CHANGE IN CONTROL AGREEMENT
SEVERANCE PAY PLAN
 
 
 
EXHIBIT 10.11
 
                         EXECUTIVE EMPLOYMENT AGREEMENT
 
      This is an Executive Employment Agreement (the "Agreement"), effective as
of August 11, 2003, between Adams Laboratories, Inc., a Texas corporation
(together with its successors and assigns, the "Company"), and Michael J.
Valentino (the "Executive" or "you").
 
                                   BACKGROUND
 
      The Company wishes to secure the services of the Executive, and the
Executive is willing to accept employment with the Company, on the terms and
conditions set forth in this Agreement. Accordingly, in consideration of the
mutual covenants and agreements set forth below, the parties agree as follows:
 
      1.    EMPLOYMENT.
 
            (a)   General. The Company will employ the Executive, and the
Executive accepts employment with the Company, upon the terms and conditions set
forth in this Agreement.
 
            (b)   Term of Employment. Unless earlier terminated in accordance
with Section 4 below, the term of the employment of the Executive under this
Agreement will be for a period of five (5) years, ending on the fifth
anniversary of the commencement of employment (the "Term"); provided, such Term
shall automatically renew for successive one-year periods, unless either party
gives written notice to the other party that such Term shall not renew within
six (6) months prior to the scheduled expiration of the Term.
 
            (c)   Position; Reporting. The Executive shall serve as the
President and Chief Executive Officer of the Company, reporting directly to the
Board of Directors of the Company (the "Board").
 
            (d)   Duties and Responsibilities. The Executive will serve in an
executive capacity and shall perform such duties as are customarily associated
with the title of President and Chief Executive Officer in a company the nature
and size of the Company, consistent with the bylaws of the Company and as
required by the Board (provided that any duties and responsibilities required
pursuant to the bylaws of the Company or by the Board shall not be inconsistent
with your position as President and Chief Executive Officer of the Company).
During the Term, you will devote your reasonable best efforts and substantially
all of your business time and attention to the business of the Company, provided
that you may serve on the boards of a reasonable number of other business
entities, trade associations and/or civic or charitable organizations with the
prior written consent of the Company, engage in charitable activities and manage
your personal and family investments, as long as such activities do not, in the
opinion of the Board, interfere with the proper performance of your duties and
responsibilities for the Company. In all events, you shall be permitted to
continue to serve as a member of the board of directors of the entities
 
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on whose boards you are currently serving as set forth in the list of such
organizations attached hereto as Exhibit A.
 
            (e)   Board of Directors. The Company will use its best efforts to
cause you to be elected to the Board for so long as you hold the position of
President or Chief Executive Officer of the Company.
 
      2.    COMPENSATION AND BENEFITS.
 
            (a)   Base Salary. The Company will pay you for your services under
this Agreement a base salary of $31,250 per month, which annualizes to $375,000,
less applicable tax and other withholdings, subject to annual review for
increase by the Board. Such salary as in effect from time to time is referred to
in this Agreement as the Executive's "Base Salary." Executive's Base Salary
cannot be reduced by the Company without the Executive's prior written consent.
 
            (b)   Bonus Plan. In addition to your Base Salary, you will also be
eligible to receive an annual performance bonus (the "Performance Bonus"),
dependent on your own and the Company's performance. The target Performance
Bonus shall be equal to 100% of your Base Salary (the "Target Bonus") with the
potential of up to 150% of your Base Salary. The amount and award of such
Performance Bonus shall be determined by the Board in its sole discretion based
upon the achievement by you and the Company of objectives set each year by you
and the Board; provided that if you meet your annual performance objectives,
your annual Performance Bonus for that year shall be paid at no less than the
Target Bonus. Within thirty (30) days of the date hereof, you will be expected
to identify a set of mutually agreed to objectives, with achievement dates, that
will result in a more specific payout formula. Any Performance Bonus shall be
paid no later than ninety (90) days after the end of the applicable performance
period.
 
            (c)   Transaction Bonus. As we have discussed with you, it is our
intent that you will lead the Company in its efforts to capitalize on a number
of substantial opportunities, building the creation of stockholder value. In the
event that there is a Corporate Transaction (as defined in Section 3(b) below,
but which for these purposes shall include the sale, transfer or other
disposition of a substantial portion of the Company's assets, whether in one or
a series of transactions) during the Term or on or prior to the nine (9) month
anniversary of your termination date in the event your employment is terminated
without Cause (as defined in Section 4(a)(2)) or due to Disability (as defined
in Section 4(b)(2)) or you resign for Good Reason (as defined in Section
4(a)(3)), you will receive a transaction bonus equal to two percent (2.0%) of
the Total Transaction Price (the "Transaction Bonus"), payable upon consummation
of any such Corporate Transaction at the same time the Company or its
stockholders receive consideration in the transaction. In no event will the
Transaction Bonus(es) payable under this Section 2(c) and Section 4(c) exceed
$2,500,000 in the aggregate. For purposes of this Section 2(c), "Total
Transaction Price" shall mean the aggregate value of the cash and securities
received by the Company or its stockholders in such transaction(s), exclusive of
any assumption of debt.
 
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            (d)   Benefits. You will be entitled to participate in the Company's
benefit programs available to all members of the executive management team on a
basis no less favorable than the basis provided such team members, including but
not limited to group health insurance, life insurance, participation in the
Company's 401(k) plan and vacation programs. At a minimum, you shall be entitled
to four (4) weeks vacation per calendar year, subject to increase with the
approval of the Compensation Committee of the Board.
 
            (e)   Relocation Costs. The Company will provide you with
reimbursement for reasonable temporary living arrangements in the Dallas-Ft.
Worth area, including meals, lodging and transportation costs for you and your
spouse, not to exceed $4,500 per month, for a period of up to six (6) months
from the date hereof. Should you require longer temporary living arrangements,
the Company will be open to discussing it with you at that point in time. In
addition, should the Company maintain its principal offices in Fort Worth, Texas
or relocate its principal offices to a location which is more than a reasonable
commute from your current residence, the Company will provide you with
reimbursement for relocation benefits to be agreed to between you and the
Company in connection with your relocation from your current residence, provided
such relocation costs at a minimum shall include: (A) home sales assistance
pursuant to which the Company will reimburse you for your brokerage commission
up to 6% of the sales price of your current residence and all reasonable legal
and closing costs associated with such sale and (B) reimbursement for reasonable
expenses incurred by you in moving your household goods and, if necessary,
storing such goods for up to 12 months.
 
            (f)   Reimbursement of Legal Fees. The Company will reimburse you
for $25,000 of your legal fees incurred in negotiating and drafting this
Agreement and its related agreements.
 
      3.    STOCK OPTIONS AND EQUITY.
 
      (a)   Grant. On the date hereof, the Company will grant you options, with
a 10-year term, to acquire five percent (5%) of the Company's outstanding shares
of Common Stock on a Fully Diluted Basis (as defined in Section 3(f)(2)), which
represents 3,893,818 shares of the Company's common stock. The option agreement
evidencing such options shall be in form and substance reasonably satisfactory
to the Executive and his counsel. Such options shall have an exercise price
equal to the fair market value of a share of the Company's common stock, $0.01
par value (the "Common Stock"), as of the date of the option grant as determined
by the Board, which in no event shall be more than $0.14 per share. Except as
otherwise provided herein, such options will vest at the rate of 20% on the date
hereof, with the remainder vesting in equal monthly installments over the next
four years. Notwithstanding the foregoing, immediately prior to a Corporate
Transaction (as defined in Section 3(b) below or in the 1999 Long-Term Incentive
Plan or any successor thereto), all of your outstanding stock options, including
but not limited to the stock options granted pursuant to this Section 3(a),
shall be deemed fully vested and shall remain exercisable for the remainder of
their original terms without regard to your termination of employment
thereafter. Such stock options shall not be subject to repurchase by the
 
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Company upon termination of your employment nor, without your prior consent,
cash-out rights as set forth in the Company's 1999 Long-Term Incentive Plan.
Except as otherwise expressly provided in this Agreement, any stock option
grant, including but not limited to the stock option grant contemplated by this
Section 3(a), shall be granted subject to the terms and conditions set forth in
the Company's 1999 Long-Term Incentive Plan, as the same may be amended, a copy
of which is attached as Exhibit B hereto. In the event of a conflict between the
terms of this Agreement and the terms of the Company's 1999 Long-Term Incentive
Plan with respect to the stock option grant contemplated by this Section 3(a),
the terms most favorable to you shall govern.
 
            (b)   A "Corporate Transaction" shall mean (A) a merger or
consolidation as a result of which stockholders of the Company immediately after
consummation of the merger or consolidation hold less than 50% of the Voting
Securities of the surviving entity (whether such entity is the Company or
another entity), or (B) the consummation by the Company of the sale, transfer or
other disposition (including the liquidation) of a substantial portion of the
Company's assets whether in one or a series of transactions. For purposes of
this definition of "Corporate Transaction," "Voting Securities" shall mean the
capital stock of any class or classes having general voting power, in the
absence of specified contingencies, to elect the directors of the Company.
 
            (c)   Stockholders' Agreement. In consideration for and as a
material inducement to the Executive entering into this Agreement, certain
stockholders of the Company shall enter into a Stockholders' Agreement in the
form attached hereto as Exhibit C upon execution of this Agreement.
 
