the following unadjusted number of Vested Performance Units (with such number
subject to adjustment pursuant to the provisions of Section 3.04 to reflect the
changes made to the Outstanding Unit Amount since January 22, 2004).  The Participants’ Vested Performance Units
remain subject to the forfeiture provisions of Section 4.02.

 

	
  Individual

  	
   

  	
  Performance Units

  	
   

  
	
  Richard C. Fuisz

  	
   

  	
  1,000,000

  	
   

  
	
  Joe Fuisz

  	
   

  	
  750,000

  	
   

  
	
  Garry Myers

  	
   

  	
  625,000

  	
   

  
	
  Robert Yang

  	
   

  	
  62,500

  	
   

  

 

3.04         Dilution
and Other Adjustments.  In the event
of any change in the outstanding ownership interests of the Company by reason
of any issuance of new or additional member interests in the Company, or any
restructuring, recapitalization, merger, consolidation, conversion, spin-off,
reorganization, combination or exchange of interests or other similar change,
the Advisory Board may equitably adjust the Outstanding Unit Amount (including
adjustment to the component thereof which represents the total outstanding
member interests of members of the Company) and/or the number or kind of
Performance Units then subject to the Plan and/or held in Participants’
Performance Unit accounts in order to reflect such changes.  The Advisory Board’s determination as to the
terms of any such adjustment shall be binding and conclusive on all
persons.  Notwithstanding the foregoing,
the Performance Units may be diluted as the result of the authorization and
issuance of additional Performance Units or the

 

4

 

authorization and issuance of additional performance units under the
Additional Performance Units Plan. 
Additionally, in the event of an adjustment under Section 3.2 of the
Acquisition Agreement dated effective as of January 22, 2004 by and between
Kosmos Pharma Limited, the Company, and Monosol LLC, the number of Vested
Performance Units held by each Participant shall be reduced by one-half while
the total Outstanding Unit Amount shall not be changed.

 

ARTICLE IV

BENEFITS

 

4.01         Benefit
Payments Following Change in Control. 
Following a Change in Control, each Participant shall receive payments
in an amount equal to the following:

 

	
  Number of such
  Participant’s

  	
   

  	
   

  	
   

  
	
  Vested Performance
  Units

  	
  X

  	
  (Market Value minus Base Value)  =

  	
  Total Payments

  
	
  Outstanding Unit Amount

  	
   

  	
   

  	
   

  

 

The number of such Participant’s Vested Performance
Units, the Outstanding Unit Amount, and the Market Value shall be determined as
of the date of such Change in Control.

 

Amounts payable under this Section 4.01 shall be paid either in cash
or, at the sole discretion of the Advisory Board, in kind in the same
consideration received by the Company or the members of the Company as a result
of the Change in Control.  Benefits
payable under this Section 4.01 shall be paid to the Participants under this
Section 4.01 within three months following the Change of Control; provided,
however, that if the consideration received by the Company or members of the
Company as a result of  the Change in
Control is deferred and paid over time, then the Participants payments
hereunder shall be deferred and paid as received by the Company or members as
the case may be.  The payment of a
Participant’s entire benefit, if any, under this Section 4.01 shall terminate
the Participant’s interest and status as a Participant under the Plan and
result in the cancellation of his Performance Units.  For purposes of illustration of these
provisions and not by way of limitation, in connection with a Change in Control
resulting from the occurrence of an initial public offering under the
Securities Act of 1933, as amended, of the business of the Company to the
public, the Advisory Board may elect to pay all or any portion of the amount
payable to such Participant under this Section 4.01 in securities of the newly
formed public company.  In any event in
which the consideration is paid in kind to the Participants, the Advisory Board
will place a value on the in kind consideration distributed hereunder for
purposes of calculating the amount paid under this plan for purposes of Article
IV of the Company Agreement. 
Notwithstanding anything to the contrary contained in this Agreement,
with respect to the occurrence of a Change in Control which does not constitute
a permissible distribution event under Code Section 409A(a)(2)(A)(v), all
amounts payable under this Section 4.01 shall be paid no later than the later
of (i) the date that is 2 1⁄2 months from the end of the Participant’s tax year
in which such Change in Control occurred or (ii) the date that is 2 1⁄2 months
from the end of the Company’s tax year in which such Change in Control
occurred.

 

4.02         Forfeiture
Provisions.  Notwithstanding anything
herein contained to the contrary, all rights to any benefits payable under the
Plan, shall be immediately forfeited, whether or not the Participant holds
Vested Performance Units, if the Participant’s employment or other service-

 

5

 

providing relationship with the Company is terminated for Cause, as
defined for the purposes of this Plan. 
The judgment of the Advisory Board, as expressed by a majority vote,
shall be final as to the whether the Participant has been terminated for Cause.

 

4.03         Withholding;
Payroll Taxes.  To the extent
required by the law in effect at the time payments are made, the Company shall
withhold from payments made hereunder any taxes required to be withheld from a
Participant’s benefit for the federal or any state or local government.

 

ARTICLE V

BENEFICIARY DESIGNATION

 

5.01         Beneficiary
Designation.  Each Participant shall
have the right, at any time, to designate any person or persons as his
Beneficiary or Beneficiaries (both primary as well as contingent) to whom
payment under this Plan shall be paid in the event of his death prior to
complete distribution to the Participant of the benefits due him under the
Plan.  If a Participant fails to
designate a Beneficiary or if all designated Beneficiaries predecease the
Participant or die prior to complete distribution of the Participant’s
benefits, then the Participant’s Beneficiary shall be deemed to be the estate
of the Participant.  The payment to the
Beneficiary or deemed Beneficiary shall completely discharge the Company’s
obligations under the Plan.

 

5.02         Amendments.  Any Beneficiary designation may be changed by
a Participant by the written filing of such change on a form prescribed by the
Advisory Board.  The filing of a new
Beneficiary designation form will, upon receipt by the Advisory Board, cancel
all Beneficiary designations previously filed.

 

ARTICLE VI

AMENDMENT AND TERMINATION

 

6.01         Right
to Amend.  The Company reserves the
right, through its Advisory Board, to amend any provisions under the Plan at
any time; provided, however, that (a) such amendment is in writing, (b) such
amendment is executed by a duly authorized member of the Advisory Board of the
Company, and (c) such amendment does not adversely affect the rights of a
Participant or his Beneficiary.

 

6.02         Termination.  The Company may not terminate this Plan
without the consent of all Participants.

 

6

 

 

ARTICLE VII

CLAIMS PROCEDURE AND DISPUTES

 

7.01         Claim
Filing Procedure.  If a dispute
arises over benefits payable under the Plan, a Claimant shall have the right to
submit a Claim with respect to such benefits. 
Such Claim shall be in writing, signed by the Claimant under oath, and
addressed and delivered to the Advisory Board either personally or by certified
or registered mail, return receipt requested. 
The Claim shall state with particularity:

 

(a)           The
benefit claimed;

(b)           The
provisions of the Plan and the particular provisions of law, if any, upon which
the Claimant relies in support of his Claim; and

(c)           All
facts believed to be relevant in connection with such Claim.

 

7.02         Consideration
of Claim; Rendering of Decision. 
Upon receipt of a Claim hereunder, the Advisory Board shall consider the
merits of the Claim and shall within 90 days from the receipt of the Claim
render a decision on the merits and communicate the same to the Claimant.  In the event the Advisory Board denies the
Claim in whole or in part, the Claimant shall be so notified in writing, which
shall be addressed and delivered to the Claimant personally or by certified or
registered mail, return receipt requested, and shall set forth the following:

 

(a)           The
reason or reasons for rejection of the Claim;

(b)           The
provisions of the Plan and the particular provisions of law, if any, relied
upon in reaching such determination; and

(c)           A
description of any additional information needed from the Claimant in order for
the Claimant to perfect his Claim.

 

The failure of the Advisory Board to render a decision
on the merits of a Claim shall be deemed to be a denial of such Claim and
notice of such denial shall be deemed to have been given to the Claimant on the
ninetieth (90th) day from receipt by the Advisory Board of the Claim.

 

7.03         Limitation
on Claims Procedure.  Any Claim under
this Claims procedure must be submitted within six months from the earlier of
(1) the date on which the Claimant learned of facts sufficient to enable him to
formulate such Claim, or (2) the date on which the Claimant should reasonably
have been expected to learn the facts sufficient to enable him to formulate
such Claim.  For this purpose, the first
date on which any document that is either given to or made available to a
Participant or Beneficiary (in pay status), and which discloses facts
sufficient to enable a reasonable person to formulate a Claim hereunder, shall
be conclusively deemed to be the date on which the Claimant should reasonably
have been expected to learn the facts sufficient to enable him to formulate
such a Claim.  Claims submitted after
such period shall be deemed to have been waived by the Claimant and shall
thereafter be wholly unenforceable.

 

7.04         Dispute
over Benefits.  If a dispute arises
as to the amount or proper recipient of any payment, the Advisory Board, in its
sole discretion, may withhold or cause to be withheld

 

7

 

such payment until the dispute shall have been settled by the parties
concerned or shall have been determined by an arbitration proceeding.  In addition, if a dispute continues to exist
after a Claim has been filed and a decision rendered by the Advisory Board
under the Claims procedure set forth above, or in the event of any dispute or
controversy concerning the construction, interpretation, performance or breach
of the Plan arising between a Participant, the Company or the Advisory Board,
the same shall be submitted to arbitration under the appropriate rules of the
American Arbitration Association.  Any
arbitration shall be conducted in Fort Worth, Texas, unless mutually agreed
otherwise by the parties.  All administrative
fees connected with initiating a demand for arbitration shall be split between
and advanced by the parties to the arbitration; subject, however, to final
apportionment by the arbitrator in his award. 
The parties agree that the arbitrator’s award shall be binding and may
be enforced in any court having jurisdiction thereof by filing a petition for
enforcement of such award.

 

ARTICLE VIII

MISCELLANEOUS

 

8.01         Headings
and Gender.  The headings of the Plan
have been inserted for convenience of reference only and are to be ignored in
any construction of the provisions hereof. 
Whenever a personal pronoun is used in the masculine gender, it shall be
deemed to include the feminine also, unless the context indicates the contrary.

 

8.02         No
Right to Employment or Retention. 
Nothing herein contained shall be construed as giving any Participant
the right to be retained in the service of the Company.

 

8.03         Action
by Officers.  Whenever under the
terms of this Plan the Company is permitted or required to take some action,
such action may be taken by any duly authorized member of the Advisory Board or
officer of the Company.

 

8.04         Assignment
of Benefits.  Except as provided in
this Section 8.04, no interest in this Plan shall be subject to assignment,
alienation, transfer or anticipation, either by voluntary or involuntary act of
any Participant or Beneficiary or by operation of law, nor shall payment or
right of interest be subject to the demands or claims of any creditor of such
person, nor be liable in any way for such person’s debts, obligations or
liabilities.

 

The Company shall not merge or consolidate with any other entity or
otherwise reorganize unless and until such succeeding entity agrees to assume
and discharge the obligations of the Company under the Plan.  Upon such assumption, the term “Company” as
used in this Plan shall be deemed to refer to such successor entity.

 

8.05         Applicable
Law; Validity.  The validity of the
Plan or any of its provisions shall be determined under and construed according
to the laws of the State of Delaware.  If
any provision of the Plan shall be held illegal or invalid for any reason, such
determination shall not affect the remaining provisions of the Plan and it
shall be construed as if said illegal or invalid provision had never been
included.

 

8

 

8.06         Expenses.  The administration costs incurred with
respect to the Plan shall be paid by the Company as an ordinary and necessary
business expense incurred in the operation of the Company’s business.

 

8.07         Plan
Funding.  Benefits under the Plan are
payable solely by the Company.  The
Company may, in its sole discretion, determine to set aside funds in a trust or
other arrangement to satisfy its obligations hereunder; provided, the trust or
other arrangement shall be unfunded for purposes of the Code, such trust or
other arrangement shall not be structured in a manner which would cause the
assets to be deemed to have been paid to the Participants under Code Section
409A(b), and no Participant or Beneficiary shall be considered to have an
interest in any such trust or other arrangement, or the assets held pursuant
thereto, except as may be specifically provided for therein.  Participants shall be regarded as general
creditors of the Company with respect to any rights derived by Participants
from the existence of the Plan.

 

[REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK]

 

9

 

IN WITNESS WHEREOF, the
Company has caused this Amended and Restated Plan to be executed by its duly
authorized officers to be effective as of September 18, 2006.

 

	
   

  	
  MONOSOL RX, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MONOSOL RX GENPAR, a
  Texas limited partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  BRATTON CAPITAL, INC.,
  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John Cochran

  
	
   

  	
   

  	
  Name:

  	
  John Cochran

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

10

 

 

MONOSOL RX,
LLC

AMENDED AND
RESTATED

PERFORMANCE
UNITS PLAN B

 

Amended and
Restated Effective September 18, 2006

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I-DEFINITIONS

  	
  1

  
	
  ARTICLE II-ADMINISTRATION

  	
  4

  
	
      2.01    Advisory
  Board; Duties

  	
  4

  
	
      2.02    Agents

  	
  4

  
	
      2.03    Binding
  Effect of Decisions

  	
  4

  
	
      2.04    Indemnity
  of Advisory Board

  	
  4

  
	
  ARTICLE III-PARTICIPATION

  	
  4

  
	
      3.01    Participation

  	
  4

  
	
      3.02    Performance
  Units

  	
  4

  
	
      3.03    Vesting
  of Performance Units

  	
  5

  
	
      3.04    Dilution
  and Other Adjustments

  	
  6

  
	
  ARTICLE IV-BENEFITS

  	
  6

  
	
      4.01    Benefit
  Payments Following Retirement, Termination or Change in Control

  	
  6

  
	
      4.02    Forfeiture
  Provisions

  	
  7

  
	
      4.03    Withholding;
  Payroll Taxes

  	
  8

  
	
  ARTICLE V-BENEFICIARY
  DESIGNATION

  	
  8

  
	
      5.01    Beneficiary
  Designation

  	
  8

  
	
      5.02    Amendments

  	
  8

  
	
  ARTICLE VI-AMENDMENT AND
  TERMINATION

  	
  9

  
	
      6.01    Right
  to Amend

  	
  9

  
	
      6.02    Termination

  	
  9

  
	
  ARTICLE VII-CLAIMS PROCEDURE
  & DISPUTES

  	
  9

  
	
      7.01    Claim
  Filing Procedure

  	
  9

  
	
      7.02    Consideration
  of Claim; Rendering of Decision

  	
  9

  
	
      7.03    Limitation
  on Claims Procedure

  	
  10

  
	
      7.04    Dispute
  over Benefits

  	
  10

  
	
  ARTICLE VIII-MISCELLANEOUS

  	
  10

  
	
      8.01    Headings
  and Gender

  	
  10

  
	
      8.02    No
  Right to Employment or Retention

  	
  10

  
	
      8.03    Action
  by Officers

  	
  11

  
	
      8.04    Assignment
  of Benefits

  	
  11

  
	
      8.05    Applicable
  Law; Validity

  	
  11

  
	
      8.06    Expenses

  	
  11

  
	
      8.07    Plan
  Funding

  	
  11

  

 

 

i

 

 

MONOSOL RX,
LLC

AMENDED AND
RESTATED

PERFORMANCE
UNITS PLAN B

 

Amended
and Restated Effective September 18, 2006

 

MONOSOL RX, LLC, a Delaware limited liability
company (the “Company”), does hereby amend and restate the Performance Units
Plan B (newly designated as Performance Units Plan B and hereinafter referred
to as the “Plan”).  The Plan was
established by the Company, effective as of January 22, 2004, for the purpose
of enhancing the long-term growth in earnings of the Company by providing
incentives to key employees and/or other service providers of the Company.  The Plan helps the Company attract and retain
employees and other service providers of exceptional ability.

ARTICLE I

DEFINITIONS

For the purposes of this Plan, the following words and
phrases shall have the meanings indicated, unless the context clearly indicates
otherwise:

“Additional Performance Units Plan” shall mean the other
Performance Units Plan established by the Company effective as of January 22,
2004 for the following participants: 
Richard C. Fuisz, Joe Fuisz, Garry Myers, and Robert Yang.

“Advisory Board” shall mean the Advisory Board
contemplated by the Company Agreement which administers the Plan pursuant to
Article II.

