CORNERSTONE LICENSE AGREEMENT

Exhibit 10.12

CORNERSTONE LICENSE AGREEMENT

     This Agreement (the “Agreement”) is made and entered into effective as of the 31st day of August, 2006, by and between Pharmaceutical Innovations, LLC. (hereinafter referred to as “PI”) and Cornerstone Biopharma, Inc. (hereinafter referred to as “Cornerstone”).

RECITALS:

     A. PI is the owner of or otherwise controls certain proprietary PI Patents (as defined below) and PI Information (as defined below) relating to the Licensed Products (as defined below).

     B. PI desires to grant a license to Cornerstone under the foregoing PI Patents and/or PI Information with respect to the manufacturing, packaging, marketing, distribution and exploitation of various prescription day-night products.

     C. Cornerstone desires to secure from PI an exclusive license in the United States and a nonexclusive license in all other markets to manufacture, package, market, distribute and otherwise exploit these various day-night products on a worldwide basis, all in accordance with the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises and covenants as contained herein, the parties hereto, intending to be legally bound, agree as follows:

Definitions.

     1.01. “Agreement” shall mean this License Agreement.

     1.02. “Article” shall mean each numbered heading used in the Agreement, individually, and all Sections that are included under each such heading.

     10.3. “Calendar Quarter Year” shall mean either the first, second, third or fourth three-month period in any Calendar Year.

     1.04. “Calendar Year” shall mean each twelfth month period ending December 31.

     1.05. “Effective Date” is the date of this Agreement appearing in the preamble to this Agreement.

     1.06. “Exclusive Territory” shall mean the United States and Puerto Rico.

     1.07. Intentionally Omitted.

     1.08. “PI Information” shall mean all technical and marketing information, data, know-how, new concepts and the like relating to Licensed Products in the possession of PI on the date of this Agreement, including processes and equipment for the production and use of Licensed Products and new PI information, data, know-how, new concepts and the like acquired or developed by or for PI after the Effective Date relating to Licensed Products.

     1.09. “PI Patents” shall mean U.S. Patent # 6,843,372 and all corresponding foreign patent applications and granted foreign patents, and all reissues, divisions, continuations, continuations-in-part, substitutes, extensions and replacements thereto.

     1.10. “Licensed Products” shall mean the following prescription day-night products which fall within the scope of one or more valid claims of any PI Patent: (i) a product (which may be known as AlleRx PE) consisting of 40 mg. phenylephrine/2.5 mg. methscopolamine nitrate, for daytime use and 10 mg. phenylephrine/8 mg. chlorpheniramine maleate/2.5 mg. methscopolamine nitrate for nighttime use; (ii) a product (which may be known as AlleRx HC) consisting of [***] and (iii) a product (which may be known as AlleRx CP) consisting of [***].

     1.11. “Minimum Royalty Payment” shall mean the minimum payment of royalties under Section 4.03 owed in any Calendar Year.

     1.12. “Net Sales” shall mean the gross invoice price of sales by Cornerstone or its sublicensees from the manufacture, use or sale of the Licensed Products, minus the sum of (i) freight and other transportation charges (to the extent included in the gross invoice price and charged to the customer as a separate charge), (ii) applicable excise, sale, use or value-added taxes and customs duties (to the extent included in the gross invoice price and charged to the customer as a separate charge), and (iii) credits for returned or defective products, rebates (including managed care rebates) not funded by third parties, chargebacks and trade discounts.

     1.13. “Nonexclusive Territory” shall mean all countries other than the United States.

     1.14. “Out-of-Pocket Expenses” of a party shall mean and include payments made by such party to unaffiliated persons, firms, corporations, and the like, and specifically excludes internal costs and expenses of such party’s own activities and operations, as conducted by its own employees and agents at its own facilities.

     1.15. “Section” shall mean each separately numbered paragraph of this Agreement, individually.

     1.16. “Seven Year Period” shall mean the seven (7) year period specified in Section 4.03(a).

