Document:

Exhibit 4.1

 

THE SYMBOL "****" DENOTES
PLACES WHERE PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. SUCH MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

EXCLUSIVE LICENSE AGREEMENT

 

THIS EXCLUSIVE LICENSE AGREEMENT
(this “Agreement”) is made and entered into effective as of November 18, 2009 (the “Effective Date”),
by and between Egalet a/s, a Danish corporation also registered under the name BM Research a/s (“Egalet”),
and RedHill Biopharma Ltd., an Israeli company (“RedHill”). Egalet and RedHill each may be referred to herein
individually as a “Party,” or collectively as the “Parties”.

 

WHEREAS,
Egalet is the sole and exclusive owner of certain patents and other intellectual property rights relating to a certain
Product (as such term is defined herein);

 

WHEREAS, Egalet
wishes to license to RedHill all Egalet's rights in and to the Product, including all patent rights and other intellectual property
rights relating thereto, and RedHill wishes to receive such license from Egalet, so that RedHill may develop and commercialize
Products for all indications and for all uses, all on the terms set forth below; and, 

 

WHEREAS,
the license to be granted shall be granted on an exclusive and global basis in so far as the rights and positions licensed relate
solely to the Product, whereas rights and positions, which may also be commercialized or exploited for purposes unrelated to the
Product, shall be granted on a non-exclusive basis, all as more fully set out below.

 

NOW THEREFORE, THE PARTIES HERETO AGREE
AS FOLLOWS:

 

		1.	DEFINITIONS

 

1.1           “Affiliate”
of a Party means any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with such first Party. For purposes of this definition only, “control” and, with correlative
meanings, the terms “controlled by” and “under common control with” will mean the possession, directly
or indirectly, of the power to direct the management or policies of an entity, whether through the ownership of fifty percent
or more of the voting securities of the other organization or entity or by contract relating to voting rights or corporate governance.

 

    	 

    	 

    

 

1.2           “Combination
Product” shall mean a product which comprises (a) a Product and (b) at least one
other active ingredient or medical device, which, if administered or used independently of the Product, would have a clinical,
diagnostic or therapeutic effect and be capable of being priced and marketed separately.

 

1.3           “Competing
Product” shall mean (i) a product for the treatment/prevention of heart failure
and/or hypertension, including, without limitation, any product belonging to ATC Class C07AG and (ii) a product for the treatment/prevention
of any other cardiovascular indication for which RedHill intends in good faith to market the Product provided that Egalet's obligations
regarding such additional indications shall only be with respect to the grant of rights made following RedHill's notice of its
intention to commercialize the Product for such additional indication. 

 

1.4           "Field
of Use" means all indications, and includes therapeutic, diagnostic and other human and/or animal uses.

 

1.5           “First
Commercial Sale” shall mean the first commercial sale of a Product, in exchange for cash or some equivalent to which
value can be assigned, after regulatory approval has been granted by a Regulatory Authority, other than the use of the Product
for testing purposes and/or a sale for experimental, promotional, compassionate named patient or test market purposes. For the
avoidance of any doubt, First Commercial Sale can only occur once worldwide, regardless of the jurisdiction in which it took place.

 

1.6           
“Licensed Know-How” means all information (other than that contained in the Patents) whether patentable or
not and physical objects related to the Product, including but not limited to Product data, Product related results and information,
including, but not limited to, clinical data, analytical test results, non-clinical pharmacology and safety data, other R&D
data, Regulatory Documentation, manufacturing and formulation information of a like nature, known to, generated by, vested in
(or licensed to) and/or controlled by Egalet. Egalet represents and warrants that the entire Licensed Know How is listed in Annex
B of this Agreement.

 

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1.7         “Net
Sales” means the gross invoice price charged by RedHill or its Affiliates in respect of the sale of a Product by RedHill
or its Affiliates, less the following items (collectively, the "Recognized Deductions"):

 

		(i)	allowances or credits granted to
                                                               and taken by customers (including wholesalers) for rejections,
                                                               returns (including as a result of recalls), retroactive price reductions
                                                               and prompt payment, and trade, cash and volume discounts;

		(ii)	amounts incurred resulting from
                                                                government mandated rebate programs (or any agency thereof);

		(iii)	freight, transport, packing and
                                                                 insurance charges;

		(iv)	taxes, including value added tax,
                                                                tariffs or import/export or customs, duties;

		(v)	rebates, charge backs and discounts
                                                               paid or credited,

		(vi)	bad debts;

		(vii)	reasonable quantities of samples;

		(viii)	liability insurance; and

		(ix)	royalties paid to third parties
                                                                in respect of the use of such third party’s intellectual
                                                                property rights for the purpose of generating the Net Sales without
                                                                infringing such third party intellectual property right positions.

 

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Notwithstanding the
foregoing, for the purposes of this definition, the transfer of a Product by RedHill or one of its Affiliates to another Affiliate
of RedHill or to a sublicensee is not a sale and in such cases, Net Sales will be determined based on the amount received by RedHill
or such Affiliate in respect of the Product as sold by the Affiliate or sublicensee to independent third-parties, less the Recognized
Deductions. For Net Sales of a Product sold or supplied as a “Combination Product”, the Net Sales of such a Combination
Product in a country will be determined by multiplying the Net Sales of such Combination Product by the fraction of A/A+B, where
A is the average unit selling price during the period in respect of which Net Sales are being calculated of the Product sold separately
in that country and B is the total average unit selling price during the period in respect of which Net Sales are being calculated
of the other product or device included in the Combination Product, when sold separately in that country. If neither the Product
nor the other product or device included in the Combination Product are sold separately during the period in respect of which
Net Sales are being calculated, then the Parties shall, considering the costs incurred by RedHill bringing about the Combination
Product, in good faith negotiate the value of the other product or device included in the Combination Product that are to be deducted
from the Net Sales of the Combination Product in determining the Net Sales of the Product contained in the Combination Product,
it being agreed that absent such mutual agreement as to the proportion of such Combination Product to be attributed to the Product,
the Parties shall mutually appoint an independent expert to determine such proportion.

 

1.8           “Patents”
shall mean the patents listed in Annex A to this Agreement, as well as such other Product-related (a) U.S. patents and patent
applications, (b) any substitutions, divisions, continuations, continuations-in-part (but only to the extent that they cover the
same invention claimed in the foregoing), reissues, renewals, registrations, confirmations, re-examinations, extensions, supplementary
protection certificates and the like, and any provisional applications, of any such patents or patent applications, and (c) any
foreign or international equivalent of any of the foregoing, of which Egalet during the term of this Agreement becomes owner or
controller.

 

1.9           
“Product” shall mean Egalet Carvedilol - a controlled release pharmaceutical formulation based on a
polymeric matrix composition formulated under one or more of the Patents and comprising Carvedilol as an active substance.

 

1.10         “Regulatory
Approval” means approval by the US FDA of an NDA (New Drug Application), or the equivalent application for marketing
approval, and satisfaction of any related applicable FDA registration and notification requirements (if any).

 

1.11         “Regulatory
Authority” means any applicable government entity regulating or otherwise exercising authority with respect to the development
and commercialization of a Product.

 

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1.12         “Regulatory
Documentation” means all applications, registrations, licenses, authorizations and approvals (including all Regulatory
Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports
relating to any communications with any Regulatory Authority), all supporting documents and all clinical studies and tests, including
the manufacturing batch records for Products to be assigned, relating to a Product, and all data contained in any of the foregoing,
including all regulatory drug lists, advertising and promotion documents, adverse event files and complaint files.

 

1.13         “Royalty
Term” shall mean the period commencing on the date of this Agreement and ending on the earlier of (i) expiration of
the Patents for which exclusivity is granted, i.e. the Patents covering the core technology of the Product, and (ii) twelve (12)
years after the First Commercial Sale. 

 

1.14         “Sublicense”
means a sublicense from RedHill to a third party under the License granted pursuant to this Agreement and the term “Sublicensee”
shall be construed accordingly. Any Sublicense may include the right to grant further Sublicenses.

 

1.15         “Sublicensee
Sales Royalties” means payments, whether comprising royalties and/or other payments, actually received by RedHill from
third party distributors and/or Sublicensees in respect of sales of the Product effected by such distributors and/or Sublicensees
(and/or any further Sublicensees thereof), less deduction of (i) debt financing; (ii) equity (and conditional equity, such as
warrants, convertible debt and the like) investments in RedHill or any Affiliate thereof at market value; (iii) payments received
in reimbursement of patent prosecution costs incurred or which shall be incurred by RedHill; (iv) payments received in reimbursement
of the cost of research and/or development activities or services performed or to be performed by RedHill or expended or to be
expended by RedHill, and (v) payments received in reimbursement for marketing expenses which have been or shall be expended by
RedHill with respect to the Product).

 

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		2.	LICENSE
                                                                                   GRANT

 

		2.1	Scope of License.
                                                                 Egalet hereby grants to RedHill a worldwide, perpetual license,
                                                                 under its rights in and to the Patents and the Licensed Know-How
                                                                 to develop, manufacture, commercialize, make, use, sell, offer
                                                                 for sale and import Products, in the Field of Use (the “License”).

 

		2.2	Scope of Exclusivity.
                                                                 The License shall, with respect to the Patents listed in
                                                                 Schedules IP-P06 and IP-P08 in Annex A, be exclusive (even as
                                                                 to Egalet), whereas the License, with respect to the Patents
                                                                 listed in Schedules IP-P03, IP-P05 and IP-P09 in Annex A, shall
                                                                 be non-exclusive. The License shall be non-exclusive with respect
                                                                 to any intellectual property included in the Licensed Know-How
                                                                 listed on Annex B that may be used by Egalet in respect of products
                                                                 other than the Product; provided, however, that Egalet shall
                                                                 not be permitted to make any use or grant any rights to such
                                                                 Licensed Know-How and/or the Patents listed in Schedules IP-P03,
                                                                 IP-P05 and IP-P09 in Annex A (i) in respect of the Product whatsoever,
                                                                 or (ii) in respect of any Competing Product or potentially Competing
                                                                 Product.

 

		2.3	Sublicenses. The
                                                                 License granted to RedHill is Sublicensable (and further Sublicensable)
                                                                 in whole or in part, to third parties (including RedHill’s
                                                                 Affiliates).

 

For the avoidance of doubt,
RedHill shall be entitled to conduct or to perform any activity in respect of the Products by means of any third party sub-contractor,
and such conduct shall not be considered to be a grant of a Sublicense hereunder.

 

		2.4	Registration. Egalet
                                                                 agrees that RedHill shall have the right, at its own account,
                                                                 to register as the licensee of the rights in and to the Patents
                                                                 and the Licensed Know-How as per Sections 2.1 and 2.2 above,
                                                                 and Egalet shall, within the scope of the License, execute all
                                                                 documentation reasonably requested by RedHill and otherwise cooperate
                                                                 with RedHill in order to ensure such registration where required
                                                                 or reasonably deemed relevant by RedHill to commercialize the
                                                                 Product.

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		2.5	Limitations on Other Licenses.
                                                                 Without derogating from any other obligation of Egalet under
                                                                 this Agreement, during the term of this Agreement, Egalet shall
                                                                 not, without RedHill’s prior written consent, grant any
                                                                 rights or licenses to Patents or Licensed Know-How, or transfer
                                                                 any data or know-how to any third party, or otherwise assist
                                                                 any third party in any manner that would conflict with Egalet’s
                                                                 obligations under this Agreement.

 

		3.	DATA AND PRODUCT TRANSFER

 

Within
thirty (30) days following the Effective Date, Egalet will (i) transfer to RedHill all relevant know how and copies of external
service and other contracts relating to the manufacturing of Product vesting in Egalet, all to the extent relevant for RedHill
to exploit the License as envisaged by this Agreement, and (ii) make available to RedHill Ex Works (Incoterms 2000) Værløse,
Denmark, any unexpired quantities of Product and unexpired quantities of raw materials for the Product it has on hand, all at
no charge whatsoever to RedHill. Egalet will transfer to RedHill all additional Licensed Know How and copies of external service
and other contracts relating to the manufacturing of Product vesting in Egalet, promptly following RedHill's request. The information
and data detailed in this Section 3 shall be provided in hard and soft copies whichever is available, all of which shall be well
organized in accordance with industry standards. In the event Egalet has a specific difficulty in providing both hard and soft
copies, it shall discuss with RedHill possible resolutions of such difficulty. From time to time during the period of twelve (12)
months following the Effective Date, Egalet will provide RedHill with any additional data, results and information in the possession
or under the control of Egalet related to the Product requested by RedHill; provided, however, that in no event shall Egalet be
obliged to generate additional materials apart from what it has on file. 

 

		4.	DILIGENCE

 

		4.1	General. RedHill
                                                                 will undertake its best efforts to diligently proceed with the
                                                                 development, manufacture and sale of Products.

 

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		4.2	Specific. Specifically,
                                                                 RedHill will use its best efforts to secure the appropriate financial
                                                                 resources to prepare, initiate and complete the clinical trials
                                                                 necessary to file an NDA with the United States FDA. RedHill
                                                                 undertakes to use its best efforts to initiate the clinical trials
                                                                 to be planned for the Product no later than 24 months following
                                                                 the Effective Date (the "Diligence Obligation").
                                                                 In the event that RedHill shall fail to satisfy the Diligence
                                                                 Obligation, Egalet’s sole and exclusive remedy shall be
                                                                 the return by RedHill of the License rights to Egalet provided
                                                                 that in the event that any such failure is due to (i) any decision
                                                                 of, or delay caused or dictated by, any Regulatory Authority,
                                                                 (ii) any technical problems (including, but not limited to, crystallinity,
                                                                 dissolution and manufacturing problems) and development failure
                                                                 related to the Products, or (iii) any other reasons that are
                                                                 beyond RedHill’s reasonable control or influence (including
                                                                 any actions or defaults by Egalet), same shall not be deemed
                                                                 to constitute a breach of the Diligence Obligation. For purposes
                                                                 of this Agreement, ‘best efforts’ will not be deemed
                                                                 to require a party to undertake extraordinary or unreasonable
                                                                 measures, including the payment of amounts in excess of normal
                                                                 and usual fees and investments made by pharmaceutical companies
                                                                 reasonably comparable to RedHill in terms of size and capital
                                                                 strength for their prioritized products considered having a strategic
                                                                 potential and as being vital to the company.

 

		4.3	No Warranty. For
                                                                 the avoidance of doubt, nothing contained in this Agreement shall
                                                                 be construed as a warranty by RedHill that any development or
                                                                 any commercialization to be carried out by it in connection with
                                                                 this Agreement will actually achieve its aims or any other results
                                                                 and RedHill makes no warranties whatsoever as to any results
                                                                 to be achieved in consequence of the carrying out of any such
                                                                 development. Furthermore, RedHill makes no representation to
                                                                 the effect that the commercialization of the Products, or any
                                                                 part thereof, will succeed, or that it shall be able to sell
                                                                 the Products in any quantity.