“Base Value” shall mean
$100,000,000.00 as of September 18, 2006. 
The Base Value is determined by the Advisory Board as of the date of
grant of Performance Units and separate Base Values may apply to blocks of
Performance Units based upon the date of grant.

“Beneficiary” shall mean the person, persons or
entity designated by the Participant, as provided in Article V, to receive any
benefits payable under the Plan following the death of the Participant.

“Cause” shall mean the involuntary termination of a
Participant’s employment or other service-providing relationship with the
Company resulting from (i) willful and continued failure of such Participant to
perform his or her duties, including, without limitation, such Participant’s
failure or refusal to follow the legitimate directions of the Company and/or of
any of the persons to whom such Participant reports (other than any such
failure resulting from his or her death or permanent disability), (ii) willful,
reckless or negligent conduct by such Participant in connection with his or her
employment with, or provision of services to, the Company, (iii) the conviction
of such Participant of any felony or any crime involving moral turpitude, (iv)
such Participant’s reporting to work or performing services impaired by or
under the influence of alcohol or illegal drugs, (v) such Participant’s
engaging in the unlawful use (including being under the influence) or
possession of

 

 

illegal drugs on the Company’s premises, (vi) such
Participant’s engaging in sexual harassment or otherwise violated any
harassment or discrimination law, or (vii) dishonesty of such Participant.

“Change
in Control” shall mean the occurrence, after the effective date of the Plan, in
a single transaction or series of transactions, of any one of the following
events or circumstances: (i) merger, consolidation or reorganization of the
Company where the beneficial owners of the interests or securities possessing
the right to vote with respect to the Company immediately preceding the merger,
consolidation or reorganization beneficially own less than 20% of the interests
or securities possessing the right to vote with respect to the survivor entity,
after giving effect to such merger, consolidation, or reorganization; (ii)
acquisition by any person or group, as defined for purposes of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, of beneficial ownership of
interests or securities possessing the right to vote with respect to the
Company where the beneficial owners of the interests or securities possessing
the right to vote with respect to the Company immediately preceding such
acquisition own less than 20% of the interests or securities possessing the
right to vote with respect to the Company, after giving effect to such
acquisition; (iii) approval by the members of the Company of a plan of
liquidation or dissolution with respect to the Company, provided such
liquidation or dissolution is consummated; (iv) the sale, exchange, or
contribution of all or substantially all the Company’s assets to an entity where
the beneficial owners of the interests or securities possessing the right to
vote with respect to the Company immediately preceding the sale, exchange, or
contribution beneficially own less than 20% of the interests or securities
possessing the right to vote with respect to the acquiring entity; or (v) an
initial public offering under the Securities Act of 1933, as amended, of the
business of the Company to the public which does not otherwise meet the
definition of a Change in Control in clause (i) — (iv) hereof.  In the event the exact date of a Change in
Control cannot be determined, such Change in Control will be deemed to have
occurred on the earliest date on which it could have occurred.

“Claim” shall mean a request by a Claimant in accordance
with Article VII for a benefit under the Plan.

“Claimant” shall mean any Participant or Beneficiary who
claims to be entitled to a benefit under the Plan.

“Company” shall mean MonoSol Rx, LLC, a Delaware limited
liability company, and any successor to the business thereof.

“Company Agreement” shall mean
the Limited Liability Operating Agreement of the Company, as amended from time
to time.

“Market Value”, at any point in time, shall mean
the fair market value of the Company’s business as of such time.  The fair market value of the Company’s
business shall be the price a willing buyer would pay to purchase the Company’s
entire business, subject to existing liabilities, in a lump sum, cash
payment.  In the case of an actual sale
of the Company’s business or other transaction resulting in a Change in
Control, the sale price or value of consideration given shall be determinative
of the fair market value of the Company’s business.  In the absence of an actual sale or other
transaction resulting in a Change in Control of the Company, the fair market
value of the Company’s business shall be the Advisory Board’s most recent
determination thereof (unless otherwise determined by mutual agreement between
the Advisory Board and the Participant);

 

2

 

provided, however, that if the Participant
objects to the Advisory Board’s most recent determination of the fair market
value of the Company’s business, or if the Advisory Board and the Participant
are unable to agree on the fair market value of the Company’s business, within
30 days following the Participant’s retirement or termination of employment or
a Change in Control, as the case may be, the Participant may retain, at his or
her own expense, a qualified, independent appraiser to perform an appraisal of
the Company’s business.  If the fair
market value determined by the appraisal commissioned by the Participant is not
greater than 110% of the most recent fair market value determined by the
Advisory Board, then the most recent fair market value determined by the
Advisory Board shall be determinative. 
If the fair market value determined by the appraisal commissioned by the
Participant is more than 110% of the most recent fair market value determined
by the Advisory Board, then the Advisory Board may, in its sole discretion, (i)
select another appraiser jointly with the Participant whose appraisal shall
conclusively bind the parties or (ii) use the average value based on the most
recent fair market value determined by the Advisory Board and the appraised
value based on the appraisal commissioned by the Participant.  In determining the fair market value, the
appraiser(s) shall be instructed to ignore any liability recorded on the books
of the Company which represents the liability under the Plan to the Participant
in question.  The Advisory Board may
determine the fair market value of the Company’s business at any time;
provided, however, that it is anticipated that such determination will be made
at least once each fiscal year of the Company.

“Outstanding
Unit Amount” at any point in time (and subject to adjustment under Section
3.04) shall mean (i) the maximum number of Performance Units that may be
granted under the Plan as of such time, plus (ii) the number of Performance
Units that, solely for purposes of the Plan, represents the maximum number of
Performance Units that may be granted under the Additional Performance Units
Plan, plus (iii) the number of Performance Units that, solely for purposes of
the Plan, represents the total outstanding member interests of members of the
Company as of such time (as determined by the Advisory Board).  Based upon adjustments under Section 3.04
since the establishment of the Plan on January 22, 2004, the Outstanding Unit
Amount as of September 18, 2006, shall be 100,000,000.

“Participant” shall mean an individual who is eligible
to participate in the Plan as provided in Article III.

“Performance Units” shall mean contractual rights
awarded to a Participant as provided in Article III.

“Target Year of Service” shall mean a one-year
period established by the Advisory Board for a particular Participant on the
last day of which such Participant is employed by the Company.

“Vested” shall mean the extent to which a Participant has earned a
right to receive benefit payments with respect to his or her Performance Units
pursuant to Section 3.03, subject to the forfeiture provisions of Section 4.02.

 

3

 

ARTICLE II

ADMINISTRATION

                2.01         Advisory Board; Duties.  The Plan shall be administered
by the Advisory Board.  Members of the
Advisory Board may be Participants under the Plan.  The Advisory Board shall also have the authority
to make, amend, interpret, and enforce all appropriate rules and regulations
for the administration of the Plan and decide or resolve any and all questions,
including interpretations of the Plan, as may arise in connection with the
Plan.

Subject to the provisions of the Plan, the Advisory Board shall have
exclusive power to (a) designate the employees and/or other service providers
to become Participants and be granted Performance Units; (b) determine the
number of Performance Units to be granted and/or criteria for granting
Performance Units to each Participant; (c) determine the time or times when
Performance Units will be granted; (d) determine whether Participants shall be
of a single class or in different classes; and (e) determine the one-year periods
for Target Years of Service.  The
one-year period for Target Years of Service may vary from Participant to
Participant.

                2.02         Agents.  In the administration of the
Plan, the Advisory Board may, from time to time, employ agents and delegate to
them such administrative duties as it sees fit and may from time to time
consult with legal counsel who may also be legal counsel to the Company.

                2.03         Binding
Effect of Decisions.  The decision or action of the
Advisory Board in respect of any question arising out of or in connection with
the administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and binding
upon all persons having any interest in the Plan.

                2.04         Indemnity of Advisory Board.  The Company shall indemnify and hold harmless the members of the
Advisory Board against any and all claims, loss, damage, expense or liability
arising from any action or failure to act with respect to the Plan, except in
the case of gross negligence or willful misconduct by the Advisory Board.

ARTICLE III

PARTICIPATION

                3.01         Participation.  Participation in the Plan
shall be limited to a select group of key employees and/or other service
providers of the Company designated by the Advisory Board.  The Advisory Board shall notify all employees
and/or other service providers who are designated to participate in the Plan of
their designation and of their grant of Performance Units within 30 days of
their designation and/or grant.

                3.02         Performance Units.  Performance Units granted by
the Advisory Board to Participants shall be credited to a Performance Unit
account to be maintained by the Advisory Board for each Participant.  The grant of Performance Units to a
Participant shall not entitle the Participant to voting or any other rights
belonging to a member of the Company. 
All rights of a Participant are set forth herein.

 

4

 

Following the adjustments
described below, the maximum number of Performance Units that may be granted
under the Plan shall be 2,500,000 in the aggregate (with such number subject to
adjustment pursuant to the provisions of Section 3.04 to correspond to the
changes to the Outstanding Unit Amount). Initially, 3,750,000 Performance Units
could be granted under the Plan and such number was increased by amendment to
5,000,000.  Pursuant to the establishment
of the Additional Performance Units Plan, 2,500,000 Performance Units were
transferred to, and granted pursuant to, the Additional Performance Units Plan
leaving 2,500,000 Performance Units for issuance under the Plan (with such
number subject to adjustment pursuant to the provisions of Section 3.04 to
correspond to the changes to the Outstanding Unit Amount).  If any Performance Units granted under the
Plan are forfeited or cancelled, such Performance Units may again be granted
under the Plan.

                3.03         Vesting of Performance Units.  A Participant shall have no
right to receive benefit payments on account of any specified part of his or
her Performance Units except to the extent the Participant is Vested in his or
her Performance Units.

                For
purposes of benefit payments under the Plan, a Participant shall become Vested
in his or her Performance Units based on the following schedule:

	
  Target Years of Service

  	
   

  	
  Percent Vested

  	
   

  
	
  0

  	
   

  	
  0%

  	
   

  
	
  1

  	
   

  	
  25%

  	
   

  
	
  2

  	
   

  	
  50%

  	
   

  
	
  3

  	
   

  	
  100%

  	
   

  

 

A Participant shall be
credited with a Target Year of Service only if the Participant is employed by,
or providing services to, the Company on the last day of such one-year
period.  Anything else to the contrary
notwithstanding, the Advisory Board may grant Vested status to a Participant
with respect to all of such Participant’s Performance Units who would not
otherwise be Vested under this Section 3.03 in all granted Performance Units
(including all previously granted Performance Units).  A Change in Control will accelerate vesting
of Performance Units so that a Participant will become Vested in all of his or
her Performance Units as of the date of such Change in Control.

Certain Participants (the
“MonoSol Participants”) were employees of MonoSol, LLC, a Delaware limited
liability company and member of the Company (“MonoSol”), and they were granted
Performance Units in recognition of their services, as key employees of
MonoSol, to the Company in connection with its formation and acquisition of
business assets from Kosmos Pharma Limited and their continuing provision of
administrative services on behalf of MonoSol to the Company.  Notwithstanding anything to the contrary
contained in this Plan, the MonoSol Participants shall be credited with a
Target Year of Service only if the MonoSol Participant is employed by MonoSol
(or its successors or assigns) on the last day of such one-year period.

                3.04         Dilution and Other Adjustments.  In the event of any change in
the outstanding ownership interests of the Company by reason of any issuance of
new or additional member interests in the Company, or any restructuring,
recapitalization, merger, consolidation, conversion,

 

5

 

spin-off, reorganization, combination or exchange
of interests or other similar change, the Advisory Board may equitably adjust
the Outstanding Unit Amount (including adjustment to the component thereof
which represents the total outstanding member interests of members of the
Company) and/or the number or kind of Performance Units then subject to the
Plan and/or held in Participants’ Performance Unit accounts in order to reflect
such changes.  The Advisory Board’s
determination as to the terms of any such adjustment shall be binding and
conclusive on all persons. 
Notwithstanding the foregoing, Performance Units may be diluted as the
result of the authorization and issuance of additional Performance Units.

 

ARTICLE
IV

BENEFITS

4.01         Benefit Payments Following
Retirement, Termination or Change in Control.  If the Advisory Board so
elects in its sole discretion within 12 months following a Participant’s
retirement or termination of employment or other service-providing relationship
for any reason, including an involuntary termination by reason of death or
permanent disability (subject to the forfeiture provisions of
Section 4.02) with the Company, the Participant shall receive cash
payments in an amount equal to the following:

	
  Number
  of such Participant’s

  	
   

  
	
  Vested
  Performance Units

  	
    X  (Market Value minus Base Value)  =  Total Payments

  
	
  Outstanding
  Unit Amount

  	
   

  

The number of such Participant’s
Vested Performance Units, the Outstanding Unit Amount, and the Market Value
shall be determined as of the date of such Participant’s retirement or
termination of employment or other service-providing relationship.  Separate calculations pursuant to the above
formula shall be made for each block of Performance Units having a separate
Base Value.  If the Advisory Board does
not so elect within 12 months following a Participant’s retirement or
termination of employment or other relationship, the Participant or his or her
estate or heirs shall continue to be eligible for benefit payments upon a Change
in Control.

If the Advisory Board so elects, amounts payable
under this Section 4.01 following a Participant’s retirement or termination of
employment or other service-providing relationship shall be paid at the sole
discretion of the Advisory Board either (a) in a single, lump sum or (b) in 24
equal monthly installments, together with interest on the unpaid balance at the
minimum rate of interest required to be charged on such obligation at the date
of the Participant’s retirement or termination of employment or other
service-providing relationship to avoid the imputation of interest for federal
income tax purposes under the Internal Revenue Code of 1986, as amended, but in
no event shall such interest rate exceed the applicable legal maximum interest
rate then prevailing.  Benefits payable
under this Section 4.01 shall be paid or commenced no later than 12 months
following the date of the retirement or termination of the Participant’s
employment or other service-providing relationship (other than for Cause) with
the Company.  The payment of a
Participant’s entire benefit, if any, under this Section 4.01 shall terminate
the Participant’s interest and status as a Participant under the Plan and
result in the cancellation of such Participant’s Performance Units.

 

6

 

Following a Change in Control,
each Participant shall receive cash payments in an amount equal to the
following: 

	
  Number
  of such Participant’s

  	
   

  
	
  Vested
  Performance Units

  	
    X  (Market Value minus Base Value)  =  Total
  Payments

  
	
  Outstanding
  Unit Amount

  	
   

  

 

The number of such Participant’s Vested
Performance Units, the Outstanding Unit Amount, and the Market Value shall be
determined as of the date of such Change in Control.  Separate calculations pursuant to the above
formula shall be made for each block of Performance Units having a separate
Base Value.

Amounts
payable under this Section 4.01 with respect to a Change in Control shall be
paid either in cash or, at the sole discretion of the Advisory Board, in kind
in the same consideration received by the Company or the members of the Company
as a result of the Change in Control. 
Benefits payable under this Section 4.01 shall be paid to the
Participants under this Section 4.01 within three months following the Change
of Control; provided, however, that if the consideration received by the
Company or members of the Company as a result of  the Change in Control is deferred and paid
over time, then the Participants payments hereunder shall be deferred and paid as
received by the Company or members as the case may be.  The payment of a Participant’s entire
benefit, if any, under this Section 4.01 shall terminate the Participant’s
interest and status as a Participant under the Plan and result in the
cancellation of his or her Performance Units. 
For purposes of illustration of these provisions and not by way of
limitation, in connection with a Change in Control resulting from the
occurrence of an initial public offering under the Securities Act of 1933, as
amended, of the business of the Company to the public, the Advisory Board may
elect to pay all or any portion of the amount payable to such Participant under
this Section 4.01 in securities of the newly formed public company.  In any event in which the consideration is
paid in kind to the Participants, the Advisory Board will place a value on the
in kind consideration distributed hereunder for purposes of calculating the
amount paid under this plan for purposes of Article IV of the Company
Agreement.  Notwithstanding anything to
the contrary contained in this Agreement, with respect to the occurrence of a
Change in Control which does not constitute a permissible distribution event
under Code Section 409A(a)(2)(A)(v), all amounts payable under this Section
4.01 shall be paid no later than the later of (i) the date that is 2 1⁄2 months
from the end of the Participant’s tax year in which such Change in Control
occurred or (ii) the date that is 2 1⁄2 months from the end of the Company’s tax
year in which such Change in Control occurred.