     1.17. “[***] Percent Royalty” shall mean the royalty specified in Section 4.02(a).

2. Disclosure to Cornerstone .

     2.01. As soon as reasonably convenient after the Effective Date (and in any event within thirty days), PI will submit to Cornerstone in writing the PI Information.

     2.02. In addition, throughout the life of this Agreement, PI will continue to disclose to Cornerstone on a prompt and regular basis all new PI Information.

3. Grant of License .

     3.01. Subject to the terms and conditions set forth in this Agreement, PI hereby grants an exclusive right and license (including the right to sublicense others) to use the PI Information to manufacture, package, market, distribute, use, sell and to otherwise exploit Licensed Products in the Exclusive Territory and a nonexclusive right and license (including the right-to-sublicense others) to use the PI Information to manufacture, package, market, distribute, use, sell and to otherwise exploit Licensed Products in the Nonexclusive Territory.

     3.02. Subject to the terms and conditions set forth in this Agreement, PI hereby grants an exclusive right and license (including the right to sublicense others) in and under the PI Patents to manufacture, package, market, distribute, use, sell and to otherwise exploit Licensed Products in the Exclusive Territory and a nonexclusive right and license (including the right to sublicense others) to use the PI Patents to manufacture, package, market, distribute, use, sell and to otherwise exploit the Licensed Products in the Nonexclusive Territory.

4. License Fees; Royalties .

     In full consideration for the rights and licenses herein granted to Cornerstone hereunder, Cornerstone agrees to pay to PI the following:

     4.01(a). A special royalty shall be payable at the rate of eight and one-half percent (8.5%) of the Net Sales of Licensed Products until the total royalty paid under this Section 4.01(a) equals Two Hundred Fifty Thousand Dollars ($250,000). This royalty shall be paid to PI in addition to the royalty under Section 4.01 (b) hereof. Cornerstone may, at any time, prepay all or any portion of this special royalty.

     4.01 (b) A royalty payment equal to the percentages of Net Sales of Licensed Products per Calendar Year according to the following schedule:

     4.02(a) For a seven (7) year period of time (“Seven Year Period”) commencing on the earlier of (i) the date all of the PI Patents expire or (ii) the date all of the PI Patents are determined to be invalid by a court of competent jurisdiction or governmental authority (and such determination is no longer subject to appeal), Cornerstone shall pay PI for PI Information a royalty equal to [***] percent ([***]%) of the Net Sales of Licensed Products sold by Cornerstone or its sublicensees (“[***] Percent Royalty”). When the Seven Year Period has expired, no further [***] Percent Royalty payments shall be owed PI under this Agreement.

     4.02.(b) At the expiration of the PI Patents, Cornerstone shall have a fully vested right to continue producing and selling Licensed Products using the technology of U.S. Patent # 6,843,372 subject only to the obligation of Cornerstone to make [***] Percent Royalty payments to PI for the Seven Year Period specified in Section 4.03(a). Notwithstanding any provision herein to the contrary, Cornerstone shall be obligated to pay the Section 4.02 royalty on Net Sales of Licensed Products that is covered by any valid, applicable and pertinent, live issued patent of PI’s.

     4.03. Cornerstone shall pay to PI Minimum Royalty Payments equal to One Hundred Fifty Thousand Dollars ($150,000) per Calendar Year for each of the three Licensed Products (such Minimum Royalty Payment to be calculated separately for each Licensed Product) for the term of this Agreement beginning with Calendar Year 2007 and ending at the beginning of the Seven Year Period (such Minimum Royalty Payments to be pro rated for periods of less than twelve months.) The Minimum Royalty Payments mean that if for any Calendar Year commencing with Calendar Year 2007 the aggregate royalties payable to PI under Section 4.01(b) are less than $450,000 (or a lesser amount if pro ration applies) for the Licensed Products, Cornerstone shall, within 30 days after the end of each such Calendar Year, make-up the difference with supplemental payments to PI such that PI is paid a total of $450,000 per Calendar Year (or a lesser amount if pro ration applies). To clarify regarding pro ration, by way of example, if the PI Patents expire on August 31 in a particular Calendar Year, the Minimum Royalty Payment for the Licensed Products for that Calendar Year shall be 66.2/3% of $450,000 or $300,000.