            (d)   Reservation, Registration and Listing of Underlying Shares.
The Company shall at all times reserve, out of its authorized and unissued
shares of Common Stock, a number of shares sufficient to provide for the
exercise in full of the Executive's stock options. Shares deliverable to the
Executive upon exercise of the stock options granted pursuant to Section 3(a),
when delivered to the Executive, shall be fully paid and non-assessable and
shall be free and clear of any and all liens, encumbrances, charges and other
third party rights. The Company agrees that all shares of Common Stock delivered
upon exercise of the stock options granted pursuant to Section 3(a) shall be
duly authorized and validly issued. The Company agrees that, subsequent to the
Company's initial underwritten registered public offering of Common Stock (an
"IPO") and the expiration of the 180 day holdback period described in Section
3(e) below, upon the written request of the Executive, it shall use its
commercially reasonable best efforts to ensure that all such shares of Common
Stock shall be (i) registered for sale, and for resale, by the Executive under
Federal and state securities laws and shall remain registered so long as the
shares of Common Stock underlying such option may not be freely sold in the
absence of such registration and (ii) listed, or otherwise qualified, for
trading in the United States on each national securities exchange or national
securities market system on which the Company's shares of Common Stock are then
listed or qualified. Notwithstanding the foregoing, the Company may postpone for
up to sixty (60) days the filing or effectiveness of a registration statement if
the Board determines in its good faith judgment that such registration should
not be made or continued because it could materially interfere with any material
financing,
 
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acquisition, corporate reorganization or merger or other material transaction
involving the Company or any of its subsidiaries.
 
            (e) Holdback Agreement. The Executive shall not effect any sale or
distribution of any shares of capital stock or equity securities of the Company,
or any securities convertible into or exchangeable or exercisable for such stock
or securities, during the 180-day period beginning on the effective date of the
Company's IPO, unless the underwriters managing the registration otherwise
agree.
 
            (f) Antidilution Protection; Participation Right.
 
                  (1) The Executive's stock options granted pursuant to this
            Section 3(a) shall enjoy standard antidilution protection for stock
            splits or stock dividends, and broad-based anti-dilution protection
            for issuance of Common Stock or Common Stock equivalents at less
            than $0.14 per share (determined on the basis of weighted average
            price), other than issuances of Common Stock or Common Stock
            equivalents issued upon conversion or exercise of any currently
            outstanding securities or rights which are convertible into or
            exercisable for shares of Company capital stock and included in the
            calculation of the Executive's 5% stock option grant under Section
            3(a) on a Fully Diluted Basis.
 
                  (2) During the term of this Agreement, the Executive shall, in
            connection with any proposed issuance of additional Company equity
            securities to non-employees exclusively for cash in a bona fide
            transaction prior to an IPO (a "Triggering Issuance"), have the
            right to irrevocably subscribe for and purchase from the Company for
            cash, additional equity securities of the same kind, at the same per
            share price and on such other terms and conditions identical in all
            material respects as such equity securities are offered in the
            Triggering Issuance. The Executive shall be permitted to purchase
            his proportionate share of such securities (based on (i) the number
            of shares of Common Stock owned by the Executive and shares of
            Common Stock issuable to the Executive upon exercise or conversion
            of any securities convertible into or exercisable for shares of the
            Company's Common Stock, as if exercised and converted to the fullest
            extent of their terms and as if then fully vested, relative to (ii)
            the total number of shares of Common Stock on a Fully-Diluted
            Basis). As used herein, "Fully-Diluted Basis" shall mean, at the
            time of such determination, (a) all shares of Company capital stock
            then outstanding, (b) all securities then outstanding which are
            convertible into or exercisable for shares of Company capital stock,
            as if exercised and converted to the fullest extent of their terms
            and as if then fully vested, (c) all securities issuable pursuant to
            contractual or other obligations of the Company then existing, and
            (d) all shares of Company capital stock then reserved for issuance
            to employees, consultants or directors of the Company.
 
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            (g) Long-Term Incentive Plan Participation. You will be entitled to
participate in the Company's long-term incentive plans, including but not
limited to the Company's 1999 Long-Term Incentive Plan or any successor thereto,
on a basis no less favorable than the basis provided other members of the
executive management team.
 
            4. TERMINATION.
 
            (a) Severance Upon Termination Without Cause or For Good Reason.
 
                  (1) Although you and the Company have the right to terminate
            your employment at will, in the event your employment is terminated
            by the Company without Cause (as defined in Section 4(a)(2) or upon
            a resignation by you for Good Reason (as defined in Section
            4(a)(3)), you shall be entitled to: (A) an amount equal to two (2.0)
            times your Base Salary and Target Bonus as then in effect (provided
            in no event shall such Base Salary or Target Bonus be less than the
            amount guaranteed in this Agreement), payable 50% following your
            termination and 50% on the 13th month anniversary of the date of
            your termination, in each case, net of the minimum applicable tax
            withholdings, (B) continued exercisability of all stock options that
            have vested as of the date of termination for the remainder of their
            original terms and (C) continuation of your group health insurance
            and life insurance benefits for you and your eligible dependents for
            a period of twenty four (24) months from the termination date or
            until you obtain comparable coverage from subsequent employment,
            whichever occurs earlier; provided that to the extent that the
            Company's plans do not permit continuation of such participation
            throughout such period, the Company shall reimburse you under COBRA
            continuation coverage for the portion of the premiums paid by the
            Company immediately prior to your termination date and, if COBRA is
            no longer available and you have not obtained comparable coverage
            from subsequent employment, an amount, payable quarterly in advance,
            which is sufficient for you to purchase equivalent benefits. The
            Company's obligation to pay the severance amount described in this
            Section 4(a)(1) is subject to, and the initial 50% payment will be
            due upon, your execution of a release of claims in the form attached
            hereto as Exhibit D and the expiration of the applicable revocation
            period with respect to such release. Upon the eighth day after your
            execution and delivery of such release to the Company (provided you
            have not revoked such release), the Company shall pay the initial
            50% payment and execute and deliver to you a release of claims
            against you in the form of Exhibit D.
 
                  (2) "Cause" shall mean any of the following: (A) your
            conviction of any crime or offense involving monies or other
            property, or your conviction of any felony offense for any crime of
            moral turpitude, fraud or embezzlement, (B) your willful neglect or
            willful misconduct relating to the performance of your duties for
            the Company, resulting, in either case, in material economic harm to
            the Company, (C) your willful violation of any
 
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            material provision of your non-competition, non-solicitation or
            confidentiality agreements with the Company, or (D) any act of moral
            turpitude or willful misconduct by you which (1) is intended to
            result in your personal enrichment or that of any immediate family
            member at the financial expense of the Company or (2) is reasonably
            expected to result in material economic injury to the Company.
            Anything herein to the contrary notwithstanding, you shall not be
            terminated for Cause within the meaning of clauses (B), (C) or (D)
            of this Section 4(a)(2) unless (x) the Company has given you written
            notice stating the basis for the termination within ninety (90) days
            of the Company's knowledge of the events giving rise to such
            "Cause," (y) you have an opportunity to be heard before the full
            Board and (z) after such hearing, there is a vote of 2/3rds of the
            directors (not including yourself) to terminate you for Cause.
 
                  (3) "Good Reason" shall mean the occurrence of any of the
            following without your prior written consent: (A) a reduction in
            your then current Base Salary or Target Bonus unless agreed to by
            the parties as part of a broader austerity program applied ratably
            to all executive officers, (B) a material diminution in your duties,
            responsibilities, authorities, powers or functions, or the
            assignment of duties to you that are inconsistent with your
            position, so that, in the reasonable exercise of your discretion,
            you are unable to carry out your duties hereunder as contemplated at
            the time this Agreement was entered into (other than in connection
            with your termination by the Company for Cause), (C) your removal as
            Chief Executive Officer or President of the Company or as a member
            of the Board, or the failure to elect or reelect you to any such
            positions (other than in connection with your termination by the
            Company for Cause), (D) a change in your reporting relationship such
            that you no longer report directly to the Board (other than in
            connection with your termination by the Company for Cause), (E) a
            breach by the Company of any material provision of this Agreement,
            including its Exhibits, or of any equity award or agreement between
            you and the Company or any affiliate or (F) the failure of the
            Company to obtain the assumption in writing of its obligations under
            this Agreement in all material respects by any successor to all or
            substantially all of its assets after any combination, merger,
            consolidation, sale, liquidation or similar transaction. Anything
            herein to the contrary notwithstanding, you shall not have "Good
            Reason" to terminate your employment unless you have given the
            Company written notice setting forth the act or acts that constitute
            "Good Reason" within ninety (90) days of your knowledge of the
            events giving rise to such "Good Reason" and the Company shall have
            failed to cure the same within fifteen (15) days of your providing
            such notice.
 
            (b) Termination for Death or Disability.
 
                  (1) Upon your death or termination of your employment due to
            your Disability (as defined in Section 4(b)(2)), you or your estate,
            as the case
 
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            may be, shall be entitled to: (A) continued exercisability of all
            stock options that have vested as of the date of termination for one
            year following your death or, upon Disability, for the remainder of
            their original terms, (B) continuation of your group health
            insurance and life insurance benefits for you (in the case of
            Disability) and your eligible dependents for a period of twelve (12)
            months from the termination date or until you obtain comparable
            coverage from subsequent employment, whichever occurs earlier;
            provided that to the extent that the Company's plans do not permit
            continuation of such participation throughout such period, the
            Company shall reimburse you (or your dependents in the case of your
            death) under COBRA continuation coverage for the portion of the
            premiums paid by the Company immediately prior to your termination
            date, and (C) with respect to your Disability termination only, a
            pro-rata Performance Bonus for the year of termination determined by
            multiplying your Target Bonus by a fraction, the numerator of which
            shall be the number of days you were employed in the applicable
            performance period and the denominator of which shall be the number
            of days in the applicable performance period.
 
                  (2) "Disability" shall mean your failure due to physical or
            mental incapacity to render services contemplated by this Agreement
            (including from a remote location) for three consecutive calendar
            months, or for shorter periods aggregating 150 or more business days
            in any twelve month period, as determined by a medical doctor
            selected by you and the Company. If you and the Company cannot agree
            on a medical doctor, you and the Company shall each select a medical
            doctor and the two doctors shall select a third who shall be the
            approved medical doctor for this purpose.
 