4.02         Forfeiture Provisions.  Notwithstanding anything
herein contained to the contrary, all rights to any benefits payable under the
Plan, shall be immediately forfeited, whether or not the Participant holds
Vested Performance Units, if any of the following events occur:

(a)           The
Participant’s employment or other service-providing relationship with the
Company is terminated for Cause, as defined either in such Participant’s
employment agreement with the Company or, if none, for the purposes of this
Plan.  The judgment of the Advisory
Board, as expressed by a majority vote, shall be final as to the whether the
Participant has been terminated for Cause.

(b)           While
employed by, or otherwise retained to provide services to, the Company or
during the 12-month period following the Participant’s retirement or other
termination of employment or other service-providing relationship with the
Company for

 

7

 

any reason, the Participant directly or
indirectly (1) induces, requests or advises any person or entity to withdraw,
curtail, or cancel that person’s or entity’s business with the Company, or to
obtain services from any person or entity that competes with the Company, or
(2) solicits or induces any employee of the Company to leave the employ of the
Company.

                4.03         Withholding; Payroll Taxes. To the extent required by the law in effect at the time payments are
made, the Company shall withhold from payments made hereunder any taxes
required to be withheld from a Participant’s benefit for the federal or any
state or local government.

ARTICLE
V

BENEFICIARY
DESIGNATION

                5.01         Beneficiary Designation.  Each Participant shall have
the right, at any time, to designate any person or persons as his or her
Beneficiary or Beneficiaries (both primary as well as contingent) to whom
payment under this Plan shall be paid in the event of his or her death prior to
complete distribution to the Participant of the benefits due him or her under
the Plan.  If a Participant fails to
designate a Beneficiary or if all designated Beneficiaries predecease the
Participant or die prior to complete distribution of the Participant’s
benefits, then the Participant’s Beneficiary shall be deemed to be the estate
of the Participant.  The payment to the
Beneficiary or deemed Beneficiary shall completely discharge the Company’s
obligations under the Plan.

                5.02         Amendments.  Any Beneficiary designation
may be changed by a Participant by the written filing of such change on a form
prescribed by the Advisory Board.  The filing
of a new Beneficiary designation form will, upon receipt by the Advisory Board,
cancel all Beneficiary designations previously filed.

 

8

 

ARTICLE VI

AMENDMENT AND TERMINATION

                6.01         Right
to Amend.  The Company reserves the
right, through its Advisory Board, to amend any provisions under the Plan at
any time; provided, however, that (a) such amendment is in writing, (b) such
amendment is executed by a duly authorized member of the Advisory Board of the
Company, and (c) such amendment does not adversely affect the rights of a
Participant or his or her Beneficiary with respect to benefits which have
accrued under the Plan prior to such amendment.

6.02         Termination.  The Company reserves the right
at any time and at its sole discretion to terminate the Plan; provided, any
termination of the Plan shall not affect any benefits previously accrued
hereunder; provided further, any termination of the Plan must be structured to
comply with the requirements of Code Section 409A regarding the permissible
acceleration of payments upon the termination of an arrangement to defer
compensation.

ARTICLE VII

CLAIMS PROCEDURE AND DISPUTES

                7.01         Claim
Filing Procedure.  If a dispute arises over
benefits payable under the Plan, a Claimant shall have the right to submit a
Claim with respect to such benefits. 
Such Claim shall be in writing, signed by the Claimant under oath, and
addressed and delivered to the Advisory Board either personally or by certified
or registered mail, return receipt requested. 
The Claim shall state with particularity:

(a)                                  The benefit claimed;

(b)           The
provisions of the Plan and the particular provisions of law, if any, upon which
the Claimant relies in support of his or her Claim; and

(c)           All
facts believed to be relevant in connection with such Claim.

7.02         Consideration of Claim; Rendering of Decision.  Upon receipt of a Claim
hereunder, the Advisory Board shall consider the merits of the Claim and shall
within 90 days from the receipt of the Claim render a decision on the merits
and communicate the same to the Claimant. 
In the event the Advisory Board denies the Claim in whole or in part,
the Claimant shall be so notified in writing, which shall be addressed and
delivered to the Claimant personally or by certified or registered mail, return
receipt requested, and shall set forth the following:

(a)                                  The reason or reasons for rejection of the Claim;

(b)           The provisions of the Plan and the particular provisions
of law, if any, relied upon in reaching such determination; and

(c)           A
description of any additional information needed from the Claimant in order for
the Claimant to perfect his or her Claim.

 

9

 

The failure of the Advisory Board to render a decision on the merits of
a Claim shall be deemed to be a denial of such Claim and notice of such denial
shall be deemed to have been given to the Claimant on the ninetieth (90th) day
from receipt by the Advisory Board of the Claim.

                7.03         Limitation on Claims Procedure. Any Claim under
this Claims procedure must be submitted within six months from the earlier of
(1) the date on which the Claimant learned of facts sufficient to enable him or
her to formulate such Claim, or (2) the date on which the Claimant should
reasonably have been expected to learn the facts sufficient to enable him or
her to formulate such Claim.  For this
purpose, the first date on which any document that is either given to or made
available to a Participant or Beneficiary (in pay status), and which discloses
facts sufficient to enable a reasonable person to formulate a Claim hereunder,
shall be conclusively deemed to be the date on which the Claimant should
reasonably have been expected to learn the facts sufficient to enable him or
her to formulate such a Claim.  Claims
submitted after such period shall be deemed to have been waived by the Claimant
and shall thereafter be wholly unenforceable.

                7.04         Dispute over Benefits. If a dispute arises as to the amount or proper recipient of any
payment, the Advisory Board, in its sole discretion, may withhold or cause to
be withheld such payment until the dispute shall have been settled by the
parties concerned or shall have been determined by an arbitration
proceeding.  In addition, if a dispute
continues to exist after a Claim has been filed and a decision rendered by the
Advisory Board under the Claims procedure set forth above, or in the event of
any dispute or controversy concerning the construction, interpretation,
performance or breach of the Plan arising between a Participant, the Company or
the Advisory Board, the same shall be submitted to arbitration under the
appropriate rules of the American Arbitration Association.  Any arbitration shall be conducted in Fort
Worth, Texas, unless mutually agreed otherwise by the parties.  All administrative fees connected with
initiating a demand for arbitration shall be split between and advanced by the
parties to the arbitration; subject, however, to final apportionment by the
arbitrator in his or her award.  The
parties agree that the arbitrator’s award shall be binding and may be enforced
in any court having jurisdiction thereof by filing a petition for enforcement
of such award.

ARTICLE VIII

MISCELLANEOUS

                8.01         Headings
and Gender.  The headings of the Plan have
been inserted for convenience of reference only and are to be ignored in any
construction of the provisions hereof. 
Whenever a personal pronoun is used in the masculine gender, it shall be
deemed to include the feminine also, unless the context indicates the contrary.

                8.02         No Right to Employment or Retention.  Nothing herein contained shall
be construed as giving any Participant the right to be retained in the service
of the Company.

                8.03         Action by Officers.  Whenever under the terms of
this Plan the Company is permitted or required to take some action, such action
may be taken by any duly authorized member of the Advisory Board or officer of
the Company.

 

10

 

                8.04         Assignment of Benefits.  Except as provided in this
Section 8.04, no interest in this Plan shall be subject to assignment,
alienation, transfer or anticipation, either by voluntary or involuntary act of
any Participant or Beneficiary or by operation of law, nor shall payment or
right of interest be subject to the demands or claims of any creditor of such
person, nor be liable in any way for such person’s debts, obligations or
liabilities.

                The Company shall
not merge or consolidate with any other entity or otherwise reorganize unless
and until such succeeding entity agrees to assume and discharge the obligations
of the Company under the Plan.  Upon such
assumption, the term “Company” as used in this Plan shall be deemed to refer to
such successor entity.

                8.05         Applicable Law; Validity.  The validity of the Plan or
any of its provisions shall be determined under and construed according to the
laws of the State of Delaware.  If any
provision of the Plan shall be held illegal or invalid for any reason, such
determination shall not affect the remaining provisions of the Plan and it
shall be construed as if said illegal or invalid provision had never been
included.

                8.06         Expenses.  The administration costs
incurred with respect to the Plan shall be paid by the Company as an ordinary
and necessary business expense incurred in the operation of the Company’s
business.

8.07         Plan Funding.  Benefits under the Plan are
payable solely by the Company.  The
Company may, in its sole discretion, determine to set aside funds in a trust or
other arrangement to satisfy its obligations hereunder; provided, the trust or
other arrangement shall be unfunded for purposes of the Code, such trust or
other arrangement shall not be structured in a manner which would cause the
assets to be deemed to have been paid to the Participants under Code Section
409A(b), and no Participant or Beneficiary shall be considered to have an
interest in any such trust or other arrangement, or the assets held pursuant
thereto, except as may be specifically provided for therein.  Participants shall be regarded as general
creditors of the Company with respect to any rights derived by Participants
from the existence of the Plan.

[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

11

 

                IN WITNESS WHEREOF, the Company has caused this
Amended and Restated Performance Units Plan B to be executed by its duly
authorized officers to be effective as of September 18, 2006.

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  MONOSOL RX, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ John Cochran

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  John Cochran

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  V.P.

  

 

 

12

 

SCHEDULE I

 

One-Year Periods

 

 

(To be determined by Advisory Board)

 

13

EXHIBIT
B

 

Benefits
Summary

 

 

 

 

 

New
Hire

Benefits
Summary

Effective
2/1/07

 

 

 

Medical Dental and Vision Care

•                  Medical
& Dental Care Plan

•                  Network Provider is Great
West Healthcare

•                  Coverage starts on first day
of the month, following hire date

•                  Vision
Care Plan

•                  Coverage is bundled with
Medical and Dental Plans (no additional premiums)

•                  Network Provider is VSP

•                  Coverage starts on first day
of the month, following hire date

 

Life Insurance, Accidental Death
& Dismemberment (AD&D), Short & Long Term Disability Coverage

•                  Company covers employee at
1.5x annual salary for Life and AD&D ($500,000 max)

•                  Short - term disability is
company paid (60% of weekly earnings, $500 per week max)

•                  Long-term disability is
company paid (60% of monthly earnings, $6000 max)

•                  Voluntary term life coverage
is available at employee expense. Coverage can include:

•                   Employee — up to 5x annual
salary, $250k max;

•                   Spouse — up to 50% of
employee benefit/$50k max;

•                   Dependent child(ren) — up
to 50% of employee benefit/$10k max

•                  Program is administered
through Mutual of Omaha

 

Paid vacation

•                  20 days vacation annually,
prorated based on hire date

 

401k

•                  Eligibility begins
immediately

•                  Company matches 100% of
employee contribution up to 6%

Administered through John HancockExhibit 10.2

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Executive Employment Agreement (the “Agreement”)
is made and entered into as of this 16th day of June, 2006 (the “Effective Date”),
by and between MonoSol RX, LLC (the “Company”), and Keith J. Kendall an individual
(the “Executive”).

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to
employ the Executive as its Senior Vice President and Chief Financial Officer,
and Executive is willing to accept such employment by the Company, on the terms
and subject to the conditions set forth in this Agreement; and

 

WHEREAS, the Company and the
Executive desire that the terms of this Agreement begin on the Effective Date;

 

NOW, THEREFORE, in consideration
of the premises and the mutual covenants herein set forth, and for other good
and valuable consideration, the parties hereto, intending to be legally bound,
hereby agree as follows:

 

1.             Employment.  During the term of this Agreement, the
Executive agrees to be employed by and to serve the Company as its Senior Vice
President and Chief Financial Officer, and the Company agrees to employ and
retain Executive in such capacity. The Executive shall report directly to the
President and CEO (hereafter the “CEO”). The Executive shall: (i) devote his
entire business time, energy and skill to the affairs of the Company; (ii)
faithfully, loyally, and industriously perform all duties incident to the
position of Senior Vice President and Chief Financial Officer, as well as any
other duties consistent with the stature and responsibility of the Executive’s
position as may from time to time be assigned by the CEO of MonoSol RX, LLC;
and (iii) diligently follow and implement all policies, practices, procedures,
and rules of the Company.

 

2.             Employment Term.  The employment term (the “Employment Term”) of
the Executive under this Agreement shall be for a period of three (3) years. The
Employment Term shall commence on the Effective Date and shall automatically
renew for further successive twelve month terms (the “Renewal Terms”), provided
either party may terminate the Agreement during the Renewal Terms pursuant to
Section 5 of this Agreement.

 

3.             Compensation.

 

A.            Base
Salary.  As compensation for services
rendered to the Company pursuant to this Agreement, the Company shall pay to
Executive a base salary (the “Base Salary”) at a rate of $325,000.00 per annum,
payable at a rate of $27,083.34 per month. The Base Salary will be paid in
accordance with the standard payroll policies of the Company as from time to
time are in effect, from which shall be deducted federal and, if applicable,
state income taxes, social security taxes, and such other and similar payroll
taxes and charges as may be required or appropriate under applicable law. The
Base Salary shall be considered by the CEO for increase based upon performance
and other considerations as appropriately determined by the CEO, including
without limitation, performance assessment, market assessment for comparable
executive and employment terms and awards as may be deemed appropriate from time
to time.

 

1

 

B.            Bonus.

 

(i)            Bonus Reimbursement.  Within thirty (30) days of the Effective Date,
the Company shall reimburse Executive $200,000.00, which represents Executive’s
2006 pro-rated bonus earned with his prior employer. Executive shall also be
eligible for a pro-rated bonus for the remainder of 2006, if applicable.

 

(ii)           Annual Bonus.  In addition to the Base Salary, at the end of
each twelve (12) month period under the Employment Term, Executive shall be
eligible, if then employed with the Company, for a bonus of seventy five
percent (75%) of Executive’s Base Salary, provided Company achieves established
performance targets. Executive must be employed by the Company on the day any
bonus payment is due and payable under this Agreement in order to receive said
bonus payment. The bonus shall be paid sixty six percent (66%) in cash and
thirty four percent (34%) either in cash or in Performance Units, in the CEO’s
good faith determination and discretion based on Company’s ability to determine
reasonable valuation of the Performance Units.  If the Company exceeds established performance
targets, the Company may, in its sole discretion, increase the amount of the
Annual Bonus.

 

C.            Award
of Performance Units.  The award of
Performance Units (as defined in the Plan) shall be structured so as to provide
Executive with notional equity participation of three percent (3%) of the
equity value of the Company as of the Effective Date in excess of a notional
exercise price of eighty-seven million six hundred thousand dollars
($87,600,000.00). In accordance with the provisions of the Plan, the number of
Performance Units awarded to Executive on the Effective Date (the “Initial
Performance Units”) shall equal three percent (3%) of the Outstanding Unit
Amount (as defined in the Plan) as of the Effective Date, with amounts payable
with respect to such Performance Units under the Plan on the basis of a Base
Value (as defined in the Plan) of eighty-seven million six hundred thousand
dollars ($87,600,000.00) as of the Effective Date. Executive shall be eligible
for an award of additional Performance Units during the Employment Term at the
times, and in the amounts, as the Company in its sole discretion shall
determine; provided, however that any such award of additional Performance
Units will not be entitled to the anti-dilution protection afforded below to
the Initial Performance Units. The award, valuation, vesting, and all other
benefits, terms, and conditions of the Performance Units are governed by the
terms and conditions of the award of Performance Units and by the MonoSol RX,
LLC, Performance Units Plan, established January 22, 2004, and all amendments,
supplements, and revisions thereto, attached hereto as Exhibit A and incorporated
herein by reference as if fully set forth herein (the “Plan”); provided,
however, that 1/6 of the Initial Performance Units shall become Vested for each
six (6) months of service by dividing each Target Year of Service (as defined
in the Plan) into two (2) six month vesting periods. Notwithstanding anything
to the contrary in the Plan, if during the Employment Term the Company
increases the Outstanding Unit Amount in connection with any of the following:
(i) the grant of Performance Units at a Base Value of at least eighty-seven
million six hundred thousand dollars ($87,600,000.00) and (ii) the issuance of
membership interests, options, warrants or any other equity in the Company
based upon a Market Value (as defined in the Plan) of the Company of at least
eighty-seven million six hundred thousand dollars ($87,600,000.00) (a “Dilution
Event”), Executive shall be entitled to receive additional Performance Units so
that the aggregate of such additional Performance Units and the number of
Initial Performance Units held prior to the Dilution Event equal three percent
(3%) of the adjusted Outstanding Unit

 

2

 

Amount after such Dilution Event. Additional
performance units will only be granted in response to a Dilution Event
occurring on or prior to January 1, 2007, including, without limitation, any
Dilution Event occurring in connection with the execution of an initial public
offering of any equity interests of the Company (or successor thereto) (“IPO”)
taking place no later than January 1, 2007. In the event of an IPO, your
Performance Units shall become fully vested. It is the intent of the parties
hereto that if an IPO occurs, either (1) Executive will be awarded, in exchange
for cancellation of Executive’s Performance Units, a number of shares in the
post-IPO successor entity to the Company that equate to participation in three
percent (3%) of the equity value in excess of eighty-seven million six hundred
thousand dollars ($87,600,000.00) or (2) the post-IPO successor entity will
continue the Plan. The Company hereby acknowledges that the Plan will be
amended to effect such intent.