 

		5.	REPORTS

 

		5.1	Until the end of the Royalty
                                                                 Term, RedHill agrees as follows:

 

5.1.1      Development
Reports. To keep Egalet informed with respect to activities and progress regarding the development and commercialization
of Product(s), and to submit semi-annual written progress reports to Egalet describing in reasonable detail RedHill's activities
related to the development, testing and commercialization of the Product(s).

 

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5.1.2      First
Commercial Sale Report. To report to Egalet the date of the First Commercial Sale, together with the name of the country
in which such First Commercial Sale occurred.

 

5.1.3      Together
with each Royalty payment detailed in Section 6.3 below, to deliver to Egalet reports ("Periodic Reports") including
the following with respect to the period covered by the Royalty payment:

 

5.1.3.1           The
amount of Net Sales received from Products sold by RedHill, including the Recognized Deductions applicable in computing Net Sales,
and the total Royalties due based on Net Sales.

 

5.1.3.2           Name
and address of all Sublicensees.

 

5.1.3.3           Total
payments due by RedHill to Egalet based on Sublicense Sales Royalties.

 

		5.2	Without prejudice to Egalet's
                                                                 compliance with financial reporting requirements applicable under
                                                                 law for Egalet, any and all information, data or reports supplied
                                                                 by RedHill pursuant to the provisions of this Section 5 shall
                                                                 be treated as RedHill's Confidential Information.

 

		5.3	Upon the termination of this
                                                                 Agreement in accordance with Section 14 below, RedHill shall
                                                                 have no further obligations under this Section 5.

 

		6.	FINANCIAL PROVISIONS
                                                                   

 

		6.1	Up-Front
                                                                                   Payment. Within fifteen (15) days after
                                                                                   the Effective Date and against receipt of a
                                                                                   lawful invoice from Egalet, RedHill will pay
                                                                                   Egalet an up-front license fee of US$100,000.
                                                                                   In the event such payment may require approval
                                                                                   of any governmental authority, RedHill undertakes
                                                                                   to file for approval promptly following closing
                                                                                   of this Agreement and undertakes to effectuate
                                                                                   prompt payment of the up-front payment following
                                                                                   receipt of the necessary approval. To the best
                                                                                   of RedHill’s knowledge and belief, no
                                                                                   significant delay in expected in receiving
                                                                                   government approval for the transfer of the
                                                                                   license fee from Israel to Denmark.

 

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		6.2	Milestone Payments.
                                                                 RedHill will pay to Egalet the following one-time milestone payments
                                                                 (such payments are due only once for the Product and are not
                                                                 payable per indication) not more than 90 days after first achievement
                                                                 of each of the applicable milestones for the first Product to
                                                                 achieve such milestone (and not, for the avoidance of doubt,
                                                                 in respect of each Product or indication of a Product to do so),
                                                                 as follows:

 

	Milestone	 	Payment	 
	First filing for Regulatory
    Approval with the US FDA and Acceptance for review of such Filing by the US FDA	 	$	200,000	 
	Receipt of Regulatory Approval
    from the US FDA	 	$	500,000	 

 

		6.3	Royalty Payments.

 

Royalty Payments
on Sales of Products that are Effected by RedHill or its Affiliates. Until the expiry of the Royalty Term RedHill will
pay Egalet a royalty of 30% of Net Sales actually received by RedHill (the “Royalties”).

 

Royalty Payments
in respect of Sublicensee Sales Royalties. Until the expiry of the Royalty Term, RedHill will pay Egalet 30% of
all Sublicensee Sales Royalties (“Sublicense Royalty Fees”).

 

		6.4	Due Dates for Payment.
                                                                 All payments due pursuant to the provisions of Section 6.3 above
                                                                 shall be due and payable to Egalet on a calendar quarterly basis
                                                                 within 90 days of the end of the applicable quarter, all against
                                                                 the receipt of a lawful invoice from Egalet for same.

 

		6.5	Payment
                                                                 Method.  Any amounts due to Egalet under this
                                                                 Agreement will be paid in U.S. dollars, by wire transfer in immediately
                                                                 available funds to an account designated in writing at least
                                                                 fifteen (15) days in advance by Egalet.

 

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		6.6	Currency;
                                                                 Foreign Payments.  If any currency conversion
                                                                 will be required in connection with the calculation of any payment
                                                                 hereunder, such conversion will be made by using the exchange
                                                                 rate for the purchase of U.S. dollars as published in The
                                                                 Wall Street Journal, Eastern Edition, on the last business
                                                                 day of the calendar quarter to which such payments relate. If
                                                                 at any time legal restrictions prevent the prompt remittance
                                                                 of any payments in any jurisdiction, RedHill may notify Egalet
                                                                 and make such payments by depositing the amount thereof in local
                                                                 currency in a bank account or other depository in such country
                                                                 in the name of Egalet or its designee, and RedHill will have
                                                                 no further obligations under this Agreement with respect thereto.

 

		6.7	Taxes.
                                                                  RedHill may deduct from any amounts it is required to
                                                                 pay to Egalet pursuant to this Agreement an
                                                                 amount equal to that withheld for or due on account of
                                                                 any taxes (including VAT to the extent applicable, but other
                                                                 than taxes imposed on or measured by net income of RedHill) or
                                                                 similar governmental charge imposed by any jurisdiction based
                                                                 on such payments to Egalet (“Withholding Taxes”).
                                                                 RedHill will provide Egalet a certificate evidencing payment
                                                                 of any Withholding Taxes hereunder within 30 days of such payment
                                                                 and will reasonably assist Egalet, at Egalet’s expense,
                                                                 to obtain the benefit of any applicable tax treaty.

 

		6.8	Continuing
                                                                 Right. Following the expiration of the Royalty
                                                                 Term in any country, RedHill shall be entitled to continue to
                                                                 exploit the License in such country with respect to the Product(s)
                                                                 without having to pay Royalties, Sublicense Royalty Fees or make
                                                                 any other payment to Egalet in respect of such activities.

 

		7.	RECORDS RETENTION AND AUDIT.

 

		7.1	Record Retention.
                                                                 Until the expiry of the Royalty Term, RedHill will maintain
                                                                 (and will ensure that its Affiliates maintain) complete and accurate
                                                                 books, records and accounts that fairly reflect Net Sales and
                                                                 Sublicensee Sales Royalties, in sufficient detail to confirm
                                                                 the accuracy of any payments required hereunder, which books,
                                                                 records and accounts will be retained for five (5) years after
                                                                 the end of the period to which such books, records and accounts
                                                                 pertain.

 

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		7.2	Audit. Egalet will
                                                                 have the right, at its own cost, to have an independent certified
                                                                 public accounting firm of nationally recognized standing, reasonably
                                                                 acceptable to RedHill and who agrees to be bound by a customary
                                                                 undertaking of confidentiality, have access during normal business
                                                                 hours, and upon reasonable prior written notice, to RedHill’s
                                                                 records (and those of its Affiliates) as may be reasonably necessary
                                                                 to verify the accuracy of Net Sales and Sublicensee Sales Royalties,
                                                                 as applicable, for any period ending not more than 24 months
                                                                 prior to the date of such request; provided, however,
                                                                 that Egalet will not, unless material discrepancies are identified,
                                                                 have the right to conduct more than one such audit in any calendar
                                                                 year or more than one such audit covering any given time period.
                                                                 The auditing firm will disclose to Egalet only the results of
                                                                 its audit and not any other information. Any such audit shall
                                                                 be made during RedHill’s normal business hours and shall
                                                                 not unreasonably interfere with the business of RedHill and shall
                                                                 be completed within a reasonable time. Egalet will bear all the
                                                                 costs of such audit. Without derogating from the forgoing, Egalet's
                                                                 audit rights shall be conducted no later than one year following
                                                                 the final payment under this Agreement.

 

		7.3	Payment
                                                                                   of Additional Amounts. If, based on
                                                                                   the results of such audit, additional payments
                                                                                   are owed by RedHill under this Agreement, RedHill
                                                                                   shall, at its own cost, have an additional
                                                                                   60 days to conduct an additional (second) audit
                                                                                   to verify Egalet’s audit results, and,
                                                                                   assuming the two audits reconcile, RedHill
                                                                                   shall make such additional payments within
                                                                                   60 days after the date on which such second
                                                                                   accounting firm’s written report is delivered
                                                                                   to RedHill. If the results of the two audits
                                                                                   do not reconcile, the parties shall, unless
                                                                                   otherwise agreed, appoint a third independent
                                                                                   auditor, who – on basis of the audit
                                                                                   results achieved by the first two auditors
                                                                                   and such additional investigations and reviews,
                                                                                   which the third auditor may find to be required
                                                                                   – shall conduct a third and final audit
                                                                                   the result of which shall be applied by the
                                                                                   Parties. The Parties shall equally share the
                                                                                   costs of for the third audit to be conducted.

 

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		7.4	Confidentiality.
                                                                 Egalet will treat all information subject to review under this
                                                                 Section 7 in accordance with the confidentiality provisions of
                                                                 Section 11 below.

 

		8.	REPRESENTATIONS AND WARRANTIES

 

		8.1	By Both Parties.
                                                                 Each Party hereby represents, warrants and covenants to the other
                                                                 Party as of the Effective Date as follows:

 

8.1.1           Corporate
Authority. Such Party (a) has the power and authority and the legal right to enter into this Agreement and perform its
obligations hereunder, and (b) has taken all necessary action on its part required to authorize the execution and delivery of
this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf
of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance
with its terms subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement
of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity,
whether enforceability is considered a proceeding at law or equity.

 

8.1.2           Consents,
Approvals, etc. All necessary consents, approvals and authorizations of all governmental authorities and other parties
required to be obtained by such Party in connection with the execution and delivery of this Agreement and the performance of its
obligations hereunder have been obtained.

 

8.1.3           Conflicts.
The execution and delivery of this Agreement and the performance of such Party’s obligations hereunder (a) do not conflict
with or violate any requirement of applicable law or any provision of the articles of incorporation, bylaws or any similar instrument
of such Party, as applicable, in any material way, and (b) do not conflict with, violate, or breach or constitute a default or
require any consent not already obtained under, any contractual obligation or court or administrative order by which such Party
is bound.

 

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		8.2	By Egalet. Egalet
                                                                 hereby further represents, warrants, and covenants to RedHill
                                                                 as of the Effective Date as follows:

 

8.2.1           IP
Ownership. Egalet has, the sufficient legal and/or beneficial title and ownership of the Patents and, to the best
of its knowledge and belief, to the Licensed Know-How as is necessary to fulfill its obligations under this Agreement and to grant
the License to RedHill pursuant to this Agreement, and the Patents and the Licensed Know-How are free and clear of any liens,
encumbrances or third party rights (including without limitation, the right to receive royalties or other compensation). Furthermore,
Egalet undertakes that to the extent that RedHill, its Affiliates, or any Sublicensee requires a license under any additional
patents or related rights controlled by Egalet in order to develop, use, sell, offer for sale or import Products, Egalet
shall grant such a license to RedHill, its Affiliates, and any Sublicensee on a non-exclusive royalty-free basis.

 

8.2.2           No
Conflicting Grants. Egalet has not and shall not grant any rights to the Patents, or the Licensed Know-How
that may derogate from the rights granted to RedHill hereunder, and no third party has any rights whatsoever (including the right
to receive royalties or any other compensation) to the Patents or the Licensed Know-How.

 

8.2.3           Third
Party Actions. Outside the scope of the IP positions listed in Annex [C], the exercise of the License by RedHill
will not - to the best of Egalet’s knowledge and belief - infringe upon the patent or other intellectual property rights
of any third party, and further that no actions, suits, claims, disputes, or proceedings concerning the Patents, the Licensed
Know-How or the Product are currently pending or have been threatened in writing, that if determined adversely to Egalet would
have an adverse effect on the Product or would impair Egalet’s ability to perform its obligations under this Agreement.
Furthermore, there are no legal suits or proceedings by a third party (including without limitation employees or former employees
of Egalet) contesting the ownership or validity of the Patents, the Licensed Know-How or the Product or any part thereof, and
that if Egalet shall become aware of any such third party, Egalet shall immediately notify RedHill of such, and undertakes to
effect any payments required (including the payment of royalties or other compensation) to be made to such third party, and to
hold RedHill harmless from, and indemnify RedHill against, any such claims or payments.

 

8.2.4           Additional
Licenses. To Egalet’s knowledge, no additional licenses to any patents (including patents owned or controlled by third
parties) or know how are required to develop, manufacture, use or sell the Product.

 

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		9.	LIMITATION OF LIABILITY.

 

Except
in the case of a willful or fraudulent misrepresentation under Section 8, and except in the case of indemnification for payments
to third parties under Section 13, in no event shall either Party be liable to the other or any of its Affiliates for any consequential,
incidental, indirect, special, punitive or exemplary damages (including, without limitation, lost profits, business or goodwill)
suffered or incurred by such other Party or its Affiliates, whether based upon a claim or action of contract, warranty, negligence
or tort, or otherwise, arising out of this Agreement.

 

		10.	PATENTS

 

		10.1	PATENT PROSECUTION AND
                                                                  MAINTENANCE

 

10.1.1           Prosecution
by RedHill. RedHill undertakes and shall have the sole, exclusive and first right to prosecute and maintain the
patents comprising the Patents that are licensed on an exclusive basis using counsel of its choice, in the jurisdictions and to
the extent that RedHill shall deem appropriate at its sole discretion. RedHill will provide Egalet with copies of all relevant
documentation so that Egalet will be informed of the continuing prosecution and may comment upon such documentation sufficiently
in advance of any initial deadline for filing a response, provided, however, that if Egalet has not commented upon such documentation
in a reasonable time for RedHill to sufficiently consider Egalet’s comments prior to a deadline with the relevant government
patent office, or RedHill must act to preserve the Patents, RedHill will be free to act without consideration of Egalet’s
comments, if any.

 

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10.1.2           Egalet
undertakes to prosecute and maintain the patents comprising the Patents that are licensed on a non-exclusive basis using counsel
of its choice in the jurisdictions and to the extent that Egalet shall deem appropriate at its sole discretion. Egalet will provide
RedHill with copies of all relevant documentation so that RedHill will be informed of the continuing prosecution and may comment
upon such documentation sufficiently in advance of any initial deadline for filing a response, provided, however, that if RedHill
has not commented upon such documentation in a reasonable time for Egalet to sufficiently consider RedHill’s comments prior
to a deadline with the relevant government patent office, or Egalet must act to preserve the Patents, Egalet will be free to act
without consideration of RedHill’s comments, if any. Egalet undertakes to inform RedHill promptly if Egalet decides
not to prosecute and maintain a Patent in order for RedHill to take such action as per RedHill’s discretion. RedHill shall
have the right but no obligation to prosecute and maintain the patents comprising the Patents that are licensed on a non-exclusive
basis.