     4.04. Cornerstone shall keep an accurate account of all Licensed Products sold under the scope of the license granted hereunder and shall render a statement in writing by Cornerstone or its sublicensees on which royalties are payable to PI in accordance with this Article. Within forty-five (45) days after the end of each Calendar Quarter Year during the term of this Agreement, Cornerstone shall report to PI in writing the amount of royalties due and payable in respect to sales of Licensed Products during the corresponding Calendar Quarter-Year. Payment of all such royalties thus shown to be due shall accompany such report. PI shall have the right, on reasonable prior notice during regular business hours, at its own expense and not more often than once in any Calendar Year, to have an independent certified public accountant audit the books of

     Cornerstone to verify the royalty statements and royalties due pursuant to this Agreement. Cornerstone shall use good faith efforts to maintain an accurate account of royalties owed on the books of Cornerstone. PI shall maintain and shall cause its auditors to maintain all records and information provided by Cornerstone and its sublicensees in strictest confidence.

     4.05. Royalties accruing hereunder on Net Sales of Licensed Products shall, at Cornerstone’s option, be paid to PI either in United States currency or in the currency of the country of sale. All royalties converted into currency other than that of the United States shall be converted on the basis of the simple average of the exchange rates reported in the London Financial Times under the heading “World Value of the Pound” on the last business day of each month during the Calendar Quarter Year for which payment is being made. To the extent that Cornerstone elects to pay royalties on sales of Licensed Products invoiced in a currency other then United States currency, the royalties payable on such sales shall be expressed in the domestic currency of the sale together with the United States currency equivalent, calculated using the simple average of the exchange rates published in the London Financial Times guide as aforesaid.

     4.06. The provisions of Article 4.03 shall have no force or effect with respect to any period in which (a) operations of Cornerstone have been interrupted or sharply curtailed for reasons of the type specified in Article 12.14 including any interruption or curtailment of the sale of Licensed Products by any government or regulation, including but not limited to the FDA (to be determined on a product by product basis and adjusted accordingly), (b) the PI Patents are all determined to be invalid by a court of competent jurisdiction or governmental authority (and such determination is no longer subject to appeal) or (c) any issue with stability, validation or manufacturing legally prevents Cornerstone from being able to market and sell Licensed Product (to be determined on a product by product basis and adjusted accordingly). Notwithstanding any provision herein to the contrary, in the event that the commercialization of any Licensed Product is delayed, interrupted or sharply curtailed as a result of an action taken by the FDA, or any issue with stability, validation and manufacturing that would not allow such Licensed Product on the market and that extends for a period of one (1) year or more, PI shall have the option at any time thereafter (but only in the event such delay, interruption or curtailment is then continuing) to terminate this Agreement as to such Licensed Product.

     4.07. All payments to PI required in accordance with this Agreement shall be minus any taxes required to be deducted or withheld from such payments in accordance with the laws or regulations of the United States or any political sub-division thereof, provided that Cornerstone shall furnish PI with written receipts for any such taxes as are actually deducted or withheld.

5. Intentionally Omitted .

6. Term .

     6.01. Subject to the provisions for termination as hereinafter provided, the term of this Agreement shall commence on the Effective Date and shall continue until the later of the expiration date of the last to expire patent in the PI Portfolio or the expiration date of the Seven Year Period specified in Section 4.02(a) (herein referred to as the “Term”). All rights and obligations of the parties, including any obligation of Cornerstone to make further payments to

PI hereunder shall cease upon such termination, except (i) to keep confidence obligations of Article 10 which shall survive such termination for 7 years following the date of termination and (ii) the license rights and grants to Cornerstone pursuant to Article 3 which shall survive and vest indefinitely.