 

4.             Additional Benefits.

 

A.            Executive
Benefits.  During the Employment
Term, Executive shall receive such benefits and participate in such executive
benefit plans as set forth in the MonoSol RX, LLC, Benefit Summary, attached
hereto as Exhibit B and incorporated herein by reference.

 

B.            Vacation;
Sick Leave.  The Executive shall,
during the Employment Term, be allowed to take up to four (4) weeks of vacation
each year, and shall be eligible for such sick leave each year as shall be
established by the Company for senior executives of the Company.

 

C.            Expense
Reimbursement.  Subject to any
maximum monthly or other ceiling established by the Company from time to time
on at least 60 days’ prior written notice to Executive, the Company shall pay
directly, or reimburse Executive for, any and all reasonable costs and expenses
incurred by Executive in connection with his performance of his duties under
this Agreement. Executive will submit expense reimbursements or payment
requests to the Company from time to time for the items referred to in this
Section 4(C) in accordance with expense reimbursement or payment policies and
procedures established from time to time by the Company.

 

5.             Termination.

 

A.            Termination
for Cause.  Notwithstanding anything
to the contrary contained in this Agreement, Termination for Cause may be
effected by the Company at any time during the term of this Agreement by
written notification to the Executive in accordance with Section 7(A) of this
Agreement. For purposes of this Agreement, “Termination for Cause” shall mean:

 

(1)           the
willful and continued failure of such Executive to perform his duties,
including, without limitation, such Executive’s failure or refusal to follow
the legitimate directions of the Company and/or of any of the persons to whom
such Executive reports (other than any such failure resulting from his death or
permanent disability); or

 

(2)           the
engaging by such Executive in willful, reckless or negligent conduct in
connection with his employment or other relationship which is materially
detrimental to the Company; or,

 

3

 

(3)           the
conviction of such Executive of any felony or any crime involving moral
turpitude; or,

 

(4)           such
Executive’s reporting to work impaired by or under the influence of alcohol or
illegal drugs; or,

 

(5)           such
Executive’s engaging in the unlawful use (including being under the influence)
or possession of illegal drugs on the Company’s premises; or,

 

(6)           such
Executive’s engaging in sexual harassment or other violation of any harassment
or discrimination law; or,

 

(7)           Executive’s
commission of fraud in connection with Executive’s employment or theft,
misappropriation or embezzlement of the Company’s funds; or,

 

(8)           the
demonstrated use or disclosure by Executive of any confidential proprietary or
trade secret information of Executive’s former employer or that Executive
learned or obtained through his former employer; or,

 

(9)           the
demonstrated use or disclosure by the Executive of any confidential information
of the Company except when such disclosure is made pursuant to the directions of
the Company or in accordance with Company policy; or,

 

(10)         such
Executive’s engaging in competitive behavior against the Company, purposely
aiding a competitor of the Company, or misappropriating or aiding in
misappropriating a material opportunity of the Company.

 

All determinations of “Cause” shall be made by the
Board of Managers of the Company (the “Board”). If the Company elects to
terminate Executive’s employment for Cause pursuant to clause (1) of the
definition of “Cause” and the action or inaction prompting such termination is
capable of cure, the Company shall first give Executive written notice thereof,
including a description of the evidence upon which the Board has relied to
support such finding and a period of thirty (30) days (the “Cause Notice Period”)
from the date of such notice to cure the action or inaction giving rise to the
written notice. If such action or inaction is not cured by Executive by the end
of the Cause Notice Period, as determined by the Board and communicated to the Executive
in writing, such termination shall be effective upon the first day after the
expiration of the Cause Notice Period.

 

B.            Termination
by Reason of Disability.  In a manner
consistent with the Americans with Disabilities Act and the Family and Medical
Leave Act, this Agreement may be terminated at the Company’s option immediately
upon notice to Executive if Executive shall suffer a Permanent Disability. For
purposes of this Agreement, the term “Permanent Disability” shall mean the
Executive’s inability to perform the essential functions of his job under this
Agreement, with or without reasonable accommodation, for a period of one
hundred twenty (120) consecutive days or for an aggregate of one hundred eighty
(180) days, whether or not consecutive, in any twelve (12) month period, due to
illness, accident or other physical or mental incapacity, as determined by a
board certified physician mutually agreed to by both the Executive and the
Company.

 

4

 

C.            Termination
by Reason of Death.  In the event of
the Executive’s death, the Executive’s employment shall be deemed to have
terminated on the date of Executive’s death.

 

D.            Voluntary
Resignation.  Executive may terminate
this Agreement at any time, subject to providing sixty (60) days’ written
notice to the Company in accordance with Section 7(B) of this Agreement;
provided, however, that Executive’s covenants and obligations under Section 8
herein shall survive Executive’s voluntary resignation.

 

E.             Involuntary
Termination.  Notwithstanding
anything to the contrary contained in this Agreement, after ninety (90) days of
the commencement of the Employment Term, involuntary termination may be
effected by the Company by giving written notification to the Executive in
accordance with Section 7(A) of this Agreement. For purposes of this Agreement,
the term “Involuntary Termination” shall mean termination by the Company of the
Executive’s employment with the Company other than: (i) Termination for Cause;
(ii) Termination by Reason of Disability; or (iii) Termination by Reason of
Death.

 

F.             Termination
for Good Reason.  The Executive may
terminate this Agreement for “Good Reason” at any time during the term of this
Agreement by providing written notification to the Company in accordance with
Section 7(B) of this Agreement. For purposes of this Agreement, “Good Reason”
shall mean (1) any action by the Company which results in a diminution in
Executive’s position, authority, duties or responsibilities (including status,
offices, titles and reporting requirements contemplated by this Agreement), (2)
any reduction in Executive’s Base Salary or bonus opportunity. (3) any change,
in any employee benefit plan, compensation plan, welfare benefit plan or fringe
benefit plan in which the Executive participates that would adversely affect
Executive’s benefits thereunder, unless such change occurs pursuant to a
program or a plan amendment or termination that is applicable to all executives
of the Company and does not result in a proportionately greater reduction in
the benefits to the Executive as compared to any other executive of the
Company, (4) material breach by the Company of its obligations under this
Agreement, or (5) without his prior concurrence, Executive is assigned to a
Company location which is more than fifty (50) miles from its current
headquarters in Warren, New Jersey.

 

6.             Obligations of the Company Upon Termination.

 

A.            Termination
for Cause.  In the event that the
Executive’s employment under this Agreement is terminated for Cause, the
Company shall have no obligation to pay the salary or any other compensation
provided under this Agreement, to or for the benefit of the Executive for any
period after the date of such termination, or to pay any bonus for the fiscal
in which such termination occurs; provided, however, that the Company shall
promptly pay: (1) all Base Salary earned by the Executive prior to the date of
such termination and (ii) any benefits under any plans of the Company in which
the Executive is a participant, to the full extent of the Executive’s rights under
such plan.

 

B.            Termination
by Reason of Disability.  In the
event that the Executive’s employment under this Agreement is terminated in a
Termination by Reason of Disability, the Company shall have no obligation to
pay the Base Salary provided under this Agreement to or

 

5

 

for the benefit of the Executive for any period after
the date of such termination; provided, however, that the Company shall
promptly pay: (i) all Base Salary earned by the Executive prior to the date of
such termination; (ii) any benefits under any plans of the Company in which the
Executive is a participant, to the full extent of the Executive’s rights under
such plan; (iii) accrued, unused vacation pay; and (iv) a cash payment equal to
the Annual Bonus received by the Executive for the previous year, pro-rated for
the number of days employed during the year of termination up to the date of
termination.

 

C.            Termination
by Reason of Death.  If the
employment of the Executive hereunder shall terminate because of death of the
Executive, the Company shall have no obligation to pay the Base Salary provided
under this Agreement to or for the benefit of the Executive for any period
after the date of such termination; provided, however, that the Company shall
promptly pay: (i) all Base Salary earned by the Executive prior to the date of
such termination; (ii) any benefits under any plans of the Company in which the
Executive was a participant to the fill extent of the Executive’s rights under
such plans; (iii) accrued, unused vacation pay; and (iv) a cash payment equal
to the Annual Bonus received by the Executive for the previous year, pro rated
for the number of days employed during the year of termination up to the date
of termination.

 

D.            Voluntary
Resignation.  In the event that the
Executive voluntarily resigns from his employment with the Company, the Company
may, at its discretion, continue the Executive’s employment with the Company
for the full amount of the notice period. In the event of said termination, the
Company shall have no obligation to pay the Base Salary provided under this
Agreement to or for the benefit of the Executive for any period after the end
of said notice; provided, however, that the Company shall promptly pay: (i) all
salary earned by the Executive prior to the date of such termination; (ii) any
benefits under any plans of the Company in which Executive is a participant, to
the full extent of the Executive’s rights under such plans (with the exception
of any bonus and/or incentive compensation); and (iii) a cash payment equal to
the Annual Bonus received by the Executive for the previous year, pro-rated for
the number of days employed during the year of termination up to the date of
termination.

 

E.             Involuntary
Termination or Termination for Good Reason.  In the event that the Executive’s employment
under this Agreement is involuntarily terminated as defined in Section 5(E) of
this Agreement or Employee terminates this Agreement for Good Reason as defined
in Section 5(F) of this Agreement, the Company shall: (i) continue to pay the
Executive the Base Salary for a period equal to the greater of (A) eighteen (18)
months from the date of termination or (B) the remainder of the Employment Term
(the “Severance Period”), at such intervals as the same would have been paid
had the Executive remained in the active service of the Company; (ii) pay
during each month of the Severance Period a cash payment equal to one-twelfth
of the Annual Bonus received by the Executive for the previous year (such
amount to be pro-rated for any partial months during the Severance Period); and
(iii) pay any benefits under any plans of the Company in which the Executive is
a participant, to the full extent of the Executive’s rights under such plans
for a period of one year. If a determination has been made (by final,
nonappealable order of a court of competent jurisdiction) that the Executive
has materially breached his obligations under Section 8 of this Agreement, the
Company may terminate the Severance Period and cease to make any further
payments to Executive.

 

6

 

F.             401(k)
Make-Whole Payment.  In the event
that Executive terminates employment with the Company at a time when Executive
has not become entitled to a fully vested benefit under the Company’s defined
contribution plan, the Company shall, regardless of the reason for Executive’s
termination of employment, pay Executive (or Executive’s estate in the event of
his death) a lump sum amount equal to the amount of Executive’s account under
the plan that was not vested as of his termination of employment. Subject to
Paragraph G below, such payment shall be made within five (5) business days
following the last day of Executive’s employment with the Company.

 

G.            409A
Compliance.  The Company shall take
all reasonable actions to ensure that none of the amounts earned or payable
under this Agreement and the Plan will violate Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”). To the extent necessary to
comply with the restriction in Section 409A(a)(2)(B) of the Code concerning
payments to “specified employees”, any amounts payable on account of the
Executive’s separation from service shall be paid (or commence to be paid in
the case of any payments to be made in installments) on the first business day
of the seventh month following Executive’s date of termination (or death, if
earlier) and the first such payment shall include the cumulative amount of any
payments that would have been paid prior to such date if not for such
restriction, together with interest on such cumulative amount during the period
of such restriction at a rate, per annum, equal to the applicable federal
short-term rate (compounded monthly) in effect under Section 1274(d) of the
Code on the date of Executive’s termination of employment.

 

7.             Notice of Termination.

 

A.            The
Company may effect a termination of this Agreement pursuant to the provisions
of Section 5 of this Agreement upon giving thirty (30) days’ written notice to
the Executive of such termination; provided, however, that a Termination for
Cause under Section 5(A) shall take effect immediately, at the option of the
CEO.

 

B.            The
Executive may effect a termination of this Agreement pursuant to the provisions
of Section 5(D) or 5(F) of this Agreement upon giving sixty (60) days’ written
notice to the Company.

 

8.             Covenants of the Executive.

 

In order to induce the Company to enter into this
Agreement and employ the Executive hereunder, the Executive hereby covenants
and agrees as follows. For all purposes under this Section 8 herein, the
Company’s “business” shall mean film based delivery systems to deliver drug
actives, nutraceuticals, cosmaceuticals or flavors, and soluble film based
packaging systems.

 

A.            Non-Competition.  During the Employment Term or the Severance
Period, if applicable, Executive shall not, without the prior written consent
of Company, which consent may be withheld at the sole discretion of Company,
engage in or in any manner be connected or concerned, directly or indirectly,
whether as an officer, director, stockholder, partner, owner, employee,
advisor, creditor, or otherwise, with the operation, management, or conduct of
any business that competes with Company. Executive shall not in any manner
disrupt or attempt to

 

7

 

disrupt any relationships which Company may have with
any of its employees, suppliers, customers, lessors, banks, consultants, or
other persons or entities with whom business dealings or ongoing relationships
exist, nor induce any such parties to terminate or otherwise alter the manner
in which such relationships are being conducted with Company.

 

B.            Confidentiality.
 During the Employment Term or the
Severance Period, if applicable, and following the termination of this
Agreement for any reason for as long as the information remains confidential,
Executive shall not make any use, for his own benefit or for the benefit of a
business or entity other than Company, of any verbal or written secret or
confidential information. Such confidential information shall include, but not
be limited to, customer lists, trade secrets, sales, marketing or consignment
information, vendor lists or operational resource information, forms, processes
or procedures, budget and financial statements or information, files, records,
documents, compilation of data, engineering drawings, computer print-outs, or
any other data of or pertaining to Company, its business, customers and
financial affairs, or its services not generally known within Company’s trade
and which was acquired by him during his affiliation with Company. Executive
shall not remove from Company premises or retain without the Company’s written
consent any of Company’s confidential information as defined herein, or copies
of or extracts therefrom. Executive shall hold in a fiduciary capacity for the
benefit of Company all secret or confidential information, knowledge, or data
of Company or its business or production operations obtained by Executive
during his employment by Company, which shall not be generally known to the
public or recognized as standard practice (whether or not developed by
Executive) and shall not, during his employment hereunder or after the
termination of such employment, communicate or divulge any such information,
knowledge or data to any person, firm or corporation other than Company or
persons, firms or corporations designated by Company. Executive acknowledges
that this information is treated as confidential by Company, that Company takes
meaningful steps to protect the confidentiality of this information, and that
Company has at all times directed Executive to maintain the confidentiality of
this information. Immediately upon termination of this Agreement, Executive
shall return all of Company’s property to it, including any and all copies of
said property.