 

10.1.3           RedHill’s
Requests. Egalet shall use reasonable efforts to amend any Patent application to include claims or any other changes
reasonably requested by RedHill to protect the Products contemplated to be sold under this Agreement. Moreover, Egalet
will cooperate in the preparation, filing, prosecution, and maintenance
of the Patents, including (a) promptly executing all papers and
instruments and requiring employees to execute such papers and instruments as reasonable and appropriate so as to enable RedHill
to file, prosecute, and maintain the Patents in any country; and (b)
promptly informing RedHill of matters that may affect the preparation,
filing, prosecution, or maintenance of any Patents.

 

10.1.4           Patent
Prosecution Costs. RedHill will bear the costs of preparing, filing, prosecuting and maintaining all patent applications
contemplated by Section 10.1.1 and Egalet will bear the costs of preparing, filing, prosecuting and maintaining all patent applications
contemplated by Section 10.1.2.

 

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10.1.5           Co-operation.
The Parties will provide reasonable assistance to each other, including providing access to relevant documents and other evidence,
making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the prosecuting
and maintaining Party to prosecute and maintain the relevant Patent.

 

		10.2	PATENT
                                                                                                       ENFORCEMENT

 

10.2.1           Infringement
Notice. If Egalet or RedHill determines that any Patent licensed hereunder is being infringed by a third party’s
activities and that such infringement could affect the exercise of the License under this Agreement, it will promptly notify the
other Party in writing. In addition, If Egalet or RedHill determines that any Licensed Know How is being misappropriated by a
third party’s activities and that such misappropriation could affect the exercise of the License under this Agreement, it
will promptly notify the other Party in writing.

 

10.2.2           Action
by RedHill. RedHill will have the sole, exclusive and first right but not the obligation to remove such infringement and/or
misappropriation and to control all litigation to remove such infringement and/or misappropriation, all to the extent the rights
infringed are exclusively licensed to RedHill and in such case as RedHill shall deem appropriate in its sole discretion. However,
RedHill undertakes to inform Egalet promptly if RedHill decides not to take infringement or misappropriation action in order for
Egalet to assume responsibility of infringement or misappropriation action to be taken as per Egalet’s discretion. Egalet
shall have the right, but no obligation to take any infringement or misappropriation action to the extent the rights infringed
are not exclusively licensed to RedHill.

 

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10.2.3           In
the event at Eagalet does, at its discretion, undertake any infringement or misappropriation action, Egalet will provide RedHill
with copies of all relevant documentation so that RedHill will be informed of the continuing action and may comment upon such
documentation sufficiently in advance of any initial deadline for filing a response, provided, however, that if RedHill has not
commented upon such documentation in a reasonable time for Egalet to sufficiently consider RedHill’s comments prior to a
deadline, or Egalet must act to preserve the action, Egalet will be free to act without consideration of RedHill’s comments,
if any. Egalet undertakes to inform RedHill promptly if Egalet decides not to take any infringement or misappropriation
action in order for RedHill to take such action as per RedHill’s discretion. RedHill shall have the right but no obligation
to take any action to remove any infringement and/or misappropriation, to the extent the rights infringed are not exclusively
licensed to RedHill.

 

10.2.4           Co-operation.
The Parties will provide reasonable assistance to each other, including providing access to relevant documents and other evidence,
making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the prosecuting
Party to maintain the action.

 

10.2.5           Recovery.
Any amounts recovered in connection with or as a result of any action contemplated by Sections 10.2.2 and 10.2.3, whether by settlement
or judgment, will be used to reimburse the Parties for their reasonable costs and expenses in making such recovery (which amounts
will be allocated pro rata if insufficient to cover the totality of such expenses), and any remainder received by RedHill in excess
of the reasonable costs and expenses in making such recovery will be treated as Net Sales or Sublicensee Sales Royalties and payments
will be due in respect of same pursuant to this Agreement.

 

		10.3	PATENT INFRINGEMENT

 

10.3.1           License.
In the event that the manufacturing, use or commercialization of the Products or any other action authorized under the License
or any part thereof, is such that RedHill determines, after prior consultation with Egalet, that it is commercially reasonable
to seek a license to the intellectual property rights of any third party (as reasonably determined by RedHill), RedHill shall
be entitled to enter into negotiations with such third party in order to reach an agreement according to which RedHill shall obtain
a license or other applicable right or a waiver from such party with respect to such intellectual property rights. In such event
RedHill shall be entitled to deduct such payments made from Net Sales and/or Sublicensee Sales Royalties.

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10.3.2           Claim
- Rights and Procedures. In the event that either Egalet or RedHill, or both of them, are sued by a third party alleging
that the commercialization of a Product infringes upon any intellectual property rights of such third party, the Party being so
sued shall immediately give the other Party notice of same. In so far the infringement alleged relates to rights licensed to RedHill
hereunder on an exclusive basis, RedHill shall have the sole, exclusive and first right, but not the obligation, to defend against
such action and to control the defense of such action, on behalf of both Parties, within 60 business days from the date the relevant
suit becomes known to RedHill. In so far as the infringement alleged relates to rights licensed to RedHill hereunder on a non-exclusive
basis, Egalet shall have the sole, exclusive and first right, but not the obligation, to defend against such action and to control
the defense of such action, on behalf of both Parties, within 60 business days from the date the relevant suit becomes known to
Egalet. Any expenses or costs incurred by RedHill in connection with such action(s) RedHill shall be entitled to deduct such payments
made from Net Sales and/or Sublicensee Sales Royalties, and any costs or amounts awarded to the counterparties in such action(s)
shall be fully borne by RedHill and shall be offset from Royalties and Sublicense Royalty Fees or any other amounts of whatsoever
nature due to Egalet. Any recovery in such action shall be retained by RedHill in full after reimbursing Egalet for any of its
reasonable costs and expenses related to such suit (provided that such claim is not the result of a breach of warranty or representation
by Egalet).

 

10.3.3           In
the event that RedHill does not exercise its right to so defend, then Egalet shall be entitled to defend against such claim at
its own cost and expense, including any costs or amounts awarded to the counterparties in such action(s), and any recovery in
such action shall be retained by Egalet in full. In the event that Egalet does not exercise its right to defend in so far as the
infringement alleged relates to rights licensed to RedHill hereunder on a non-exclusive basis, then RedHill shall be entitled
to defend against such claim at its own cost and expense, including any costs or amounts awarded to the counterparties in such
action(s), and any recovery in such action shall be retained by RedHill in full.

 

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10.3.4           Neither
Party shall, without the consent of the other Party, enter into any settlement or compromise or consent to any judgment in respect
of any claim related to rights licensed on an exclusive basis to RedHill under this Agreement, unless such settlement, compromise
or consent includes an unconditional release of the other Party from all liability arising out of the claim and does not otherwise
limit the other Party.

 

		11.	CONFIDENTIALITY

 

		11.1	Disclosure
                                                                  and Use Restriction.  The Parties agree that,
                                                                  during the Term of this Agreement and thereafter, each Party
                                                                  will keep completely confidential
                                                                  and will not publish, submit for publication or otherwise disclose,
                                                                  and will not use for any purpose except for the purposes contemplated
                                                                  by this Agreement, any Confidential Information (as such term
                                                                  is defined below) received from the other Party.

 

		11.2	Confidential Information.
                                                                  “Confidential Information” shall mean all
                                                                  information and know-how and any tangible embodiments thereof
                                                                  provided by or on behalf of one Party to the other Party either
                                                                  in connection with the discussions and negotiations pertaining
                                                                  to this Agreement or in the course of performing this Agreement,
                                                                  which may include data; knowledge; practices; processes; ideas;
                                                                  research plans; engineering designs and drawings; research data;
                                                                  manufacturing processes and techniques; scientific, manufacturing,
                                                                  marketing and business plans; and financial and personnel matters
                                                                  relating to the disclosing Party or to its present or future
                                                                  products, sales, suppliers, customers, employees, investors
                                                                  or business. Notwithstanding the foregoing, information or know-how
                                                                  of a Party shall not be deemed Confidential Information of such
                                                                  Party for purposes of this Agreement if such information or
                                                                  know-how:

 

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(a)          was
already known to the receiving Party, other than under an obligation of confidentiality or non-use, at the time of disclosure
to such receiving Party;

 

(b)          was
generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was
otherwise part of the public domain, at the time of its disclosure to such receiving Party;

 

(c)          became
generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise
became part of the public domain, after its disclosure to such receiving Party through no fault of the receiving Party;

 

(d)          was
disclosed to such receiving Party, other than under an obligation of confidentiality or non-use, by a third party who had no obligation
to the disclosing Party not to disclose such information or know-how to others; or

 

(e)          was
independently discovered or developed by such receiving Party, as evidenced by their written records, without the use of Confidential
Information belonging to the disclosing Party and prior to any subsequent disclosure by the receiving Party.

 

All Licensed Know-How shall
be deemed to be Confidential Information of Egalet; provided that RedHill shall be entitled to disclose such information under
the same confidentiality undertakings as listed in section 11.2 to third parties that are relevant for the commercialization of
the Product and to use any Licensed Know-How in the exercise of its rights under this Agreement.

 

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11.3        Authorized
Disclosure. Notwithstanding the provisions of Section 11.1 above, a Party shall be entitled to disclose the Confidential
Information of the other Party hereto to the extent that such disclosure is:

 

(i) 
         made in response to a valid order of a court of competent jurisdiction; provided,
however, that such Party will first (to the extent practicably possible) have given notice to such other Party and given
such other Party a reasonable opportunity to quash such order and to obtain a protective order requiring that the
Confidential Information and documents that are the subject of such order be held in confidence by such court or agency or,
if disclosed, be used only for the purposes for which the order was issued; and provided further that if a disclosure
order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such court
or governmental order will be limited to that information which is legally required to be disclosed in response to such court
or governmental order;

 

(ii)         otherwise
required by law; provided, however, that the disclosing Party will provide such other Party with notice of such disclosure
in advance thereof to the extent practicably possible;

 

(iii)
        made by such Party to the Regulatory Authorities as necessary for the
development or commercialization of a medicinal product, including the Product, in a country, as required in connection with
any filing, application or request for Regulatory Approval or as required by applicable securities laws and regulations;

 

(iv)
        made by such Party, in connection with the performance of this Agreement, to
Sublicensees, directors, officers, employees, consultants, representatives or agents, each of whom prior to disclosure must
be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Agreement;
or

 

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(v) 
        made by such Party in the course of submitting financial accounts to relevant
authorities as per local statutory requirements or to existing or potential acquirers; existing or potential collaborators;
investment bankers; existing or potential investors, merger candidates, partners, venture capital firms or other financial
institutions or investors for purposes of obtaining financing; or, bona fide strategic potential partners; each of whom prior
to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in
this Agreement.

 

12.        
PRESS RELEASES 

 

Press
Releases. Press releases or other similar public communication by either Party relating to the terms
of this Agreement (but not, for the avoidance of doubt, unless reference is made to the other Party or the terms of this Agreement,
with respect to activities in exercise of its rights under this Agreement) will be approved in advance by the other Party, which
approval will not be unreasonably withheld or delayed, except for those communications required by applicable law, regulation
or securities exchange rule (including, but not limited to, a public offering prospectus), disclosures of information for which
consent has previously been obtained, and information of a similar nature to that which has been previously disclosed publicly
with respect to this Agreement, each of which will not require advance approval, but will be provided to the other Party as soon
as practicable after the release or communication thereof. For the avoidance of doubt, the Parties may issue press releases regarding
the fact that this Agreement has been signed so long as they do not describe the specific provisions hereof.

 

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13.         
INDEMNIFICATION AND INSURANCE

 

13.1        Indemnification
of Egalet. RedHill will indemnify Egalet and its directors, officers, employees and agents (“Egalet Parties”)
and defend and hold each of them harmless, from and against any and all losses, damages, liabilities, costs and expenses (including
reasonable attorneys’ fees and expenses) to the extent arising from or occurring as a result of any and all liability suits,
investigations, claims or demands by a third party (collectively, “Losses”) arising from or occurring as a
result of or in connection with (a) the negligence or willful misconduct on the part of RedHill in performing any activity contemplated
by this Agreement, (b) breach by RedHill of any representations, warranties, or covenants set forth in this Agreement and/or (c)
losses stemming from Product liability related losses or claims; except to the extent a Loss arises from the (i) negligence or
willful misconduct on the part of an Egalet Party; or (ii) breach by Egalet of any representations, warranties or covenants set
forth in this Agreement.

 

13.2        Indemnification
of RedHill. Egalet will indemnify RedHill, its Affiliates, and their respective directors, officers, employees
and agents (“RedHill Parties”), and defend and hold each of them harmless, from and against any and
all Losses to the extent arising from or occurring as a result of or in connection with (a) negligence or willful misconduct on
the part of Egalet; or (b) breach by Egalet of any representations, warranties, or covenants set forth in this Agreement, except
to the extent a Loss arises from or occurs as a result of or in connection with (i) negligence or willful misconduct on the part
of a RedHill Party; or (ii) breach by RedHill of any representations, warranties, or covenants set forth in this Agreement. Egalet
shall further be responsible for and shall indemnify and hold RedHill harmless in respect of:

 

13.2.1  All
royalties and other payments existing under an agreement signed by Egalet or any obligation undertaken by Egalet, required to
be paid to third parties in respect of the commercialization of the Products.

 

13.2.2
All royalty and other payments required to be paid to other third parties in respect of the Product as a result of a claim by
any of Egalet’s existing or former employees, consultants or shareholders, or any person named in Egalet’s patents
or patent applications, or any person claiming it should have been named as an inventor in such patent applications.

 

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13.3        In
the event that additional license(s) to intellectual property (irrespective of whether such is the intellectual property covered
herein or any other intellectual property) are necessary to enable RedHill, its Affiliates or Sublicensees to exercise the License,
and the receipt of or license to use such additional intellectual property requires payment of royalties, settlement payments,
awards or any other payments made to and taken by any third party on account of the use of such third party’s intellectual
property, then RedHill shall effect a reduction in the Royalties and Sublicense Sales Royalties payable to Egalet hereunder
by the amount of such third party payments (without derogating from any other deductions permitted herein, including without limitation,
on account of a Combination Product reduction).

 

13.4        Conditions
to Indemnity.
Each Party’s agreement to indemnify and hold the other harmless is conditioned upon the indemnified Party (i) providing
written notice to the indemnifying Party of any claim, demand or action arising out of the indemnified activities within thirty
(30) days after the indemnified Party has knowledge of such claim, demand or action, (ii) permitting the indemnifying Party to
assume full responsibility to investigate, prepare for and defend against any such claim or demand, (iii) assisting the indemnifying
Party, at the indemnifying Party’s reasonable expense, in the investigation of, preparation of and defense of any such claim
or demand; and (iv) the indemnifying Party not compromising or settling such claim or demand without the indemnified Party’s
prior written consent, unless such settlement includes as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified Party a complete release from all liability in respect of such claim or litigation; provided that,
if the Party entitled to indemnification fails to promptly notify the indemnifying Party pursuant to the foregoing clause
(i), the indemnifying Party shall only be relieved of its indemnification obligation to the extent prejudiced by such failure
and that provided that the indemnified Party is not obligated to notifying the indemnifying Party of claims,
demands and/or actions made directly against the indemnifying Party. Notwithstanding the foregoing, if in the reasonable
judgment of the indemnified party, such suit or claim involves an issue or matter which could have a materially adverse affect
on the business, operations or assets of the indemnified party, the indemnified party may waive its rights to indemnity under
this Agreement and control the defense or settlement thereof, but in no event shall any such waiver be construed as a waiver of
any indemnification rights such indemnified party may have at law or in equity.

