by and between

1
[EXECUTION COPY]

LICENSE AND SUPPLY AGREEMENT

by and between

NASTECH PHARMACEUTICAL COMPANY INC.

and

XXXXXXX PHARMA, INC.

dated as of December 11, 1997
2
TABLE OF CONTENTS

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SECTION 1
DEFINITIONS

SECTION 2
GRANT OF LICENSES; LICENSE OPTION

2.1 Grant of Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Sublicenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Nastech Retained Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Additional Indication Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Scopolamine Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

SECTION 3
ROYALTY AND MILESTONE PAYMENTS

3.1 Royalty and Milestone Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Records and Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Quarterly Reports of Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

SECTION 4
SUPPLY OF SCOPOLAMINE UNITS

4.1 Supply of Scopolamine Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Minimum Annual Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Supply Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 Forecasts, Delivery and Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 Rejection and Replacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 Invoice and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 Supply Disruption; Alternate Manufacturing Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

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SECTION 5
CONDITIONS PRECEDENT TO THE CLOSING;
CLOSING DATE; TERM OF AGREEMENT

5.1 Conditions Precedent to Xxxxxxx'x Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Conditions Precedent to Nastech's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SECTION 6
REPRESENTATIONS AND WARRANTIES OF NASTECH

6.1 Organization, Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Due Authority; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 IND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Technology Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.7 Governmental Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.8 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.9 Implied Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

SECTION 7
REPRESENTATIONS AND WARRANTIES OF XXXXXXX

7.1 Organization, Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Due Authority; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.5 Governmental Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

SECTION 8
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES

8.1 Governmental Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 Responsibility for NDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 Recall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

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8.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.7 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.9 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.10 Competition; No Sale for Resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.11 Scopolamine Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.12 Conflicting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.13 Patent and Trademark Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.14 Infringement; Enforcement of Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.15 Supply of Scopolamine Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.16 Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.17 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.18 Referral of Orders and Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.19 Deemed Breach of Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.20 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

SECTION 9
INDEMNIFICATION

9.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 Notice and Opportunity To Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3 Indemnification Payment Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.4 Indemnification Payment Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.5 Indemnification Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

SECTION 10
TERMINATION

10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

SECTION 11
MISCELLANEOUS

11.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.3 Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

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11.5 Independent Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.7 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.10 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.12 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.14 Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

SCHEDULES

Schedule 2.1(a) IND
Schedule 3.1(a) Royalty Payments
Schedule 3.1(b) Milestone Payments
Schedule 4.2(a) Sales Forecast
Schedule 4.5(d) Quality Assurance Addendum
Schedule 6.4 Intellectual Property

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LICENSE AND SUPPLY AGREEMENT

This LICENSE AND SUPPLY AGREEMENT ("Agreement"), dated as of December
11, 1997, is by and between NASTECH PHARMACEUTICAL COMPANY INC., a Delaware
corporation ("Nastech"), and XXXXXXX PHARMA, INC., a Delaware corporation
("Xxxxxxx").

W I T N E S S E T H

WHEREAS, Nastech is engaged, among other things, in the business of
research, development, manufacturing and commercialization of nasally
administered forms of pharmaceutical products;

WHEREAS, Xxxxxxx is engaged, among other things, in the business of
manufacturing, marketing and selling of pharmaceutical products; and

WHEREAS, subject to the terms and conditions set forth in this
Agreement, Nastech wishes to license to Xxxxxxx and Xxxxxxx wishes to license
from Nastech certain rights to a pharmaceutical specialty, containing
scopolamine as its active ingredient;

NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

SECTION 1

DEFINITIONS

For purposes of this Agreement, the following terms shall have the
meanings set forth below:

"Activities" shall mean the manufacturing, promoting, marketing,
selling and distributing of Scopolamine in the Territory as contemplated by
this Agreement.

"Affiliates" shall mean, with respect to any Person, any Persons
directly or indirectly controlling, controlled by, or under common control
with, such other Person. For purposes hereof, the term "controlled" (including
the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the direct or indirect ability or power to
direct or cause the direction of management policies of such Person or
otherwise direct the affairs of such Person, whether through ownership of
voting securities or otherwise.

"Annual Net Sales" shall mean, for any Year, the Net Sales for such
Year.
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"Closing Date" shall have the meaning given in Section 5.3 hereof.

"Copyrights" shall mean all of Nastech's copyright rights in the
Territory that are used or exercised by Nastech solely in connection with the
Activities, including, without limitation, Nastech's copyright rights in the
Marketing and Pricing Data and the Marketing Materials.

"Damages" shall mean any and all actions, costs, losses, claims,
liabilities, fines, penalties, demands, damages and expenses, court costs, and
reasonable fees and disbursements of counsel, consultants and expert witnesses
incurred by a party hereto (including interest which may be imposed in
connection therewith).

"Defective" shall mean, as to any Scopolamine Unit, the failure of
such Scopolamine Unit to strictly conform to the Specifications, the NDA, this
Agreement and all applicable law, including, without limitation, PDMA.

"FDA" shall mean the United States Food and Drug Administration.

"GMP" shall mean current Good Manufacturing Practices, as determined
by the FDA from time to time.

"Improved Scopolamine Unit" shall mean an improved version of the
Scopolamine Unit that is approved for marketing by the FDA.

"IND" shall have the meaning set forth in Section 2.1(a).

"Indemnified Party" shall have the meaning given in Section 9.2
hereof.

"Indemnifying Party" shall have the meaning given in Section 9.2
hereof.

"Intellectual Property" shall mean, collectively, (i) the Copyrights,
(ii) the Patents, and (iii) the Marketing Materials.

"Launch" shall mean the date, after Scopolamine receives final
marketing approval from the FDA, when Scopolamine Units are first made
commercially available by Xxxxxxx.

"Licensed Assets" shall have the meaning set forth in Section 2.1
hereof.

"Marketing and Research Data" shall mean, with respect to Scopolamine,
all Nastech customer lists, price lists, pricing information, studies, research
data and reports.

"Marketing Materials" shall mean all labeling, marketing and
promotional materials and inserts currently used by Nastech solely in
connection with the Activities.

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"Nastech" shall have the meaning given in the preamble and shall
include its Affiliates.

"NDA" shall have the meaning set forth in Section 2.1(a).

"Net Average Sales Price" shall, for any Quarter, mean (i) Net Sales
for such Quarter, divided by (ii) the number of Nascobal Units sold during such
Quarter.

"Net Sales" shall mean, with respect to Scopolamine, the gross amount
invoiced to unrelated third parties for Scopolamine in the Territory, less:

(a) trade and reasonable and customary cash discounts allowed;

(b) refunds, rebates, chargebacks, retroactive price adjustments
and any other allowances which effectively reduce the net
selling price; and

Such amounts shall be determined from books and records maintained in
accordance with GAAP, consistently applied.

"Patents" shall mean the provisional U.S. patent application serial
number 60/058,651 and those United States patents or patent applications
pending or filed by Nastech or its Affiliates (or the rights to which have been
assigned to Nastech) as of the date hereof relating to Scopolamine, including
any such patents and patent applications set forth on Schedule 6.4 hereto, and
any patents and patent applications resulting therefrom, including any
extension, reissue, renewal, reexamination or continuation-in-part of such
patent or patent application.

"PDMA" shall mean the Prescription Drug Marketing Act of 1987, as
amended from time to time, together with any rules or regulations promulgated
thereunder.

"Person" shall mean a natural person, a corporation, a partnership, a
trust, a joint venture, a limited liability company, any governmental authority
or any other entity or organization.

"Promotional Materials" shall mean any tangible advertising and
promotional labeling bearing a name (trade name or generic name) used in the
promotion of Scopolamine, including, without limitation, promotional materials
produced by Xxxxxxx (examples include, but are not limited to, journal ads,
brochures, service items, managed care pull through sheets, formulary
presentations, price lists, monographs, Internet pages and telephone or
television advertisements) and materials produced by outside sources (examples
include, but are not limited to, medical reprints, textbooks and CME materials)
to the extent funded by, created in cooperation with, reviewed, or distributed
by Xxxxxxx. The definition of Promotional Materials shall also include press
releases and other releases of information to the media regarding Scopolamine.

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"Quarter" shall mean, as the case may be, the three months ending on
March 31, June 30, September 30 or December 31 in any Year.

"Regulatory Problem" shall have the meaning given in Section 8.2(b).

"Xxxxxxx" shall have the meaning given in the preamble and shall
include its Affiliates.

"Scopolamine" shall mean an intranasal form of scopolamine for the
prevention and treatment of motion sickness and all other additional
indications and product line extensions, in all dosage strengths and sizes that
may potentially, pursuant to applicable laws and regulations, be developed
under the IND and manufactured, marketed and sold in the Territory under the
NDA (when approved), together with all expansions and improvements to
Scopolamine which may be included in any supplement, modification or addition
to the NDA.

"Scopolamine Unit" shall mean a ready for sale packaged unit
containing (i) a sealed prescription vial containing a metered dose actuator
and a dust cover, (ii) a 5.0 xx xxxxx bottle containing Scopolamine gel
solution, and (iii) a patient instruction sheet. A screw-on actuator is
provided. The actuator, following priming, will deliver 0.1 ml of the
Scopolamine gel solution. The dosing of the Scopolamine Unit is to be
determined, but will fall within a range of 0.1 mg to 0.4 mg per dose. One
bottle will deliver twenty-four doses.

"Specifications" shall mean, at any time, the specifications for
Scopolamine that are then approved by the FDA and contained in the NDA in
effect at such time.

"Target Indication" shall mean the multiple daily dosing for the
prevention and treatment of motion sickness.