     6.02. Notwithstanding any provision herein to the contrary: If the royalty payments to PI are in arrears for thirty (30) days after the due date (or such longer period, if any, as PI may agree to in its discretion), or if either party defaults in performing any of the other provisions of this Agreement and such default continues for a period of thirty (30) days following written notice thereof, or if either party is adjudicated a bankrupt or becomes insolvent, or enters into a composition with creditors, or if a receiver is appointed for it, then the non-breaching party shall thereafter have the right to terminate this Agreement upon giving written notice to the breaching party and all rights and licenses granted to Cornerstone hereunder shall, at the non-breaching party’s option, terminate without prejudice to the non-breaching party’s rights under this Agreement, including, if Cornerstone is the breaching party, PI’s right to collect monies due or to become due under this Agreement.

7. Promotional, Distribution and Maintenance Covenants . Cornerstone shall use commercially reasonable diligent efforts to promote the sale and distribution of the Licensed Products in the Exclusive Territory. PI shall maintain the patents in PI’s Patent Portfolio enforceable by making timely payment of all appropriate patent office maintenance fees.

8. Patent Marking . During the time that the indicated patents remains in force, Cornerstone shall mark all Licensed Products sold in the United States with the following legend or its substantial equivalent:

LICENSED UNDER
U.S. Patent #6,843,372

9. Patents, Trademarks, Licensed Know-How, Confidentiality and Competition .

     9.01. Infringement by Third Parties .

          (a) Nothing in this Agreement shall be construed as a warranty that any PI patent is valid and enforceable or that its exercise does not infringe any patent rights of any third party. PI has no knowledge and is unaware of any fact which would adversely affect the validity of any patent or which could give rise to a claim of third party patent infringement relating to the sale or use of the Licensed Products.

          (b) If either Cornerstone or PI becomes aware of an infringement of any relevant patent, or any unfair or illegal competition by others relating to the Licensed Products, it shall give prompt written notice thereof to the other party. In the event PI deems it necessary after consulting with Cornerstone to bring an action against a third party for patent infringement of the rights to PI technology granted Cornerstone under this Agreement, PI shall have the first option to prosecute such an infringement action and choose its own counsel. PI shall bear the entire cost of such litigation.

          (c) PI shall pay all costs and expenses, including attorneys’ fees, for any action prosecuted by PI pursuant to Section 9.01(b).

          (d) If PI, recovers any damages as a result of an infringement proceeding prosecuted by PI pursuant to Section 9.01(b), such amounts shall be retained by PI, except that any portion of the damages attributable to damages suffered by Cornerstone (if any) shall be distributed to Cornerstone.

          (e) If PI elects not to prosecute an action pursuant to Section 9.01(b), which written election shall be made within ninety (90) days after notification of an actionable infringement by a third party, Cornerstone may do so at its sole option and expense and shall have full, sole control over such action. Unless otherwise agreed upon by the parties, if Cornerstone is successful in its action, and Cornerstone recovers any damages as a result of such an infringement proceeding, such amounts shall be retained by Cornerstone, except that any portion of the damages attributable to damages suffered by PI (if any) shall be distributed to PI.

          (f) PI and Cornerstone agree to cooperate with each other in any proceeding under this Section 9.01, and each agrees to participate as a party as necessary to any proceeding initiated under this Section 9.01.

     9.02 Actions for Infringement by Third Parties. Each party shall indemnify and hold the other harmless from and against any and all claims, judgments, liabilities and damages arising out of any claim that the technology of the other party infringes any patent, trade secret, or other intellectual property right of a third party. In the event any such claim is made, the party to be indemnified (the “Indemnitee”) shall immediately notify the indemnifying party (the “Indemnitor”). The Indemnitor shall have the right to control the defense of such claim with counsel of its choice and shall bear all cost and expense of such defense. The Indemnitee shall allow the Indemnitor to co