            (c) Effect of Exercise of Redemption Rights. If the holders of at
least a majority of the outstanding shares of the Company's preferred stock
request redemption by the Company of such holders' shares of preferred stock,
you shall have the right to treat such exercise as an event giving rise to a
resignation by you for Good Reason and shall be entitled to the severance and
other entitlements set forth above in Section 4(a)(1). In addition, you shall be
entitled to a Transaction Bonus equal to two percent (2.0%) of the total
redemption price to be paid by the Company to its preferred stockholders in such
redemption, payable in a lump sum in cash prior to any payment by the Company
(including the execution of any promissory note) to or for the benefit of any
redeeming preferred stockholder. In no event will the Transaction Bonus(es)
payable under Section 2(c) and this Section 4(c) exceed $2,500,000 in the
aggregate.
 
            (d) Provisions Applicable Upon Any Termination. In the event of any
termination of your employment, you shall be entitled to: (A) amounts earned or
due but unpaid through the date of termination, including Base Salary,
unreimbursed business expenses, any incentive awards due for any performance
period or performance measurement cycle that have been completed prior to the
date of termination and any amounts payable in lieu of accrued vacation, (B) any
compensation previously deferred by you and any accrued interest on earnings on
such deferred compensation to the extent not
 
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previously paid to you, (C) any other benefits, rights or entitlements,
including senior-level executive benefits, if any, in accordance with the
applicable plans, programs, policies, agreements or other arrangements of the
Company or any of its subsidiaries and (D) in the case of a voluntary
resignation (other than for Good Reason or upon Disability), continued
exercisability of all stock options that have vested as of the date of
termination for three (3) months following the date of termination. In addition,
in the event of any termination of your employment, you shall be under no
obligation to seek other employment and there shall be no offset against amounts
due to you on account of any remuneration or benefits provided by any subsequent
employment you may obtain or on account of any claims the Company or any of its
subsidiaries may have against you.
 
            5. CONFIDENTIALITY AND NONCOMPETITION AGREEMENT. In consideration
for and as a material inducement to the parties entering into this Agreement,
the Company and the Executive agree to execute that certain Confidentiality and
Noncompetition Agreement in the form attached hereto as Exhibit E upon execution
of this Agreement.
 
            6. INDEMNIFICATION; D&O LIABILITY INSURANCE.
 
            (a) The Company agrees that if you are made a party to, are
threatened to be made a party to, receive any legal process in, or receive any
discovery request or request for information in connection with, any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that you are or were a director, officer,
employee, consultant or agent of the Company, or are or were serving at the
request of, or on behalf of, the Company as a director, officer, member,
employee, consultant or agent of another corporation, limited liability
corporation, partnership, joint venture, trust or other entity, including
service with respect to employee benefit plans, you shall be indemnified and
held harmless by the Company to the fullest extent permitted or authorized by
the Company's articles of incorporation or by-laws or, if greater, by applicable
law, against any and all costs, expenses, liabilities and losses (including,
without limitation, attorneys' fees reasonably incurred, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement and any
reasonable costs and fees incurred in enforcing your rights to indemnification
or contribution) incurred or suffered by you in connection therewith, and such
indemnification shall continue as to you even though you have ceased to be a
director, officer, member, employee, consultant or agent of the Company or other
entity and shall inure to the benefit of your heirs, executors and
administrators. The Company shall reimburse you for all costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by you in
connection with any Proceeding within 20 business days after receipt by the
Company of a written request for such reimbursement and appropriate
documentation associated with these expenses. Such request shall include an
undertaking by you to repay the amount of such advance if it shall ultimately be
determined that you are not entitled to be indemnified against such costs and
expenses.
 
            (b) Neither the failure of the Company (including its Board,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any Proceeding concerning payment of amounts claimed by you
under Section 6(a) that
 
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indemnification of you is proper because you have met the applicable standard of
conduct, nor a determination by the Company (including its Board, independent
legal counsel or stockholders) that you have not met such applicable standard of
conduct, shall create a presumption or inference that you have not met the
applicable standard of conduct.
 
            (c) The Company agrees to continue and maintain a directors' and
officers' liability insurance policy or policies covering you at a level, and on
terms and conditions, no less favorable to you than the coverage the Company
provides directors and/or other similarly-situated executives until such time as
suits against you are no longer permitted by law.
 
            (d) Nothing in this Section 6 shall be construed as reducing or
waiving any right to indemnification, or advancement of expenses, you would
otherwise have under the Company's articles of incorporation or by-laws or under
applicable law.
 
            7. DISPUTE RESOLUTION. Any disputes or claims arising under or in
connection with this Agreement, your employment with the Company, or the
termination thereof, shall be resolved by binding arbitration, to be held in the
State in which the Company's headquarters is located at the time of such
hearing, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Judgment upon the award rendered by the arbitrators may
be entered into any court having jurisdiction thereof. Each party shall bear its
own costs and expenses (including attorneys' fees) in arbitration, and shall
share equally the costs of arbitration.
 
            8. REPRESENTATIONS AND WARRANTIES.
 
            (a) By the Company. The Company represents and warrants that (i) the
execution, delivery and performance of this Agreement by the Company has been
fully and validly authorized by all necessary corporate action, (ii) the officer
signing this Agreement on behalf of the Company is duly authorized to do so,
(iii) the execution, delivery and performance of this Agreement does not violate
any applicable law, regulation, order, judgment or decree or any agreement, plan
or corporate governance document to which the Company is a party or by which it
is bound and (iv) upon execution and delivery of this Agreement by the parties,
it shall be a valid and binding obligation of the Company enforceable against it
in accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
 
            (b) By Executive. The Executive represents and warrants that (i) the
execution, delivery and performance of this Agreement does not violate any
applicable law, regulation, order, judgment or decree or any agreement to which
the Executive is a party or by which he is bound and (ii) upon execution and
delivery of this Agreement by the parties, it shall be a valid and binding
obligation of Executive enforceable against him in accordance with its terms.
 
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            9. MISCELLANEOUS.
 
            (a) Notice. Any notice, request or other communication given in
connection with this Agreement shall be in writing and shall be deemed to have
been given (i) when personally delivered to the recipient or (ii) provided that
a written acknowledgement of receipt is obtained, three days after being sent by
prepaid certified or registered mail, or two days after being sent by a
nationally recognized overnight courier, to the address specified in this
Section 9(a) (or such other address as the recipient shall have specified by ten
(10) days' advance written notice given in accordance with this Section 9(a)).
Such communication shall be addressed to you at your home address and to the
Company at its corporate headquarters (unless such address is changed in
accordance with this Section 9(a)).
 
            (b) Entire Agreement. This Agreement, together with the Exhibits
hereto which are incorporated herein by reference, constitutes the sole
agreement between the parties as to the subject matter hereof and supercedes all
prior agreements, understandings, discussions, negotiations, and undertakings,
whether written or oral, between the parties with respect thereto. This
Agreement may only be modified by a written document signed by you and a duly
authorized officer of the Company with Board approval. Any waiver by any person
of any provision of this Agreement shall be effective only if in writing and
signed by the person against whom enforcement of the wavier is sought. For any
waiver or modification to be effective, it must specifically refer to this
Agreement and to the terms and provisions being modified or waived. No waiver of
any provision of this Agreement shall be effective as to any other provision of
this Agreement except to the extent specifically provided in an effective
written waiver. In the event of any inconsistency between the terms of this
Agreement and the terms of any Company plan, policy, arrangement or other
agreement, the terms most favorable to you shall control.
 
            (c) Successors and Assigns. The provisions of this Agreement shall
inure to the benefit of, and shall be binding upon, each of the parties and
their heirs, representatives, successors and assigns. No rights or obligations
of the Company under this Agreement may be assigned or transferred by the
Company, without your prior written consent, except that such rights or
obligations may be assigned or transferred pursuant to the sale or transfer of a
substantial portion of the Company's assets, provided that the assignee or
transferee is the successor to a substantial portion of the assets of the
Company and assumes the liabilities, obligations and duties of the Company under
this Agreement, either contractually or as a matter of law. Your rights or
obligations may not be assigned or transferred by you, without the Company's
prior written consent, other than your rights to compensation and benefits,
which may be transferred by will or operation of law. You shall be entitled, to
the extent permitted under applicable law or the relevant plan or policy, to
select and change a beneficiary or beneficiaries to receive any compensation or
benefit hereunder following your death by giving the Company written notice
thereof. In the event of your death or a judicial determination of your
incompetence, references in this Agreement to you shall be deemed, where
appropriate, to refer to your beneficiary, estate or other legal representative.
 
                                       11
<PAGE>
 
            (d) Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions or portions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by law
and the invalid or unenforceable provisions or portions shall be reformed so as
to give maximum legal effect to the agreements of the parties contained herein;
provided, however, that such reformation shall be effective only if the overall
economic or legal substance of the transactions contemplated hereby would not
thereby be affected in any manner materially adverse to either party.
 
            (e) Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Texas, without regard to conflicts of law principles
to the extent that such principles would require the application of the laws of
another jurisdiction.
 
            (f) Miscellaneous. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument. Signatures delivered by
facsimile shall be effective for all purposes. Upon the expiration of the Term
of this Agreement, the respective rights and obligations of the parties shall
survive such expiration to the extent necessary to carry out the intentions of
the parties as embodied in their respective rights and obligations under this
Agreement. This Agreement shall continue in effect until there are no further
rights or obligations of either party outstanding hereunder and shall not be
terminated by either party without the express prior written consent of the
other party.
 
            (g) No Strict Construction. The parties to this Agreement have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties, and no
presumption or burden of proof will arise in favor or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
 
                                       12
<PAGE>
 
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
 
                                             THE COMPANY:
 
                                             ADAMS LABORATORIES, INC.
 