"Technology" shall mean all of Nastech's Patents, technology, know-how
and all other information necessary to the manufacture of Scopolamine.

"Territory" shall mean the fifty (50) states, the District of Columbia
and the territories and possessions comprising the United States of America,
including Puerto Rico.

"Trademarks" shall have the meaning given in Section 8.13(b).

"Year" shall mean a calendar year during the term of this Agreement.

SECTION 2

GRANT OF LICENSES; LICENSE OPTION

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2.1 Grant of Licenses. Nastech hereby grants to Xxxxxxx an
exclusive, even as to Nastech (except as set forth in Section 2.3), license
under the following assets to make, use and sell Scopolamine, for all
indications and for all product line extensions, in the Territory (such assets
are referred to herein collectively as the "Licensed Assets"):

(a) all of Nastech's rights under the Investigational New
Drug Application No. 33,983 filed by Nastech with the FDA for
Scopolamine (the "IND") (which IND is set forth on Schedule 2.1(a)),
any future New Drug Applications filed by Nastech with the FDA for
Scopolamine (collectively, the "NDA"), and all other regulatory
filings and approvals, registrations and governmental authorizations
that relate to Scopolamine in the Territory;

(b) the Intellectual Property;

(d) the Technology.

2.2 Sublicenses. The licenses granted herein shall not be
sublicensed by Xxxxxxx without the prior written consent of Nastech, which
consent shall not be unreasonably withheld.

2.3 Nastech Retained Rights. Anything herein contained to the
contrary notwithstanding, Nastech shall retain at all times during the term of
this Agreement, and shall bear all costs associated with, all rights necessary:
(a) to manufacture, or to have manufactured, Scopolamine for Xxxxxxx hereunder
and otherwise fulfill its obligations under this Agreement, (b) to manufacture,
have manufactured, use or sell Scopolamine in the Territory for any
subsequently developed product pursuant to Section 2.5, (c) to manufacture,
have manufactured, use or sell Scopolamine outside of the Territory, (d) to
manufacture or have manufactured Scopolamine in the Territory for sales outside
the Territory, and (e) subject to Section 8.3, to make such changes as Nastech
may deem reasonably appropriate in connection with any differing approach to
manufacturing it may adopt in a facility(ies) in which any of the components of
Scopolamine are produced. Except as provided by this Section, Nastech shall
have no right to use or sell the Licensed Assets.

2.4 Marketing. After Scopolamine receives final marketing approval
from the FDA, Xxxxxxx shall use commercially reasonable efforts to market and
sell Scopolamine in the Territory. Such efforts shall be consistent with
industry norms, given the product profile, product potential and the state of
the market at Launch. Xxxxxxx will consult with Nastech on the development of
Xxxxxxx'x marketing plan for the Scopolamine.

2.5 Additional Indication Option. Should Xxxxxxx fail to (i) conduct
clinical studies within six months after approval of the NDA for the Target
Indication as to any single indication for Scopolamine in addition to the
Target Indication (an "Additional Indication"), (ii) provide

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Nastech with a plan for the development of such Additional Indication within
six months after approval of the NDA for the Target Indication, or (iii) submit
a NDA as to such Additional Indication within four years after approval of the
NDA for the Target Indication, then rights to all indications other than the
Target Indication (the "Other Indications") shall, at Nastech's option, revert
back to Nastech; provided, however, that (A) any product subsequently developed
by Nastech that is based on the Other Indications shall not appear
substantially similar to Scopolamine (including as further developed by
Xxxxxxx) and shall not use the same or similar bottle, dispensed dose
concentration of active ingredient or packaging; (B) Nastech shall use its best
efforts throughout the term of this Agreement to prevent "off-label" sales of
such product from competing with sales of Scopolamine for the Target Indication
in the Territory; (C) Nastech shall not enter into any license, joint venture,
distribution, marketing, sales or similar agreement in respect of any product
based on an Other Indication unless such third party has agreed, for Xxxxxxx'x
benefit, to use its best efforts throughout the term of this Agreement to
prevent "off-label" sales of such product from competing with sales of
Scopolamine for the Target Indication in the Territory; and (D) all data,
discoveries, improvements, reports, research and studies generated by Xxxxxxx
in connection with the development of any additional Indication shall be the
exclusive property of Xxxxxxx. Notwithstanding the foregoing, (x) Nastech
shall cooperate and assist Xxxxxxx in its development of an Additional
Indication; and (y) should Nastech fail to perform its obligations pursuant to
clause (y) of this sentence in any material respect, no rights to any Other
Indications shall revert to Nastech under this Section 2.5.

2.6 Scopolamine Development. Nastech shall have authority over the
development of Scopolamine in accordance with this Agreement, but shall consult
with Xxxxxxx on all significant development issues. Nastech will develop
specifications for Scopolamine and conduct research and development necessary
or desirable to enable the production and marketing of Scopolamine for the
Target Indication. Further, Nastech will conduct all pre-clinical and clinical
trials and design specific protocols for Scopolamine that are, in each case,
necessary or desirable in obtaining a Letter of Approval from the FDA approving
the marketing of Scopolamine for the Target Indication. Nastech shall send
Xxxxxxx a written report as to the status of Nastech's development efforts on
June 30 and December 31 of each Year prior to receiving the Letter of Approval
referenced above. Nastech shall use its best efforts to fulfill its
development obligations hereunder as expeditiously as possible.

SECTION 3

ROYALTY AND MILESTONE PAYMENTS

3.1 Royalty and Milestone Payments.

(a) Xxxxxxx shall make combined royalty and cost of goods
payments to Nastech, at the times, in the amounts and subject to the
conditions set forth on Schedule 3.1(a).

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(b) Xxxxxxx shall make milestone payments to Nastech, at the
times, in the amounts and subject to the conditions set forth on
Schedule 3.1(b).

(c) In the event that (i) the Net Average Sales Price falls
below $20.80, (ii) a Patent is not granted in respect of Scopolamine
before December 31, 2000 or any Patent is unenforceable, (iii) a
generic drug competitor with a nasal scopolamine product emerges, (iv)
there is an interruption in the supply of the Scopolamine for a period
of 60 days, and/or (v) the occurrence of any circumstance having a
materially adverse effect on Scopolamine which is beyond the control
of Xxxxxxx, then, in each case, the obligation of Xxxxxxx to make any
payments pursuant to Section 3.1(a) or Schedule 3.1(a) shall terminate
and be deemed waived by Nastech and shall be promptly renegotiated in
good faith by Xxxxxxx and Nastech. Any renegotiated obligations
pursuant to this Section 3.1(c) shall be retroactively effective to
the date the applicable event described above occurred.

(d) In the event of any patent infringement, illegality or
severe side effect profile having a materially adverse effect on
Scopolamine, then the obligation of Xxxxxxx to make any payments
pursuant to Section 3.1(b) or Schedule 3.1(b) shall terminate and be
deemed waived by Nastech and shall be promptly renegotiated in good
faith by Xxxxxxx and Nastech. Any renegotiated obligations pursuant
to this Section 3.1(d) shall be retroactively effective to the date
the applicable event described above occurred.

3.2 Records and Audit.

(a) Xxxxxxx and its Affiliates shall keep full, true and
accurate books of account containing all particulars that may be
necessary for the purpose of showing the amounts payable to Nastech
hereunder. Such books of account shall be kept at Xxxxxxx'x principal
place of business or the principal place of business of the
appropriate Affiliate of Xxxxxxx to which this Agreement relates.
Such books and the supporting data shall be open, at all reasonable
times and upon reasonable notice during the term of this Agreement and
for 2 years after its termination, to the inspection of a firm of
certified public accountants selected by Nastech and reasonably
acceptable to Xxxxxxx, for the limited purpose of verifying Xxxxxxx'x
royalty statements; provided, however, that such examination shall not
take place more often than once each Year and shall not cover more
than the preceding 3 Years, with no right to audit any period
previously audited. Except as otherwise provided in this Section,
the cost of any such examination shall be paid by Nastech. In the
event that any such inspection reveals a deficiency in excess of 5% of
the reported royalty for the period covered by the inspection, Xxxxxxx
shall promptly pay Nastech the deficiency, plus interest, and shall
reimburse Nastech for the fees and expenses paid to such accountants
in connection with their inspection. The parties agree that neither
party shall be required to retain books and records with respect to
the above other than books and records relating to the current Year
and the immediately preceding 3 Years.

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(b) Nastech and its Affiliates shall keep full, true and
accurate books of account containing all particulars that may be
necessary for the purpose of showing the cost of manufacturing the
Scopolamine Units and Scopolamine samples supplied hereunder. Such
books of account shall be kept at Nastech's principal place of
business or the principal place of business of the appropriate
Affiliate of Nastech to which this Agreement relates. Such books and
the supporting data shall be open, at all reasonable times and upon
reasonable notice during the term of this Agreement and for 2 years
after its termination, to the inspection of a firm of certified public
accountants selected by Xxxxxxx and reasonably acceptable to Nastech,
for the limited purpose of verifying the cost of manufacturing the
Scopolamine Units and Scopolamine samples supplied hereunder;
provided, however, that such examination shall not take place more
often than once each Year and shall not cover more than the preceding
3 Years, with no right to audit any period previously audited.
Except as otherwise provided in this Section, the cost of any such
examination shall be paid by Schwarz. In the event that any such
inspection reveals that the actual cost invoiced to Xxxxxxx for
Scopolamine samples (prior to the 20% xxxx-up under Section 4.4(b))
exceeds the cost of manufacturing the Scopolamine samples by more than
5% during the period covered by the inspection, Nastech shall promptly
pay Xxxxxxx the amount by which Xxxxxxx previously overpaid for any
Scopolamine samples under Section 4.4(b), plus interest, and shall
reimburse Xxxxxxx for the fees and expenses paid to such accountants
in connection with their inspection. The parties agree that neither
party shall be required to retain books and records with respect to
the above other than books and records relating to the current Year
and the immediately preceding 3 Years.