 

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13.5        Insurance.
RedHill will have and maintain such types and amounts of liability insurance, including clinical trial and product liability insurance,
as is normal and customary in the industry generally for parties similarly situated. RedHill undertakes to send a copy of such
insurance at the request of Egalet.

 

14.        
TERM AND TERMINATION

 

14.1        Term.
Unless earlier terminated in accordance with the provisions of this Article 14, the term of this Agreement (the “Term”)
commences upon the Effective Date and will continue until terminated in accordance with the terms hereof.

 

14.2        Termination.

 

14.2.1           Termination
for Breach. Failure by a Party to comply with any of its material obligations contained herein will entitle the Party
not in default to give to the defaulting Party notice specifying the nature of the material breach, requiring the defaulting Party
to make good or otherwise cure such material breach, providing specific actions that the defaulting Party could take to cure such
material breach, and stating its intention to invoke the provisions of Section 14.3 if such material breach is not cured. If such
material breach is not cured within 90 days after the receipt of such notice (or, if such material breach cannot be cured within
such 90-day period, if the defaulting Party does not commence actions to cure such material breach within such period and thereafter
diligently continue such actions), the Party not in default will be entitled, without limiting any of its other rights conferred
on it by this Agreement (except as expressly set forth herein), to terminate this Agreement by providing written notice to the
breaching Party.

  

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Notwithstanding anything to
the contrary herein, in the event of Egalet’s material breach of this Agreement, and without derogating from any of RedHill’s
other rights at law, RedHill shall have the right to continue all activities under the License granted herein and to continue
utilizing the Patents for the exploitation of the License, with the right to set-off, from any sums due to the Egalet hereunder,
amounts equivalent to any damage caused to RedHill as a result of Egalet’s breach hereunder.

 

Notwithstanding, it is clarified
that Egalet shall not be entitled to terminate this Agreement for any reason whatsoever once the Royalty Term has expired, provided
that this shall not derogate from any right of termination available to Egalet if RedHill has not complied with any and all of
its obligations hereunder as per elapse of the Royalty Term.

 

14.2.2           Voluntary
Termination. RedHill shall be entitled, in its sole discretion, to terminate this Agreement at any time on thirty
(30) days written notice to Egalet, without the need to pay Egalet any compensation in respect of such termination, in which case
RedHill will immediately cease any and all development and other activities regarding the Product. Outside the scope of Sections
14.2.1 and 15.11 Egalet shall have no right to terminate this Agreement.

 

14.3        Consequences
of Termination.

 

14.3.1           License.
Upon early termination of this Agreement in its entirety pursuant to Section 14.2, the License granted by Egalet
to RedHill hereunder will terminate; provided that RedHill shall have a period of 180 days after the date of termination
to dispose, for consideration or otherwise as RedHill deems fit, of all previously made or partially made Product, subject to
Royalties and Sublicense Royalty Fees on such sales being duly paid to Egalet.

 

14.3.2           Continuation
following Egalet’s Bankruptcy. The Parties agree that in the event that Egalet becomes
insolvent or makes a filing under bankruptcy or similar laws in any jurisdiction, RedHill shall have the protection afforded to
the licensee under the United States Bankruptcy Code, including but not limited to, the protections set forth in 11 U.S.C §365(n)
or its equivalent in any other jurisdiction which allows the licensee, upon rejection of the license agreement by the debtor-licensor
or its representative, the option to either retain the licensee’s rights in the intellectual property under the existing
contract while continuing to pay royalties, or to treat the executory contract as terminated. Egalet
does not warrant that the rights granted to RedHill under this Section 14.3.2 will be enforceable under the laws of the jurisdiction
under which Egalet operates.

 

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14.3.3           Return
of Information and Materials. Upon early termination of this Agreement in its entirety pursuant to Section 14.2, each
Party will return to the other all Confidential Information of the other Party (except one copy of which may be retained for archival
and compliance purposes), RedHill will return to Egalet or its designee all Licensed Know How and any other tangible materials
received by RedHill under this Agreement and RedHill will further waive and actively deregister or assign as requested by Egalet,
all Patent right registrations made under Section 2.4 above.

 

14.3.4           Accrued
Rights. Termination or expiration of this Agreement for any reason will be without prejudice to any rights or financial
compensation that will have accrued to the benefit of a Party prior to such termination or expiration. Such termination or expiration
will not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.

 

14.3.5           Survival.
Sections [6.8, 7, 9, 11, 12, 13.1-13.4, 14.3 and 15.3] of this Agreement will survive expiration or termination of this Agreement
for any reason.

 

14.3.6           License
Survival. Once the Royalty Term shall expire, RedHill shall, provided that the Agreement has not been terminated by Egalet
under Section 14.2.1 or by RedHill under Section 14.2.2, be entitled to continue to manufacture and/or sell the Product throughout
the world without having to pay Royalties or Sublicense Royalty Fees or any other amounts of whatsoever nature to Egalet in respect
of such activities subsequent to such date. This Section 14.3.6 shall survive termination or expiration of this Agreement.

 

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15.         
MISCELLANEOUS

 

15.1       Assignment.
Without the prior written consent of the other Party hereto, neither Party will sell, transfer, assign, delegate, pledge or
otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights
or duties hereunder; provided, however, that (i) either Party hereto may assign or transfer this Agreement or any of its rights
or obligations hereunder without the consent of the other Party to any Affiliate, or to any third party successor in interest
with which it has merged or consolidated, or to which it has transferred all or substantial part of its assets or stock to which
this Agreement relates. Any purported assignment or transfer in violation of this Section 15.1 will be void ab initio and
of no force or effect. This provision shall not prevent Egalet from assigning or prohibit the transfer of the rights to future
Royalties and Sublicense Royalty Fees to a third party, provided however that such third party in no event shall enjoy any better
rights vis-à-vis RedHill than Egalet.

 

15.2      Severability.
Should any term or provision of this Agreement be or become invalid or unenforceable or should this Agreement contain an omission,
the validity or enforceability of the remaining terms or provisions shall not be affected. In such case, subject to the next following
sentence, the parties shall immediately commence to negotiate in good faith in order to replace the invalid or unenforceable term
or provision by such other valid or enforceable term or provision which comes as close as possible to the original intent and
effect of the invalid or unenforceable term or provision, or respectively, to fill the omission by inserting such term or provision
which the parties would have reasonably agreed to, if they had considered the omission at the date hereof. In the event that any
term or provision as aforesaid is invalid, void or unenforceable by reason of its scope, duration or area of applicability or
some similar limitation as aforesaid, then the court making such determination shall have the power to reduce the scope, duration,
area or applicability of the term or provision so that they shall be enforceable to the maximum scope, duration, area or applicability
permitted by applicable law which shall not exceed those specified in this Agreement or to replace such term or provision with
a term or provision that comes closest to expressing the intention of the invalid or unenforceable term or provision.

 

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15.3      Governing
Law. This Agreement will be governed by and construed in accordance with the laws of England, without reference to
any rules of conflicts of laws.

 

15.4  
    Notices. All notices or other communications that are required or permitted hereunder
will be in writing and delivered personally with acknowledgement of receipt, sent by electronic mail (provided receipt is
acknowledged), facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier as
provided herein), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:

 

If to Egalet, to:

 

Egalet a/s

Lejrvej 37-41

DK-3500Værløse,

Denmark

Phone: +45 4447 8080

Telefax: +45 4447
8081

 

If to RedHill, to:

 

RedHill Biopharma Ltd.

42 Givati St.

Ramat Gan 52232

Israel

Fax: +972 (3) 725 5723

 

or
to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance
herewith. Any such communication will be deemed to have been given (i) when delivered, if personally delivered, (ii) on the business
day (on the receiving end) after dispatch, if sent by nationally-recognized overnight courier (third business day if sent internationally),
(iii) on the third business day following the date of mailing, if sent by mail (fifth business day if sent internationally) and
(iv) on the first business day (on the receiving end) after being sent by facsimile or by if sent by electronic mail followed
by facsimile. It is understood and agreed that this Section 15.4 is not intended to govern the day-to-day business communications
necessary between the Parties in performing their duties, in due course, under the terms of this Agreement.

 

    	30

    	 

    

 

 

15.5      Entire
Agreement; Modifications. This Agreement sets forth and constitutes the entire agreement and understanding between the
Parties with respect to the subject matter hereof and all prior agreements, understanding, promises and representations, whether
written or oral, with respect thereto are superseded hereby. Each Party confirms that it is not relying on any representations
or warranties of the other Party except as specifically set forth herein. No amendment, modification, release or discharge will
be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.

 

15.6       Relationship
of the Parties. It is expressly agreed that the Parties will be independent contractors of one another and that the
relationship between the Parties will not constitute a partnership, joint venture or agency.

 

15.7       Waiver. Any
term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such
waiver will be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term
or condition. Any such waiver will not be deemed a waiver of any other right or breach hereunder.

 

15.8       Counterparts.
This Agreement may be executed in two (2) or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

 

15.9       No
Third Party Beneficiaries. The representations, warranties, covenants and agreements set forth in this Agreement are for
the sole benefit of the Parties hereto and their successors and permitted assigns, and they will not be construed as conferring
any rights on any other parties.

 

    	31

    	 

    

 

15.10       Further
Assurances. Each Party will duly execute and deliver, or cause to be duly executed and delivered, such further
instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements,
documents and instruments, as may be necessary to carry out the provisions and purposes of this Agreement.

 

15.11      Force
Majeure. Neither party shall be responsible to the other for failure or delay in
performing any of its obligations under this Agreement or for other non-performance hereof but only to the extent that such delay
or non-performance is occasioned by a cause beyond the reasonable control and without fault or negligence of such party, including,
but not limited to earthquake, fire, flood, explosion, discontinuity in the supply of power, court order or governmental interference,
act of God, strike or other labor trouble, act of war or terrorism and provided that such party will inform the other party as
soon as is reasonably practicable and that it will entirely perform its obligations immediately after the relevant cause has ceased
its effect. If any such force majeure event continues for a continuous period of 12 months, the Party whose performance is not
prevented by such event may terminate this Agreement with immediate effect by providing the other Party with written notice.

 

    	32

    	 

    

 

IN WITNESS WHEREOF, the Parties
hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.

 

	Egalet a/s	 	 	RedHill Biopharma Ltd.
	Signature:	/s/ M. Fiorini	 	Signature:	/s/ Dror Ben-Asher
	Name:	M. Fiorini	 	Name:	Dror Ben-Asher
	Title:	Chairman	 	Title:	CEO

 

	Egalet a/s	 	RedHill Biopharma Ltd.
	Signature:	/s/ P. Nordwood	 	Signature:	/s/ Ori Shilo
	Name:	 P. Nordwood	 	Name:	Ori Shilo
	Title:	 CEO	 	Title:	CFO

 

    	33

    	 

    

 

ANNEX A

 

PATENT TABLES

 

Patent
license granted on an exclusive basis: Tables IP-P06 and IP-P08.

Patent
license granted on a non-exclusive basis: Tables IP-P03, IP-P05 and IP-P09.

 

IP-P03 - Coat (coating with cellulose)

  

	
        Application /

        Patent type
	 	Title	 	Patent No.	 	
        Application No. /

        Publication No.
	 	Filing date
	PCT application	 	Controlled release composition	 	-	 	PCT/DK95/00080 /	 	23-02-95
	 	 	 	 	 	 	WO/1995/022962	 	 
	 	 	 	 	 	 	 	 	 
	Japan application	 	Controlled release composition	 	JP 4194114	 	HEI7(1995)-522075 /	 	 
	 	 	 	 	 	 	JP9509184	 	 
	Japan application	 	Controlled release composition	 	-	 	2005-282068 / 2006-	 	Withdrawn
	 	 	 	 	 	 	052228	 	 
	US patent*	 	Controlled release composition	 	US 6,787,156	 	08/693,254	 	 
	US application	 	Controlled release composition	 	-	 	10/827,521 /	 	Abandon
	 	 	 	 	 	 	US2005019405	 	 
	US application	 	Controlled release composition	 	-	 	12/213,087 /	 	Withdrawn
	 	 	 	 	 	 	US2008254124	 	 
	 	 	-	 	 	 	 	 	 
	EP Patent**	 	Controlled release composition	 	EP 0746310	 	95909667.8	 	 
	Switzerland	 	 	 	EP 0746310	 	From EP	 	 
	France	 	 	 	EP 0746310	 	From EP	 	 
	Great Britain	 	 	 	EP 0746310	 	From EP	 	 
	Italy	 	 	 	EP 0746310	 	From EP	 	 
	Germany	 	Zusammensetzung mit gesteuerter	 	DE69506086	 	From EP	 	 
	 	 	freizetzung	 	 	 	 	 	 
	Denmark	 	Præparat med styret afgivelse	 	DK 0746310	 	From EP	 	 

 

Proprietor: BM Research

  

    	34

    	 

    

 

Status:

- EP patent issued in Switzerland, France, Great Britain,
Italy, Germany & Denmark and expires 23 February 2015

- US patent issued and expires 7 September 2021

- JP patent issued and expires 23 February 2015

 

    	35

    	 

    

 

IP-P05 - Polymer release system

 

	
        Application /

        Patent type
	 	
        Title
	 	
        Patent No.
	 	
        Application No. /

        Publication No.
	 	