                                             By:  /s/ David Becker
                                                  _________________________
                                             Its: Chief Financial Officer
                                                  _________________________
 
                                             THE EXECUTIVE:
 
                                             /s/ Michael J. Valentino
                                             ______________________________
                                             Michael J. Valentino
 
Exhibit A - List of entities on whose Boards Executive is currently serving
 
Exhibit B - 1999 Long-Term Incentive Plan
 
Exhibit C - Executive and Stockholders' Agreement
 
Exhibit D - Form of Mutual Release
 
Exhibit E - Confidentiality and Noncompetition Agreement
 
                                       13
<PAGE>
                                                                       EXHIBIT A
 
                     Executive's Current Board Memberships
 
Private Volunteer Boards:        Freedom House
 
Industry Boards:                 Consumer Healthcare Products Association (CHPA)
                                 World Self Medication Industry (WSMI)
 
<PAGE>
 
                                                                       EXHIBIT B
 
                            ADAMS LABORATORIES, INC.
 
                          1999 LONG-TERM INCENTIVE PLAN
 
ARTICLE 1. ESTABLISHMENT AND PURPOSE
 
      1.1   ESTABLISHMENT. ADAMS LABORATORIES, INC., a Texas corporation, hereby
establishes the ADAMS LABORATORIES, INC. 1999 LONG-TERM INCENTIVE PLAN, as set
forth in this document.
 
      1.2   PURPOSE. The purposes of the Plan are to attract able persons to
enter the employ of the Company, to encourage Employees to remain in the employ
of the Company and to provide motivation to Employees to put forth maximum
efforts toward the continued growth, profitability and success of the Company,
by providing incentives to such persons through the ownership and performance of
the Common Stock of AdamsLabs. A further purpose of the Plan is to provide a
means through which the Company may attract able persons to become directors,
consultants and independent contractors of the Company and to perform other
services beneficial to the Company and to provide such individuals with
incentive and reward opportunities. Toward these objectives, Awards may be
granted under the Plan to Employees and Consultants on the terms and subject to
the conditions set forth in the Plan.
 
      1.3   EFFECTIVENESS. The Plan shall become effective as of July 21, 1999,
the date of its adoption by the Board, provided it is duly approved by the
holders of at least a majority of the shares of Common Stock present or
represented and entitled to vote at a meeting of the shareholders of AdamsLabs
duly held in accordance with applicable law within twelve months after the date
of adoption of the Plan by the Board. If the Plan is not so approved, the Plan
shall terminate and any Award granted hereunder shall be null and void.
 
ARTICLE 2. DEFINITIONS
 
      2.1   ADAMSLABS. "AdamsLabs" means ADAMS LABORATORIES, INC., a Texas
corporation, and any successor thereto.
 
      2.2   AFFILIATE. "Affiliate" means a "parent corporation" or a "subsidiary
corporation" of AdamsLabs, as those terms are defined in Section 424(e) and (f)
of the Code.
 
      2.3   AWARD. "Award" means any Option or Restricted Stock granted under
the Plan to a Participant.
 
      2.4   AWARD AGREEMENT. "Award Agreement" means a written agreement between
AdamsLabs and a Participant that sets forth the terms, conditions, restrictions
and/or limitations applicable to an Award.
 
      2.5   BOARD. "Board" means the Board of Directors of AdamsLabs.
 
<PAGE>
 
      2.6   CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
 
      2.7   COMMON STOCK. "Common Stock" means the Common Stock, $0.01 par value
per share, of AdamsLabs, or any stock or other securities of AdamsLabs hereafter
issued or issuable in substitution or exchange for the Common Stock.
 
      2.8   COMPANY. "Company" means AdamsLabs and its Affiliates.
 
      2.9   CONSULTANT. "Consultant" means (i) an individual duly elected or
chosen as a director of AdamsLabs who is not also an Employee or (ii) any other
individual who performs services for and is treated by AdamsLabs or an Affiliate
as an independent contractor for employment tax purposes.
 
      2.10  EFFECTIVE DATE. "Effective Date" means the date an Award is
determined to be effective by the Board upon the grant of such Award.
 
      2.11  EMPLOYEE. "Employee" means any person treated as an employee by
AdamsLabs or an Affiliate. "Employee" shall not include a Consultant.
 
      2.12  FAIR MARKET VALUE. "Fair Market Value" means the fair market value
of the Common Stock as determined by the Board in good faith.
 
      2.13  INCENTIVE STOCK OPTION. "Incentive Stock Option" means an Option
that is intended to meet the requirements of Section 422(b) of the Code.
 
      2.14  NONQUALIFIED STOCK OPTION. "Nonqualified Stock Option" means an
Option that is not intended to meet the requirements of Section 422(b) of the
Code.
 
      2.15  OPTION. "Option" means an option to purchase shares of Common Stock
granted to a Participant pursuant to Article 7, and includes both Incentive
Stock Options and Nonqualified Stock Options.
 
      2.16  PARTICIPANT. "Participant" means any Employee or Consultant to whom
an Award has been granted under the Plan.
 
      2.17  PLAN. "Plan" means this ADAMS LABORATORIES, INC. 1999 LONG-TERM
INCENTIVE PLAN.
 
      2.18  RESTRICTED STOCK. "Restricted Stock" means an Award of shares of
Common Stock granted to a Participant pursuant to, and with such restrictions as
are imposed under, Article 8. Restricted Stock shall constitute issued and
outstanding shares of Common Stock for all corporate purposes.
 
                                      -2-
<PAGE>
 
      2.19  RETIREMENT. "Retirement" means the termination of an Employee's
employment with AdamsLabs or an Affiliate on or after the Employee's attainment
of age 65 and completion of at least 15 years of employment with AdamsLabs or an
Affiliate.
 
ARTICLE 3. PLAN ADMINISTRATION
 
      3.1   RESPONSIBILITY OF ADMINISTRATOR. The Plan shall be administered by
the Board. The Board may delegate responsibility for administration of the Plan
to a committee appointed by and serving at the pleasure of the Board, under such
terms and conditions as the Board shall determine; provided, however, that one
member of any such committee shall be appointed by and serve at the pleasure of
S.Z. Investments, L.L.C. The Board shall have total and exclusive responsibility
to control, operate, manage and administer the Plan in accordance with its
terms. The Board shall have all the authority that may be necessary or helpful
to enable it to discharge its responsibilities with respect to the Plan. Without
limiting the generality of the preceding sentence, the Board shall have the
exclusive right to: (i) interpret the Plan and the Award Agreements executed
hereunder; (ii) determine eligibility for participation in the Plan; (iii)
decide all questions concerning eligibility for, and the amount of, Awards
payable under the Plan; (iv) construe any ambiguous provision of the Plan or any
Award Agreement; (v) prescribe the form of the Award Agreements embodying Awards
granted under the Plan; (vi) correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award Agreement; (vii) issue
administrative guidelines as an aid to administer the Plan and make changes in
such guidelines as it from time to time deems proper; (viii) make regulations
for carrying out the Plan and make changes in such regulations as it from time
to time deems proper; (ix) to the extent permitted under the Plan, grant waivers
of Plan terms, conditions, restrictions and limitations; (x) accelerate the
exercise, vesting or payment of an Award when such action or actions would be in
the best interests of the Company; (xi) grant Awards in replacement of Awards
previously granted under the Plan or any other employee benefit plan of the
Company; and (xii) take any and all other actions it deems necessary or
advisable for the proper operation or administration of the Plan.
 
      3.2   DISCRETIONARY AUTHORITY. The Board shall have full discretionary
authority in all matters related to the discharge of its responsibilities and
the exercise of its authority under the Plan, including, without limitation, its
construction of the terms of the Plan and its determination of eligibility for
participation and Awards under the Plan. The decisions of the Board and its
actions with respect to the Plan shall be final, conclusive and binding on all
persons having or claiming to have any right or interest in or under the Plan,
including Participants and their respective estates, beneficiaries and legal
representatives.
 
      3.3   LIABILITY; INDEMNIFICATION. No member of the Board nor any person to
whom authority has been properly delegated, shall be personally liable for any
action, interpretation or determination made in good faith with respect to the
Plan or Awards granted hereunder, and each member of the Board (or delegatee of
the Board) shall be fully indemnified and protected by AdamsLabs with respect to
any liability he or she may incur with respect to any such action,
interpretation or determination, to the extent permitted by applicable law.
 
                                      -3-
<PAGE>
 
ARTICLE 4. ELIGIBILITY
 
      All Employees and Consultants are eligible to participate in the Plan. The
Board shall select, from time to time, Participants from those Employees and
Consultants, who, in the opinion of the Board, can further the Plan's purposes.
In making this selection, the Board may give consideration to the functions and
responsibilities of the Participant, his or her past, present and potential
contributions to the growth and success of the Company and such other factors
deemed relevant by the Board. Once a Participant is so selected, the Board shall
determine the type and size of Award to be granted to the Participant and shall
establish in the related Award Agreement the terms, conditions, restrictions
and/or limitations applicable to the Award, in addition to those set forth in
the Plan and the administrative rules and regulations, if any, established by
the Board.
 
ARTICLE 5. FORM OF AWARDS
 
      Awards may, at the Board's sole discretion, be granted under the Plan in
the form of Options pursuant to Article 7, Restricted Stock pursuant to Article
8, or a combination thereof. All Awards shall be subject to the terms,
conditions, restrictions and limitations of the Plan. The Board may, in its sole
judgment, subject any Award to such other terms, conditions, restrictions and/or
limitations (including, but not limited to, the time and conditions of exercise,
vesting or payment of an Award and restrictions on transferability of any shares
of Common Stock issued or delivered pursuant to an Award), provided they are not
inconsistent with the terms of the Plan. Awards under a particular Article of
the Plan need not be uniform, and Awards under two or more Articles of the Plan
may be combined into a single Award Agreement. Any combination of Awards may be
granted at one time and on more than one occasion to the same Participant.
 