3.3 Quarterly Reports of Royalties. In any Year, Xxxxxxx shall,
within 30 days after the end of each Quarter, deliver to Nastech true and
accurate reports, certified by an authorized official of Xxxxxxx, setting forth
the estimated or actual Annual Net Sales and total royalties due under Section
3.1(a) for such Year. If no royalties shall be due, Xxxxxxx shall so report.

3.4 Late Payments. Any amounts not paid by Xxxxxxx when due under
this Agreement shall be subject to interest from and including the date payment
is due through and including the date upon which Nastech received such amounts
at a rate equal to the sum of one and one half percent (1 1/2%) plus the prime
rate of interest quoted in the Money Rates section of The Wall Street Journal
(or similarly reputable data source), calculated daily on the basis of a
365-day year.

SECTION 4

SUPPLY OF SCOPOLAMINE UNITS

4.1 Supply of Scopolamine Units.

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(a) For the term of this Agreement, or for as long as Nastech
manufactures Scopolamine, whichever is shorter, Xxxxxxx agrees to
purchase from Nastech and Nastech agrees to supply Xxxxxxx with all of
its requirements for Scopolamine Units and Scopolamine samples for
their subsequent use, sale, lease or transfer by Xxxxxxx. In case
Nastech develops Improved Scopolamine Units, Nastech may, with
Xxxxxxx'x consent, to be given or withheld in Xxxxxxx'x sole
discretion, supply Improved Scopolamine Units instead of Scopolamine
Units under this Agreement.

(b) Xxxxxxx agrees to initiate purchases of Scopolamine Units
and Scopolamine samples hereunder by issuing Nastech purchase orders
not less than 60 days prior to the required delivery date set forth
therein. Nastech agrees to accept any order issued in accordance with
this Section 4.1(b) which specifies quantities reasonably consistent
with those set forth in the purchase forecasts for such Quarter and to
meet the delivery dates specified thereon. All purchase orders
hereunder shall be on Xxxxxxx'x standard purchase order form (a copy
of which has been delivered to Nastech) and shall be directed to
Nastech at the address set forth below. The terms and conditions of
purchase enumerated on the reverse side of such standard purchase
order form shall prevail over any inconsistent or conflicting language
as may exist on invoices, confirmation or order acknowledgment forms
of Nastech, provided, however, that in the event any terms thereof are
in conflict, or are inconsistent with any terms of this Agreement, the
terms and conditions hereof shall prevail. All Scopolamine Units
shall have at least a 22 month shelf life upon delivery to Xxxxxxx.

(c) Xxxxxxx may increase, without payment of any penalty or
premium, the quantities of Scopolamine specified on any purchase order
by up to thirty-five percent (35%) from the forecasts provided under
Section 4.5, provided, however, that notice of such increase is
received by Nastech on a supplemental purchase order not less than 45
days prior to the requested delivery date for such increased quantity
of Scopolamine. Subject to conformity with the manufacturing lead
times for Scopolamine ordered on such supplemental purchase order,
Nastech agrees to accept supplemental purchase orders for increased
quantities issued in accordance with this Section 4.1(c).

4.2 Minimum Annual Net Sales.

(a) Xxxxxxx shall guarantee minimum Annual Net Sales equal to
50% of the sales forecast set forth on Schedule 4.2(a).

(b) In the event that (i) the Net Average Sales Price falls
below $20.80, (ii) a Patent is not granted in respect of Scopolamine
before December 31, 2000 or any Patent is unenforceable, (iii) a
generic drug competitor with a nasal scopolamine product emerges, (iv)
there is an interruption in the supply of the Scopolamine for a period
of 60 days, and/or (v) the occurrence of any circumstance having a
materially adverse effect on Scopolamine which is beyond the control
of Xxxxxxx, then, in each case, the minimum

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Annual Net Sales requirements under Section 4.2(a) shall terminate and
be deemed waived by Nastech and shall be promptly renegotiated in good
faith by Xxxxxxx and Nastech. Any renegotiated minimum Annual Net
Sales requirement shall be retroactively effective to the date the
applicable event described above occurred.

4.3 Identification. Xxxxxxx may market Scopolamine under its name,
with its packaging and logo; Xxxxxxx will, however, identify Nastech as the
supplier in a fair manner, reasonably acceptable to Nastech. Nastech will bear
all the costs of labeling Scopolamine so as to appropriately display the
Xxxxxxx name provided Xxxxxxx supplies all the appropriate graphics, designs,
logos and related and appropriate artwork, provided that such labeling costs
will reasonably approximate Nastech's existing labeling costs. Xxxxxxx may use
Nastech's name and derivations thereof in promoting, marketing and selling
Scopolamine in the Territory; provided, however, that the particular
formulation of any reference to Nastech's name in any promotional material
shall be subject to Nastech's review and consent; and provided, further, that
once the formulation of any such reference has been reviewed and consented to
by Nastech, any subsequent reference to Nastech's name using such formulation
or a substantially similar formulation shall not be subject to the review or
consent of Nastech. All samples shall be clearly marked "for sample use only".

4.4 Supply Price.

(a) During the first 12 months after Launch, Nastech shall
supply Scopolamine Units to Xxxxxxx at the fixed price of $2.30 per
Scopolamine Unit. At all times after such 12 month period, Nastech
shall supply Scopolamine Units to Xxxxxxx at no additional cost to
Xxxxxxx. The combined royalty and cost of goods payments set forth on
Section 3.1(a) and Schedule 3.1(a) include any and all consideration
for the supply of Scopolamine Units. Accordingly, any payments to
Nastech pursuant to this Section 4.4(a) shall be deducted from future
payments to Nastech pursuant to Section 3.1(a) and Schedule 3.1(a), as
provided by Schedule 3.1(a).

(b) Nastech shall supply Scopolamine samples to Xxxxxxx at
Nastech's actual cost in manufacturing such samples (determined in
accordance with GAAP) plus 20%; provided, however, that Nastech's
actual cost in manufacturing such samples shall in no event exceed the
actual cost in manufacturing Scopolamine Units.

4.5 Forecasts, Delivery and Quality.

(a) Xxxxxxx shall provide Nastech with forecasts a minimum of
two Quarters prior to anticipated delivery dates; provided, that, only
60% of the forecast for the first such Quarter shall be binding.
These forecasts will be revised and extended in each succeeding
Quarter.

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(b) Delivery of Scopolamine Units shall be in accordance with
the destination and dates set forth in Xxxxxxx'x purchase order.
Delivery shall be C.I.F. point of delivery, and identification and
delivery of Scopolamine shall be deemed to have occurred when they
have been packed for shipment and delivered to Xxxxxxx'x single
designated point of delivery, at which time title and risk of loss
shall pass to Xxxxxxx. All deliveries shall be made using ground
transportation.

(c) All deliveries of Scopolamine Units hereunder shall
include a certificate of analysis provided by the quality control
manager of Nastech attesting to the fact that such Scopolamine Units
(i) have been manufactured by a process which complies with GMP and
has as its goal compliance with ISO 9002 standards and (ii) are of
quality which is in accordance with criteria established in the
Specifications, the NDA and all FDA requirements.

(d) The Scopolamine Units supplied hereunder shall have been
manufactured by a process which complies with the quality assurance
addendum set forth on Schedule 4.5(d).

4.6 Rejection and Replacement.

(a) In the event Xxxxxxx determines that any Scopolamine
Units as manufactured are Defective, then, within 60 days after
delivery of such Scopolamine Units to Xxxxxxx, Xxxxxxx shall provide
to Nastech a written notice of rejection, specifying in reasonable
detail the manner in which Scopolamine are Defective (the "Notice of
Rejection"). If no written Notice of Rejection is given to Nastech by
Xxxxxxx within such 60 day period, such Scopolamine Units shall be
deemed to have been accepted by Xxxxxxx, provided, however, that
nothing contained in this Section 4.6(a) shall be deemed to relieve
Nastech of its obligations under the warranties set forth in Section 6
below.

(b) Upon receipt of a Notice of Rejection from Xxxxxxx and in
order to minimize any hardship to Xxxxxxx'x customers, Nastech shall
use its best efforts to promptly supply to Xxxxxxx a quantity of
replacement Scopolamine Units meeting the Specifications equal to the
size of the lot which Xxxxxxx claims was Defective so that such
replacement Scopolamine Units shall be received by Xxxxxxx within 60
days following Nastech's receipt of Xxxxxxx'x Notice of Rejection.
All actual and documented costs and expenses relating to any rejection
and replacement pursuant to this Section 4.6 shall be paid by Nastech.

4.7 Invoice and Payment. Upon delivery of any Scopolamine shipment,
Nastech shall be entitled to submit invoices therefor to Xxxxxxx, and Xxxxxxx
agrees to remit payment within 30 days from receipt of the invoice.

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4.8 Supply Disruption; Alternate Manufacturing Site.