 

C.            Ownership
of Work Product.  Executive agrees
that Company shall own all intellectual property including trade secrets,
patents, patentable inventions, discoveries and improvements that relate to
Company’s business that Executive conceives, develops during the Employment
Term or delivers to the Company while performing services pursuant to this
Agreement (“Work Product”). Executive further agrees to deliver to the Company,
and that the Company shall thereafter own for all purposes, all Work Product
conceived or developed by the Executive relating to the business of the Company
which does not otherwise belong to Employee’s former employer or to which the
former employer has no legal right or claim. Executive hereby irrevocably
extinguishes for the benefit of the Company and its assigns any moral right to
the Work Product recognized by applicable law. All Work Product shall be
considered a work made for hire by Executive and owned by Company.  If any of the Work Product may not, by
operation of law, be considered work made for hire by Executive for Company, or
if ownership of all right, title and interest of the intellectual property
rights therein shall, not otherwise vest exclusively in the Company, Executive
agrees to assign, and upon creation thereof automatically assign, without
further consideration, the ownership of all trade secrets, copyrights,
patentable inventions, and other intellectual property rights therein to

 

8

 

Company, its successors and assigns. Company, its
successors, and assigns, shall have the right to obtain and hold in its or
their own name copyrights, patents, registrations and any other protection available
in the foregoing. For purposes hereof, a “trade secret” shall mean any
information, including, but not limited to, technical or nontechnical data,
formulae, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers that derive economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from their disclosure or use and are the subject of efforts that are reasonable
under the circumstances to maintain their secrecy. Executive agrees to perform,
upon the reasonable request of Company and at no cost to the Company (other
than travel out of pocket costs where applicable), during or after the
period(s) that this Agreement remains in effect, such further acts as may be
necessary or desirable to transfer, perfect and defend the Company’s ownership
of Work Product, or to enforce the Company’s Work Product against third
parties. When requested, Executive shall promptly and at no cost to the Company
(other than travel out of pocket costs, where applicable):  (a) execute, acknowledge and deliver any
requested affidavits and documents of assignment and conveyance; (b) obtain and
aid in the enforcement of copyright and, if applicable, patents with respect to
the Work Product in any countries; (e) provide testimony in connection with any
enforcement proceeding or any proceeding affecting the right, title or interest
of Company in any Work Product; and (d) perform any other acts deemed necessary
or desirable to carry out the purposes of this Agreement.

 

D.            Inventions.
 All discoveries, designs, improvements,
ideas and inventions, whether patentable or not, relating to (or suggested by
or resulting from) products, services, or other technology of Company or
relating to (or suggested by or resulting from) methods or processes used or
usable in connection with the business of Company that have been, or may be,
conceived, developed or made by Executive during the Employment Term
(hereinafter “Inventions”), either solely or jointly with others, shall
automatically become the sole property of Company. Executive shall immediately
disclose to Company all such Inventions and shall, without additional
compensation, execute all assignments and other documents deemed necessary by
Company to perfect Company’s title thereto, or to the patents issued thereon,
or to otherwise secure and protect Company’s property rights therein. These
obligations shall continue beyond the termination of Executive employment with
respect to Inventions conceived, developed or made by Executive during
employment with Company. The Company acknowledges and agrees that the provisions
of this paragraph shall not apply to any invention for which no equipment,
supplies, facilities or trade secret (or proprietary) information of Company is
used by Executive and which is developed entirely on Executive’s own time,
unless (a) such invention related to the business of Company or to Company’s
actual or demonstrably anticipated research or development; or (b) such
invention results from any work performed by Executive for Company.

 

E.             Competition
Following Termination.  During the
Severance Period, except as provided herein, Executive shall not, without the
prior written consent of Company, which consent may be withheld at the sole
discretion of Company: (a) engage in or in any manner be connected or
concerned, directly or indirectly, whether as an officer, director,
stockholder, partner, owner, employee, advisor, creditor, or otherwise with the
operation, management, or conduct of any business in the United States that is
or was a customer of Company, or that

 

9

 

competes with the business of Company being conducted
at the time of such termination; (b) solicit, contact, interfere with, or
divert any customer served by Company or potential customer identified by
Company during the period of Executive’s employment hereunder; or (c) solicit
any person then or previously employed by Company to join Executive, whether as
a partner, agent, employee, or otherwise, in any enterprise engaged in a
business that competes with business of the Company at the time of such
termination. Provided, however, that Executive shall not be bound by the
Covenant set forth in this paragraph 8(E) in the event that the Company
breaches any of its obligations to the Executive hereunder or in the event of
the cessation or dissolution of the Company’s business. As used herein, “cessation
or dissolution” means total liquidation of the Company and does not include a
cessation of business due to any change in control.

 

F.             Acknowledgment.  Executive acknowledges that all of the
restrictions set forth in this Section entitled “Covenants of the Executive”
are reasonable in scope and essential to the preservation of Company’s business
and proprietary properties and that the enforcement thereof will not in any
manner preclude Executive, in the event of Executive’s termination of employment
with Company, from becoming gainfully employed in such manner and to such
extent as to provide a standard of living for himself the members of his
family, and those dependent upon him of at least the sort and fashion to which
he and they have become accustomed and may expect.

 

G.            Representations
and Warranties.  Executive represents
and warrants to the Company as follows: (a) Executive is under no contractual
or other restriction or obligation which may conflict with or be inconsistent
with the execution of this Agreement or with the performing of any duties for
Company, or any other rights of Company; (b) neither Company nor any of its
affiliates nor any of their respective officers, directors, employees, agents
or employees has requested that Executive communicate or otherwise make
available to any such parties at any time any proprietary information, data,
trade secrets, or other confidential information belonging to Executive’s
former employers or others.

 

H.            Severability.
All of the covenants of Executive contained in this Section entitled “Covenants
of the Executive” shall each be construed as an agreement independent of any
other provision in this Agreement, and the existence of any claim or cause of
action of Executive against Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Company of such
covenants. Both parties hereby expressly agree that it is not the intention of either
party to violate any public policy, statutory or common law. If any sentence,
paragraph, clause or combination of the same of this Agreement is in violation
of the law of any state where applicable, such sentence, paragraph, clause or
combination of the same shall be void in the jurisdictions where it is
unlawful, and the remainder of such paragraph and this Agreement shall remain
binding on the parties to the extent that it may be lawfully done under
existing applicable laws. In the event that any part of any covenant of this
Agreement is determined by a court of law to be overly broad thereby making the
covenant unenforceable, the parties hereto agree, and it is their desire that
such court shall substitute a judicially enforceable limitation in its place,
and that as so modified the covenant shall be binding upon the parties as if
originally set forth herein.

 

10

 

I.              Remedies.
 The Executive agrees that irreparable
harm would result from any breach by Executive of the covenants of this Section
8 in particular, and this Agreement in general, and that monetary damages alone
would not provide the Company adequate relief for any such breach. Accordingly,
if Executive breaches any covenant in this Section 8, the parties acknowledge
that equitable or injunctive relief in favor of the Company is a proper remedy,
and nothing in this Agreement shall be construed as precluding the Company from
seeking such equitable or injunctive relief in a court of competent
jurisdiction for Executive’s violations of Section 8. Any award of equitable or
injunctive relief shall not preclude the Company from seeking or recovering any
lawful compensatory damages that may have resulted from a breach of the
covenants of this Agreement. Any waiver or failure to seek enforcement or
remedy for any breach or suspected breach of any covenant of Executive in this
Agreement shall not he deemed a waiver of such provision in the future.
Furthermore, the existence of any claim of Executive against the Company,
whether based upon this Agreement or otherwise, shall not operate as a defense
to the Company’s enforcement of any provision of this Agreement. Proceedings
seeking equitable and injunctive relief to enforce the terms of this Section 8
may be brought in any court of competent jurisdiction.

 

9.             Indemnification.  To the fullest extent allowed or permitted
under any provision of applicable law, the Company shall indemnify Executive
against any losses, claims, damages or liabilities incurred by Executive arising
out of any claim based upon acts performed or omitted to be performed by
Executive in connection with his employment with the Company.

 

10.           Attorneys’ Fees.  In any action brought by any party under this
Agreement to enforce any of its terms, or any appeal therefrom each party shall
be responsible for its own attorneys’ fees.

 

11.           Travel Restrictions.  As is reasonable, Executive has the right to
refuse travel to destinations deemed politically unstable or otherwise hostile
and/or those that may represent a danger to the Executive’s health and
well-being.

 

12.           Notices.  Any notices permitted or required under this
Agreement shall be deemed given upon the date of personal delivery or
forty-eight (48) hours after deposit in the United States mail, postage fully
paid, certified mail, return receipt requested, addressed to the following
address:

 

	
   

  	
  If to the
  Company:

  	
  Alexander
  Mark Schobel

  
	
   

  	
   

  	
  30
  Technology Drive

  
	
   

  	
   

  	
  Warren
  Township, NJ 07059

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy
  to:

  	
  Doug Bratton

  
	
   

  	
   

  	
  201 Main
  Street, Suite 1900

  
	
   

  	
   

  	
  Fort Worth,
  Texas 76102

  
	
   

  	
   

  	
   

  
	
   

  	
  If to the
  Executive:

  	
  Keith J.
  Kendall

  
	
   

  	
   

  	
  195
  Beaumonte Way

  
	
   

  	
   

  	
  Bridgewater,
  NJ 08807

  

 

11

 

Either party may change the address to which notices
to such party shall be delivered personally or mailed by giving notice thereof
to the other party hereto.

 

13.           Venue; Jurisdiction.  Any suit concerning this Agreement shall be
filed solely in the courts of Tarrant County, Texas. In any action brought
concerning or arising from this Agreement, Executive hereby agrees that he
shall be subject to the jurisdiction of the state and federal courts of Texas.

 

14.           Binding Effect; Assignment.  Executive shall not, without the prior written
consent of the Company, assign, transfer, or otherwise convey this Agreement,
or any right or interest herein. This Agreement, and all rights and obligations
of the Company or any of its successors, may be assigned or otherwise
transferred to any of its successors and shall be binding upon and inure to the
benefit of its successors. As used herein, the term “successor” shall mean any
person, corporation or other entity that, by merger, consolidation, purchase of
stock, assets, liquidation, voluntary or involuntary assignment, or otherwise,
acquires all or a substantial part of the assets of the Company or succeeds to
one or more lines of business of the Company.

 

15.           Entire Agreement.  This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, understandings and arrangements, both oral
and written, between the parties hereto with respect to such subject matter.
This Agreement may not be modified, amended, altered or rescinded in any
manner, except by written instrument signed by all of the parties hereto; any
waiver by either party with respect to any provision hereof, or the breach of
any provision hereof by the other party, need be signed only by the party
waiving such provision or breach; provided, further, that the waiver by either
party hereto of a breach or compliance with any provision of this Agreement
shall not operate nor be construed as a waiver of any subsequent breach or
compliance.

 

16.           Severability.  In ease any one or more of the provisions of
this Agreement shall he held by any court of competent jurisdiction to be
illegal, invalid or unenforceable in any respect, the remainder of this
Agreement, or the application of such provision to persons or circumstances
other than those to which it is held to be illegal, invalid, or unenforceable,
shall not be affected thereby.

 

17.           Section Headings.  The section headings contained in this
Agreement are for reference purposes only and shall not affect in any manner
the meaning or interpretation of this Agreement.

 

18.           Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.

 

19.           Survival.  The provisions of Sections 8 and 9 of this
Agreement shall survive any termination of this Agreement and the termination
of Executive’s employment.

 

[Signature Page to Follow]

 

12

 

IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Agreement as of the day and year first above written.

 

	
   

  	
   

  	
  MonoSol RX, LLC

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
        /s/ Alexander M. Schobel

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Date:

  	
    6/16/06

  	
   

  	
  Title:

  	
     President & CEO

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  Keith J. Kendall, Individually

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Date:

  	
    6/16/06

  	
   

  	
   

  	
  /s/ Keith J. Kendall

  	
   

  
									

 

13

 

EXHIBIT
A

 

Performance
Units Plan

 

 

 

MONOSOL RX, LLC

AMENDED AND RESTATED

PERFORMANCE UNITS PLAN

 

Amended
and Restated Effective September 18, 2006

 

 

 

 

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  ADMINISTRATION

  	
  3

  
	
   

  	
   

  	
   

  
	
  2.01

  	
  Advisory Board; Duties

  	
  3

  
	
  2.02

  	
  Agents

  	
  3

  
	
  2.03

  	
  Binding Effect of
  Decisions

  	
  3

  
	
  2.04

  	
  Indemnity of Advisory
  Board

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  PARTICIPATION

  	
  3

  
	
   

  	
   

  	
   

  
	
  3.01

  	
  Participation

  	
  3

  
	
  3.02

  	
  Performance Units

  	
  4

  
	
  3.03

  	
  Vesting of Performance
  Units

  	
  4

  
	
  3.04

  	
  Dilution and Other
  Adjustments

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  BENEFITS

  	
  5

  
	
   

  	
   

  	
   

  
	
  4.01

  	
  Benefit Payments
  Following Change in Control

  	
  5

  
	
  4.02

  	
  Forfeiture Provisions

  	
  5

  
	
  4.03

  	
  Withholding; Payroll
  Taxes

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  BENEFICIARY DESIGNATION

  	
  6

  
	
   

  	
   

  	
   

  
	
  5.01

  	
  Beneficiary Designation

  	
  6

  
	
  5.02

  	
  Amendments

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  AMENDMENT AND
  TERMINATION

  	
  6

  
	
   

  	
   

  	
   

  
	
  6.01

  	
  Right to Amend

  	
  6

  
	
  6.02

  	
  Termination

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  CLAIMS PROCEDURE AND
  DISPUTES

  	
  7

  
	
   

  	
   

  	
   

  
	
  7.01

  	
  Claim Filing Procedure

  	
  7

  
	
  7.02

  	
  Consideration of Claim;
  Rendering of Decision

  	
  7

  
	
  7.03

  	
  Limitation on Claims
  Procedure

  	
  7

  
	
  7.04

  	
  Dispute over Benefits

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  MISCELLANEOUS

  	
  8

  
	
   

  	
   

  	
   

  
	
  8.01

  	
  Headings and Gender

  	
  8

  
	
  8.02

  	
  No Right to Employment
  or Retention

  	
  8

  
	
  8.03

  	
  Action by Officers

  	
  8

  

 

i

 

	
  8.04

  	
  Assignment of Benefits

  	
  8

  
	
  8.05

  	
  Applicable Law;
  Validity

  	
  8

  
	
  8.06

  	
  Expenses

  	
  9

  
	
  8.07

  	
  Plan Funding

  	
  9

  

 

ii

 

MONOSOL RX, LLC

AMENDED AND RESTATED

PERFORMANCE UNITS PLAN

 

Amended and Restated
Effective September 18, 2006

 

MONOSOL RX, LLC, a Delaware limited liability company (the “Company”),
does hereby amend and restate the Performance Units Plan (hereinafter referred
to as the “Plan”).  The Plan was
established by the Company, effective as of January 22, 2004, for the purpose
of enhancing the long-term growth in earnings of the Company by providing
incentives to key employees and/or other service providers of the Company.  The Plan helps the Company attract and retain
employees and other service providers of exceptional ability.

 

ARTICLE I

DEFINITIONS

For the purposes of this Plan, the following words and phrases shall
have the meanings indicated, unless the context clearly indicates otherwise:

 

“Additional Performance Units Plan” shall mean the other Performance
Units Plan B established by the Company effective as of January 22, 2004.

 

“Advisory Board” shall mean the Advisory Board contemplated by the
Company Agreement which administers the Plan pursuant to Article II.

 

“Base Value” shall mean $12,500,000.00, the Base Value determined by
the Advisory Board on January 22, 2004.

 

“Beneficiary” shall mean the person, persons or entity designated by
the Participant, as provided in Article V, to receive any benefits payable
under the Plan following the death of the Participant.

 

“Cause” shall mean the involuntary termination of a Participant’s
employment or other service-providing relationship with the Company resulting
from (i) willful, reckless or negligent conduct by such Participant in
connection with his employment with, or provision of services to, the Company,
(ii) the conviction of such Participant of any felony or any crime involving
moral turpitude, (iii) such Participant’s reporting to work or performing
services impaired by or under the influence of alcohol or illegal drugs, (iv)
such Participant’s engaging in the unlawful use (including being under the
influence) or possession of illegal drugs on the Company’s premises, (v) such
Participant’s engaging in sexual harassment or otherwise violated any
harassment or discrimination law, or (vi) dishonesty of such Participant.