        Filing

        date

	PCT application	 	Polymer release system	 	-	 	PCT/DK02/00620 /	 	23-09-02
	 	 	 	 	 	 	WO 2003/024429	 	 
	 	 	 	 	 	 	 	 	 
	US application	 	Polymer release system	 	-	 	10/490,308 /	 	Abandon
	 	 	 	 	 	 	US2004/0234602	 	 
	US continuation	 	 	 	 	 	12/073,692 /	 	07-03-08
	 	 	 	 	 	 	US2008254122	 	 
	 	 	 	 	 	 	 	 	 
	EP application	 	Polymer release system	 	 	 	EP 1429739/	 	 
	 	 	 	 	 	 	02779224.1	 	 

 

Proprietor: Egalet a/s

 

    	36

    	 

    

 

IP-P06 - Controlled release solid dispersions

  

	Application /

    Patent type	 	Title	 	Patent No.	 	Application No. /
 Publication No.	 	Filing date
	PCT application	 	Controlled release solid dispersion	 	-	 	PCT/DK02/00621	 	23-09-02
	 	 	 	 	 	 	WO 2003/024426	 	 
	 	 	 	 	 	 	 	 	 
	US application	 	Controlled release solid dispersion	 	-	 	10/490,170 /	 	Abandon
	 	 	 	 	 	 	US2005/0019399	 	 
	 	 	 	 	 	 	 	 	 
	US continuation	 	Controlled release solid dispersion	 	 	 	12/073,691 /	 	07-03-08
	 	 	 	 	 	 	US2008/0234352	 	 
	EP application	 	Controlled release solid dispersion	 	EP 1429734	 	02776907.4	 	 
	AT	 	 	 	AT E 381 924	 	From EP	 	 
	BE	 	 	 	EP 1429734	 	From EP	 	 
	CH	 	 	 	EP 1429734	 	From EP	 	 
	DE	 	 	 	DE 602 24 293	 	From EP	 	 
	DK	 	 	 	EP 1429734	 	From EP	 	 
	ES	 	 	 	EP 1429734	 	From EP	 	 
	FR	 	 	 	EP 1429734	 	From EP	 	 
	GB	 	 	 	EP 1429734	 	From EP	 	 
	IE	 	 	 	EP 1429734	 	From EP	 	 
	IT	 	 	 	EP 1429734	 	From EP	 	 
	EP Divisional	 	Controlled release solid dispersion	 	 	 	EP 1929998/	 	20-12-07
	 	 	 	 	 	 	07024778.8	 	 

 

Proprietor: Egalet a/s

 

Status:

- EP patent granted 26 December 2007 and expires 23. September
2022

 

    	37

    	 

    

 

IP-P08 - Controlled release Carvedilol compositions

 

	Application
    /

    Patent type	 	Title	 	Patent
    No.	 	Application No. /
 Publication No.	 	Filing date
	PCT application	 	Controlled release carvedilol 	 	-	 	PCT/DK03/00765/	 	07-11-03
	 	 	compositions	 	 	 	WO 2004/041252	 	 
	 	 	 	 	 	 	 	 	 
	US application	 	Controlled release solid dispersion	 	-	 	10/703,084 / 	 	Abandon
	 	 	 	 	 	 	US2004/0151772	 	 
	US continuation	 	Controlled release solid dispersion	 	 	 	12/076,105 /	 	13-03-08
	 	 	 	 	 	 	 US2008268057	 	 
	 	 	 	 	 	 	 	 	 
	EP application	 	Controlled release solid dispersion	 	-	 	EP 1562552/	 	Withdrawn
	 	 	 	 	 	 	 03810382.6	 	 

 

Proprietor: Egalet a/s

 

    	38

    	 

    

 

IP-P09 - Polymer blend

 

	Application
    /

    Patent type	 	Title	 	Patent
    No.	 	Application No. /
 Publication No.	 	Filing date
	PCT application	 	Matrix composition for controlled release	 	-	 	PCT/DK04/000217	 	26-03-04
	 	 	 	 	 	 	WO 2004/084869	 	 
	 	 	 	 	 	 	 	 	 
	US application	 	Matrix composition for controlled release	 		 	10/550,685 /	 	 
	 	 	 	 	 	 	 US2007/0042044	 	 
	Canada application	 	Matrix composition for controlled release	 		 	2,520,312	 	 
	 	 	 	 	 	 	 	 	 
	Japan application	 	Matrix composition for controlled release	 		 	2006-504340 /	 	 
	 	 	 	 	 	 	 2006521301	 	 
	 	 	 	 		 	 	 	 
	India application	 	Matrix composition for controlled release	 	IN 233507	 	4439/DELNP/2005	 	 
	 	 	 	 		 	 	 	 
	EP application	 	Matrix composition for controlled release	 	EP 1610768	 	04723523.9	 	 
	 	 	 	 		 	 	 	 
	AT	 		 	AT E 399 538	 	From EP	 	 
	BE	 	 	 	EP 1610768	 	From EP	 	 
	CH	 	 	 	EP 1610768	 	From EP	 	 
	DE	 	 	 	EP 1610768	 	From EP	 	 
	DK	 	 	 	EP 1610768	 	From EP	 	 
	ES	 	 	 	EP 1610768	 	From EP	 	 
	FR	 	 	 	EP 1610768	 	From EP	 	 
	GB	 	 	 	EP 1610768	 	From EP	 	 
	IE	 	 	 	EP 1610768	 	From EP	 	 
	IT	 	 	 	EP 1610768	 	From EP	 	 
	NL	 	 	 	EP 1610768	 	From EP	 	 
	EP Divisional	 	Matrix composition for controlled release	 	 	 	EP 1974726/ 08158752,9	 	 
	 	 	 	 	 	 	1120403	 	 
	HK application	 	 	 	 	 	 	 	 

 

Proprietor: Egalet a/s

 

    	39

    	 

    

 

 

- EP patent granted and expires 26. Marts 2024

- IN Patent granted and expires 26. Marts 2024

 

    	40

    	 

    

 

ANNEX B

[****]

 

    	41

    	 

    

 

ANNEX C

Third Party Patents

 

EP 1272179 (WO 01/74357)

US  5,902,821

 

    	42Exhibit 4.2

 

EXCLUSIVE LICENSE AGREEMENT

 

THIS EXCLUSIVE LICENSE
AGREEMENT (this “Agreement”) is made and entered into as of May 2, 2010 (the “Effective Date”),
by and between SCOLR Pharma Inc., a Delaware corporation (“SCOLR”), and RedHill Biopharma Ltd., an Israeli company
(“RedHill”). SCOLR and RedHill each may be referred to herein individually as a “Party,” or collectively
as the “Parties”.

 

WHEREAS,
SCOLR is the sole and exclusive owner of certain patents and other intellectual property
relating to a certain Product (as such term is defined herein);

 

WHEREAS,
SCOLR wishes to license to RedHill all SCOLR's rights in and to the Product, including all patent rights and other intellectual
property relating thereto, and RedHill wishes to receive such license from SCOLR, so that RedHill may develop and commercialize
Products for all indications and for all uses, all on the terms set forth below; and, 

 

WHEREAS,
the license to be granted shall be granted on an exclusive and worldwide basis all as more fully set out below.

 

NOW THEREFORE, THE
PARTIES HERETO AGREE AS FOLLOWS:

 

1.           DEFINITIONS

 

1.1          “Affiliate”
of a Party means any other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with such first Party. For purposes of this definition only, “control” and, with correlative
meanings, the terms “controlled by” and “under common control with” will mean the possession, directly
or indirectly, of the power to direct the management or policies of an entity, whether through the ownership of fifty percent or
more of the voting securities of the other organization or entity or by contract relating to voting rights or corporate governance.

 

    	 

    	 

    

 

1.2          “Combination
Product” shall mean a product which comprises
(a) a Product and (b) at least one other active ingredient or medical device, which, if administered or used independently of the
Product, would have a clinical, diagnostic or therapeutic effect.

 

1.3          “Field
of Use” means all indications, and includes therapeutic, diagnostic and other human and/or animal uses.

 

1.4          “First
Commercial Sale” shall mean the first commercial sale of a Product, in exchange for cash or some equivalent to which
value can be assigned, after regulatory approval has been granted by a Regulatory Authority, other than the use of the Product
for testing purposes and/or a sale for experimental, promotional, compassionate named patient or test market purposes. For the
avoidance of any doubt, First Commercial Sale can only occur once worldwide, regardless of the jurisdiction in which it took place.

 

1.5          
“Licensed Know-How” means all information (other than that contained in the Patents) whether patentable or not
and physical objects related to the Product, including but not limited to Product data, Product related results and information,
including, but not limited to, clinical data, analytical test results, non-clinical pharmacology and safety data, other R&D
data, Regulatory Documentation, manufacturing and formulation information of a like nature, all provided that the Licensed Know-How
is known to, generated by, vested in (or licensed to) and/or controlled by SCOLR, including, without limitation, the Licensed Know-
How listed in Annex B of this Agreement.

 

1.6          “Net
Sales” means the amounts (cash or equivalent to which value can be assigned) actually received by RedHill or its Affiliates
in respect of the sale of a Product by RedHill or its Affiliates, less, and following recovery of, the following items (collectively,
the "Recognized Deductions") as considered under International Accounting Standards (IFRS):

 

		(i)	allowances or credits granted to and taken by customers (including wholesalers) for rejections,
returns (including as a result of recalls), and prompt payment and trade, cash and volume discounts or resulting from inventory
management;

 

    	2

    	 

    

 

		(ii)	amounts incurred resulting from government mandated rebate programs (or any agency thereof);
	 	 	 

	 	(iii)	freight, transport, packing and insurance charges;
	 	 	 

		(iv)	taxes, including value added tax, tariffs or import/export or customs, duties;
	 	 	 

		(v)	rebates, charge backs and discounts paid or credited;
	 	 	 

		(vi)	bad debts;
	 	 	 

		(vii)	reasonable quantities of samples; and
	 	 	 

		(viii)	royalties paid to third parties in respect of the use of such third party’s intellectual
property rights necessary for the exercise of the License.

 

RedHill shall provide SCOLR an accounting
of all such deductions with each report delivered under Section 5.

 

Notwithstanding the
foregoing, for the purposes of this definition, the transfer of a Product by RedHill or one of its Affiliates to another Affiliate
of RedHill or to a sublicensee for resale is not a sale and in such cases, Net Sales will be determined based on the amount received
by RedHill or such Affiliate in respect of the Product or “Combination Product” (subject to the adjustments set forth
below) as sold by the Affiliate or sublicensee to independent third-parties, less the Recognized Deductions.

 

For Net Sales of a
Product sold or supplied as a “Combination Product”, the Net Sales of such a Combination Product in a country will
be determined by multiplying the Net Sales of such Combination Product by the fraction of A/A+B, where A is the average unit selling
price during the period in respect of which Net Sales are being calculated of the Product sold separately in that country and B
is the total average unit selling price during the period in respect of which Net Sales are being calculated of the other product
or device included in the Combination Product, when sold separately in that country. If neither the Product nor the other product
or device included in the Combination Product are sold separately during the period in respect of which Net Sales are being calculated,
then the Parties shall, considering the costs incurred by RedHill bringing about the Combination Product, in good faith negotiate
the value of the other product or device included in the Combination Product that are to be deducted from the Net Sales of the
Combination Product in determining the Net Sales of the Product contained in the Combination Product, it being agreed that absent
such mutual agreement as to the proportion of such Combination Product to be attributed to the Product, the Parties shall mutually
appoint an independent expert to determine such proportion.

 

    	3

    	 

    

 

1.7          “Patents”
shall mean the patents listed in Annex A to this Agreement, as well as such other Product-related (a) U.S. patents and patent
applications, (b) any substitutions, divisions, continuations, continuations-in-part (but only to the extent that they cover the
same invention claimed in the foregoing), reissues, renewals, registrations, confirmations, re-examinations, extensions, supplementary
protection certificates and the like, and any provisional applications, of any such patents or patent applications, and (c) any
foreign or international equivalent of any of the foregoing, of which SCOLR is as of the date of this Agreement or during the term
of this Agreement becomes owner or controller.

 

1.8          
“Product” shall mean all extended release (including, but not limited to, 24 hour extended release) and all
other Ondansetron tablet formulations, that infringe one or more claims of the Patents and Licensed Know How, including SCOLR’s
CDT® delivery technology.

 

1.9          “Regulatory
Approval” means approval by the US FDA of an NDA (New Drug Application), or the equivalent application for marketing
approval, and satisfaction of any related applicable FDA registration and notification requirements (if any).

 

1.10          “Regulatory
Authority” means any applicable government entity regulating or otherwise exercising authority with respect to the development
and commercialization of a Product.

 

1.11          “Regulatory
Documentation” means all applications, registrations, licenses, authorizations and approvals (including all Regulatory
Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports
relating to any communications with any Regulatory Authority), all supporting documents and all clinical studies and tests, including
the manufacturing batch records for Products to be assigned, relating to a Product, and all data contained in any of the foregoing,
including all regulatory drug lists, advertising and promotion documents, adverse event files and complaint files.

 

    	4

    	 

    

 

1.12          “Royalty
Term” shall mean the period commencing on the date of this Agreement and ending on the earlier of (i) expiration of
the last to expire of the Patents as listed in Annex A, (ii) and 10 years starting on the earlier of the date
of the First Commercial Sale by RedHill or a third party partner, and (iii) RedHill's payment of the maximum cap amount of US
$30 million. 

 

1.13          “Sublicense”
means a sublicense from RedHill to a third party under the License granted pursuant to this Agreement and the term “Sublicensee”
shall be construed accordingly. Any Sublicense may include the right to grant further Sublicenses. All Sublicenses shall include
provisions for the benefit of SCOLR corresponding to those contained herein, mutatis mutandis. A breach of the terms of
a Sublicense, to the extent that same would constitute a breach of the terms hereof by Redhill, shall be considered a breach of
RedHill’s obligations under this Agreement. RedHill shall, upon request, provide SCOLR with redacted copies of each Sublicense
granted under this Agreement, subject to SCOLR undertaking to maintain same in confidence in accordance with the terms hereof.

 

1.14          “Sublicense
Sales Royalties” means sales royalties actually received by RedHill from third party distributors and/or Sublicensees
in respect to the sublicense of the Patents and of sales of the Product effected by such distributors and/or Sublicensees (and/or
any further Sublicensees thereof), excluding, for example but without limitation, payments on account of (i) debt financing; (ii)
equity (and conditional equity, such as warrants, convertible debt and the like) investments in RedHill or any Affiliate thereof
at market value; and (iii) patent prosecution costs incurred or which shall be incurred by RedHill.

 

2.           LICENSE GRANT

 

2.1          Scope
of License. SCOLR hereby grants to RedHill an exclusive (including as to SCOLR itself), worldwide, perpetual (subject to the
rights of termination set forth herein) license under the Patents and the Licensed Know-How for the sole purpose of developing,
manufacturing, commercializing, making, using, selling, offering for sale and importing Products, in the Field of Use (the “License”).
RedHill may not exercise any rights granted under Sections 2.1, 2.2, or 2.3 until it has delivered the payment to SCOLR required
under Section 6.1 of this Agreement. Nothing in this Agreement shall limit SCOLR's right to make use of the Licensed Know-How for
purposes other than the Product or products competing with the Product in the Field of Use.

 

    	5

    	 

    

 

2.2          Sublicenses.
The License granted to RedHill is Sublicensable (and further Sublicensable) in whole or in part, to third parties (including RedHill’s
Affiliates) in arms length transactions. For the avoidance of doubt, RedHill shall be entitled to conduct or to perform any activity
in respect of the Products by means of any third party sub-contractor, and such conduct shall not be considered to be a grant of
a Sublicense hereunder.

 

2.3          Registration.
SCOLR agrees that RedHill shall have the right, on its own account and at its own expense, to register as the exclusive
licensee of the rights in and to the Patents and the Licensed Know How as needed to develop, manufacture, commercialize, make,
use, sell, offer for sale and import Products, in the Field of Use and SCOLR shall, execute all documentation reasonably requested
by RedHill and otherwise cooperate with RedHill in order to ensure such registration.