(a) Nastech shall use its best efforts to supply Xxxxxxx with
Scopolamine Units in a timely manner in accordance with the orders and
forecasts received by Nastech pursuant to Sections 4.1(b) and 4.5(a),
respectively, such efforts to include the maintenance of a stock of
the glass bottles and pumps from FDA approved vendors sufficient to
produce 100% of the quantity of Scopolamine Units shipped to Xxxxxxx
during the immediately preceding Quarter. In any Quarter, should
Nastech fail to supply Xxxxxxx with the greater of (x) 90% of the of
the quantity of Scopolamine Units forecasted for such Quarter pursuant
to Section 4.5(a) or (y) 90% of the quantity of Scopolamine Units
shipped to Xxxxxxx during the immediately preceding Quarter (if at
least so many are ordered for such Quarter pursuant to Section
4.1(b)), Xxxxxxx shall have the right to manufacture Scopolamine Units
and Xxxxxxx and Nastech shall transfer the manufacture of the
Scopolamine Units to Xxxxxxx'x Xxxxxxx facility or other designated
facility. Nastech will assume all costs of such transfer, such costs
not to exceed $150,000. Should Nastech cure its failure to supply,
Nastech shall have the right to resume the manufacture of Scopolamine
Units and Xxxxxxx and Nastech shall, at Nastech's expense, transfer
the manufacture of Scopolamine Units back to Nastech within a
commercially reasonable amount of time.

(b) Xxxxxxx shall have the option, at its sole discretion, to
transfer the manufacture of Scopolamine to its Seymour facility or
other designated facility. If Xxxxxxx exercises such option, Nastech
will use its best efforts to assist Xxxxxxx in transferring
Scopolamine to its designated facility. Xxxxxxx will assume all costs
of such transfer, such costs not to exceed $150,000. Any provision
herein to the contrary notwithstanding, should Xxxxxxx assume the
manufacture of Scopolamine, including pursuant to Section 4.8(a) or
this Section 4.8(b), Xxxxxxx and Nastech will renegotiate in good
faith the combined royalty and cost of goods rates provided for in
Section 3.1(a) prior to such manufacturing assumption.

(c) Should the manufacture of Scopolamine Units transfer to
Xxxxxxx pursuant to Sections 4.8(a) or (b), Xxxxxxx shall supply
Nastech Scopolamine Units for sales outside the Territory at Xxxxxxx'x
actual cost in manufacturing such Scopolamine Units plus 35%.

(d) Nastech and Xxxxxxx shall, as soon as practicable
following FDA approval of the NDA, qualify a manufacturing plant
designated by Xxxxxxx as an alternate FDA approved manufacturing and
packaging site for the Scopolamine Units. The costs of obtaining such
approval shall be borne equally by Nastech and Xxxxxxx.

SECTION 5

CONDITIONS PRECEDENT TO THE CLOSING;

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CLOSING DATE; TERM OF AGREEMENT

5.1 Conditions Precedent to Xxxxxxx'x Obligations. Subject to waiver
as set forth in Section 11.3, all obligations of Xxxxxxx to close the
transactions contemplated under this Agreement are subject to the fulfillment
or satisfaction of each of the following conditions precedent:

(a) Representations and Warranties True as of the Closing
Date. The representations and warranties of Nastech contained in this
Agreement or in any schedule, certificate or document delivered by
Nastech to Xxxxxxx pursuant to the provisions hereof shall have been
true on the date hereof and shall be true on the Closing Date with the
same effect as though such representations and warranties were made as
of such date.

(b) Compliance with this Agreement. Nastech shall have
performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or by
the Closing Date.

(c) Closing Certificate. Xxxxxxx shall have received a
certificate from Nastech, executed by an officer of Nastech,
certifying in such detail as Xxxxxxx may reasonably request that the
conditions specified in Sections 5.1(a) and 5.1(b), above, have been
fulfilled and certifying that Nastech has obtained all consents and
approvals required hereunder.

(d) No Threatened or Pending Litigation. On the Closing
Date, no suit, action or other proceeding, or injunction or final
judgment relating thereto, shall, to the best of Nastech's knowledge,
be threatened or be pending before any court or governmental or
regulatory official, body or authority in which it is sought to
restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might result in any
such suit, action or proceeding shall be pending or, to the best of
Nastech's knowledge, threatened.

5.2 Conditions Precedent to Nastech's Obligations. Subject to waiver
as set forth in Section 11.3, all obligations of Nastech to close the
transactions contemplated under this Agreement are subject to the fulfillment
or satisfaction of each of the following conditions precedent:

(a) Representations and Warranties True as of the Closing
Date. The representations and warranties of Xxxxxxx contained in this
Agreement or in any schedule, certificate or document delivered by
Xxxxxxx to Nastech pursuant to the provisions hereof shall have been
true on the date hereof and shall be true on the Closing Date with the
same effect as though such representations and warranties were made as
of such date.

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(b) Compliance with this Agreement. Xxxxxxx shall have
performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or by
the Closing Date.

(c) Closing Certificate. Nastech shall have received a
certificate from Xxxxxxx, executed by an officer of Xxxxxxx,
certifying in such detail as Nastech may reasonably request that the
conditions specified in Sections 5.2(a) and 5.2(b), above, have been
fulfilled and certifying that Xxxxxxx has obtained all consents and
approvals required hereunder.

(d) No Threatened or Pending Litigation. On the Closing
Date, no suit, action or other proceeding, or injunction or final
judgment relating thereto, shall, to the best of Xxxxxxx'x knowledge,
be threatened or be pending before any court or governmental or
regulatory official, body or authority in which it is sought to
restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might result in any
such suit, action or proceeding shall be pending or, to the best of
Xxxxxxx'x knowledge, threatened.

5.3 Closing Date.

(a) Subject to Section 5.3(b), below, the closing of the
transactions contemplated by this Agreement shall take place at 10:00
a.m., local time, on December 11, 1997, or on such other date as may
be mutually agreed upon in writing by the parties (the "Closing
Date"), at the offices of Xxxxx, Xxxxx & Xxxxx, 0000 Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.

(b) Each party hereby agrees to use its best efforts to
consummate the transactions contemplated herein, as modified, on or
before December 11, 1997; provided, however, that if the parties are
unable to close the transactions contemplated hereby by December 11,
1997, or such later date as shall be mutually agreed to in writing by
Nastech and Xxxxxxx, then all of the rights and obligations of the
parties under this Agreement shall terminate without liability.

SECTION 6

REPRESENTATIONS AND WARRANTIES OF NASTECH

Nastech hereby represents and warrants to Xxxxxxx that:

6.1 Organization, Power and Authority. Nastech is a corporation duly
organized and validly existing under the laws of the State of Delaware.
Nastech has all necessary corporate

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power and authority to enter into, and be bound by the terms and conditions of,
this Agreement, and to license the Licensed Assets, the Patents and the
Technology to Xxxxxxx pursuant hereto.

6.2 Due Authority; No Breach. The execution, delivery and
performance by Nastech of this Agreement and each agreement or instrument
contemplated by this Agreement, and the performance of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action by Nastech. This Agreement is, and each agreement or
instrument contemplated by this Agreement, when executed and delivered by
Nastech in accordance with the provisions hereof, will be (assuming the due
execution and delivery hereof and thereof by Xxxxxxx) the legal, valid and
binding obligation of Nastech, in each case enforceable against Nastech in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization, or similar laws
from time to time in effect which affect the enforcement of creditors' rights
generally and by legal and equitable limitations on the availability of
specific performance and other equitable remedies against Nastech. All persons
who have executed this Agreement on behalf of Nastech, or who will execute on
behalf of Nastech any agreement or instrument contemplated by this Agreement,
have been duly authorized to do so by all necessary corporate action. Neither
the execution and delivery of this Agreement or any such other agreement or
instrument by Nastech, nor the performance of the obligations contemplated
hereby and thereby, will (i) conflict with or result in any violation of or
constitute a breach of any of the terms or provisions of, or result in the
acceleration of any obligation under, or constitute a default under any
provision of the Articles of Incorporation or By-laws of Nastech or any
material contract or any other material obligation to which Nastech is a party
or to which it is subject or bound, or (ii) violate any judgment, order,
injunction, decree or award of any court, administrative agency, arbitrator or
governmental body against, or affecting or binding upon, Nastech or upon the
securities, property or business of Nastech, or (iii) constitute a violation by
Nastech of any applicable law or regulation of any jurisdiction as such law or
regulation relates to Nastech, or to the property or business of Nastech except
for such conflict, acceleration, default, breach or violation that is not
reasonably likely to have a material adverse effect on Nastech's ability to
perform its obligations under this Agreement or under any agreement or
instrument contemplated hereby.

6.3 IND. Nastech has furnished Xxxxxxx with access to a complete
copy of the IND, including all material amendments and supplements thereto.
Nastech is the lawful holder of all rights under the IND. Nastech has complied
in all material respects with all applicable laws and regulations in connection
with the transfer and continuation of the IND from the U.S. National
Aeronautical Space Administration, and the IND has been accepted by, and
nothing has come to the attention of Nastech which has, or reasonably should
have, led Nastech to believe that the IND is not in good standing with, the
FDA. Other than pursuant to this Agreement, Nastech has neither independently
marketed, nor has it made arrangements for others to market Scopolamine or
Scopolamine Units in the Territory.

6.4 Intellectual Property. Set forth on Schedule 6.4 hereto is a
list of all present and pending Intellectual Property and Patents. Except as
set forth on Schedule 6.4 hereto, (i) Nastech

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is the lawful owner of the Intellectual Property, Patents and Technology, (ii)
Nastech can license the Intellectual Property, Patents and Technology without
the consent of any third party, (iii) there is no pending or overtly threatened
claim against Nastech asserting that any of the Intellectual Property, Patents
or Technology infringes or violates the rights of third parties or that
Xxxxxxx, by practicing under the Licensed Assets or Technology in running the
Activities, would violate any of the intellectual property rights of any third
party, and (iv) nothing has come to the attention of Nastech which has, or
reasonably should have, led Nastech to believe that any of the Intellectual
Property, Patents or Technology infringes or violates the right of third
parties. Except as set forth on Schedule 6.4 hereto, Nastech has not given any
notice to any third parties asserting infringement by such third parties upon
any of the Intellectual Property, Patents or Technology. Nastech is not aware
of and has not received any communications challenging the ownership, validity
or effectiveness of any of the Intellectual Property, Patents or Technology, or
any other intellectual property rights relating to the Activities. Nastech has
not granted any right to any third party relating to the Activities which would
violate the terms of or conflict with the rights granted to Xxxxxxx pursuant to
this Agreement.