ARTICLE 6. SHARES SUBJECT TO THE PLAN
 
      6.1   AVAILABLE SHARES. The maximum number of shares of Common Stock that
shall be available for grant of Awards under the Plan shall not exceed 700,000,
subject to adjustment as provided in Sections 6.2 and 6.3. Shares of Common
Stock issued pursuant to the Plan may be shares of original issuance or treasury
shares or a combination of the foregoing, as the Board, in its discretion, shall
from time to time determine.
 
      6.2   ADJUSTMENTS FOR RECAPITALIZATIONS AND REORGANIZATIONS.
 
            (a)   The shares with respect to which Awards may be granted under
      the Plan are shares of Common Stock as presently constituted, but if, and
      whenever, prior to the expiration or satisfaction of an Award theretofore
      granted, AdamsLabs shall effect a subdivision or consolidation of shares
      of Common Stock or the payment of a stock dividend on Common Stock without
      receipt of consideration by AdamsLabs, the number of shares of Common
      Stock with respect to which such Award may thereafter be exercised or
      satisfied, as applicable, (i) in the event of an increase in the number of
      outstanding shares shall be proportionately increased, and the exercise
      price per share
 
                                      -4-
<PAGE>
 
      shall be proportionately reduced, and (ii) in the event of a reduction in
      the number of outstanding shares shall be proportionately reduced, and the
      exercise price per share shall be proportionately increased.
 
            (b)   If AdamsLabs recapitalizes or otherwise changes its capital
      structure, thereafter upon any exercise or satisfaction, as applicable, of
      an Award theretofore granted the Participant shall be entitled to (or
      entitled to purchase, if applicable) under such Award, in lieu of the
      number of shares of Common Stock then covered by such Award, the number
      and class of shares of stock or other securities to which the Participant
      would have been entitled pursuant to the terms of the recapitalization if,
      immediately prior to such recapitalization, the Participant had been the
      holder of record of the number of shares of Common Stock then covered by
      such Award.
 
            (c)   In the event of changes in the outstanding Common Stock by
      reason of recapitalizations, reorganizations, mergers, consolidations,
      combinations, separations (including a spin-off or other distribution of
      stock or property), exchanges or other relevant changes in capitalization
      occurring after the date of grant of any Award and not otherwise provided
      for by this Section 6.2, any outstanding Awards and any Award Agreements
      evidencing such Awards shall be subject to adjustment by the Board at its
      discretion as to the number, price and kind of shares or other
      consideration subject to, and other terms of, such Awards to reflect such
      changes in the outstanding Common Stock.
 
            (d)   In the event of any changes in the outstanding Common Stock
      provided for in this Section 6.2, the aggregate number of shares available
      for grant of Awards under the Plan may be equitably adjusted by the Board,
      whose determination shall be conclusive. Any adjustment provided for in
      this Section 6.2 shall be subject to any required stockholder action.
 
      6.3   ADJUSTMENTS FOR AWARDS. The Board shall have full discretion to
determine the manner in which shares of Common Stock available for grant of
Awards under the Plan are counted. Without limiting the discretion of the Board
under this Section 6.3, the following rules shall apply for the purpose of
determining the number of shares of Common Stock available for grant of Awards
under the Plan unless otherwise determined by the Board in its discretion;
provided, however, that any exercise of discretion by the Board with respect to
the rules set forth below that is not consistent with the rule as set forth
below shall not be given effect without the consent of a member of the Board
designated by S.Z. Investments, L.L.C. for such purpose:
 
            (a)   OPTIONS AND RESTRICTED STOCK. The grant of Options and
      Restricted Stock shall reduce the number of shares available for grant of
      Awards under the Plan by the number of shares subject to such Award.
 
            (b)   TERMINATION. If any Award referred to in paragraph (a) above
      is canceled or forfeited, or terminates, expires or lapses for any reason,
      the shares then subject to such Award shall again be available for grant
      of Awards under the Plan.
 
                                      -5-
<PAGE>
 
            (c)   PAYMENT OF EXERCISE PRICE AND WITHHOLDING TAXES. If previously
      acquired shares of Common Stock are used to pay the exercise price of an
      Award, or shares of Common Stock that would be acquired upon exercise of
      an Award are withheld to pay the exercise price of such Award, the number
      of shares available for grant of Awards under the Plan other than
      Incentive Stock Options shall be increased by the number of shares
      delivered or withheld as payment of such exercise price. If previously
      acquired shares of Common Stock are used to pay withholding taxes payable
      upon exercise, vesting or payment of an Award, or shares of Common Stock
      that would be acquired upon exercise, vesting or payment of an Award are
      withheld to pay withholding taxes payable upon exercise, vesting or
      payment of such Award, the number of shares available for grant of Awards
      under the Plan other than Incentive Stock Options shall be increased by
      the number of shares delivered or withheld as payment of such withholding
      taxes.
 
ARTICLE 7. OPTIONS
 
      7.1   GENERAL. Awards may be granted to Employees and Consultants in the
form of Options. These Options may be Incentive Stock Options or Nonqualified
Stock Options, or a combination of both; provided, however, that (i) no
Incentive Stock Options shall be granted later than 10 years from the date of
adoption of the Plan by the Board and (ii) only Employees shall be eligible to
receive Incentive Stock Options.
 
      7.2   TERMS AND CONDITIONS OF OPTIONS. An Option shall be exercisable in
whole or in such installments and at such times as may be determined by the
Board; provided, however, that except as provided in Article 9 of this Plan, no
Option shall be exercisable sooner than one year from the Effective Date of the
Option and the Option shall first become exercisable with respect to no more
than 20% of the number of shares covered by the Option on the date which is one
year from the Effective Date of the Option with no more than an additional 20%
first becoming exercisable on each subsequent anniversary thereof until such
Option is exercisable in full. Notwithstanding the preceding sentence, the Board
may grant an Option that is exercisable in full immediately upon grant provided
that the shares purchased upon exercise of any such Option shall be Restricted
Stock, the Restriction Period for which shall begin on the Effective Date of the
Option and, except as provided in Article 9 of this Plan, shall end no sooner
than (i) one year with respect to 20% of the shares covered by the Option, (ii)
two years with respect to an additional 20% of the shares covered by the Option,
(iii) three years with respect to an additional 20% of the shares covered by the
Option, (iv) four years with respect to an additional 20% of the shares covered
by the Option, and (v) five years with respect to the remainder of shares
covered by the Option. The preceding provisions to the contrary notwithstanding,
solely for purposes of determining the percentage of shares exercisable pursuant
to an Option and the Restriction Period with respect to Restricted Stock
purchased upon exercise of an Option, the Effective Date of an Option granted to
an Employee in substitution for the cancellation of all phantom share units
previously granted to such Employee under a phantom stock plan of AdamsLabs in
effect prior to the date of adoption of this Plan shall be the original
effective date of the grant of such phantom share units. Any Restricted Stock
purchased pursuant to the
 
                                      -6-
<PAGE>
 
exercise of an Option as provided in the preceding provisions of this Section
shall be subject to the terms of Article 8 of this Plan and such other
provisions of this Plan that are applicable to Restricted Stock, and the Award
Agreement for such Option shall provide that in the event of the Participant's
termination of employment or termination of services as a Consultant during the
Restriction Period for any reason, all shares with respect to which the
Restriction Period has not ended shall be forfeited to AdamsLabs and AdamsLabs
shall pay to the Participant an amount equal to the lesser of the price paid by
the Participant upon exercise of the shares so forfeited or the Fair Market
Value of the shares on the date of forfeiture; provided, however, that for this
purpose, the "price paid by the Participant upon exercise" of a Nonqualified
Stock Option that is exercised solely by means of the withholding of shares
which otherwise would be acquired on exercise shall be zero. The price at which
a share of Common Stock may be purchased upon exercise of an Option shall be
determined by the Board, but such exercise price shall not be less than 100% of
the Fair Market Value of a share of Common Stock on the Effective Date of the
Option's grant. Except as otherwise provided in Section 7.3, the term of each
Option shall be as specified by the Board; provided, however, that, unless
otherwise designated by the Board, no Options shall be exercisable later than 10
years from the Effective Date of the Option's grant.
 
      7.3   RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS. Options granted in
the form of Incentive Stock Options shall, in addition to being subject to the
terms and conditions of Section 7.2, comply with Section 422(b) of the Code.
Accordingly, to the extent that the aggregate Fair Market Value (determined at
the time the respective Incentive Stock Option is granted) of Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
an individual during any calendar year under all incentive stock option plans of
AdamsLabs and its Affiliates exceeds $100,000, such excess Incentive Stock
Options shall be treated as options which do not constitute Incentive Stock
Options. The Board shall determine, in accordance with applicable provisions of
the Code, which of an optionee's Incentive Stock Options will not constitute
Incentive Stock Options because of such limitation and shall notify the optionee
of such determination as soon as practicable after such determination. No
Incentive Stock Option shall be granted to an Employee under the Plan if, at the
time such Option is granted, such Employee owns stock possessing more than 10%
of the total combined voting power of all classes of stock of AdamsLabs or an
Affiliate, within the meaning of Section 422(b)(6) of the Code, unless (i) on
the Effective Date of grant of such Option, the exercise price of such Option is
at least 110% of the Fair Market Value of the Common Stock subject to the Option
and (ii) such Option by its terms is not exercisable after the expiration of
five years from the Effective Date of the Option's grant.
 
      7.4   ADDITIONAL TERMS AND CONDITIONS. The Board may subject any Award of
an Option to such other terms, conditions, restrictions and/or limitations as it
determines are necessary or appropriate, provided they are not inconsistent with
the Plan.
 
      7.5   EXERCISE OF OPTIONS. Subject to the terms and conditions of the
Plan, Options shall be exercised by the delivery of a written notice of exercise
to AdamsLabs, setting forth the number of shares of Common Stock with respect to
which the Option is to be exercised, accompanied by full payment for such
shares.
 