 

“Change in Control” shall mean the occurrence, after the effective date
of the Plan, in a single transaction or series of transactions, of any one of
the following events or circumstances: (i) merger, consolidation or
reorganization of the Company where the beneficial owners of the

 

 

interests or securities possessing the right to vote
with respect to the Company immediately preceding the merger, consolidation or
reorganization beneficially own less than 20% of the interests or securities
possessing the right to vote with respect to the survivor entity, after giving
effect to such merger, consolidation, or reorganization; (ii) acquisition by
any person or group, as defined for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, of beneficial ownership of interests or
securities possessing the right to vote with respect to the Company where the
beneficial owners of the interests or securities possessing the right to vote
with respect to the Company immediately preceding such acquisition own less
than 20% of the interests or securities possessing the right to vote with
respect to the Company, after giving effect to such acquisition; (iii) approval
by the members of the Company of a plan of liquidation or dissolution with
respect to the Company, provided such liquidation or dissolution is
consummated; (iv) the sale, exchange, or contribution of all or substantially
all the Company’s assets to an entity where the beneficial owners of the interests
or securities possessing the right to vote with respect to the Company
immediately preceding the sale, exchange, or contribution beneficially own less
than 20% of the interests or securities possessing the right to vote with
respect to the acquiring entity; or (v) an initial public offering under the
Securities Act of 1933, as amended, of the business of the Company to the
public which does not otherwise meet the definition of a Change in Control in
clause (i) — (iv) hereof.  In the event
the exact date of a Change in Control cannot be determined, such Change in
Control will be deemed to have occurred on the earliest date on which it could
have occurred.

 

“Claim” shall mean a request by a Claimant in accordance with Article
VII for a benefit under the Plan.

 

“Claimant” shall mean any Participant or Beneficiary who claims to be
entitled to a benefit under the Plan.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).

 

“Company” shall mean Monosol RX, LLC, a Delaware limited liability
company, and any successor to the business thereof.

 

“Company Agreement” shall mean the Limited Liability Operating
Agreement of the Company, as amended from time to time.

 

“Market Value”, at any point in time, shall mean the fair market value
of the Company’s business as of such time. 
The fair market value of the Company’s business shall be the price a
willing buyer would pay to purchase the Company’s entire business, subject to
existing liabilities, in a lump sum, cash payment.  In the case of an actual sale of the
Company’s business or other transaction resulting in a Change in Control, the
sale price or value of consideration given shall be determinative of the fair
market value of the Company’s business.

 

“Outstanding Unit Amount” at any point in time (and subject to
adjustment under Section 3.04) shall mean (i) the maximum number of Performance
Units that may be granted under the Plan as of such time, plus (ii) the number
of Performance Units that, solely for purposes of the

 

2

 

Plan, represents the maximum number of Performance
Units that may be granted under the Additional Performance Units Plan, plus
(iii) the number of Performance Units that, solely for purposes of the Plan,
represents the total outstanding member interests of members of the Company as
of such time (as determined by the Advisory Board).  Based upon adjustments under Section 3.04 since
the establishment of the Plan on January 22, 2004, the Outstanding Unit Amount
as of September 18, 2006, shall be 100,000,000.

 

“Participant” shall mean an individual who
is eligible to participate in the Plan as provided in Article III.

 

“Performance Units” shall mean contractual rights awarded to a
Participant as provided in Article III.

 

“Vested” shall mean the extent to which a Participant has earned a
right to receive benefit payments with respect to his Performance Units
pursuant to Section 3.03, subject to the forfeiture provisions of Section 4.02.

 

ARTICLE II

ADMINISTRATION

 

2.01         Advisory
Board; Duties.  The Plan shall be
administered by the Advisory Board. 
Members of the Advisory Board may be Participants under the Plan.  The Advisory Board shall also have the
authority to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of the Plan and decide or resolve any and
all questions, including interpretations of the Plan, as may arise in
connection with the Plan.

 

2.02         Agents.  In the administration of the Plan, the
Advisory Board may, from time to time, employ agents and delegate to them such
administrative duties as it sees fit and may from time to time consult with
legal counsel who may also be legal counsel to the Company.

 

2.03         Binding
Effect of Decisions.  The decision or
action of the Advisory Board in respect of any question arising out of or in
connection with the administration, interpretation and application of the Plan
and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the Plan.

 

2.04         Indemnity
of Advisory Board.  The Company shall
indemnify and hold harmless the members of the Advisory Board against any and
all claims, loss, damage, expense or liability arising from any action or
failure to act with respect to the Plan, except in the case of gross negligence
or willful misconduct by the Advisory Board.

 

ARTICLE III

PARTICIPATION

 

3

 

3.01         Participation.  Participation in the Plan shall be limited to
the following individuals: Richard C. Fuisz, Joe Fuisz, Garry Myers and Robert
Yang.

 

3.02         Performance
Units.  On January 22, 2004,
Performance Units were granted under this Plan to the Participants as follows:

 

	
  Individual

  	
   

  	
  Performance Units

  	
   

  
	
  Richard C. Fuisz

  	
   

  	
  1,000,000

  	
   

  
	
  Joe Fuisz

  	
   

  	
  750,000

  	
   

  
	
  Garry Myers

  	
   

  	
  625,000

  	
   

  
	
  Robert Yang

  	
   

  	
  125,000

  	
   

  

 

The grant of Performance Units to a Participant does
not entitle the Participant to voting or any other rights belonging to a member
of the Company.  All rights of a
Participant are set forth herein.  The
2,500,000 Performance Units granted to the Participants listed above equaled
the maximum number of Performance Units available under the Plan on January 22,
2004 (with such number subject to adjustment pursuant to the provisions of
Section 3.04).  If any Performance Units
granted under the Plan are forfeited or cancelled, such Performance Units may
not be granted again under the Plan.

 

3.03         Vesting
of Performance Units.  A Participant
shall have no right to receive benefit payments on account of any specified
part of his Performance Units except to the extent the Participant is Vested in
his Performance Units.  Based upon the
number of Performance Units granted on January 22, 2004, the Participants hold
the following unadjusted number of Vested Performance Units (with such number
subject to adjustment pursuant to the provisions of Section 3.04 to reflect the
changes made to the Outstanding Unit Amount since January 22, 2004).  The Participants’ Vested Performance Units
remain subject to the forfeiture provisions of Section 4.02.

 

	
  Individual

  	
   

  	
  Performance Units

  	
   

  
	
  Richard C. Fuisz

  	
   

  	
  1,000,000

  	
   

  
	
  Joe Fuisz

  	
   

  	
  750,000

  	
   

  
	
  Garry Myers

  	
   

  	
  625,000

  	
   

  
	
  Robert Yang

  	
   

  	
  62,500

  	
   

  

 

3.04         Dilution
and Other Adjustments.  In the event
of any change in the outstanding ownership interests of the Company by reason
of any issuance of new or additional member interests in the Company, or any
restructuring, recapitalization, merger, consolidation, conversion, spin-off,
reorganization, combination or exchange of interests or other similar change,
the Advisory Board may equitably adjust the Outstanding Unit Amount (including
adjustment to the component thereof which represents the total outstanding
member interests of members of the Company) and/or the number or kind of
Performance Units then subject to the Plan and/or held in Participants’
Performance Unit accounts in order to reflect such changes.  The Advisory Board’s determination as to the
terms of any such adjustment shall be binding and conclusive on all
persons.  Notwithstanding the foregoing,
the Performance Units may be diluted as the result of the authorization and
issuance of additional Performance Units or the

 

4

 

authorization and issuance of additional performance units under the
Additional Performance Units Plan. 
Additionally, in the event of an adjustment under Section 3.2 of the
Acquisition Agreement dated effective as of January 22, 2004 by and between
Kosmos Pharma Limited, the Company, and Monosol LLC, the number of Vested
Performance Units held by each Participant shall be reduced by one-half while
the total Outstanding Unit Amount shall not be changed.

 

ARTICLE IV

BENEFITS

 

4.01         Benefit
Payments Following Change in Control. 
Following a Change in Control, each Participant shall receive payments
in an amount equal to the following:

 

	
  Number of such
  Participant’s

  	
   

  	
   

  	
   

  
	
  Vested Performance
  Units

  	
  X

  	
  (Market Value minus Base Value)  =

  	
  Total Payments

  
	
  Outstanding Unit Amount

  	
   

  	
   

  	
   

  

 

The number of such Participant’s Vested Performance
Units, the Outstanding Unit Amount, and the Market Value shall be determined as
of the date of such Change in Control.

 

Amounts payable under this Section 4.01 shall be paid either in cash
or, at the sole discretion of the Advisory Board, in kind in the same
consideration received by the Company or the members of the Company as a result
of the Change in Control.  Benefits
payable under this Section 4.01 shall be paid to the Participants under this
Section 4.01 within three months following the Change of Control; provided,
however, that if the consideration received by the Company or members of the
Company as a result of  the Change in
Control is deferred and paid over time, then the Participants payments
hereunder shall be deferred and paid as received by the Company or members as
the case may be.  The payment of a
Participant’s entire benefit, if any, under this Section 4.01 shall terminate
the Participant’s interest and status as a Participant under the Plan and
result in the cancellation of his Performance Units.  For purposes of illustration of these
provisions and not by way of limitation, in connection with a Change in Control
resulting from the occurrence of an initial public offering under the
Securities Act of 1933, as amended, of the business of the Company to the
public, the Advisory Board may elect to pay all or any portion of the amount
payable to such Participant under this Section 4.01 in securities of the newly
formed public company.  In any event in
which the consideration is paid in kind to the Participants, the Advisory Board
will place a value on the in kind consideration distributed hereunder for
purposes of calculating the amount paid under this plan for purposes of Article
IV of the Company Agreement. 
Notwithstanding anything to the contrary contained in this Agreement,
with respect to the occurrence of a Change in Control which does not constitute
a permissible distribution event under Code Section 409A(a)(2)(A)(v), all
amounts payable under this Section 4.01 shall be paid no later than the later
of (i) the date that is 2 1⁄2 months from the end of the Participant’s tax year
in which such Change in Control occurred or (ii) the date that is 2 1⁄2 months
from the end of the Company’s tax year in which such Change in Control
occurred.

 

4.02         Forfeiture
Provisions.  Notwithstanding anything
herein contained to the contrary, all rights to any benefits payable under the
Plan, shall be immediately forfeited, whether or not the Participant holds
Vested Performance Units, if the Participant’s employment or other service-

 

5

 

providing relationship with the Company is terminated for Cause, as
defined for the purposes of this Plan.  The
judgment of the Advisory Board, as expressed by a majority vote, shall be final
as to the whether the Participant has been terminated for Cause.

 

4.03         Withholding;
Payroll Taxes.  To the extent
required by the law in effect at the time payments are made, the Company shall
withhold from payments made hereunder any taxes required to be withheld from a
Participant’s benefit for the federal or any state or local government.

 

ARTICLE V

BENEFICIARY DESIGNATION

 

5.01         Beneficiary
Designation.  Each Participant shall
have the right, at any time, to designate any person or persons as his
Beneficiary or Beneficiaries (both primary as well as contingent) to whom
payment under this Plan shall be paid in the event of his death prior to
complete distribution to the Participant of the benefits due him under the
Plan.  If a Participant fails to
designate a Beneficiary or if all designated Beneficiaries predecease the
Participant or die prior to complete distribution of the Participant’s
benefits, then the Participant’s Beneficiary shall be deemed to be the estate
of the Participant.  The payment to the
Beneficiary or deemed Beneficiary shall completely discharge the Company’s
obligations under the Plan.

 

5.02         Amendments.  Any Beneficiary designation may be changed by
a Participant by the written filing of such change on a form prescribed by the
Advisory Board.  The filing of a new
Beneficiary designation form will, upon receipt by the Advisory Board, cancel
all Beneficiary designations previously filed.

 

ARTICLE VI

AMENDMENT AND TERMINATION

 

6.01         Right
to Amend.  The Company reserves the
right, through its Advisory Board, to amend any provisions under the Plan at
any time; provided, however, that (a) such amendment is in writing, (b) such
amendment is executed by a duly authorized member of the Advisory Board of the
Company, and (c) such amendment does not adversely affect the rights of a
Participant or his Beneficiary.

 

6.02         Termination.  The Company may not terminate this Plan
without the consent of all Participants.

 

6

 

 

ARTICLE VII

CLAIMS PROCEDURE AND DISPUTES

 

7.01         Claim
Filing Procedure.  If a dispute
arises over benefits payable under the Plan, a Claimant shall have the right to
submit a Claim with respect to such benefits. 
Such Claim shall be in writing, signed by the Claimant under oath, and
addressed and delivered to the Advisory Board either personally or by certified
or registered mail, return receipt requested. 
The Claim shall state with particularity:

 

(a)           The
benefit claimed;

(b)           The
provisions of the Plan and the particular provisions of law, if any, upon which
the Claimant relies in support of his Claim; and

(c)           All
facts believed to be relevant in connection with such Claim.

 

7.02         Consideration
of Claim; Rendering of Decision. 
Upon receipt of a Claim hereunder, the Advisory Board shall consider the
merits of the Claim and shall within 90 days from the receipt of the Claim
render a decision on the merits and communicate the same to the Claimant.  In the event the Advisory Board denies the
Claim in whole or in part, the Claimant shall be so notified in writing, which
shall be addressed and delivered to the Claimant personally or by certified or
registered mail, return receipt requested, and shall set forth the following:

 

(a)           The
reason or reasons for rejection of the Claim;

(b)           The
provisions of the Plan and the particular provisions of law, if any, relied
upon in reaching such determination; and

(c)           A
description of any additional information needed from the Claimant in order for
the Claimant to perfect his Claim.

 

The failure of the Advisory Board to render a decision
on the merits of a Claim shall be deemed to be a denial of such Claim and
notice of such denial shall be deemed to have been given to the Claimant on the
ninetieth (90th) day from receipt by the Advisory Board of the Claim.

 

7.03         Limitation
on Claims Procedure.  Any Claim under
this Claims procedure must be submitted within six months from the earlier of
(1) the date on which the Claimant learned of facts sufficient to enable him to
formulate such Claim, or (2) the date on which the Claimant should reasonably
have been expected to learn the facts sufficient to enable him to formulate
such Claim.  For this purpose, the first
date on which any document that is either given to or made available to a
Participant or Beneficiary (in pay status), and which discloses facts
sufficient to enable a reasonable person to formulate a Claim hereunder, shall
be conclusively deemed to be the date on which the Claimant should reasonably
have been expected to learn the facts sufficient to enable him to formulate
such a Claim.  Claims submitted after
such period shall be deemed to have been waived by the Claimant and shall
thereafter be wholly unenforceable.

 

7.04         Dispute
over Benefits.  If a dispute arises
as to the amount or proper recipient of any payment, the Advisory Board, in its
sole discretion, may withhold or cause to be withheld

 

7

 

such payment until the dispute shall have been settled by the parties
concerned or shall have been determined by an arbitration proceeding.  In addition, if a dispute continues to exist
after a Claim has been filed and a decision rendered by the Advisory Board
under the Claims procedure set forth above, or in the event of any dispute or
controversy concerning the construction, interpretation, performance or breach
of the Plan arising between a Participant, the Company or the Advisory Board,
the same shall be submitted to arbitration under the appropriate rules of the
American Arbitration Association.  Any
arbitration shall be conducted in Fort Worth, Texas, unless mutually agreed
otherwise by the parties.  All administrative
fees connected with initiating a demand for arbitration shall be split between
and advanced by the parties to the arbitration; subject, however, to final
apportionment by the arbitrator in his award. 
The parties agree that the arbitrator’s award shall be binding and may
be enforced in any court having jurisdiction thereof by filing a petition for
enforcement of such award.

 

ARTICLE VIII

MISCELLANEOUS

 

8.01         Headings
and Gender.  The headings of the Plan
have been inserted for convenience of reference only and are to be ignored in
any construction of the provisions hereof. 
Whenever a personal pronoun is used in the masculine gender, it shall be
deemed to include the feminine also, unless the context indicates the contrary.

 

8.02         No
Right to Employment or Retention. 
Nothing herein contained shall be construed as giving any Participant
the right to be retained in the service of the Company.

 

8.03         Action
by Officers.  Whenever under the
terms of this Plan the Company is permitted or required to take some action,
such action may be taken by any duly authorized member of the Advisory Board or
officer of the Company.

 

8.04         Assignment
of Benefits.  Except as provided in
this Section 8.04, no interest in this Plan shall be subject to assignment,
alienation, transfer or anticipation, either by voluntary or involuntary act of
any Participant or Beneficiary or by operation of law, nor shall payment or
right of interest be subject to the demands or claims of any creditor of such
person, nor be liable in any way for such person’s debts, obligations or
liabilities.