6.5 Technology Rights. The Patents and the Technology contain all
the technology, patents, know-how, trade secrets and other intellectual
property necessary to manufacture Scopolamine Units.

6.6 Litigation. There are no pending or, to the best of Nastech's
knowledge, threatened judicial, administrative or arbitral actions, claims,
suits or proceedings pending as of the date hereof against Nastech relating to
the Activities, the Licensed Assets, Patents or the Technology which, either
individually or together with any other, would have a material adverse effect
on the Activities, the Licensed Assets, the Patents, Technology or the ability
of Nastech to perform its obligations under this Agreement or any agreement or
instrument contemplated hereby. There are no pending, and Nastech does not
presently contemplate bringing, any actions or suits relating to the
Activities, the Licensed Assets, the Patents or the Technology brought by
Nastech against others.

6.7 Governmental Approval. Other than FDA approval of the
Scopolamine Units pursuant to a NDA, no consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution, delivery and
performance of this Agreement, or any agreement or instrument contemplated by
this Agreement, by Nastech or the performance by Nastech of its obligations
contemplated hereby and thereby.

6.8 Brokerage. Other than Mazier Partners LLC, no broker, finder or
similar agent has been employed by or on behalf of Nastech, and no Person with
which Nastech has had any dealings or communications of any kind is entitled to
any brokerage commission, finder's fee or any similar compensation, in
connection with this Agreement or the transactions contemplated hereby.
Nastech shall bear any brokerage commission, finder's fee or any similar
compensation owed to Mazier Partners LLC.

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6.9 Implied Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION
6, NASTECH MAKES NO REPRESENTATION OR WARRANTY AS TO THE LICENSED ASSETS, THE
PATENTS, THE TECHNOLOGY OR THE ACTIVITIES, EITHER IN FACT OR BY OPERATION OF
LAW, AND NASTECH SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY
WARRANTIES.

SECTION 7

REPRESENTATIONS AND WARRANTIES OF XXXXXXX

Xxxxxxx represents and warrants to Nastech that:

7.1 Organization, Power and Authority. Xxxxxxx is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Xxxxxxx has all necessary corporate power and authority to enter
into, and be bound by the terms and conditions of, this Agreement, and to
license the Licensed Assets, the Patents and the Technology from Nastech
pursuant hereto.

7.2 Due Authority; No Breach. The execution, delivery and
performance by Xxxxxxx of this Agreement, and each agreement or instrument
contemplated by this Agreement, and the performance of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action by Xxxxxxx. This Agreement is, and each agreement or
instrument contemplated by this Agreement, when executed and delivered by
Xxxxxxx in accordance with the provisions hereof, will be (assuming due
execution and delivery hereof and thereof by Nastech) the legal, valid and
binding obligation of Xxxxxxx, in each case enforceable against Xxxxxxx in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization, or similar laws
from time to time in effect which affect the enforcement of creditors' rights
generally and by legal and equitable limitations on the availability of
specific performance and other equitable remedies against Xxxxxxx. All persons
who have executed this Agreement on behalf of Xxxxxxx, or who will execute on
behalf of Xxxxxxx any agreement or instrument contemplated by this Agreement,
have been duly authorized to do so by all necessary corporate action. Neither
the execution and delivery of this Agreement by Xxxxxxx, or any such other
agreement or instrument by Xxxxxxx, nor the performance of the obligations
contemplated hereby and thereby, will (i) conflict with or result in any
violation of or constitute a breach of any of the terms or provisions of, or
result in the acceleration of any obligation under, or constitute a default
under any provision of the Articles of Incorporation or By-laws of Xxxxxxx or
any material contract or any other material obligation to which Xxxxxxx is a
party or to which it is subject or bound, or (ii) violate any judgment, order,
injunction, decree or award of any court, administrative agency, arbitrator or
government body against, or affecting or binding upon, Xxxxxxx or upon the
securities, property or business of Xxxxxxx, or (iii) constitute a violation by
Xxxxxxx of any applicable law or regulation of any jurisdiction as such law or
regulation relates to Xxxxxxx or to the property or business of Xxxxxxx, except
for such conflict,

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acceleration, default, breach or violation that is not reasonably likely to
have a material adverse effect on Xxxxxxx'x ability to perform its obligations
under this Agreement or any agreement or instrument contemplated hereby.

7.3 Brokerage. No broker, finder or similar agent has been employed
by or on behalf of Xxxxxxx and no Person with which Xxxxxxx has had any
dealings or communications of any kind is entitled to any brokerage commission,
finder's fee or any similar compensation, in connection with this Agreement or
the transactions contemplated hereby.

7.4 Litigation. There are no pending or, to the best of Xxxxxxx'x
knowledge, threatened judicial, administrative or arbitral actions, claims,
suits or proceedings pending as of the date hereof against Xxxxxxx which,
either individually or together with any other, will have a material adverse
effect on the ability of Xxxxxxx to perform its obligations under this
Agreement or any agreement or instrument contemplated hereby.

7.5 Governmental Approval. No consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution, delivery and
performance of this Agreement, or any agreement or instrument contemplated by
this Agreement, by Xxxxxxx or the performance by Xxxxxxx of its obligations
contemplated hereby and thereby.

SECTION 8

ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES

8.1 Governmental Filings. Nastech and Xxxxxxx each agree to prepare
and file whatever filings, requests or applications are required to be filed
with any governmental authority in connection with this Agreement and to
cooperate with one another as reasonably necessary to accomplish the foregoing.

8.2 Responsibility for NDA.

(a) Nastech shall remain responsible for fulfilling all
regulatory requirements with respect to Scopolamine that are imposed
upon Nastech as the owner of the IND and shall complete all steps
necessary for obtaining approval of the NDA for the Target Indication.
Nastech shall maintain the NDA in its own name and at its own cost.
Nastech shall provide Xxxxxxx, upon request after reasonable notice
from Xxxxxxx, with access to copies of all filings submitted by
Nastech to the FDA in respect of the Scopolamine. Xxxxxxx shall, on a
timely basis, provide to Nastech all information that Xxxxxxx has that
Nastech does not have that is reasonably necessary and relevant to
Nastech's obligations hereunder to fulfill such requirements
including, but not limited to, sales distribution information
concerning Scopolamine, and shall otherwise cooperate with Nastech as
reasonably necessary in connection therewith. Nastech and Xxxxxxx
shall collaborate in

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good faith in every matter relating to the NDA and in every case on
whether and how to supplement, amend or otherwise alter the NDA and
any other issues in connection with the NDA and on whether and how to
communicate with the FDA in connection therewith. If Xxxxxxx elects
to undertake a regulatory obligation, such election shall be subject
to Nastech and Xxxxxxx mutually agreeing upon the terms and conditions
(including, but not limited to, compensation to Xxxxxxx) of any such
obligation.

(b) Anything to the contrary in Section 8.2(a)
notwithstanding, Nastech may, and in the event of any regulatory
problem that disrupts the promotion, marketing or sale of Scopolamine
or Scopolamine Units or has a materially adverse effect on the
Activities (each a "Regulatory Problem"), Nastech shall pay Xxxxxxx
$75,000 per annum to assume responsibility for fulfilling all
regulatory requirements with respect to Scopolamine that are imposed
upon Nastech as the owner of the NDA. In any such case, Nastech
shall, on a timely basis, perform any action and provide to Xxxxxxx
all information and materials that Nastech can or has that Xxxxxxx can
not or does not have that are reasonably necessary and relevant to
Xxxxxxx'x obligations hereunder to fulfill such requirements,
including providing copies of Form 356(h) or other letter required by
the FDA or applicable law to be received from the NDA owner, and
Nastech shall otherwise cooperate with Xxxxxxx as reasonably necessary
in connection therewith. Xxxxxxx shall have the final decision-making
authority in every case on whether and how to supplement, amend or
otherwise alter the NDA and any other issues in connection with the
NDA and on whether and how to communicate with the FDA in connection
therewith.

(c) If Nastech is forced pursuant to Section 8.2(b) to
transfer the responsibility for fulfilling regulatory requirements
with respect to Scopolamine to Xxxxxxx because of a Regulatory
Problem, then Nastech shall, upon its development of procedures and/or
the capability to cure such Regulatory Problem, have the right to
reassume such responsibility and Xxxxxxx and Nastech shall transfer
such responsibility back to Nastech within a commercially reasonable
amount of time; provided, however, that Nastech shall pay all
reasonable costs and expenses of Xxxxxxx associated with such
transfer, including, without limitation, the cost of terminating any
employees of Xxxxxxx specifically hired to fulfill the regulatory
requirements with respect to Scopolamine.

(d) Xxxxxxx and Nastech shall jointly develop written
procedures and define responsibilities for (i) the reporting of
adverse drug experiences, (ii) the submission by Xxxxxxx to Nastech
and by Nastech to FDA of labeling and promotional materials related to
Scopolamine, (iii) the administration of and response to medical
inquiries concerning Scopolamine by consumers, physicians, pharmacists
and other health care professionals, (iv) the administration and
analysis of and response to complaints concerning Scopolamine, and (v)
the development of training materials related to Scopolamine. Xxxxxxx
and Nastech shall each comply with the provisions of such written
procedures.