                                      -7-
<PAGE>
 
      Upon exercise of an Option, the exercise price of the Option shall be
payable to AdamsLabs in full either: (i) in cash or an equivalent acceptable to
the Board or (ii) in the discretion of the Board and in accordance with any
applicable administrative guidelines established by the Board, by (a) tendering
previously acquired nonforfeitable, unrestricted shares of Common Stock having
an aggregate Fair Market Value at the time of exercise equal to the total
exercise price (including an actual or deemed multiple series of exchanges of
such shares), (b) with respect to Nonqualified Stock Options only, withholding
shares which otherwise would be acquired on exercise having an aggregate Fair
Market Value at the time of exercise equal to the total exercise price or (c) a
combination of the forms of payment specified in clauses (i), (ii)(a) or (ii)(b)
above.
 
      In addition, the Board, in its sole and absolute discretion, may approve
the extension of a loan to an optionee who is an Employee to assist the optionee
in paying the exercise price of an Option; provided, however, that no such loan
shall be for an amount greater than the excess of the (i) the exercise price of
the shares of Common Stock issuable upon exercise of the Option over (ii) the
par value of such shares of Common Stock. Any such loan will be made on such
terms and conditions as the Board shall deem to be appropriate.
 
      In addition, any grant of a Nonqualified Stock Option under the Plan may
provide that payment of the exercise price of the Nonqualified Stock Option may
also be made in whole or in part in the form of shares of Restricted Stock or
other shares of Common Stock that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by the Board at the time
of grant of such Nonqualified Stock Option, whenever the exercise price of such
Nonqualified Stock Option is paid in whole or in part by means of the form of
consideration specified in the immediately preceding sentence, the shares of
Common Stock received by the Participant upon the exercise of such Option shall
be subject to the same risk of forfeiture and restrictions on transfer as those
that applied to the consideration surrendered by the Participant. However, the
risk of forfeiture and restrictions on transfer shall apply only to the same
number of shares of Common Stock received by the Participant upon exercise as
applied to the forfeitable or restricted Common Stock surrendered by the
Participant in payment of the exercise price.
 
      As soon as reasonably practicable after receipt of written notification of
exercise of an Option and full payment of the exercise price and any required
withholding taxes, AdamsLabs shall deliver to the Participant, in the
Participant's name, a stock certificate or certificates in an appropriate amount
based upon the number of shares of Common Stock purchased under the Option.
 
      7.6   TERMINATION OF SERVICE. Each Award Agreement embodying the Award of
an Option shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment or service with the Company. Such provisions shall be determined in
the sole discretion of the Board, need not be uniform among all Options granted
under the Plan and may reflect distinctions based on the reasons for termination
of employment or service. Subject to Sections 7.2 and 7.3 and Article 9, in the
event that an Employee's Award Agreement embodying the Award of an Option does
not set forth such
 
                                      -8-
<PAGE>
 
termination provisions, the following termination provisions shall apply with
respect to such Award:
 
            (a)   RETIREMENT, DEATH OR DISABILITY. If the employment of a
      Participant shall terminate by reason of Retirement, death or permanent
      and total disability (within the meaning of Section 22(e)(3) of the Code),
      outstanding Options held by the Participant may be exercised, to the
      extent then vested, no more than one year from the date of such
      termination of employment, unless the Options, by their terms, expire
      earlier.
 
            (b)   INVOLUNTARY TERMINATION. If the employment of a Participant is
      involuntarily terminated by the Company for any reason (other than for
      cause as described in paragraph (d) below), outstanding Options held by
      the Participant may be exercised, to the extent then vested, no more than
      three months from the date of such termination of employment, unless the
      Options, by their terms, expire earlier.
 
            (c)   VOLUNTARY TERMINATION. If the employment of a Participant
      terminates due to the Participant's voluntary resignation for any reason
      (other than the reasons set forth in paragraph (a) above), outstanding
      Options held by the Participant may be exercised, to the extent then
      vested, no more than thirty days from the date of such termination of
      employment, unless the Options, by their terms, expire earlier.
 
            (d)   TERMINATION FOR CAUSE. Notwithstanding paragraphs (a), (b) and
      (c) above, if the employment of a Participant shall be terminated for
      cause, all outstanding Options held by the Participant shall immediately
      be forfeited to the Company and no additional exercise period shall be
      allowed, regardless of the vested status of the Options. For this purpose,
      termination for "cause" shall mean termination by reason of such
      Participant's fraud, dishonesty or performance of other acts detrimental
      to the Company, as determined by the Board in good faith.
 
      7.7   MAXIMUM OPTION GRANTS. Notwithstanding any provision contained in
the Plan to the contrary, the maximum number of shares of Common Stock for which
Options may be granted under the Plan to any one Employee during a calendar year
is 100,000.
 
ARTICLE 8. RESTRICTED STOCK
 
      8.1   GENERAL. Awards may be granted to Employees and Consultants in the
form of Restricted Stock. Restricted Stock shall be awarded in such numbers and
at such times as the Board shall determine.
 
      8.2   RESTRICTION PERIOD. At the time an Award of Restricted Stock is
granted, the Board shall establish a period of time (the "Restriction Period")
applicable to such Restricted Stock; provided, however, that except as provided
in Article 9 of this Plan, the Restriction Period with respect to any Award of
Restricted Stock shall be at least (i) one year with respect to 20% of the
shares awarded, (ii) two years with respect to an additional 20% of the shares
awarded, (iii)
 
                                      -9-
<PAGE>
 
three years with respect to an additional 20% of the shares awarded, (iv) four
years with respect to an additional 20% of the shares awarded and (v) five years
with respect to the remainder of shares awarded. Subject to the preceding
sentence, each Award of Restricted Stock may have a different Restriction
Period, in the discretion of the Board. The Restriction Period applicable to a
particular Award of Restricted Stock shall not be changed except as permitted by
Section 6.2, Section 8.3 or Article 9.
 
      8.3   OTHER TERMS AND CONDITIONS. Restricted Stock awarded to a
Participant under the Plan shall be represented by a stock certificate
registered in the name of the Participant or, at the option of AdamsLabs, in the
name of a nominee of AdamsLabs. Subject to the terms and conditions of the Award
Agreement, a Participant to whom Restricted Stock has been awarded shall have
the right to receive dividends thereon during the Restriction Period, to vote
the Restricted Stock and to enjoy all other stockholder rights with respect
thereto, except that (i) the Participant shall not be entitled to possession of
the stock certificate representing the Restricted Stock until the Restriction
Period shall have expired, (ii) AdamsLabs shall retain custody of the Restricted
Stock during the Restriction Period, (iii) the Participant may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of the Restricted
Stock during the Restriction Period and (iv) a breach of the terms and
conditions established by the Board pursuant to the Award of the Restricted
Stock shall cause a forfeiture of the Restricted Stock. At the time of an Award
of Restricted Stock, the Board may, in its sole discretion, prescribe additional
terms, conditions, restrictions and/or limitations applicable to the Restricted
Stock, including, but not limited to, rules pertaining to the termination of
employment or service (by reason of death, permanent and total disability, or
otherwise) of a Participant prior to expiration of the Restriction Period.
 
      8.4   PAYMENT FOR RESTRICTED STOCK. A Participant shall not be required to
make any payment for Restricted Stock awarded to the Participant, except to the
extent otherwise required by the Board or by applicable law.
 
      8.5   MISCELLANEOUS. Nothing in this Article 8 shall prohibit the exchange
of shares of Restricted Stock issued under the Plan pursuant to a plan of
reorganization for stock or securities of AdamsLabs or another corporation a
party to the reorganization, but the stock or securities so received for shares
of Restricted Stock shall, except as provided in Section 6.2 or Article 9,
become subject to the restrictions applicable to the Award of such Restricted
Stock. Any shares of stock received as a result of a stock split or stock
dividend with respect to shares of Restricted Stock shall also become subject to
the restrictions applicable to the Award of such Restricted Stock.
 
ARTICLE 9. CORPORATE TRANSACTION
 
                                      -10-
<PAGE>
 
      Notwithstanding anything contained in the Plan to the contrary, in the
event of a Corporate Transaction (as defined below), unless otherwise provided
in the related Award Agreement: (i) each Option then outstanding shall become
exercisable in full; (ii) all restrictions (other than restrictions imposed by
law) and conditions of all Restricted Stock then outstanding shall be deemed
satisfied; and (iii) AdamsLabs shall have the right, but shall not be obligated,
to cancel any and all Options outstanding at the time of such Corporate
Transaction by payment for each share of Common Stock that may be purchased
pursuant to the Option at the time of the cancellation of an amount in cash
equal to the excess, if any, of the Fair Market Value of the Common Stock as
determined by the Board based upon the consideration being paid for a share of
Common Stock in the Corporate Transaction, over the purchase price set forth in
the Option.
 
      A "Corporate Transaction" shall include any of the following transactions
with respect to which AdamsLabs is a party:
 
            (a)   a merger or consolidation in which AdamsLabs is not the
      surviving entity, except for (i) a transaction the principal purpose of
      which is to change the state of AdamsLabs's incorporation, or (ii) a
      transaction in which AdamsLabs's shareholders immediately prior to such
      merger or consolidation hold (by virtue of securities received in exchange
      for their shares in AdamsLabs) securities of the surviving entity
      representing more than fifty percent (50%) of the total voting power of
      such entity immediately after such transaction;
 
            (b)   the sale, transfer or other disposition of all or
      substantially all of the assets of AdamsLabs unless AdamsLabs's
      shareholders immediately prior to such sale, transfer or other disposition
      hold (by virtue of securities received in exchange for their shares in
      AdamsLabs) securities of the purchaser or other transferee representing
      more than fifty percent (50%) of the total voting power of such entity
      immediately after such transaction; or
 
            (c)   any reverse merger in which AdamsLabs is the surviving entity
      but in which AdamsLabs's shareholders immediately prior to such merger do
      not hold (by virtue of their shares in AdamsLabs held immediately prior to
      such transaction) securities of AdamsLabs representing more than fifty
      percent (50%) of the total voting power of AdamsLabs immediately after
      such transaction.
 