 

The Company shall not merge or consolidate with any other entity or
otherwise reorganize unless and until such succeeding entity agrees to assume
and discharge the obligations of the Company under the Plan.  Upon such assumption, the term “Company” as
used in this Plan shall be deemed to refer to such successor entity.

 

8.05         Applicable
Law; Validity.  The validity of the
Plan or any of its provisions shall be determined under and construed according
to the laws of the State of Delaware.  If
any provision of the Plan shall be held illegal or invalid for any reason, such
determination shall not affect the remaining provisions of the Plan and it
shall be construed as if said illegal or invalid provision had never been
included.

 

8

 

8.06         Expenses.  The administration costs incurred with
respect to the Plan shall be paid by the Company as an ordinary and necessary
business expense incurred in the operation of the Company’s business.

 

8.07         Plan
Funding.  Benefits under the Plan are
payable solely by the Company.  The
Company may, in its sole discretion, determine to set aside funds in a trust or
other arrangement to satisfy its obligations hereunder; provided, the trust or
other arrangement shall be unfunded for purposes of the Code, such trust or
other arrangement shall not be structured in a manner which would cause the
assets to be deemed to have been paid to the Participants under Code Section
409A(b), and no Participant or Beneficiary shall be considered to have an
interest in any such trust or other arrangement, or the assets held pursuant
thereto, except as may be specifically provided for therein.  Participants shall be regarded as general
creditors of the Company with respect to any rights derived by Participants
from the existence of the Plan.

 

[REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK]

 

9

 

IN WITNESS WHEREOF, the
Company has caused this Amended and Restated Plan to be executed by its duly
authorized officers to be effective as of September 18, 2006.

 

	
   

  	
  MONOSOL RX, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  MONOSOL RX GENPAR, a
  Texas limited partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  BRATTON CAPITAL, INC.,
  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John Cochran

  
	
   

  	
   

  	
  Name:

  	
  John Cochran

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

10

 

 

MONOSOL RX,
LLC

AMENDED AND
RESTATED

PERFORMANCE
UNITS PLAN B

 

Amended and
Restated Effective September 18, 2006

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I-DEFINITIONS

  	
  1

  
	
  ARTICLE II-ADMINISTRATION

  	
  4

  
	
      2.01    Advisory
  Board; Duties

  	
  4

  
	
      2.02    Agents

  	
  4

  
	
      2.03    Binding
  Effect of Decisions

  	
  4

  
	
      2.04    Indemnity
  of Advisory Board

  	
  4

  
	
  ARTICLE III-PARTICIPATION

  	
  4

  
	
      3.01    Participation

  	
  4

  
	
      3.02    Performance
  Units

  	
  4

  
	
      3.03    Vesting
  of Performance Units

  	
  5

  
	
      3.04    Dilution
  and Other Adjustments

  	
  6

  
	
  ARTICLE IV-BENEFITS

  	
  6

  
	
      4.01    Benefit
  Payments Following Retirement, Termination or Change in Control

  	
  6

  
	
      4.02    Forfeiture
  Provisions

  	
  7

  
	
      4.03    Withholding;
  Payroll Taxes

  	
  8

  
	
  ARTICLE V-BENEFICIARY
  DESIGNATION

  	
  8

  
	
      5.01    Beneficiary
  Designation

  	
  8

  
	
      5.02    Amendments

  	
  8

  
	
  ARTICLE VI-AMENDMENT AND
  TERMINATION

  	
  9

  
	
      6.01    Right
  to Amend

  	
  9

  
	
      6.02    Termination

  	
  9

  
	
  ARTICLE VII-CLAIMS PROCEDURE
  & DISPUTES

  	
  9

  
	
      7.01    Claim
  Filing Procedure

  	
  9

  
	
      7.02    Consideration
  of Claim; Rendering of Decision

  	
  9

  
	
      7.03    Limitation
  on Claims Procedure

  	
  10

  
	
      7.04    Dispute
  over Benefits

  	
  10

  
	
  ARTICLE VIII-MISCELLANEOUS

  	
  10

  
	
      8.01    Headings
  and Gender

  	
  10

  
	
      8.02    No
  Right to Employment or Retention

  	
  10

  
	
      8.03    Action
  by Officers

  	
  11

  
	
      8.04    Assignment
  of Benefits

  	
  11

  
	
      8.05    Applicable
  Law; Validity

  	
  11

  
	
      8.06    Expenses

  	
  11

  
	
      8.07    Plan
  Funding

  	
  11

  

 

i

 

 

MONOSOL RX,
LLC

AMENDED AND
RESTATED

PERFORMANCE
UNITS PLAN B

 

Amended
and Restated Effective September 18, 2006

 

MONOSOL RX, LLC, a Delaware limited liability
company (the “Company”), does hereby amend and restate the Performance Units
Plan B (newly designated as Performance Units Plan B and hereinafter referred
to as the “Plan”).  The Plan was
established by the Company, effective as of January 22, 2004, for the purpose
of enhancing the long-term growth in earnings of the Company by providing
incentives to key employees and/or other service providers of the Company.  The Plan helps the Company attract and retain
employees and other service providers of exceptional ability.

ARTICLE I

DEFINITIONS

For the purposes of this Plan, the following words and
phrases shall have the meanings indicated, unless the context clearly indicates
otherwise:

“Additional Performance Units Plan” shall mean the other
Performance Units Plan established by the Company effective as of January 22,
2004 for the following participants: 
Richard C. Fuisz, Joe Fuisz, Garry Myers, and Robert Yang.

“Advisory Board” shall mean the Advisory Board
contemplated by the Company Agreement which administers the Plan pursuant to
Article II.

“Base Value” shall mean
$100,000,000.00 as of September 18, 2006. 
The Base Value is determined by the Advisory Board as of the date of
grant of Performance Units and separate Base Values may apply to blocks of
Performance Units based upon the date of grant.

“Beneficiary” shall mean the person, persons or
entity designated by the Participant, as provided in Article V, to receive any
benefits payable under the Plan following the death of the Participant.

“Cause” shall mean the involuntary termination of a
Participant’s employment or other service-providing relationship with the
Company resulting from (i) willful and continued failure of such Participant to
perform his or her duties, including, without limitation, such Participant’s
failure or refusal to follow the legitimate directions of the Company and/or of
any of the persons to whom such Participant reports (other than any such
failure resulting from his or her death or permanent disability), (ii) willful,
reckless or negligent conduct by such Participant in connection with his or her
employment with, or provision of services to, the Company, (iii) the conviction
of such Participant of any felony or any crime involving moral turpitude, (iv)
such Participant’s reporting to work or performing services impaired by or
under the influence of alcohol or illegal drugs, (v) such Participant’s
engaging in the unlawful use (including being under the influence) or
possession of

 

 

illegal drugs on the Company’s premises, (vi) such
Participant’s engaging in sexual harassment or otherwise violated any
harassment or discrimination law, or (vii) dishonesty of such Participant.

“Change
in Control” shall mean the occurrence, after the effective date of the Plan, in
a single transaction or series of transactions, of any one of the following
events or circumstances: (i) merger, consolidation or reorganization of the
Company where the beneficial owners of the interests or securities possessing
the right to vote with respect to the Company immediately preceding the merger,
consolidation or reorganization beneficially own less than 20% of the interests
or securities possessing the right to vote with respect to the survivor entity,
after giving effect to such merger, consolidation, or reorganization; (ii)
acquisition by any person or group, as defined for purposes of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, of beneficial ownership of
interests or securities possessing the right to vote with respect to the
Company where the beneficial owners of the interests or securities possessing
the right to vote with respect to the Company immediately preceding such
acquisition own less than 20% of the interests or securities possessing the
right to vote with respect to the Company, after giving effect to such
acquisition; (iii) approval by the members of the Company of a plan of
liquidation or dissolution with respect to the Company, provided such
liquidation or dissolution is consummated; (iv) the sale, exchange, or
contribution of all or substantially all the Company’s assets to an entity
where the beneficial owners of the interests or securities possessing the right
to vote with respect to the Company immediately preceding the sale, exchange,
or contribution beneficially own less than 20% of the interests or securities
possessing the right to vote with respect to the acquiring entity; or (v) an
initial public offering under the Securities Act of 1933, as amended, of the
business of the Company to the public which does not otherwise meet the
definition of a Change in Control in clause (i) — (iv) hereof.  In the event the exact date of a Change in
Control cannot be determined, such Change in Control will be deemed to have
occurred on the earliest date on which it could have occurred.

“Claim” shall mean a request by a Claimant in accordance
with Article VII for a benefit under the Plan.

“Claimant” shall mean any Participant or Beneficiary who
claims to be entitled to a benefit under the Plan.

“Company” shall mean MonoSol Rx, LLC, a Delaware limited
liability company, and any successor to the business thereof.

“Company Agreement” shall mean
the Limited Liability Operating Agreement of the Company, as amended from time
to time.

“Market Value”, at any point in time, shall mean
the fair market value of the Company’s business as of such time.  The fair market value of the Company’s
business shall be the price a willing buyer would pay to purchase the Company’s
entire business, subject to existing liabilities, in a lump sum, cash
payment.  In the case of an actual sale
of the Company’s business or other transaction resulting in a Change in
Control, the sale price or value of consideration given shall be determinative
of the fair market value of the Company’s business.  In the absence of an actual sale or other transaction
resulting in a Change in Control of the Company, the fair market value of the
Company’s business shall be the Advisory Board’s most recent determination
thereof (unless otherwise determined by mutual agreement between the Advisory
Board and the Participant);

 

2

 

provided, however, that if the Participant
objects to the Advisory Board’s most recent determination of the fair market
value of the Company’s business, or if the Advisory Board and the Participant
are unable to agree on the fair market value of the Company’s business, within
30 days following the Participant’s retirement or termination of employment or
a Change in Control, as the case may be, the Participant may retain, at his or
her own expense, a qualified, independent appraiser to perform an appraisal of
the Company’s business.  If the fair
market value determined by the appraisal commissioned by the Participant is not
greater than 110% of the most recent fair market value determined by the
Advisory Board, then the most recent fair market value determined by the
Advisory Board shall be determinative. 
If the fair market value determined by the appraisal commissioned by the
Participant is more than 110% of the most recent fair market value determined
by the Advisory Board, then the Advisory Board may, in its sole discretion, (i)
select another appraiser jointly with the Participant whose appraisal shall
conclusively bind the parties or (ii) use the average value based on the most
recent fair market value determined by the Advisory Board and the appraised
value based on the appraisal commissioned by the Participant.  In determining the fair market value, the
appraiser(s) shall be instructed to ignore any liability recorded on the books
of the Company which represents the liability under the Plan to the Participant
in question.  The Advisory Board may
determine the fair market value of the Company’s business at any time;
provided, however, that it is anticipated that such determination will be made
at least once each fiscal year of the Company.

“Outstanding
Unit Amount” at any point in time (and subject to adjustment under Section
3.04) shall mean (i) the maximum number of Performance Units that may be
granted under the Plan as of such time, plus (ii) the number of Performance
Units that, solely for purposes of the Plan, represents the maximum number of
Performance Units that may be granted under the Additional Performance Units
Plan, plus (iii) the number of Performance Units that, solely for purposes of
the Plan, represents the total outstanding member interests of members of the
Company as of such time (as determined by the Advisory Board).  Based upon adjustments under Section 3.04
since the establishment of the Plan on January 22, 2004, the Outstanding Unit
Amount as of September 18, 2006, shall be 100,000,000.

“Participant” shall mean an individual who is eligible
to participate in the Plan as provided in Article III.

“Performance Units” shall mean contractual rights
awarded to a Participant as provided in Article III.

“Target Year of Service” shall mean a one-year
period established by the Advisory Board for a particular Participant on the
last day of which such Participant is employed by the Company.

“Vested” shall mean the extent to which a Participant has earned a
right to receive benefit payments with respect to his or her Performance Units
pursuant to Section 3.03, subject to the forfeiture provisions of Section 4.02.

 

3

 

ARTICLE II

ADMINISTRATION

                2.01         Advisory Board; Duties.  The Plan shall be administered
by the Advisory Board.  Members of the
Advisory Board may be Participants under the Plan.  The Advisory Board shall also have the authority
to make, amend, interpret, and enforce all appropriate rules and regulations
for the administration of the Plan and decide or resolve any and all questions,
including interpretations of the Plan, as may arise in connection with the
Plan.

Subject to the provisions of the Plan, the Advisory Board shall have
exclusive power to (a) designate the employees and/or other service providers
to become Participants and be granted Performance Units; (b) determine the
number of Performance Units to be granted and/or criteria for granting
Performance Units to each Participant; (c) determine the time or times when
Performance Units will be granted; (d) determine whether Participants shall be
of a single class or in different classes; and (e) determine the one-year periods
for Target Years of Service.  The
one-year period for Target Years of Service may vary from Participant to
Participant.

                2.02         Agents.  In the administration of the
Plan, the Advisory Board may, from time to time, employ agents and delegate to
them such administrative duties as it sees fit and may from time to time
consult with legal counsel who may also be legal counsel to the Company.

                2.03         Binding
Effect of Decisions.  The decision or action of the
Advisory Board in respect of any question arising out of or in connection with
the administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and binding
upon all persons having any interest in the Plan.

                2.04         Indemnity of Advisory Board.  The Company shall indemnify and hold harmless the members of the
Advisory Board against any and all claims, loss, damage, expense or liability
arising from any action or failure to act with respect to the Plan, except in
the case of gross negligence or willful misconduct by the Advisory Board.

ARTICLE III

PARTICIPATION

                3.01         Participation.  Participation in the Plan
shall be limited to a select group of key employees and/or other service
providers of the Company designated by the Advisory Board.  The Advisory Board shall notify all employees
and/or other service providers who are designated to participate in the Plan of
their designation and of their grant of Performance Units within 30 days of
their designation and/or grant.

                3.02         Performance Units.  Performance Units granted by
the Advisory Board to Participants shall be credited to a Performance Unit
account to be maintained by the Advisory Board for each Participant.  The grant of Performance Units to a
Participant shall not entitle the Participant to voting or any other rights
belonging to a member of the Company. 
All rights of a Participant are set forth herein.

 

4

 

Following the adjustments
described below, the maximum number of Performance Units that may be granted
under the Plan shall be 2,500,000 in the aggregate (with such number subject to
adjustment pursuant to the provisions of Section 3.04 to correspond to the
changes to the Outstanding Unit Amount). Initially, 3,750,000 Performance Units
could be granted under the Plan and such number was increased by amendment to
5,000,000.  Pursuant to the establishment
of the Additional Performance Units Plan, 2,500,000 Performance Units were transferred
to, and granted pursuant to, the Additional Performance Units Plan leaving
2,500,000 Performance Units for issuance under the Plan (with such number
subject to adjustment pursuant to the provisions of Section 3.04 to correspond
to the changes to the Outstanding Unit Amount). 
If any Performance Units granted under the Plan are forfeited or
cancelled, such Performance Units may again be granted under the Plan.

                3.03         Vesting of Performance Units.  A Participant shall have no
right to receive benefit payments on account of any specified part of his or
her Performance Units except to the extent the Participant is Vested in his or
her Performance Units.

                For
purposes of benefit payments under the Plan, a Participant shall become Vested
in his or her Performance Units based on the following schedule:

	
  Target Years of Service

  	
   

  	
  Percent Vested

  	
   

  
	
  0

  	
   

  	
  0%

  	
   

  
	
  1

  	
   

  	
  25%

  	
   

  
	
  2

  	
   

  	
  50%

  	
   

  
	
  3

  	
   

  	
  100%

  	
   

  

 

A Participant shall be
credited with a Target Year of Service only if the Participant is employed by,
or providing services to, the Company on the last day of such one-year
period.  Anything else to the contrary
notwithstanding, the Advisory Board may grant Vested status to a Participant
with respect to all of such Participant’s Performance Units who would not otherwise
be Vested under this Section 3.03 in all granted Performance Units (including
all previously granted Performance Units). 
A Change in Control will accelerate vesting of Performance Units so that
a Participant will become Vested in all of his or her Performance Units as of
the date of such Change in Control.