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8.3 Compliance with Law. Xxxxxxx and Nastech shall each comply with
all federal, state and local laws and regulations applicable to developing,
approving, manufacturing, marketing and selling Scopolamine in the Territory,
the Licensed Assets, the Patents and the Technology or the performance of their
respective obligations hereunder. Nastech and Xxxxxxx each shall keep all
records and reports required to be kept by applicable laws and regulations, and
each shall make its facilities available at reasonable times during business
hours for inspection by representatives of governmental agencies. Nastech and
Xxxxxxx each shall notify the other within twenty-four (24) hours of receipt of
any notice or any other indication whatsoever of any FDA or other governmental
agency inspection, investigation or other inquiry, or other material notice or
communication of any type, involving Scopolamine. Xxxxxxx and Nastech shall
cooperate with each other during any such inspection, investigation or other
inquiry including, but not limited to, allowing upon request a representative
of the other to be present during the applicable portions of any such
inspection, investigation or other inquiry and providing copies of all relevant
documents. Xxxxxxx and Nastech shall discuss any response to observations or
notifications received in connection with any such inspection, investigation or
other inquiry and each shall give the other an opportunity to comment upon any
proposed response before it is made. In the event of disagreement concerning
the form or content of such response, however, Nastech shall be responsible for
deciding the appropriate form and content of any response with respect to any
of its cited activities and Xxxxxxx shall be responsible for deciding the
appropriate form and content of any response with respect to any of its cited
activities.

8.4 Recall. Xxxxxxx and Nastech shall consult with one another as to
all decisions concerning recall or withdrawal of Scopolamine from the market,
including, but not limited to, determining whether or not to make any such
recall or withdrawal, the timing and scope thereof, and the means of conducting
any recall or withdrawal. The party requesting any recall or withdrawal must
receive the prior written consent of the other party, such consent not to be
unreasonably withheld, prior to initiating such recall or withdrawal. No
consent shall be necessary if the recall or withdrawal is required by the FDA
or other governmental authority. Nastech shall bear the costs (including but
not limited to, shipping and product credits) for any recall or withdrawal
primarily due to the failure of the product integrity of the Scopolamine Units,
including but not limited to, Nastech's failure to comply with this Agreement,
GMP, federal regulations or the FDA approved specifications. The costs for any
other recall or withdrawal shall be the responsibility of Xxxxxxx. In the
event of any material recall or withdrawal of Scopolamine due to the failure of
the product integrity of the Scopolamine Units, the minimum Annual Net Sales
requirements pursuant to Section 4.2 shall terminate and be deemed waived by
Nastech and shall be renegotiated in good faith by Nastech and Xxxxxxx. Each
party will cooperate fully with the other in connection with any recall or
withdrawal.

8.5 Confidentiality. Xxxxxxx shall treat as confidential the
Licensed Assets, the Patents, the Technology, and all other information of
Nastech of which Xxxxxxx becomes aware in connection with this Agreement
(collectively, "Nastech Proprietary Information"). Xxxxxxx shall neither
disclose Nastech Proprietary Information to any third party nor use Nastech
Proprietary Information for any purpose other than as set forth in this
Agreement. Nastech shall treat as

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confidential all information of Xxxxxxx of which Nastech becomes aware in
connection with this Agreement (collectively, "Xxxxxxx Proprietary
Information"). Nastech shall neither disclose Xxxxxxx Proprietary Information
to any third party nor use Xxxxxxx Proprietary Information for any purpose
other than as set forth in this Agreement.

Nothing contained herein will in any way restrict or impair either
party's (the "Using Party's") right to use, disclose or otherwise deal with any
Proprietary Information of the other party which:

(a) at the time of disclosure is known to the public or
thereafter becomes known to the public by publication or otherwise
through no fault of the Using Party;

(b) the Using Party can establish was in its possession prior
to the time of the disclosure and was not obtained directly or
indirectly from the other party;

(c) is independently made available as a matter of right to
the Using Party by a third party who is not thereby in violation of a
confidential relationship with the other party;

(d) is developed by the Using Party independently of the
Proprietary Information received from the other party and the Using
Party can establish such development; or

(e) is information required to be disclosed by legal or
regulatory process; provided, in each case the Using Party timely
informs the other party and uses reasonable efforts to limit the
disclosure and maintain confidentiality to the extent possible and
permits the other party to intervene and contest or attempt to limit
the disclosure.

Xxxxxxx shall obtain no right or license of any kind under the Nastech
Proprietary Information except as set forth in this Agreement. Nastech shall
obtain no right or license of any kind under the Xxxxxxx Proprietary
Information except as set forth in this Agreement.

8.6 Expenses. Nastech and Xxxxxxx shall each bear their own direct
and indirect expenses incurred in connection with the negotiation and
preparation of this Agreement and, except as set forth in this Agreement, the
performance of the obligations contemplated hereby.

8.7 Reasonable Efforts. Nastech and Xxxxxxx each hereby agrees to
use all reasonable efforts to take, or cause to be taken, all actions and to
do, or cause to be done all things necessary or proper to make effective the
transactions contemplated by this Agreement, including such actions as may be
reasonably necessary to obtain approvals and consents of governmental Persons
and other Persons (including, without limitation, all applicable drug listing
and NDA notifications to the FDA identifying Xxxxxxx as a distributor of
Scopolamine).

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8.8 Publicity. The parties agree that no publicity release or
announcement concerning the transactions contemplated hereby shall be issued
without the advance written consent of the other, except as such release or
announcement may be required by law, in which case the party making the release
or announcement shall, before making any such release or announcement, afford
the other party a reasonable opportunity to review and comment upon such
release or announcement.

8.9 Cooperation. If either party shall become engaged in or
participate in any investigation, claim, litigation or other proceeding with
any third party, including the FDA, relating in any way to Scopolamine or any
of the Licensed Assets, the Patents or the Technology, the other party shall
cooperate in all reasonable respects with such party in connection therewith,
including, without limitation, using its reasonable efforts to make available
to the other such employees who may be helpful with respect to such
investigation, claim, litigation or other proceeding, provided that, for
purposes of this provision, reasonable efforts to make available any employee
shall be deemed to mean providing a party with reasonable access to any such
employee at no cost for a period of time not to exceed 24 hours (e.g., three
8-hour business days). Thereafter, any such employee shall be made available
for such time and upon such terms and conditions (including, but not limited
to, compensation) as the parties may mutually agree.

8.10 Competition; No Sale for Resale.

(a) Nastech agrees that, commencing on the Closing Date and
continuing for the term of this Agreement, it shall not directly or
indirectly, engage in any activity in competition with the Activities
in the Territory. It is understood that Nastech may manufacture or
have manufactured Scopolamine in the Territory for sale outside the
Territory. It is further understood that the remedies at law are
inadequate in the case of any breach of this covenant and that Xxxxxxx
shall be entitled to equitable relief, including the remedy of
specific performance, with respect to any breach of such covenant.

(b) Neither Xxxxxxx nor any sublicensee of Xxxxxxx shall
knowingly sell any Scopolamine Units to anyone in the Territory for
subsequent distribution or resale outside the Territory and each shall
take all reasonable precautions to prevent such distribution or resale
outside the Territory. Nastech shall not knowingly sell any
Scopolamine Units to anyone in the Territory or outside the Territory
for subsequent distribution or resale in the Territory and Nastech
shall take all reasonable precautions to prevent such distribution or
resale in the Territory.

8.11 Scopolamine Returns. Xxxxxxx shall be responsible for all
rebates, chargebacks and returns of Scopolamine Units sold on or after the date
of this Agreement and Nastech shall be responsible for all rebates, chargebacks
and returns of Scopolamine Units sold prior to the date of this Agreement.

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8.12 Conflicting Rights. Nastech shall not grant any right to any
third party relating to the Activities which would violate the terms of or
conflict with the rights granted to Xxxxxxx pursuant to this Agreement.

8.13 Patent and Trademark Maintenance.

(a) Nastech shall be solely responsible for filing,
prosecuting, and maintaining all of the Patents, and Nastech shall pay
the costs associated therewith. Nastech shall file, prosecute, and
maintain all Patents so as to fully continue the benefits under the
licenses granted to Xxxxxxx hereunder, including, without limitation,
convert the Patent Application to a non-provisional patent application
as soon as practicable. In the event that any extension,
registration, confirmation, reissue, renewal, reexamination or
continuation-in-part is to be filed with respect to a Patent, Nastech
shall provide Xxxxxxx with the opportunity to review such extension,
registration, confirmation, reissue, renewal, reexamination or
continuation-in-part and provide input thereto. Nastech shall use its
best efforts to diligently and expeditiously prosecute the Patent
Application.