Notwithstanding the foregoing, a "Corporate Transaction" shall not include a
transaction or series of transactions involving an internal reorganization of
AdamsLabs pursuant to which certain assets of AdamsLabs are transferred, leased
or otherwise contributed to entities which are directly or indirectly wholly
owned by AdamsLabs.
 
ARTICLE 10. AMENDMENT AND TERMINATION
 
                                      -11-
<PAGE>
 
      The Board may at any time suspend, terminate, amend or modify the Plan, in
whole or in part; provided, however, that no amendment or modification of the
Plan shall become effective without the approval of such amendment or
modification by the stockholders of AdamsLabs if such amendment or modification
(i) increases the maximum number of shares subject to the Plan or (ii) changes
the designation or class of persons eligible to receive Awards under the Plan.
Upon termination of the Plan, the terms and provisions of the Plan shall,
notwithstanding such termination, continue to apply to Awards granted prior to
such termination. No suspension, termination, amendment or modification of the
Plan shall adversely affect in any material way any Award previously granted
under the Plan, without the consent of the Participant holding such Award.
 
      The Board may amend the terms of any outstanding Award granted pursuant to
this Plan, but any amendment that would adversely affect the Participant's
rights under an outstanding Award shall not be made without the written consent
of the Participant. The Board may, with a Participant's written consent, cancel
any outstanding Award or accept any outstanding Award in exchange for a new
Award.
 
ARTICLE 11. MISCELLANEOUS
 
      11.1  AWARD AGREEMENTS. After the Board grants an Award under the Plan to
a Participant, AdamsLabs and the Participant shall enter into an Award Agreement
setting forth the terms, conditions, restrictions and/or limitations applicable
to the Award and such other matters as the Board may determine to be
appropriate. The terms and provisions of the respective Award Agreements need
not be identical. In the event of any conflict between an Award Agreement and
the Plan, the terms of the Plan shall govern.
 
      11.2  ADDITIONAL CONDITIONS. Notwithstanding anything in the Plan to the
contrary: (i) AdamsLabs may, if it shall determine it necessary or desirable for
any reason, at the time of grant of any Award or the issuance of any shares of
Common Stock pursuant to any Award, require the recipient of the Award or such
shares of Common Stock, as a condition to the receipt thereof, to deliver to
AdamsLabs a written representation of present intention to acquire the Award or
such shares of Common Stock for his or her own account for investment and not
for distribution; and (ii) if at any time AdamsLabs further determines, in its
sole discretion, that the listing, registration or qualification (or any
updating of any such document) of any Award or shares of Common Stock issuable
pursuant thereto is necessary on any securities exchange or market or under any
federal or state securities or blue sky laws, or that the consent or approval of
any governmental or regulatory body is necessary or desirable as a condition of,
or in connection with, the grant of any Award, the issuance of shares of Common
Stock pursuant thereto or the removal of any restrictions imposed on such
shares, such Award shall not be awarded or such shares of Common Stock shall not
be issued or such restrictions shall not be removed, as the case may be, in
whole or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to AdamsLabs.
 
                                      -12-
<PAGE>
 
      11.3  LEGEND ON STOCK CERTIFICATES. Each certificate representing shares
of Common Stock issued pursuant to an Award shall bear a legend in substantially
the following form:
 
      THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
      THE TERMS OF THE 1999 LONG-TERM INCENTIVE PLAN OF ADAMS LABORATORIES, INC.
      ("ADAMSLABS") AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
      OTHERWISE ENCUMBERED OR DISPOSED OF EXCEPT AS SET FORTH IN THE TERMS OF AN
      AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER HEREOF AND ADAMSLABS.
      A COPY OF SUCH PLAN AND AGREEMENT ARE ON FILE AT THE PRINCIPAL EXECUTIVE
      OFFICES OF ADAMSLABS.
 
      11.4  RESTRICTIONS ON TRANSFER. The Common Stock acquired pursuant to any
and all Awards shall be subject to a right of first refusal in favor of
AdamsLabs, its successors and designees, and such other restrictions and
agreements regarding sale, assignment, encumbrances or other transfer as the
Board shall deem advisable and shall set forth in the Award Agreement. In
addition, AdamsLabs shall have the right to repurchase the shares of Common
Stock acquired pursuant to any and all Awards at any time on or after an
Employee's termination of employment for any reason or the termination of
services of a Consultant. The price to be paid by AdamsLabs, its successors or
designees for the repurchase of Common Stock acquired pursuant to an Award shall
be the Fair Market Value of the Common Stock; provided, however, that in the
event of a repurchase of Common Stock with respect to a Participant following
such Participant's termination of employment for cause as described in Section
7.3(d), the price to be paid by AdamsLabs, its successors or designees for the
repurchase of Common Stock acquired pursuant to an Award shall be the lesser of
the Fair Market Value of the Common Stock or the price paid for the shares, if
any. The preceding provisions of this Section 11.4 to the contrary
notwithstanding, unless otherwise provided in the related Award Agreement, the
rights of AdamsLabs, its successors and designees to a right of first refusal
for or right to repurchase Common Stock pursuant to this Section or an Award
Agreement and such other restrictions and agreements regarding sale, assignment,
encumbrances or other transfer of Common Stock as may be set forth in an Award
Agreement, shall terminate upon the closing of the first underwritten public
offering of the common stock of AdamsLabs that is pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act of 1933, as amended, covering the offer and
sale of any common stock to the public for AdamsLabs' account; provided,
however, that nothing in this Section is intended to or shall shorten the
Restriction Period with respect to Restricted Stock or accelerate the
exercisability or vesting of any Award prior to time provided for such exercise
or vesting pursuant to the terms of this Plan and the related Award Agreement.
 
      11.5  NONASSIGNABILITY. No Award granted under the Plan may be sold,
transferred, pledged, exchanged, hypothecated or otherwise disposed of, other
than by will or pursuant to the applicable laws of descent and distribution.
Further, no such Award shall be subject to execution, attachment or similar
process. Any attempted sale, transfer, pledge, exchange,
 
                                      -13-
<PAGE>
 
hypothecation or other disposition of an Award not specifically permitted by the
Plan or the Award Agreement shall be null and void and without effect. All
Awards granted to a Participant under the Plan shall be exercisable during his
or her lifetime only by such Participant or, in the event of the Participant's
legal incapacity, by his or her guardian or legal representative.
 
      11.6  WITHHOLDING TAXES. The Company shall be entitled to deduct from any
payment made under the Plan, regardless of the form of such payment, the amount
of all applicable income and employment taxes required by law to be withheld
with respect to such payment, may require the Participant to pay to the Company
such withholding taxes prior to and as a condition of the making of any payment
or the issuance or delivery of any shares of Common Stock under the Plan and
shall be entitled to deduct from any other compensation payable to the
Participant any withholding obligations with respect to Awards under the Plan.
In accordance with any applicable administrative guidelines it establishes, the
Board may allow a Participant to pay the amount of taxes required by law to be
withheld from or with respect to an Award by (i) withholding shares of Common
Stock from any payment of Common Stock due as a result of such Award or (ii)
permitting the Participant to deliver to the Company previously acquired shares
of Common Stock, in each case having a Fair Market Value equal to the amount of
such required withholding taxes. No payment shall be made and no shares of
Common Stock shall be issued pursuant to any Award unless and until the
applicable tax withholding obligations have been satisfied.
 
      11.7  NO FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Award granted hereunder, and no
payment or other adjustment shall be made in respect of any such fractional
share.
 
      11.8  NOTICES. All notices required or permitted to be given or made under
the Plan or any Award Agreement shall be in writing and shall be deemed to have
been duly given or made if (i) delivered personally, (ii) transmitted by first
class registered or certified United States mail, postage prepaid, return
receipt requested, (iii) sent by prepaid overnight courier service or (iv) sent
by telecopy or facsimile transmission, answer back requested, to the person who
is to receive it at the address that such person has theretofore specified by
written notice delivered in accordance herewith. Such notices shall be effective
(i) if delivered personally or sent by courier service, upon actual receipt by
the intended recipient, (ii) if mailed, upon the earlier of five days after
deposit in the mail or the date of delivery as shown by the return receipt
therefor or (iii) if sent by telecopy or facsimile transmission, when the answer
back is received. AdamsLabs or a Participant may change, at any time and from
time to time, by written notice to the other, the address that it or such
Participant had theretofore specified for receiving notices. Until such address
is changed in accordance herewith, notices hereunder or under an Award Agreement
shall be delivered or sent (i) to a Participant at his or her address as set
forth in the records of the Company or (ii) to AdamsLabs at the principal
executive offices of AdamsLabs clearly marked "Attention: LTIP Administration".
 
      11.9  BINDING EFFECT. The obligations of AdamsLabs under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other
 
                                      -14-
<PAGE>
 
reorganization of AdamsLabs, or upon any successor corporation or organization
succeeding to all or substantially all of the assets and business of AdamsLabs.
The terms and conditions of the Plan shall be binding upon each Participant and
his or her heirs, legatees, distributees and legal representatives.
 
      11.10 SEVERABILITY. If any provision of the Plan or any Award Agreement is
held to be illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining provisions of the Plan or such agreement, as the case
may be, but such provision shall be fully severable and the Plan or such
agreement, as the case may be, shall be construed and enforced as if the illegal
or invalid provision had never been included herein or therein.
 