Certain Participants (the
“MonoSol Participants”) were employees of MonoSol, LLC, a Delaware limited
liability company and member of the Company (“MonoSol”), and they were granted
Performance Units in recognition of their services, as key employees of
MonoSol, to the Company in connection with its formation and acquisition of
business assets from Kosmos Pharma Limited and their continuing provision of
administrative services on behalf of MonoSol to the Company.  Notwithstanding anything to the contrary
contained in this Plan, the MonoSol Participants shall be credited with a
Target Year of Service only if the MonoSol Participant is employed by MonoSol
(or its successors or assigns) on the last day of such one-year period.

                3.04         Dilution and Other Adjustments.  In the event of any change in
the outstanding ownership interests of the Company by reason of any issuance of
new or additional member interests in the Company, or any restructuring,
recapitalization, merger, consolidation, conversion,

 

5

 

spin-off, reorganization, combination or exchange
of interests or other similar change, the Advisory Board may equitably adjust
the Outstanding Unit Amount (including adjustment to the component thereof
which represents the total outstanding member interests of members of the
Company) and/or the number or kind of Performance Units then subject to the
Plan and/or held in Participants’ Performance Unit accounts in order to reflect
such changes.  The Advisory Board’s
determination as to the terms of any such adjustment shall be binding and
conclusive on all persons. 
Notwithstanding the foregoing, Performance Units may be diluted as the
result of the authorization and issuance of additional Performance Units.

 

ARTICLE
IV

BENEFITS

4.01         Benefit Payments Following
Retirement, Termination or Change in Control.  If the Advisory Board so
elects in its sole discretion within 12 months following a Participant’s
retirement or termination of employment or other service-providing relationship
for any reason, including an involuntary termination by reason of death or
permanent disability (subject to the forfeiture provisions of
Section 4.02) with the Company, the Participant shall receive cash
payments in an amount equal to the following:

	
  Number
  of such Participant’s

  	
   

  
	
  Vested
  Performance Units

  	
    X  (Market Value minus Base Value)  =  Total Payments

  
	
  Outstanding
  Unit Amount

  	
   

  

The number of such Participant’s
Vested Performance Units, the Outstanding Unit Amount, and the Market Value
shall be determined as of the date of such Participant’s retirement or
termination of employment or other service-providing relationship.  Separate calculations pursuant to the above
formula shall be made for each block of Performance Units having a separate
Base Value.  If the Advisory Board does
not so elect within 12 months following a Participant’s retirement or
termination of employment or other relationship, the Participant or his or her
estate or heirs shall continue to be eligible for benefit payments upon a Change
in Control.

If the Advisory Board so elects, amounts payable
under this Section 4.01 following a Participant’s retirement or termination of
employment or other service-providing relationship shall be paid at the sole
discretion of the Advisory Board either (a) in a single, lump sum or (b) in 24
equal monthly installments, together with interest on the unpaid balance at the
minimum rate of interest required to be charged on such obligation at the date
of the Participant’s retirement or termination of employment or other
service-providing relationship to avoid the imputation of interest for federal
income tax purposes under the Internal Revenue Code of 1986, as amended, but in
no event shall such interest rate exceed the applicable legal maximum interest rate
then prevailing.  Benefits payable under
this Section 4.01 shall be paid or commenced no later than 12 months following
the date of the retirement or termination of the Participant’s employment or
other service-providing relationship (other than for Cause) with the
Company.  The payment of a Participant’s
entire benefit, if any, under this Section 4.01 shall terminate the
Participant’s interest and status as a Participant under the Plan and result in
the cancellation of such Participant’s Performance Units.

 

6

 

Following a Change in Control,
each Participant shall receive cash payments in an amount equal to the
following: 

	
  Number
  of such Participant’s

  	
   

  
	
  Vested
  Performance Units

  	
    X  (Market Value minus Base Value)  =  Total
  Payments

  
	
  Outstanding
  Unit Amount

  	
   

  

 

The number of such Participant’s Vested
Performance Units, the Outstanding Unit Amount, and the Market Value shall be
determined as of the date of such Change in Control.  Separate calculations pursuant to the above
formula shall be made for each block of Performance Units having a separate
Base Value.

Amounts
payable under this Section 4.01 with respect to a Change in Control shall be
paid either in cash or, at the sole discretion of the Advisory Board, in kind
in the same consideration received by the Company or the members of the Company
as a result of the Change in Control. 
Benefits payable under this Section 4.01 shall be paid to the
Participants under this Section 4.01 within three months following the Change
of Control; provided, however, that if the consideration received by the
Company or members of the Company as a result of  the Change in Control is deferred and paid
over time, then the Participants payments hereunder shall be deferred and paid
as received by the Company or members as the case may be.  The payment of a Participant’s entire
benefit, if any, under this Section 4.01 shall terminate the Participant’s
interest and status as a Participant under the Plan and result in the
cancellation of his or her Performance Units. 
For purposes of illustration of these provisions and not by way of
limitation, in connection with a Change in Control resulting from the
occurrence of an initial public offering under the Securities Act of 1933, as
amended, of the business of the Company to the public, the Advisory Board may
elect to pay all or any portion of the amount payable to such Participant under
this Section 4.01 in securities of the newly formed public company.  In any event in which the consideration is
paid in kind to the Participants, the Advisory Board will place a value on the
in kind consideration distributed hereunder for purposes of calculating the
amount paid under this plan for purposes of Article IV of the Company
Agreement.  Notwithstanding anything to
the contrary contained in this Agreement, with respect to the occurrence of a
Change in Control which does not constitute a permissible distribution event
under Code Section 409A(a)(2)(A)(v), all amounts payable under this Section
4.01 shall be paid no later than the later of (i) the date that is 2 1⁄2 months
from the end of the Participant’s tax year in which such Change in Control
occurred or (ii) the date that is 2 1⁄2 months from the end of the Company’s tax
year in which such Change in Control occurred.

4.02         Forfeiture Provisions.  Notwithstanding anything
herein contained to the contrary, all rights to any benefits payable under the
Plan, shall be immediately forfeited, whether or not the Participant holds
Vested Performance Units, if any of the following events occur:

(a)           The
Participant’s employment or other service-providing relationship with the
Company is terminated for Cause, as defined either in such Participant’s
employment agreement with the Company or, if none, for the purposes of this
Plan.  The judgment of the Advisory
Board, as expressed by a majority vote, shall be final as to the whether the
Participant has been terminated for Cause.

(b)           While
employed by, or otherwise retained to provide services to, the Company or
during the 12-month period following the Participant’s retirement or other
termination of employment or other service-providing relationship with the
Company for

 

7

 

any reason, the Participant directly or
indirectly (1) induces, requests or advises any person or entity to withdraw,
curtail, or cancel that person’s or entity’s business with the Company, or to
obtain services from any person or entity that competes with the Company, or
(2) solicits or induces any employee of the Company to leave the employ of the
Company.

                4.03         Withholding; Payroll Taxes. To the extent required by the law in effect at the time payments are
made, the Company shall withhold from payments made hereunder any taxes
required to be withheld from a Participant’s benefit for the federal or any
state or local government.

ARTICLE
V

BENEFICIARY
DESIGNATION

                5.01         Beneficiary Designation.  Each Participant shall have
the right, at any time, to designate any person or persons as his or her
Beneficiary or Beneficiaries (both primary as well as contingent) to whom
payment under this Plan shall be paid in the event of his or her death prior to
complete distribution to the Participant of the benefits due him or her under
the Plan.  If a Participant fails to
designate a Beneficiary or if all designated Beneficiaries predecease the
Participant or die prior to complete distribution of the Participant’s
benefits, then the Participant’s Beneficiary shall be deemed to be the estate
of the Participant.  The payment to the
Beneficiary or deemed Beneficiary shall completely discharge the Company’s
obligations under the Plan.

                5.02         Amendments.  Any Beneficiary designation
may be changed by a Participant by the written filing of such change on a form
prescribed by the Advisory Board.  The filing
of a new Beneficiary designation form will, upon receipt by the Advisory Board,
cancel all Beneficiary designations previously filed.

 

8

 

ARTICLE VI

AMENDMENT AND TERMINATION

                6.01         Right
to Amend.  The Company reserves the
right, through its Advisory Board, to amend any provisions under the Plan at
any time; provided, however, that (a) such amendment is in writing, (b) such
amendment is executed by a duly authorized member of the Advisory Board of the
Company, and (c) such amendment does not adversely affect the rights of a
Participant or his or her Beneficiary with respect to benefits which have
accrued under the Plan prior to such amendment.

6.02         Termination.  The Company reserves the right
at any time and at its sole discretion to terminate the Plan; provided, any
termination of the Plan shall not affect any benefits previously accrued
hereunder; provided further, any termination of the Plan must be structured to
comply with the requirements of Code Section 409A regarding the permissible
acceleration of payments upon the termination of an arrangement to defer
compensation.

ARTICLE VII

CLAIMS PROCEDURE AND DISPUTES

                7.01         Claim
Filing Procedure.  If a dispute arises over
benefits payable under the Plan, a Claimant shall have the right to submit a
Claim with respect to such benefits. 
Such Claim shall be in writing, signed by the Claimant under oath, and
addressed and delivered to the Advisory Board either personally or by certified
or registered mail, return receipt requested. 
The Claim shall state with particularity:

(a)                                  The benefit claimed;

(b)           The
provisions of the Plan and the particular provisions of law, if any, upon which
the Claimant relies in support of his or her Claim; and

(c)           All
facts believed to be relevant in connection with such Claim.

7.02         Consideration of Claim; Rendering of Decision.  Upon receipt of a Claim
hereunder, the Advisory Board shall consider the merits of the Claim and shall
within 90 days from the receipt of the Claim render a decision on the merits
and communicate the same to the Claimant. 
In the event the Advisory Board denies the Claim in whole or in part,
the Claimant shall be so notified in writing, which shall be addressed and
delivered to the Claimant personally or by certified or registered mail, return
receipt requested, and shall set forth the following:

(a)                                  The reason or reasons for rejection of the Claim;

(b)           The provisions of the Plan and the particular provisions
of law, if any, relied upon in reaching such determination; and

(c)           A
description of any additional information needed from the Claimant in order for
the Claimant to perfect his or her Claim.

 

9

 

The failure of the Advisory Board to render a decision on the merits of
a Claim shall be deemed to be a denial of such Claim and notice of such denial
shall be deemed to have been given to the Claimant on the ninetieth (90th) day
from receipt by the Advisory Board of the Claim.

                7.03         Limitation on Claims Procedure. Any Claim under
this Claims procedure must be submitted within six months from the earlier of
(1) the date on which the Claimant learned of facts sufficient to enable him or
her to formulate such Claim, or (2) the date on which the Claimant should
reasonably have been expected to learn the facts sufficient to enable him or
her to formulate such Claim.  For this
purpose, the first date on which any document that is either given to or made
available to a Participant or Beneficiary (in pay status), and which discloses
facts sufficient to enable a reasonable person to formulate a Claim hereunder,
shall be conclusively deemed to be the date on which the Claimant should
reasonably have been expected to learn the facts sufficient to enable him or
her to formulate such a Claim.  Claims
submitted after such period shall be deemed to have been waived by the Claimant
and shall thereafter be wholly unenforceable.

                7.04         Dispute over Benefits. If a dispute arises as to the amount or proper recipient of any
payment, the Advisory Board, in its sole discretion, may withhold or cause to
be withheld such payment until the dispute shall have been settled by the
parties concerned or shall have been determined by an arbitration
proceeding.  In addition, if a dispute
continues to exist after a Claim has been filed and a decision rendered by the
Advisory Board under the Claims procedure set forth above, or in the event of
any dispute or controversy concerning the construction, interpretation,
performance or breach of the Plan arising between a Participant, the Company or
the Advisory Board, the same shall be submitted to arbitration under the
appropriate rules of the American Arbitration Association.  Any arbitration shall be conducted in Fort
Worth, Texas, unless mutually agreed otherwise by the parties.  All administrative fees connected with
initiating a demand for arbitration shall be split between and advanced by the
parties to the arbitration; subject, however, to final apportionment by the
arbitrator in his or her award.  The
parties agree that the arbitrator’s award shall be binding and may be enforced
in any court having jurisdiction thereof by filing a petition for enforcement
of such award.

ARTICLE VIII

MISCELLANEOUS

                8.01         Headings
and Gender.  The headings of the Plan have
been inserted for convenience of reference only and are to be ignored in any
construction of the provisions hereof. 
Whenever a personal pronoun is used in the masculine gender, it shall be
deemed to include the feminine also, unless the context indicates the contrary.

                8.02         No Right to Employment or Retention.  Nothing herein contained shall
be construed as giving any Participant the right to be retained in the service
of the Company.

                8.03         Action by Officers.  Whenever under the terms of
this Plan the Company is permitted or required to take some action, such action
may be taken by any duly authorized member of the Advisory Board or officer of
the Company.

 

10

 

                8.04         Assignment of Benefits.  Except as provided in this
Section 8.04, no interest in this Plan shall be subject to assignment,
alienation, transfer or anticipation, either by voluntary or involuntary act of
any Participant or Beneficiary or by operation of law, nor shall payment or
right of interest be subject to the demands or claims of any creditor of such
person, nor be liable in any way for such person’s debts, obligations or
liabilities.

                The Company shall
not merge or consolidate with any other entity or otherwise reorganize unless
and until such succeeding entity agrees to assume and discharge the obligations
of the Company under the Plan.  Upon such
assumption, the term “Company” as used in this Plan shall be deemed to refer to
such successor entity.

                8.05         Applicable Law; Validity.  The validity of the Plan or
any of its provisions shall be determined under and construed according to the
laws of the State of Delaware.  If any
provision of the Plan shall be held illegal or invalid for any reason, such
determination shall not affect the remaining provisions of the Plan and it
shall be construed as if said illegal or invalid provision had never been
included.

                8.06         Expenses.  The administration costs
incurred with respect to the Plan shall be paid by the Company as an ordinary
and necessary business expense incurred in the operation of the Company’s
business.

8.07         Plan Funding.  Benefits under the Plan are
payable solely by the Company.  The
Company may, in its sole discretion, determine to set aside funds in a trust or
other arrangement to satisfy its obligations hereunder; provided, the trust or
other arrangement shall be unfunded for purposes of the Code, such trust or
other arrangement shall not be structured in a manner which would cause the
assets to be deemed to have been paid to the Participants under Code Section
409A(b), and no Participant or Beneficiary shall be considered to have an
interest in any such trust or other arrangement, or the assets held pursuant
thereto, except as may be specifically provided for therein.  Participants shall be regarded as general
creditors of the Company with respect to any rights derived by Participants
from the existence of the Plan.

[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

11

 

                IN WITNESS WHEREOF, the Company has caused this
Amended and Restated Performance Units Plan B to be executed by its duly
authorized officers to be effective as of September 18, 2006.

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  MONOSOL RX, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ John Cochran

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  John Cochran

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  V.P.

  

 

 

12

 

SCHEDULE I

 

One-Year Periods

 

 

(To be determined by Advisory Board)

 

13

 

 

EXHIBIT
B

 

Benefits
Summary

 

 

 

 

New
Hire

Benefits
Summary

Effective
2/1/07

 

Medical Dental and Vision Care

•                    Medical
& Dental Care Plan

•                    Network
Provider is Great West Healthcare

•                    Coverage starts
on first day of the month, following hire date

•                    Vision
Care Plan

•                    Coverage is
bundled with Medical and Dental Plans (no additional premiums)

•                    Network
Provider is VSP

•                    Coverage starts
on first day of the month, following hire date

 

Life Insurance, Accidental Death
& Dismemberment (AD&D), Short & Long Term Disability Coverage

•                    Company covers
employee at 1.5x annual salary for Life and AD&D ($500,000 max)

•                    Short - term
disability is company paid (60% of weekly earnings, $500 per week max)

•                    Long-term
disability is company paid (60% of monthly earnings, $6000 max)

•                    Voluntary term
life coverage is available at employee expense. Coverage can include:

•                     Employee — up
to 5x annual salary, $250k max;

•                     Spouse — up to
50% of employee benefit/$50k max;

•                     Dependent
child(ren) — up to 50% of employee benefit/$10k max

•                    Program is
administered through Mutual of Omaha

 

Paid vacation

•                    20 days
vacation annually, prorated based on hire date

 

401k

•                    Eligibility
begins immediately

•                    Company matches
100% of employee contribution up to 6%

Administered through John Hancock

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