(b) Xxxxxxx shall be solely responsible for filing,
prosecuting, and maintaining all trademarks for Scopolamine (the
"Trademarks"), and Xxxxxxx shall pay the costs associated therewith.
All registrations, variations, logos, goodwill and other rights under
or acquired through use of the Trademarks shall accrue and belong to
Xxxxxxx. Nastech shall have no rights to use the Trademarks,
including, without limitation, in connection with any product
subsequently developed by Nastech pursuant to Section 2.6. Nastech
will not use in its business, in or outside of the Territory, any
other xxxx or name which is similar to or nearly resembles the
Trademarks in use by Xxxxxxx to indicate the source and origin of
Scopolamine as to be likely to cause deception or confusion. Nastech
recognizes that Xxxxxxx is the owner of all Trademarks used in
commerce to indicate the source of Scopolamine and agrees that the
Trademarks shall remain vested in Xxxxxxx both during the term of this
Agreement and thereafter. Nastech shall not contest the validity of
the Trademarks or Xxxxxxx'x ownership of the Trademarks. Use of the
Trademarks by Xxxxxxx in conjunction with the manufacture, use, and
sale of Scopolamine and all good will related thereto shall inure to
the benefit of Xxxxxxx for purposes of building the longevity and
extent of use of the Trademarks. Nastech may from time to time
license such Trademarks from Xxxxxxx for use (or, with the prior
written consent of Xxxxxxx, such consent not to be unreasonably
withheld, for sublicense) outside the Territory for consideration of
3% of Nastech's net sales outside the Territory.

(c) Xxxxxxx and Nastech agree that, where applicable, all
packaging of the Scopolamine Units shall identify (i) the number of
the Patents and Nastech as the owner thereof and (ii) Xxxxxxx as the
owner of the Trademarks.

(d) Any improvements to the Technology (whether or not
patentable) that are developed solely by either party shall be owned
solely by such party. Such party shall

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have the right, at its own expense, and solely in its own name, to
apply for, prosecute and defend its proprietary rights with respect
thereto. Jointly developed improvements shall be jointly owned by the
parties.

8.14 Infringement; Enforcement of Proprietary Rights.

(a) Infringement of Patent Rights. Each party shall promptly
notify the other of any alleged infringement by third parties of any
Patent and provide any information available to that party relating to
such alleged infringement. Nastech shall have the responsibility to
investigate such alleged infringement and act diligently to end any
infringement of such rights, including, but not limited to, bringing
suit against such third party infringer.

(b) Procedures. No settlement, consent judgment or other
voluntary final disposition of the suit may be entered into without
the consent of each party, which consent shall not be unreasonably
withheld or delayed. Any recovery of damages in any such suit shall
be retained by the party bearing the costs of such suit. In the event
of any infringement suit against a third party brought by either party
pursuant to this Section 8.14, the party not bringing such suit shall
cooperate in all respects, execute any documents reasonably necessary
to permit the other party to prosecute such suit, and to the extent
reasonable shall make available its employees and relevant records to
provide evidence for such suit.

(c) Infringement of Third Party Rights. If, during the term
of this Agreement, any third party (other than an Affiliate of
Xxxxxxx) claims that Xxxxxxx'x marketing or selling of Scopolamine
Units hereunder infringes on a third party patent based upon claims
that dominate claims in the Patents, within 120 days after notice by
Xxxxxxx, Nastech shall (i) initiate an action for a declaratory
judgment of invalidity and/or non-infringement of any such patents, or
(ii) procure for Xxxxxxx the right to exercise all rights licensed
under this Agreement without any additional payment therefor by
Schwarz.

8.15 Supply of Scopolamine Units. Nastech shall maintain the
capacity throughout the term of this Agreement to meet the requirements of
Xxxxxxx for Scopolamine Units hereunder.

8.16 Technology. Nastech shall be solely responsible for maintaining
the Technology in accordance with the terms set forth in this Agreement.

8.17 Liability Insurance. Prior to Launch, Nastech shall obtain and
carry in full force and effect insurance for clinical studies as required by
law and consistent with industry standards. At and after Launch, Nastech shall
obtain and carry in full force and effect product liability insurance in
respect of Scopolamine in the amount of $1,000,000 per occurrence, $3,000,000
in the aggregate. At and after Launch, Xxxxxxx shall obtain and carry in full
force and effect product

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liability insurance in respect of Scopolamine in the amount of $10,000,000 per
occurrence, $10,000,000 in the aggregate.

8.18 Referral of Orders and Inquiries. Nastech shall refer all
Persons sending orders or making inquiries regarding Scopolamine or Scopolamine
Units within the Territory to Xxxxxxx and shall promptly notify Xxxxxxx of the
name of each such Person and the nature of the inquiry of such Person.

(a) Deemed Breach of Covenant. Neither Nastech nor Xxxxxxx
shall be deemed to be in breach of any covenant contained in this
Section 8 if such party's deemed breach is the result of any action or
inaction on the part of the other party.

8.19 Board of Directors. Nastech agrees to cause Xx. Xxxx Xxxxx to
become elected to Nastech's scientific advisory board on or prior to March 1,
1998 to fill a vacancy that will exist at that time. Nastech shall indemnify,
defend and hold Xx. Xxxxx harmless from and against any Damages arising out of
his tenure on Nastech's scientific advisory board.

SECTION 9

INDEMNIFICATION

9.1 Indemnification.

(a) Nastech shall indemnify, defend and hold Xxxxxxx (and its
directors, officers, employees, and Affiliates) harmless from and
against any and all Damages incurred or suffered by Schwarz (and its
directors, officers, employees, and Affiliates) as a consequence of:

(i) any breach of any representation or warranty
made by Nastech in this Agreement or any agreement, instrument
or document delivered by Nastech pursuant to the terms of this
Agreement;

(ii) any failure to perform duly and punctually any
covenant, agreement or undertaking on the part of Nastech
contained in this Agreement;

(iii) any act or omission of Nastech with respect to
the operation of Nastech's business, or the handling,
manufacturing, sale, consumption or use of Scopolamine by
Nastech; or

(iv) the infringement of the Licensed Assets, the
Patent or the Technology of any patent, trademark, copyright,
trade secret or other intellectual property right of any
person other than Nastech or Xxxxxxx.

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(x) Xxxxxxx shall indemnify, defend and hold Nastech (and its
directors, officers, employees, and Affiliates) harmless from and
against any and all Damages incurred or suffered by Nastech (and its
directors, officers, employees, and Affiliates) as a consequence of:

(i) any breach of any representation or warranty
made by Xxxxxxx in this Agreement or any agreement, instrument
or document delivered by Xxxxxxx pursuant to the terms of this
Agreement;

(ii) any failure to perform duly and punctually any
covenant, agreement or undertaking on the part of Xxxxxxx
contained in this Agreement; or

(iii) any act or omission of Xxxxxxx with respect to
the operation of Xxxxxxx'x business or the handling,
manufacturing, sale, consumption or use of Scopolamine by
Xxxxxxx.

9.2 Notice and Opportunity To Defend. Promptly after receipt by a
party hereto of notice of any claim which could give rise to a right to
indemnification pursuant to Section 9.1. such party (the "Indemnified Party")
shall give the other party (the "Indemnifying Party") written notice describing
the claim in reasonable detail. The failure of an Indemnified Party to give
notice in the manner provided herein shall not relieve the Indemnifying Party
of its obligations under this Section, except to the extent that such failure
to give notice materially prejudices the Indemnifying Party's ability to defend
such claim. The Indemnifying Party shall have the right, at its option, to
compromise or defend, at its own expense and by its own counsel, any such
matter involving the asserted liability of the party seeking such
indemnification. If the Indemnifying Party shall undertake to compromise or
defend any such asserted liability, it shall promptly (and in any event not
less than 10 days after receipt of the Indemnified Party's original notice)
notify the Indemnified Party in writing of its intention to do so, and the
Indemnified Party agrees to cooperate fully with the Indemnifying Party and its
counsel in the compromise or defense against any such asserted liability. All
reasonable costs and expenses incurred in connection with such cooperation
shall be borne by the Indemnifying Party. If the Indemnifying Party elects not
to compromise or defend the asserted liability, fails to notify the Indemnified
Party of its election to compromise or defend as herein provided, fails to
admit its obligation to indemnify under this Agreement with respect to the
claim, or, if in the reasonable opinion of the Indemnified Party, the claim
could result in the Indemnified Party becoming subject to injunctive relief or
relief other than the payment of money damages that could materially adversely
affect the ongoing business of the Indemnified Party in any manner, the
Indemnified Party shall have the right, at its option, to pay, compromise or
defend such asserted liability by its own counsel and its reasonable costs and
expenses shall be included as part of the indemnification obligation of the
Indemnifying Party hereunder. Notwithstanding the foregoing, neither the
Indemnifying Party nor the Indemnified Party may settle or compromise any claim
over the objection of the other; provided, however, that consent to settlement
or compromise shall not be unreasonably withheld. In any event, the
Indemnified Party and the Indemnifying Party may participate, at their own
expense, in the

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defense of such asserted liability. If the Indemnifying Party chooses to
defend any claim, the Indemnified Party shall make available to the
Indemnifying Party any books, records or other documents within its control
that are necessary or appropriate for such defense. Notwithstanding anything
to the contrary in this Section 9.2, (i) the party conducting the defense of a
claim shall (A) keep the other party informed on a reasonable and timely basis
as to the status of the defense of such claim (but only to the extent such
other party is not participating jointly in the defense of such claim), and (B)
conduct the defense of such claim in a prudent manner, and (ii) the
Indemnifying Party shall not cease to defend, settle or otherwise dispose of
any claim without the prior written consent of the Indemnified Party (which
consent shall not be unreasonably withheld).

9.3 Indemnification Payment Obligation. No Indemnifying Party will
have any obligations under Sections 9.1(a) or 9.1(b) until the cumulative
aggregate amount of Damages incurred or suffered by the Indemnified Party which
the Indemnifying Party is otherwise subject to under this Agreement exceeds
$50,000 at which time the entire cumulative aggregate amount of such Damages
shall be covered. The provisions of this Section 9.3 shall not limit or
otherwise affect the obligations of any Indemnifying Party under any other
Section of this Agreement.