 

2.4          Limitations
on Other Licenses. During the term of this Agreement, SCOLR shall not, without RedHill’s prior written consent, grant
any rights or licenses to any Patents or Licensed Know-How, or transfer any data or know-how to any third party that conflict with
the rights granted to RedHill under this Agreement

 

2.5          Marking.
RedHill will mark, and require all sublicensees to mark, all Products sold or otherwise disposed of under the license granted in
Section 2.1 with the word “Patent” or “Patents” and the number or numbers of the Patents applicable thereto.

 

    	6

    	 

    

 

3.           DATA
AND PRODUCT TRANSFER

 

3.1          Know-How.
Within thirty (30) days following the Effective Date, SCOLR will (i) transfer to RedHill the Licensed Know-How and all information
relating thereto and to the Patents, and copies of external service and other contracts and documentation and correspondence relating
to the manufacture of Product, all to the extent necessary for RedHill to exploit the License as envisaged by this Agreement, and
(ii) make available to RedHill Ex Works (Incoterms 2000), any unexpired quantities of Product and unexpired quantities of raw materials
for the Product it has on hand, all at no charge whatsoever to RedHill. Should RedHill fail to effect payment of the upfront payment
detailed in Section 6.1 below within ninety (90) days following the Effective Date for any reason, SCOLR shall be entitled to terminate
the License and demand the prompt return of all aforesaid information, documentation and Products. The information and data detailed
in this Section 3 shall be provided in hard and soft copies whichever is available. In the event SCOLR has a specific difficulty
in providing both hard and soft copies, it shall discuss with RedHill possible resolutions of such difficulty. Following the Effective
Date, SCOLR will provide RedHill with reasonable assistance in replying to inquiries by RedHill in respect of the information and
data provided and exercise of the License.

 

3.2          Assistance.
Following payment of the up-front payment, SCOLR undertakes to assist RedHill or Sublicensees in a technical transfer
of Know- How to a contract manufacturing organization chosen by RedHill. In consideration for technical transfer activities
that require travel, SCOLR will be compensated according to a rate and travel expenses budget to be pre-approved (in writing)
by RedHill..

 

4.           DILIGENCE

 

4.1          Obligations.
RedHill will make a good faith, continuous and diligent effort to allocate appropriate financial resources (currently estimated
by SCOLR at US $1.3 million) to prepare, initiate and complete the clinical development of the Product and file an application
for regulatory marketing approval in accordance with industry standards (the “Diligence Obligation”). For the
avoidance of any doubt, development failures, negative regulatory decisions, and/or other reasons that are beyond RedHill’s
control, do not constitute a breach of the Diligence Obligation. SCOLR’s sole and exclusive remedy for a breach of the Diligence
Obligation by RedHill shall be termination of and return of all rights granted to RedHill under this Agreement, termination of
SCOLR’s obligations under Section 2.4, return of all Licensed Know-How and SCOLR Confidential Information, and payment of
any unpaid Milestone and Royalty payments actually owing prior to termination. Specifically, RedHill will use its reasonable commercial
efforts to secure the appropriate financial resources to prepare, initiate and complete the clinical trials necessary to file an
NDA in respect of the Product with the United States FDA. For purposes of this Agreement, ‘reasonable commercial efforts’
will not be deemed to require a party to undertake extraordinary or unreasonable measures, including the payment of amounts in
excess of normal and usual fees or other payments.

 

    	7

    	 

    
 

4.2          No
Warranty. For the avoidance of doubt, nothing contained in this Agreement shall be construed as a warranty by RedHill that
any development or any commercialization to be carried out by it in connection with this Agreement will actually achieve its aims
or any other results and RedHill makes no warranties whatsoever as to any results to be achieved in consequence of the carrying
out of any such development. Furthermore, RedHill makes no representation to the effect that the commercialization of the Products,
or any part thereof, will succeed, or that it shall be able to sell the Products in any quantity.

 

5.           REPORTS

 

5.1          Until
the end of the Royalty Term, RedHill agrees as follows:

 

5.1.1       Development
Reports. To keep SCOLR informed with respect to activities and progress regarding the development, commercialization, sublicensing,
and government approvals of Product(s), RedHill will provide annual reports within 30 days of the close of each twelve-month period.

 

5.1.2       First
Commercial Sale Report. To report to SCOLR the date of the First Commercial Sale, together with the name of the country in
which such First Commercial Sale occurred.

 

5.1.3       Royalty
Reports. With respect to each Royalty payment pursuant to Section 6.3 below, following the First Commercial Sale to deliver
to SCOLR reports including the following with respect to the period covered by the Royalty payment on a calendar quarterly basis
within 30 days following the end of each March, June September and December.

 

5.1.3.1          The
amount of Net Sales and Sublicense Sales Royalties received from Products, including the Recognized Deductions applicable in computing
Net Sales and the deductions applicable in computing Sublicense Sales Royalties, and the total Royalties due based on Net Sales
and Sublicense Sales Royalties.

 

    	8

    	 

    

 

5.1.3.2          Name
and address of all Sublicensees.

 

5.2          Without
prejudice to SCOLR's compliance with financial reporting requirements applicable under law for SCOLR, any and all information,
data or reports supplied by RedHill pursuant to the provisions of this Section 5 shall be treated as RedHill's Confidential Information.

 

5.3          If
this Agreement is terminated for any reason during the Royalty Term, RedHill shall deliver a final report and associated Royalty
payment to SCOLR within sixty (60) days after such termination. Except as provided above, following termination, RedHill shall
have no further reporting obligations under this Section 5.

 

6.           FINANCIAL
PROVISIONS 

 

6.1          Up-Front
Payment. Within thirty (30) days after the Effective Date and against receipt of an appropriate invoice from SCOLR, RedHill
will pay SCOLR a non-refundable up-front license fee of US$100,000. In the event such payment may require approval of any governmental
authority, RedHill undertakes to file for approval promptly following closing of this Agreement and undertakes to effectuate prompt
payment of the up-front payment following receipt of the necessary approval. Should RedHill fail to effect payment of the upfront
payment within the 30-day period (or if payment is delayed due to a delay in receiving necessary governmental approval, within
180-days after the Effective Date), SCOLR shall be entitled to terminate the License and demand the prompt return of all information,
documentation and Product provided pursuant to Section 3.1 above. Any upfront payment not made within 30-days after due date shall
accrue interest at the rate of two percent (2%) per month from the date due until paid in full, subject to Section 6.8 below (deduction
of withholding tax, if applicable).

 

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6.2          Milestone
Payments. RedHill will pay to SCOLR the following non-refundable one-time milestone payments (such payments are due only once
for the Product and are not payable per indication or per jurisdiction). Within sixty (60) days after first achievement of each
of the applicable milestones for the first Product to achieve such milestone (and not, for the avoidance of doubt, in respect of
each Product or indication of a Product to do so), as follows:

 

	Milestone	 	Payment	 
	 	 	 	 
	Final Marketing Approval by the US FDA	 	$	250,000	 
	First Commercial Sale	 	$	250,000	 

 

RedHill acknowledges and agrees that SCOLR
makes no representations or warranties that the Products will receive approval from the US-FDA or that a market exists for the
Products such that RedHill may recoup amounts paid to SCOLR under Sections 6.1 or 6.2. In the event that (i) Final Marketing Approval
by the US FDA is not achieved within thirty six (36) months following transfer know-how under Section 3.1 or (ii) the First Commercial
Sale is not made with forty-eight (48) months following transfer know-how under Section 3.1, SCOLR’s shall be entitled to
terminate this Agreement and the license granted to RedHill hereunder; provided, however, that SCOLR shall first provide RedHill
with forty five (45) days notice of its intent to so terminate the Agreement and license and RedHill shall be entitled at any time
prior to the end of such notice period to pay the relevant milestone payment and upon such payment SCOLR's right to terminate under
this Section 6.2 shall expire and not be exercisable. The right to terminate shall be SCOLR's sole and exclusive right in connection
with the failure to achieve the milestones.

 

6.3          Royalty
Payments. Until the expiry of the Royalty Term, RedHill will pay SCOLR a royalty of 8% of Net Sales and 8% of Sublicense Sales
Royalties actually received by RedHill after recovery by RedHill of reasonable marketing and distribution expenses (including but
not limited to direct R&D expenses prior to launch) (“Royalties”).

 

6.4          Due
Dates for Payment. All payments due pursuant to the provisions of Section 6.3 above shall be due and payable to SCOLR on a
calendar quarterly basis within 60 days following the end of the applicable quarter, all against the receipt of an appropriate
invoice from SCOLR for same. In the event such payment may require approval of any governmental authority, RedHill undertakes to
file for approval promptly following closing of this Agreement and undertakes to effectuate prompt payment of the up-front payment
following receipt of the necessary approval. Should RedHill fail to effect payment of the payment as aforesaid within ninety (90)
days following the due date, SCOLR shall be entitled to terminate the License and demand the prompt return of all information,
documentation and Product provided pursuant to Section 3.1 above.

 

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6.5          Payment
Method. Any amounts due to SCOLR under this Agreement will be paid in U.S. dollars, by wire transfer in immediately available
funds to an account designated in writing in an appropriate invoice at least fifteen (15) days in advance by SCOLR. Any payment
not delivered on time shall accrue interest from the date due until paid in full at the rate of the lower of 1.5% per month or
the highest rate allowed under applicable laws.

 

6.6          Maximum
Cap Amount. The total aggregated payments made by RedHill pursuant to this Agreement, including, without limitation, the upfront
payment, milestone payments and Royalties, shall not exceed a maximum cap amount of US $30 million (the “Cap Amount”).
If the Cap Amount is reached, no additional payment of any kind whatsoever shall be due.

 

6.7          Currency;
Foreign Payments. If any currency conversion will be required in connection with the calculation of any payment hereunder,
such conversion will be made by using the exchange rate for the purchase of U.S. dollars as published in The Wall Street Journal,
Eastern Edition, on the date of the payment. If at any time legal restrictions prevent the prompt remittance of any payments in
any jurisdiction, RedHill may notify SCOLR and make such payments by depositing the amount thereof in local currency in a bank
account or other depository in such country in the name of SCOLR or its designee, and RedHill will have no further obligations
under this Agreement with respect thereto.

 

6.8          Taxes.
 RedHill may deduct from amounts it is required to pay SCOLR pursuant to this Agreement an amount equal to that required by
applicable law to be withheld by RedHill for or due on account of any taxes (including VAT to the extent applicable, but other
than taxes imposed on or measured by net income of RedHill) or similar governmental charge imposed by any jurisdiction based on
such payments to SCOLR (“Withholding Taxes”) and such payment shall be deemed as payment to SCOLR in accordance
with this Agreement. RedHill will provide SCOLR a certificate evidencing payment of any Withholding Taxes.

 

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6.9          Continuing
Right. Following the expiration of the Royalty Term RedHill shall be entitled to continue to exploit the License
worldwide with respect to the Product(s) without having to pay Royalties or make any other payment to SCOLR in respect of such
activities.

 

7.           RECORDS
RETENTION AND AUDIT

 

7.1          Record
Retention. Until the expiry of the Royalty Term, RedHill will maintain (and will ensure that its Affiliates maintain)
complete and accurate books, records and accounts that fairly reflect Net Sales and Sublicense Sales Royalties, in sufficient detail
to confirm the accuracy of any payments required hereunder, which books, records and accounts will be retained for two (2) years
after the end of the period to which such books, records and accounts pertain.

 

7.2          Audit.
SCOLR will have the right, at its own cost, to have an independent certified public accounting firm of nationally recognized
standing, reasonably acceptable to RedHill and who agrees to be bound by a customary undertaking of confidentiality, have access
during normal business hours, and upon reasonable prior written notice, to RedHill’s records as may be reasonably necessary
to verify RedHill’s compliance with the terms of this Agreement, including without limitation the accuracy of Net Salesand
Sublicense Sales Royalties, as applicable, for any period ending not more than 24 months prior to the date of such request; provided,
however, that SCOLR will not have the right to conduct more than one such audit in any calendar year or more than one such
audit covering any given time period. The auditing firm will disclose to SCOLR only the results of its audit and not any other
information. Any such audit shall be made during RedHill’s normal business hours and shall not unreasonably interfere with
the business of RedHill and shall be completed within a reasonable time. SCOLR will bear all the costs of such audit. Without derogating
from the forgoing, SCOLR's audit rights shall be conducted no later than two years following the final payment under this Agreement.
The costs of the audit are the responsibility of SCOLR except in the event there is a substantial shortfall in the payment due.
In the event that there is a shortfall of more than 10% in the payment due, and provided such 10% or more shortfall is verified
by an additional (second) audit to be conducted by RedHill per section 7.3 below, the audit costs and all related travel costs
up to a maximum cap of US $50,000 will be covered by RedHill within thirty (30) days of billing.

 

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7.3          Payment
of Additional Amounts. If, based on the results of such audit, additional payments are owed by RedHill under this Agreement,
RedHill shall, at its own cost, have an additional 120 days to conduct an additional (second) audit to verify SCOLR’s audit
results, and, assuming the two audits reconcile, RedHill shall make such additional payments within 30 days after the date on which
such second accounting firm’s written report is delivered to RedHill. If the results of the two audits do not reconcile,
the Parties shall, unless otherwise agreed, appoint a third independent auditor, who – on basis of the audit results achieved
by the first two auditors and such additional investigations and reviews, which the third auditor may find to be required –
shall conduct a third and final audit the result of which shall be applied by the Parties. The Parties shall equally share the
costs of for the third audit to be conducted, unless the third audit substantially confirms the results of the either parties’
individual audit in which case the cost of such audit shall be paid by the other party hereto up to a maximum cap of US $50,000.

 

7.4          Confidentiality.
SCOLR will treat all information subject to review under this Section 7 in accordance with the confidentiality provisions of Section
11 below.

 

8.           REPRESENTATIONS
AND WARRANTIES

 

8.1          By
Both Parties. Each Party hereby represents, warrants and covenants to the other Party as of the Effective Date as follows:

 

8.1.1          Corporate
Authority. Such Party (a) has the power and authority and the legal right to enter into this Agreement and perform its obligations
hereunder, and (b) has taken all necessary action on its part required to authorize the execution and delivery of this Agreement
and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such Party and
constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms subject
to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and
judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability
is considered a proceeding at law or equity.

 

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8.1.2          Consents,
Approvals, etc. Such Party has obtained all necessary consents, approvals and authorizations of all governmental authorities
and other parties required to be obtained by such Party in connection with the execution and delivery of this Agreement and the
performance of its obligations hereunder have been obtained.

 

8.1.3          Conflicts.
The execution and delivery of this Agreement and the performance of such Party’s obligations hereunder (a) do not conflict
with or violate any requirement of applicable law or any provision of the articles of incorporation, bylaws or any similar instrument
of such Party, as applicable, in any material way, and (b) do not conflict with, violate, or breach or constitute a default or
require any consent not already obtained under, any contractual obligation or court or administrative order by which such Party
is bound.

 

8.2          By
SCOLR. SCOLR hereby further represents, warrants, and covenants to RedHill as of the Effective Date as follows:

 

8.2.1          IP
Ownership. SCOLR has the sole legal and/or beneficial title to and ownership of the Patents (and represents and warrants
that the Licensed Know-How has not been misappropriated and is, to SCOLR’s knowledge, non-infringing) as is necessary to
fulfill its obligations under this Agreement and to grant the License to RedHill pursuant to this Agreement, and the Patents and
the Licensed Know-How are free and clear of any liens, encumbrances or third party rights (including without limitation, the right
to receive royalties or other compensation). Furthermore, SCOLR undertakes that to the extent that RedHill, its Affiliates,
or any Sublicensee requires a license under any additional patents or related rights controlled by SCOLR in order to develop,
use, sell, offer for sale or import Products, SCOLR shall grant such a license to RedHill, its Affiliates, and any Sublicensee
on a non-exclusive royalty-free basis solely for the purpose of developing, using, selling, offering for sale or importing Products.

 

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8.2.2          No
Conflicting Grants. SCOLR has not and during the term of this Agreement, and, provided that this Agreement expires
due to the expiration of the Royalty Term, thereafter, shall not grant any rights to the Patents or the Licensed Know-How that
conflict with the rights granted to RedHill hereunder, and no third party has any rights whatsoever (including the right to receive
royalties or any other compensation) under the Patents, or to develop, use, sell, offer for sale or import Products under the Licensed
Know-How.

 

8.2.3          Third
Party Actions. The exercise by RedHill of the License granted under the Patents and the Licensed Know-How to make, have
made, use, sell, commercialize, offer for sale, and import the Products will not by itself infringe upon the patent or other intellectual
property rights of any third party, and no actions, suits, claims, disputes, or proceedings concerning the Patents or the Licensed
Know-How currently pending or have been threatened, that could have an adverse effect on the Product or could impair SCOLR’s
ability to perform its obligations under this Agreement. Furthermore, there are no legal suits or proceedings by a third party
(including without limitation employees or former employees of SCOLR) contesting the ownership or validity of the Patents, the
Licensed Know-How or the Product or any part thereof.  

 

8.2.4          Additional
Licenses. To the best of SCOLR’s knowledge, no additional licenses to any patents (including patents owned or controlled
by third parties) or know-how are required to develop, manufacture, use or sell the Product.

 

8.2.5          Limitation.
          SCOLR has no liability in respect of the manufacture of the Product.

 

8.2.6          Disclaimer
of Warranties. The warranties given by SCOLR in THIS Section 8.2 are exclusive and
in lieu of all other warranties. Except for such express warranties, SCOLR makes no other warranties of any kind and hereby disclaims
all other warranties, express or implied, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NONINFRINGEMENT, OR WARRANTIES ARISING FROM COURSE OF DEALING OR USE OF TRADE. 

 

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9.            LIMITATION
OF LIABILITY.

 

Except in the
case of a willful or fraudulent misrepresentation under Section 8, and except in the case of indemnification for payments to third
parties under Section 13, in no event shall either Party be liable to the other or any of its Affiliates for any consequential,
incidental, indirect, special, punitive or exemplary damages (including, without limitation, lost profits, business or goodwill)
suffered or incurred by such other Party or its Affiliates, whether based upon a claim or action of contract, warranty, negligence
or tort, or otherwise, arising out of this Agreement.

 

10.          PATENTS

 

10.1        Patent
Prosecution and And Maintenance

 

10.1.1          Prosecution
by RedHill. RedHill undertakes and shall have the sole, exclusive and first right to prosecute and maintain the Patents
listed in Part I of Exhibit A using counsel of its choice, in the jurisdictions and to the extent that RedHill shall deem appropriate
at its sole discretion. All such filings shall be for the benefit of SCOLR and shall identify SCOLR as the owner of the inventions
described in the applications. RedHill will provide SCOLR with copies of all relevant documentation so that SCOLR will be informed
of the continuing prosecution and may comment upon such documentation sufficiently in advance of any initial deadline for filing
a response, provided, however, that if SCOLR has not commented upon such documentation in a reasonable time for RedHill to sufficiently
consider SCOLR’s comments prior to a deadline with the relevant government patent office, or RedHill must act to preserve
the Patents, RedHill will be free to act without consideration of SCOLR’s comments, if any.

 

10.1.2          SCOLR
undertakes to prosecute and maintain the Patents listed in Part II of Exhibit A using counsel of its choice in the jurisdictions
and to the extent decided after conferring with RedHill. SCOLR will provide RedHill with copies of all relevant documentation so
that RedHill will be informed of the continuing prosecution and may comment upon such documentation sufficiently in advance of
any initial deadline for filing a response, provided, however, that if RedHill has not commented upon such documentation in a reasonable
time for SCOLR to sufficiently consider RedHill’s comments prior to a deadline with the relevant government patent office,
or SCOLR must act to preserve the Patents, SCOLR will be free to act without consideration of RedHill’s comments, if any.
SCOLR undertakes to inform RedHill promptly if SCOLR decides not to prosecute and maintain a Patent in order for RedHill to
take such action as per RedHill’s discretion. RedHill shall have the right but not the obligation to prosecute and maintain
the Patents listed in Part II of Exhibit A.

 

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10.1.3          RedHill’s
Requests. SCOLR shall use reasonable efforts to amend any Patent application to include claims or any other changes
reasonably requested by RedHill to protect the Products contemplated to be sold under this Agreement. Moreover, SCOLR will cooperate
in the preparation, filing, prosecution, and maintenance of the Patents, including (a) promptly executing all papers and instruments
and requiring employees to execute such papers and instruments as reasonable and appropriate so as to enable RedHill to file, prosecute,
and maintain the Patents in any country; and (b) promptly informing RedHill of matters that may affect the preparation, filing,
prosecution, or maintenance of any Patents.

 

10.1.4          Patent
Prosecution Costs. RedHill will bear the costs of preparing, filing, prosecuting and maintaining all patent applications contemplated
by Section 10.1.1 and SCOLR shall bear the costs of preparing, filing, prosecuting and maintaining all patent applications contemplated
by Section 10.1.2, provided, however that RedHill shall pay all costs and expenses incurred in making amendments or changes required
by RedHill under Section 10.1.3 provided such amendments or changes have been expressly and specifically requested from SCOLR in
advance and in writing by RedHill and provided all such costs and expenses have been pre-approved in writing by RedHill.

 

10.1.5          Co-operation.
The Parties will provide reasonable assistance to each other, including providing access to relevant documents and other evidence,
making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the prosecuting
and maintaining Party to prosecute and maintain the relevant Patent.

 

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10.2        Patent
Enforcement.

 

10.2.1          Infringement
Notice. If SCOLR or RedHill determines that any Patent is being infringed by a third party’s activities and
that such infringement could affect the exercise of the License under this Agreement, it will promptly notify the other Party
in writing. In addition, if SCOLR or RedHill determines that any Licensed Know- How is being misappropriated by a third
party’s activities and that such misappropriation could affect the exercise of the License under this Agreement, it
will promptly notify the other Party in writing

 

10.2.2          Subject
to the limitation in Section 10.3.3, RedHill will have the sole, exclusive and first right but not the obligation to remove such
infringement and/or misappropriation and to control all litigation to remove such infringement and/or misappropriation, all as
RedHill shall deem appropriate in its sole discretion. RedHill shall provide SCOLR with information regarding any such litigation
in the same manner as required by SCOLR under Section 10.2.3 and shall, subject to recovery under Section 10.2.5, be solely responsible
for all costs and expenses of such litigation. In addition, RedHill shall indemnify, defend and hold SCOLR harmless from all loss,
claim or damage, including reasonable attorney’s fees and costs, awarded against SCOLR in connection with such litigation.
RedHill agrees to inform SCOLR promptly if RedHill decides not to take infringement or misappropriation action in order for SCOLR
to assume responsibility of infringement or misappropriation action to be taken as per SCOLR’s discretion.

 

In the event SCOLR
does, at its discretion, undertake any infringement or misappropriation action, SCOLR will provide RedHill with copies of all relevant
documentation so that RedHill will be informed of the continuing action and may comment upon such documentation sufficiently in
advance of any initial deadline for filing a response, provided, however, that if RedHill has not commented upon such documentation
in a reasonable time for SCOLR to sufficiently consider RedHill’s comments prior to a deadline, or SCOLR must act to preserve
the action, SCOLR will be free to act without consideration of RedHill’s comments, if any. 

 

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10.2.3          Co-operation.
The Parties will provide reasonable assistance to each other, including providing access to relevant documents and other evidence,
making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the prosecuting
Party to maintain the action.

 

10.2.4          Recovery.
Any amounts recovered in connection with or as a result of any action contemplated by Sections 10.2.2 and 10.2.3, whether by settlement
or judgment, will be used to reimburse the Parties for their reasonable costs and expenses in making such recovery (which amounts
will be allocated pro rata if insufficient to cover the totality of such expenses), and any remainder received by RedHill in excess
of the reasonable costs and expenses in making such recovery will be treated as Net Sales (without deduction of Recognized Deductions)
and payments will be due in respect of same pursuant to this Agreement.

 

10.3        Patent
License

 

10.3.1          Claim
- Rights and Procedures. In the event that either SCOLR or RedHill, or both of them, are sued by a third party alleging that
the commercialization of a Product infringes upon any intellectual property rights of such third party, the Party being so sued
shall immediately give the other Party notice of same and the Parties shall thereafter proceed as provided in Section 13.

 

10.3.2          Neither
Party shall, without the consent of the other Party, enter into any settlement or compromise or consent to any judgment in respect
of any claim related to rights licensed to RedHill under this Agreement, unless such settlement, compromise or consent includes
an unconditional release of the other Party from all liability arising out of the claim and does not otherwise limit or impair
the other Party’s rights.

 

11.          CONFIDENTIALITY

 

11.1         Disclosure
and Use Restriction. The Parties agree that, during the Term of this Agreement and thereafter, each Party will keep completely
confidential and will not publish, submit for publication or otherwise disclose, and will not use for any purpose except for the
purposes contemplated by this Agreement, any Confidential Information (as such term is defined below) received from the other Party.

 

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11.2         Confidential
Information. “Confidential Information” shall mean all information and know-how and any tangible embodiments
thereof provided by or on behalf of one Party to the other Party either in connection with the discussions and negotiations pertaining
to this Agreement or in the course of performing this Agreement, which may include data; knowledge; practices; processes; ideas;
research plans; engineering designs and drawings; research data; manufacturing processes and techniques; scientific, manufacturing,
marketing and business plans; and financial and personnel matters relating to the disclosing Party or to its present or future
products, sales, suppliers, customers, employees, investors or business. Notwithstanding the foregoing, information or know-how
of a Party shall not be deemed Confidential Information of such Party for purposes of this Agreement if such information or know-how:

 

(i)          was
already known to the receiving Party, other than under an obligation of confidentiality or non-use, at the time of disclosure to
such receiving Party;

 

(ii)          was
generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was
otherwise part of the public domain, at the time of its disclosure to such receiving Party;

 

(iii)          became
generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise
became part of the public domain, after its disclosure to such receiving Party through no fault of the receiving Party;

 

(iv)          was
disclosed to such receiving Party, other than under an obligation of confidentiality or non-use, by a third party who had no obligation
to the disclosing Party not to disclose such information or know-how to others; or

 

(v)          was
independently discovered or developed by such receiving Party, as evidenced by their written records, without the use of Confidential
Information belonging to the disclosing Party and prior to any subsequent disclosure by the receiving Party.

 

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All Licensed Know-How shall be deemed to
be Confidential Information of SCOLR; provided that RedHill shall be entitled to disclose and use any Licensed Know-How in the
exercise of its rights under this Agreement on the terms provided in Section 11.3 below, including, without limitation, clause
(iv) thereof.

 

11.3         Authorized
Disclosure. Notwithstanding the provisions of Section 11.1 above, a Party shall be entitled to disclose the Confidential Information
of the other Party hereto to the extent that such disclosure is:

 

(i)          made
in response to a valid order of a court of competent jurisdiction; provided, however, that such Party will first (to the
extent practicably possible) have given notice to such other Party and given such other Party a reasonable opportunity to quash
such order and to obtain a protective order requiring that the Confidential Information and documents that are the subject of such
order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued;
and provided further that if a disclosure order is not quashed or a protective order is not obtained, the Confidential Information
disclosed in response to such court or governmental order will be limited to that information which is legally required to be disclosed
in response to such court or governmental order;

 

(ii)          otherwise
required by law; provided, however, that the disclosing Party will provide such other Party with notice of such disclosure
in advance thereof to the extent practicably possible and to the extent permitted, will redact from such disclosure the other party’s
Confidential Information or designate the same as trade secret;

 

(iii)          made
by such Party to the Regulatory Authorities as necessary for the development or commercialization of a medicinal product, including
the Product, in a country, as required in connection with any filing, application or request for Regulatory Approval or as required
by applicable securities laws and regulations, subject to the limitations in Section 11.3(ii);

 

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(iv)          made
by such Party, in connection with the performance of this Agreement, to Sublicensees, Affiliates, directors, officers, employees,
consultants, representatives or agents, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use
at least equivalent in scope to those set forth in this Agreement; or

 

(v)          made
by such Party in the course of submitting financial accounts to relevant authorities as per local statutory requirements or to
existing or potential acquirers; existing or potential collaborators; investment bankers; existing or potential investors, merger
candidates, partners, venture capital firms or other financial institutions or investors for purposes of obtaining financing; or,
bona fide strategic potential partners; each of whom prior to disclosure must be bound by obligations of confidentiality and non-use
at least equivalent in scope to those set forth in this Agreement.

 

12.          PRESS
RELEASES 

 

Press releases
or other similar public communication by either Party relating to the terms of this Agreement (but not, for the avoidance of doubt,
unless reference is made to the other Party or the terms of this Agreement, with respect to activities in exercise of its rights
under this Agreement) will be approved in advance by the other Party, which approval will not be unreasonably withheld or delayed,
except for those communications required by applicable law, regulation or securities exchange rule (including, but not limited
to, a public offering prospectus), disclosures of information for which consent has previously been obtained, and information of
a similar nature to that which has been previously disclosed publicly with respect to this Agreement, each of which will not require
advance approval, but will be provided to the other Party as soon as practicable after the release or communication thereof. For
the avoidance of doubt, the Parties may issue press releases regarding the fact that this Agreement has been signed and the nature
of the agreement so long as they do not describe the specific provisions hereof without approval from the other party.

 

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13.          INDEMNIFICATION

 

13.1         Indemnification
of SCOLR. RedHill will defend and hold SCOLR and its directors, officers, employees and agents (“SCOLR Parties”)
harmless, from and against any and all liability, suits, investigations, claims or demands by a third party to the extent arising
from or occurring as a result of or in connection with (a) the negligence or willful misconduct on the part of RedHill in performing
any activity contemplated by this Agreement, (b) breach by RedHill of any representations, warranties, or covenants set forth in
this Agreement and/or (c)Product liability; except to the extent a Loss arises from the (i) negligence or willful misconduct on
the part of an SCOLR Party; or (ii) breach by SCOLR of any representations, warranties or covenants set forth in this Agreement.
RedHill shall, in addition, indemnify SCOLR against any losses, damages or liabilities from such claims (including reasonable attorneys’
fees and expenses) by paying the amount of any judgment awarded against SCOLR in connection with such claims.