9.4 Indemnification Payment Adjustments. The amount of any Damages
for which indemnification is provided under this Section 9 shall be reduced to
take account of any net tax benefit and shall be increased to take account of
any net tax detriment arising from the incurrence or payment of any such
Damages or from the receipt of any such indemnification payment and shall be
reduced by the insurance proceeds received and any other amount recovered, if
any, by the Indemnified Party with respect to any Damages; provided, however,
that an Indemnified Party shall not be subject to an obligation to pursue an
insurance claim relating to any Damages for which indemnification is sought
hereunder. If any Indemnified Party shall have received any payment pursuant
to this Section 9 with respect to any Damages and shall subsequently have
received insurance proceeds or other amounts with respect to such Damages, then
such Indemnified Party shall pay to the Indemnifying Party an amount equal to
the difference (if any) between (i) the sum of the amount of those insurance
proceeds or other amounts received and the amount of the payment by such
Indemnifying Party pursuant to this Section 9 with respect to such Damages and
(ii) the amount necessary to fully and completely indemnify and hold harmless
such Indemnified Party from and against such Damages; provided, however, in no
event will such Indemnified Party have any obligation pursuant to this sentence
to pay to such Indemnifying Party an amount greater than the amount of the
payment by such Indemnifying Party pursuant to this Section 9 with respect to
such Damages.

9.5 Indemnification Payment. Upon the final determination of
liability and the amount of the indemnification payment under this Section 9,
the appropriate party shall pay to the other, as the case may be, within 10
business days after such determination, the amount of any claim for
indemnification made hereunder.

9.6 Survival. The provisions of Section 9 shall survive any
termination of this Agreement. Each Indemnified Party's rights under Section 9
shall not be deemed to have been

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waived or otherwise affected by such Indemnified Party's waiver of the breach
of any representation, warranty, agreement or covenant contained in or made
pursuant this Agreement, unless such waiver expressly and in writing also
waives any or all of the Indemnified Party's right under Section 9.

SECTION 10

TERMINATION

10.1 Termination. The term of this Agreement shall begin upon the
Closing Date and, unless sooner terminated as hereinafter provided, shall end
upon the later of (i) the fifteenth anniversary of the Closing Date, (ii) the
expiration of the approved Patent Application (including any continuation
thereof) and (iii) the fifteenth anniversary of the date of launch of any
product line extensions related to Scopolamine. Notwithstanding the foregoing,
this Agreement may be terminated as follows:

(a) Termination for Insolvency. If either Xxxxxxx or Nastech
(i) makes a general assignment for the benefit of creditors or becomes
insolvent; (ii) files an insolvency petition in bankruptcy; (iii)
petitions for or acquiesces in the appointment of any receiver,
trustee or similar officer to liquidate or conserve its business or
any substantial part of its assets; (iv) commences under the laws of
any jurisdiction any proceeding involving its insolvency, bankruptcy,
reorganization, adjustment of debt, dissolution, liquidation or any
other similar proceeding for the release of financially distressed
debtors; or (v) becomes a party to any proceeding or action of the
type described above in (iii) or (iv) and such proceeding or action
remains undismissed or unstayed for a period of more than 60 days,
then the other party may by written notice terminate this Agreement in
its entirety with immediate effect.

(b) Termination for Default. Xxxxxxx and Nastech each shall
have the right to terminate this Agreement for default upon the
other's failure to comply in any material respect with the terms and
conditions of this Agreement. At least 30 days prior to any such
termination for default, the party seeking to so terminate shall give
the other written notice of its intention to terminate this Agreement
in accordance with the provisions of this Section 10.1(b), which
notice shall set forth the default(s) which form the basis for such
termination. If the defaulting party fails to correct such default(s)
within 30 days after receipt of notification, or if the same cannot
reasonably be corrected or remedied within 30 days, then if the
defaulting party has not commenced curing said default(s) within said
30 days and be diligently pursuing completion of same, then such party
immediately may terminate this Agreement. This Section 10.1(b) shall
not be exclusive and shall not be in lieu of any other remedies
available to a party hereto for any default hereunder on the part of
the other party.

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(c) Continuing Obligations. Termination of this Agreement
for any reason shall not relieve the parties of any obligation
accruing prior thereto with respect to Scopolamine and any ongoing
obligations hereunder with respect to the remaining Scopolamine and
shall be without prejudice to the rights and remedies of either party
with respect to any antecedent breach of the provisions of this
Agreement. Without limiting the generality of the foregoing, no
termination of this Agreement, whether by lapse of time or otherwise,
shall serve to terminate the obligations of the parties hereto under
Sections 8.4, 8.5, 8.6, 8.8, 8.11, 8.17, 9, 10.1(c) and 11 hereof, and
such obligations shall survive any such termination.

SECTION 11

MISCELLANEOUS

11.1 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that neither Nastech nor
Xxxxxxx may assign any of its rights, duties or obligations hereunder without
the prior written consent of the other, which consent shall not be unreasonably
withheld, except that no prior written consent shall be required in the event
that a third party acquires substantially all of the assets or outstanding
shares of, or merges with, Xxxxxxx or Nastech, as the case may be.

11.2 Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or facsimile and confirmed in writing, or
mailed first class, postage prepaid, by registered or certified mail, return
receipt requested (mailed notices and notices sent by facsimile shall be deemed
to have been given on the date received) as follows:

If to Nastech, as follows:

Nastech Pharmaceutical Company Inc.
00 Xxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attention: President

If to Xxxxxxx, as follows:

Xxxxxxx Pharma, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxxx, Xxxxxxxxx 00000
Facsimile: 000-000-0000

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Attention: Xxxxxx Xxxxxx

or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Section 11.2 by any party hereto to the other
party.

11.3 Waiver; Remedies. Any term or provision of this Agreement may
be waived at any time by the party entitled to the benefit thereof by a written
instrument executed by such party. No delay on the part of Nastech or Xxxxxxx
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either Nastech or Schwarz of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. The
indemnification provided in Section 9 shall be the sole remedy available for
any Damages arising out of or in connection with this Agreement except for any
rights or remedies which the parties hereto may otherwise have in equity.

11.4 Survival of Representations. Each of the representations and
warranties made in this Agreement shall continue for the term of this Agreement
and shall thereafter be extinguished.

11.5 Independent Contractors. The parties hereto are independent
contractors, and nothing contained in this Agreement shall be deemed to create
the relationship of partners, joint venturers, or of principal and agent,
franchisor and franchisee, or of any association or relationship between the
parties other than as expressly provided in this Agreement. Xxxxxxx
acknowledges that it does not have, and Xxxxxxx shall not make representations
to any third party, either directly or indirectly, indicating that Xxxxxxx has
any authority to act for or on behalf of Nastech or to obligate Nastech in any
way whatsoever. Nastech acknowledges that it does not have, and it shall not
make any representations to any third party, either directly or indirectly,
indicating that it has any authority to act for or on behalf of Xxxxxxx or to
obligate Xxxxxxx in any way whatsoever.

11.6 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings of the parties relating
thereto.

11.7 Amendment. This Agreement may be modified or amended only by
written agreement of the parties hereto.

11.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute a single instrument.

11.9 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York excluding any choice of
law rules which may direct the application of the law of another state.

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11.10 Arbitration. Any dispute, controversy or claim arising out of
or in connection with this Agreement shall be determined and settled by
arbitration in New York, New York, pursuant to the Rules of Arbitration then in
effect of the American Arbitration Association. Any award rendered shall be
final and conclusive upon the parties and a judgment thereon may be entered in
a court having competent jurisdiction. Any arbitration hereunder shall be (i)
submitted to an arbitration tribunal comprised of three (3) independent members
knowledgeable in the pharmaceutical industry, one of whom shall be selected by
Schwarz, one of whom shall be selected by Nastech, and one of whom shall be
selected by the other two arbitrators; (ii) allow for the parties to request
discovery pursuant to the rules then in effect under the Federal Rules of Civil
Procedure for a period not to exceed 90 days; and (iii) require the award to be
accompanied by findings of fact and a statement of reasons for the decision.
Each party shall bear its own costs and expenses, including attorney's fees
incurred in any dispute which is determined and/or settled by arbitration
pursuant to this Section. Except where clearly prevented by the area in
dispute, both parties agree to continue performing their respective obligations
under this Agreement while the dispute is being resolved. Arbitration shall
not prevent any party from seeking injunctive relief where such remedy is an
appropriate form of remedy under the circumstances.

11.11 Captions. All section titles or captions contained in this
Agreement, in any Schedule referred to herein or in any Exhibit annexed hereto,
and the table of contents, if any, to this Agreement are for convenience only,
shall not be deemed a part of this Agreement and shall not affect the meaning
or interpretation of this Agreement.

11.12 No Third-Party Rights. No provision of this Agreement shall be
deemed or construed in any way to result in the creation of any rights or
obligation in any Person not a party or not affiliated with a party to this
Agreement.

11.13 Severability. If any provision of this Agreement is found or
declared to be invalid or unenforceable by any court or other competent
authority having jurisdiction, such finding or declaration shall not invalidate
any other provision hereof, and this Agreement shall thereafter continue in
full force and effect.

11.14 Attachments. All Schedules, Exhibits and other attachments to
this Agreement are by this reference incorporated herein and made a part of
this Agreement.

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.

NASTECH PHARMACEUTICAL
COMPANY INC.

By: /s/ XXXXX X. XXXXX
-----------------------------------
Name: Xxxxx X. Xxxxx
Title: Chairman

XXXXXXX PHARMA, INC.

By: /s/ XXXXX XXXXXXXX
-----------------------------------
Name: Xxxxx Xxxxxxxx
Title: President

[License and Supply Agreement]

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