 

Indemnification
of RedHill. SCOLR will defend and hold RedHill, its Affiliates, and their respective directors, officers, employees
and agents (“RedHill Parties”), harmless, from and against any and all liability, suits, investigations,
claims or demands by a third party to the extent arising from or occurring as a result of or in connection with (a) negligence
or willful misconduct on the part of SCOLR; or (b) breach by SCOLR of any representations, warranties, or covenants set forth in
this Agreement, except to the extent the liability or loss arises from or occurs as a result of or in connection with (i) negligence
or willful misconduct on the part of a RedHill Party; (ii) breach by RedHill of any representations, warranties, or covenants set
forth in this Agreement. SCOLR shall, in addition, indemnify RedHill against any losses, damages or liabilities from such claims
(including reasonable attorneys’ fees and expenses) by paying the amount of any judgment awarded against RedHill in connection
with such claims.

 

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SCOLR shall further
be responsible for and shall indemnify and hold RedHill harmless in respect of:

 

13.1.1          All royalties and other payments
existing under an agreement signed by SCOLR or any obligation undertaken by SCOLR, required to be paid to third parties in respect
of the commercialization of the Products.

 

13.1.2          All royalty and other payments
required to be paid to other third parties in respect of the Product as a result of a claim by any of SCOLR’s existing or
former employees, consultants or shareholders, or any person named in SCOLR’s patents or patent applications, or any person
claiming it should have been named as an inventor in such patent applications.

 

		13.2	In the event that additional license(s) or rights or waivers with respect to intellectual property
(irrespective of whether such is the intellectual property covered herein or any other intellectual property) are necessary to
enable RedHill, its Affiliates or Sublicensees to exercise the License, and the receipt of same requires payment of royalties,
settlement payments, awards or any other payments made to and taken by any third party on account of the use of such third party’s
intellectual property or a waiver with respect thereto, then RedHill shall effect a reduction in the Royalties payable to SCOLR
hereunder by the amount of such third party payments (without derogating from any other deductions permitted herein, including
without limitation, on account of a Combination Product reduction).

 

13.3         Limitations.
The Parties acknowledge and agree that Sections 10.2, 10.3, 13.1, 13.2 and 13.3 state the Parties’- sole rights, remedies and obligations
with respect to the claims described therein.

 

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13.4         Conditions
to Indemnity. Each Party’s agreement to indemnify and
hold the other harmless is conditioned upon the indemnified Party (i) providing written notice to the indemnifying Party of any
claim, demand or action arising out of the indemnified activities within thirty (30) days after the indemnified Party has knowledge
of such claim, demand or action, (ii) permitting the indemnifying Party to assume full responsibility to investigate, prepare for
and defend against any such claim or demand, (iii) assisting the indemnifying Party, at the indemnifying Party’s reasonable
expense, in the investigation of, preparation of and defense of any such claim or demand; and (iv) the indemnifying Party not compromising
or settling such claim or demand without the indemnified Party’s prior written consent, unless such settlement includes as
an unconditional term thereof the giving by the claimant or plaintiff to such indemnified Party a complete release from all liability
in respect of such claim or litigation; provided that, if the Party entitled to indemnification fails to promptly
notify the indemnifying Party pursuant to the foregoing clause (i), the indemnifying Party shall only be relieved of its indemnification
obligation to the extent it is prejudiced by such failure and provided further that the indemnified Party is not obligated
to notify the indemnifying Party of claims, demands and/or actions made
directly against the indemnifying Party only. Notwithstanding the foregoing, if in the reasonable judgment of the indemnified
party, such suit or claim involves an issue or matter which could have a materially adverse affect on the business, operations
or assets of the indemnified party, the indemnified party may waive its rights to indemnity under this Agreement and control the
defense or settlement thereof, but in no event shall any such waiver be construed as a waiver of any indemnification rights such
indemnified party may have at law or in equity.

 

14.          TERM
AND TERMINATION

 

14.1         Term.
Unless earlier terminated in accordance with the provisions of this Article 14, the term of this Agreement (the “Term”)
commences upon the Effective Date and will continue until terminated in accordance with the terms hereof.

 

14.2         Termination.

 

14.2.1          Termination
for Breach. Failure by a Party to comply with any of its material obligations contained herein will entitle the Party not in
default to give to the defaulting Party notice specifying the nature of the material breach, requiring the defaulting Party to
make good or otherwise cure such material breach, providing specific actions that the defaulting Party could take to cure such
material breach, and stating its intention to invoke the provisions of Section 14.3 if such material breach is not cured. If such
material breach is not cured within 90 days after the receipt of such notice (or, if such material breach cannot be cured within
such 90-day period, if the defaulting Party does not commence actions to cure such material breach within such period and thereafter
diligently continue such actions), the Party not in default will be entitled, without limiting any of its other rights conferred
on it by this Agreement (except as expressly set forth herein), to terminate this Agreement by providing written notice to the
breaching Party.

 

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Notwithstanding anything to the contrary
herein, in the event of SCOLR’s material breach of this Agreement, and without derogating from any of RedHill’s other
rights at law, RedHill shall have the right to continue all activities under the License granted herein and to continue utilizing
the Patents for the exploitation of the License, with the right to set-off, from any sums due to the SCOLR hereunder, amounts equivalent
to any damage caused to RedHill as a result of SCOLR’s breach hereunder.

 

Notwithstanding, it is clarified that SCOLR shall not be entitled
to terminate this Agreement for any reason whatsoever once the Royalty Term has expired

 

14.2.2          Voluntary
Termination. Following payment of the up-front payment under Section 6.1, RedHill shall be entitled, in its sole discretion,
to terminate this Agreement at any time on thirty (30) days written notice to SCOLR, without the need to pay SCOLR any compensation
in respect of such termination, in which case the license granted under this Agreement shall immediately terminate and, except
as permitted in Section 14.3.1, RedHill will immediately cease any and all development and other activities regarding the Product.
Outside the scope of Sections 14.2.1 and 15.11 SCOLR shall have no right to terminate this Agreement.

 

14.3         Consequences
of Termination

 

14.3.1          License.
Upon early termination of this Agreement, all rights granted to RedHill under Section 2.1 will terminate; provided that RedHill
shall have a period of 180 days after the date of termination to sell-off all previously made Product, subject to Royalties and
Sublicense Sale Royalties on such sales being duly paid to SCOLR; and provided further that, upon termination of this Agreement
by SCOLR for RedHill’s breach, RedHill shall have no sell-off right whatsoever. Upon termination of this Agreement all sublicenses
granted by RedHill shall terminate.

 

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14.3.2          Continuation
following SCOLR’s Bankruptcy. The Parties agree that in the event that SCOLR becomes insolvent or makes a filing under
bankruptcy or similar laws in any jurisdiction, RedHill shall have the protection afforded to the licensee under the United States
Bankruptcy Code, including but not limited to, the protections set forth in 11 U.S.C §365(n) or its equivalent in any other
jurisdiction which allows the licensee, upon rejection of the license agreement by the debtor-licensor or its representative, the
option to either retain the licensee’s rights in the intellectual property under the existing contract while continuing to
pay royalties, or to treat the executory contract as terminated. SCOLR does not warrant that the rights granted to RedHill under
this Section 14.3.2 will be enforceable under the laws of the jurisdiction under which SCOLR operates.

 

14.3.3          Return
of Information and Materials. Upon early termination of this Agreement, each Party will return to the other all Confidential
Information of the other Party (except one copy of which may be retained for archival and compliance purposes), RedHill will return
to SCOLR or its designee all Licensed Know-How and any other tangible materials received by RedHill under this Agreement and RedHill
will further waive and actively deregister or assign as requested by SCOLR, all Patent right registrations made under Sections
2.3 and 10.1.1 above.

 

14.3.4          Accrued
Rights. Termination or expiration of this Agreement for any reason will be without prejudice to any rights or financial compensation
that will have accrued to the benefit of a Party prior to such termination or expiration. Such termination or expiration will not
relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.

 

14.3.5          Survival.
Sections 6.9, 7, 9, 11, 13.1-13.4, 14.3 and 15.3 of this Agreement will survive expiration or termination of this Agreement for
any reason.

 

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14.3.6          License
Survival. Once the Royalty Term shall expire, RedHill shall, provided that the Agreement has not been terminated by SCOLR under
Section 14.2.1 or by RedHill under Section 14.2.2, be entitled to continue to manufacture and/or sell the Product throughout the
world without having to pay Royalties or any other amounts of whatsoever nature to SCOLR in respect of such activities subsequent
to such date. This Section 14.3.6 shall survive termination or expiration of this Agreement.

 

15.          MISCELLANEOUS

 

15.1         Assignment.
Without the prior written consent of the other Party hereto, neither Party will sell, transfer, assign, delegate, pledge or otherwise
dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties
hereunder; provided, however, that (i) either Party hereto may assign or transfer this Agreement or any of its rights or obligations
hereunder without the consent of the other Party to any Affiliate, or to any third party successor in interest with which it has
merged or consolidated, or to which it has transferred all or substantial part of its assets or stock to which this Agreement relates.
Any purported assignment or transfer in violation of this Section 15.1 will be void ab initio and of no force or effect.

 

15.2         Severability.
Should any term or provision of this Agreement be or become invalid or unenforceable or should this Agreement contain
an omission, the validity or enforceability of the remaining terms or provisions shall not be affected. In such case, subject to
the next following sentence, the Parties shall immediately commence to negotiate in good faith in order to replace the invalid
or unenforceable term or provision by such other valid or enforceable term or provision which comes as close as possible to the
original intent and effect of the invalid or unenforceable term or provision, or respectively, to fill the omission by inserting
such term or provision which the Parties would have reasonably agreed to, if they had considered the omission at the date hereof.
In the event that any term or provision as aforesaid is invalid, void or unenforceable by reason of its scope, duration or area
of applicability or some similar limitation as aforesaid, then the court making such determination shall have the power to reduce
the scope, duration, area or applicability of the term or provision so that they shall be enforceable to the maximum scope, duration,
area or applicability permitted by applicable law which shall not exceed those specified in this Agreement or to replace such term
or provision with a term or provision that comes closest to expressing the intention of the invalid or unenforceable term or provision

 

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15.3         Governing
Law. This Agreement will be governed by and construed in accordance with English law, without reference to any rules of conflicts
of laws and the courts of London, England shall have exclusive jurisdiction of disputes regarding this Agreement and the Parties
hereby submit to the jurisdiction of such courts.

 

15.4         Notices.
All notices or other communications that are required or permitted hereunder will be in writing and delivered personally with acknowledgement
of receipt, sent by electronic mail (provided receipt is acknowledged), facsimile (and promptly confirmed by personal delivery,
registered or certified mail or overnight courier as provided herein), sent by nationally-recognized overnight courier or sent
by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

If to SCOLR, to:

 

SCOLR Pharma
Inc.

19204 North
Creek Parkway

Suite 100

Bothell, WA
98011

USA

Fax: + (425)
368-1051

 

If to RedHill, to:

 

RedHill Biopharma
Ltd.

42 Givati
St.

Ramat Gan
52232

Israel

Fax: +972
(3) 725 5723

 

or to such other
address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any
such communication will be deemed to have been given (i) when delivered, if personally delivered, (ii) on the business day (on
the receiving end) after dispatch, if sent by nationally-recognized overnight courier (third business day if sent internationally),
(iii) on the third business day following the date of mailing, if sent by mail (fifth business day if sent internationally) and
(iv) on the first business day (on the receiving end) after being sent by facsimile or by if sent by electronic mail followed by
facsimile. It is understood and agreed that this Section 15.4 is not intended to govern the day-to-day business communications
necessary between the Parties in performing their duties, in due course, under the terms of this Agreement.

 

    	29

    	 

    

 

15.5         Entire
Agreement; Modifications. This Agreement sets forth and constitutes the entire agreement and understanding between the Parties
with respect to the subject matter hereof and all prior agreements, understanding, promises and representations, whether written
or oral, with respect thereto are superseded hereby. Each Party confirms that it is not relying on any representations or warranties
of the other Party except as specifically set forth herein. No amendment, modification, release or discharge will be binding upon
the Parties unless in writing and duly executed by authorized representatives of both Parties.

 

15.6         Relationship
of the Parties. It is expressly agreed that the Parties will be independent contractors of one another and that the relationship
between the Parties will not constitute a partnership, joint venture or agency.

 

15.7         Waiver.
Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no
such waiver will be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such
term or condition. Any such waiver will not be deemed a waiver of any other right or breach hereunder.

 

15.8         Counterparts.
This Agreement may be executed in two (2) or more counterparts, each of which will be deemed an original, but all of which together
will constitute one and the same instrument.

 

15.9         No
Third Party Beneficiaries. The representations, warranties, covenants and agreements set forth in this Agreement are for the
sole benefit of the Parties hereto and their successors and permitted assigns, and they will not be construed as conferring any
rights on any other parties.

 

15.10       Further
Assurances. Each Party will duly execute and deliver, or cause to be duly executed and delivered, such further instruments
and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents and instruments,
as may be necessary to carry out the provisions and purposes of this Agreement.

 

    	30

    	 

    

 

15.11       Force
Majeure. Neither party shall be responsible to the other for failure or delay in performing
any of its obligations under this Agreement or for other non-performance hereof but only to the extent that such delay or non-performance
is occasioned by a cause beyond the reasonable control and without fault or negligence of such party, including, but not limited
to earthquake, fire, flood, explosion, discontinuity in the supply of power, court order or governmental interference, act of God,
strike or other labor trouble, act of war or terrorism and provided that such party will inform the other party as soon as is reasonably
practicable and that it will entirely perform its obligations immediately after the relevant cause has ceased its effect. If any
such force majeure event continues for a continuous period of 12 months, the Party whose performance is not prevented by such event
may terminate this Agreement with immediate effect by providing the other Party with written notice.

 

IN WITNESS WHEREOF, the Parties
hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date. 

 

	SCOLR Pharma Inc.	 	RedHill Biopharma Ltd.
	 	 	 
	Signature: 	/s/ Stephen J. Turner	 	Signature: 	/s/ Dror Ben-Asher
	Name:  Stephen J. Turner	 	Name: Dror Ben-Asher
	Title: President & CEO	 	Title: CEO

 

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ANNEX A

 

PATENTS 

 

Part II:

 

US Patent 6,517,868

US Patent 6,936,275

US Patent 7,229,642

And any related foreign applications or patents*

 

    	32

    	 

    

 

ANNEX B

 

LICENSED KNOW- HOW

 

List all related
documentation and “know- how” for ondansetron formulation

FDA correspondence

Formulation data

Clinical data

Analytical data

Scientific write up and reviews

 

Manufacturing data

SCOLR undertakes to assist RedHill or its
sublicensee in a technical transfer to a contract manufacturing organization.

 

    	33

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