      11.11 NO RESTRICTION OF CORPORATE ACTION. Nothing contained in the Plan
shall be construed to prevent AdamsLabs or any Affiliate from taking any
corporate action (including any corporate action to suspend, terminate, amend or
modify the Plan) that is deemed by AdamsLabs or such Affiliate to be appropriate
or in its best interest, whether or not such action would have an adverse effect
on the Plan or any Awards made or to be made under the Plan. No Participant or
other person shall have any claim against AdamsLabs or any Affiliate as a result
of such action.
 
      11.12 GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the internal laws (and not the principles relating to conflicts
of laws) of the State of Texas, except as superseded by applicable federal law.
 
      11.13 NO RIGHT, TITLE OR INTEREST IN COMPANY ASSETS. No Participant shall
have any rights as a stockholder of AdamsLabs as a result of participation in
the Plan until the date of issuance of a stock certificate in his or her name
and, in the case of Restricted Stock, unless and until such rights are granted
to the Participant under the Plan. To the extent any person acquires a right to
receive payments from the Company under the Plan, such rights shall be no
greater than the rights of an unsecured creditor of the Company, and such person
shall not have any rights in or against any specific assets of the Company. All
of the Awards granted under the Plan shall be unfunded.
 
      11.14 RISK OF PARTICIPATION. Nothing contained in the Plan shall be
construed either as a guarantee by AdamsLabs or its Affiliates, or their
respective stockholders, directors, officers or employees, of the value of any
assets of the Plan or as an agreement by AdamsLabs or its Affiliates, or their
respective stockholders, directors, officers or employees, to indemnify anyone
for any losses, damages, costs or expenses resulting from participation in the
Plan.
 
      11.15 NO GUARANTEE OF TAX CONSEQUENCES. No person connected with the Plan
in any capacity, including, but not limited to, AdamsLabs and the Affiliates and
their respective directors, officers, agents and employees, makes any
representation, commitment or guarantee that any tax treatment, including, but
not limited to, Federal, state and local income, estate and gift tax treatment,
will be applicable with respect to any Awards or payments thereunder made to
 
                                      -15-
<PAGE>
 
or for the benefit of a Participant under the Plan or that such tax treatment
will apply to or be available to a Participant on account of participation in
the Plan.
 
      11.16 OTHER BENEFITS. No Award granted under the Plan shall be considered
compensation for purposes of computing benefits or contributions under any
retirement plan of AdamsLabs or any Affiliate, nor affect any benefits or
compensation under any other benefit or compensation plan of AdamsLabs or any
Affiliate now or subsequently in effect.
 
      11.17 CONTINUED EMPLOYMENT. Nothing contained in the Plan or in any Award
Agreement shall confer upon any Participant the right to continue in the employ
of the Company, or interfere in any way with the rights of the Company to
terminate his or her employment at any time, with or without cause.
 
      11.18 NO MODIFICATION OF OTHER AGREEMENTS. Notwithstanding anything to the
contrary contained herein, the approval of this Plan by the Board and by
AdamsLabs' shareholders shall not be construed as an amendment, modification or
waiver by any such shareholder (or by any person or entity who has designated
any such approving Board member to serve in such capacity) of or under any
provision of any other agreement or instrument, including, without limitation,
any stock purchase agreement or shareholders agreement.
 
      11.19 MISCELLANEOUS. Headings are given to the articles and sections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction of the Plan or
any provisions hereof. The use of the masculine gender shall also include within
its meaning the feminine. Wherever the context of the Plan dictates, the use of
the singular shall also include within its meaning the plural, and vice versa.
 
      IN WITNESS WHEREOF, this Plan has been executed as of this 16th day of
September, 1999 to be effective as of July 21, 1999.
 
                                    ADAMS LABORATORIES, INC.
 
                                    By /s/ John Q. Adams, Jr.
                                       ____________________________________
                                       Title: President
 
                                      -16-
 
<PAGE>
                             AMENDMENT NO. 1 TO THE
 
                            ADAMS LABORATORIES, INC.
                         1999 LONG-TERM INCENTIVE PLAN
 
 
     Pursuant to the provisions of Article 10 thereof, the Adams Laboratories,
Inc. 1999 Long-Term Incentive Plan (the "Plan") is hereby amended in the
following respects only:
 
     FIRST: Section 7.2 of the Plan is hereby amended by restatement in its
entirety to read as follows:
 
 
          7.2  TERMS AND CONDITIONS OF OPTIONS. An Option shall be exercisable
     in whole or in such installments and at such times as may be determined by
     the Board; provided, however, that except as provided in Article 9 of this
     Plan, no Option granted to an Employee shall be exercisable sooner than one
     year from the Effective Date of the Option and the Option shall first
     become exercisable with respect to no more than 20% of the number of shares
     covered by the Option on the date which is one year from the Effective Date
     of the Option with no more than an additional 20% first becoming
     exercisable on each subsequent anniversary thereof until such Option is
     exercisable in full. Notwithstanding the preceding sentence, the Board may
     grant an Option to an Employee that is exercisable in full immediately upon
     grant provided that the shares purchased upon exercise of any such Option
     shall be Restricted Stock, the Restriction Period for which shall begin on
     the Effective Date of the Option and, except as provided in Article 9 of
     this Plan, shall end no sooner than (i) one year with respect to 20% of the
     shares covered by the Option, (ii) two years with respect to an additional
     20% of the shares covered by the Option, (iii) three years with respect to
     an additional 20% of the shares covered by the Option, (iv) four years with
     respect to an additional 20% of the shares covered by the Option, and (v)
     five years with respect to the remainder of shares covered by the Option.
     The preceding provisions to the contrary notwithstanding, solely for
     purposes of determining the percentage of shares exercisable pursuant to an
     Option and Restriction Period with respect to Restricted Stock purchased
     upon exercise of an Option, the Effective Date of an Option granted to an
     Employee in substitution for the cancellation of all phantom share units
     previously granted to such Employee under a phantom stock plan of AdamsLabs
     in effect prior to the date of adoption of this Plan shall be the original
     effective date of the grant of such phantom share units. Any Restricted
     Stock purchased pursuant to the exercise of an Option as provided in the
     preceding provisions of this Section shall be subject to the terms of
     Article 8 of this Plan and such other provisions of this Plan that are
     applicable to Restricted Stock, and the Award Agreement for such Option
     shall provide that in the event of the Participant's termination of
     employment during the Restriction Period for any reason, all shares with
     respect to which the Restriction Period has not ended shall be forfeited to
     AdamsLabs and AdamsLabs shall pay to the Participant an amount equal to the
     lesser of the price paid by the Participant upon exercise of the shares so
     forfeited or the Fair Market Value of the shares on the date of forfeiture;
     provided, however, that for this purpose, the "price paid by the
<PAGE>
     Participant upon exercise" of a Nonqualified Stock Option that is exercised
     solely by means of the withholding of shares which otherwise would be
     acquired on exercise shall be zero. The price at which a share of Common
     Stock may be purchased upon exercise of an Option shall be determined by
     the Board, but such exercise price shall not be less than 100% of the Fair
     Market Value of a share of Common Stock on the Effective Date of the
     Option's grant. Except as otherwise provided in Section 7.3, the term of
     each Option shall be as specified by the Board; provided, however, that,
     unless otherwise designated by the Board, no Options shall be exercisable
     later than 10 years from the Effective Date of the Option's grant.
 
     SECOND:   Section 8.2 of the Plan is hereby amended by restatement in its
entirety to read as follows:
 
          8.2  RESTRICTION PERIOD. At the time an Award of Restricted stock is
     granted, the Board shall establish a period of time (the "Restriction
     Period") applicable to such Restricted Stock; provided, however, that
     except as provided in Article 9 of this Plan, the Restriction Period with
     respect to any Award of Restricted Stock made to an Employee shall be at
     least (i) one year with respect to 20% of the shares awarded, (ii) two
     years with respect to an additional 20% of the shares awarded, (iii) three
     years with respect to an additional 20% of the shares awarded, (iv) four
     years with respect to an additional 20% of the shares awarded and (v) five
     years with respect to the remainder of shares awarded Subject to the
     preceding sentence, each Award of Restricted Stock may have a different
     Restriction Period, in the discretion of the Board. The Restriction Period
     applicable to a particular Award of Restricted Stock shall not be changed
     except as permitted by Section 6.2, Section 8.3 or Article 9.
 
     IN WITNESS WHEREOF, this Amendment has been executed this 19th day of
November, 1999 to be effective as of the date of the Plan's original adoption.
 
                                        ADAMS LABORATORIES, INC.
 
 
                                        By /s/ John Q. Adams, Sr.
                                           ___________________________________
 
                                           Title: CEO
 
 
 
                                      -2-
<PAGE>
 
                             AMENDMENT NO. 2 TO THE
                            ADAMS LABORATORIES, INC.
                          1999 LONG-TERM INCENTIVE PLAN
 
      Pursuant to the provisions of Article 10 thereof, the Adams Laboratories,
Inc. 1999 Long-Term Incentive Plan (the "Plan") is hereby amended in the
following respects only:
 
      FIRST: Section 6.1 of the Plan is hereby amended by replacing "700,000"
with "8,177,018".
 
      SECOND: Section 7.2 of the Plan is hereby amended by restatement in its
entirety to read as follows:
 
 
            7.2 TERMS AND CONDITIONS OF OPTIONS. An Option shall be exercisable
      in whole or in such installments and at such times as may be determined by
      the Board in its discretion.
 
 
      THIRD: Section 7.7 of the Plan is hereby amended by deleting such section
in its entirety and inserting in lieu thereof the word "Reserved".
 
      FOURTH: Section 11.1 of the Plan is hereby amended by replacing the last
sentence of such Section in its entirety with the following:
 
      Unless the Award Agreement provides otherwise, in the event of any
      conflict between an Award Agreement and the Plan, the terms of the Plan
      shall govern.
 
      FIFTH: Section 11.11 of the Plan is hereby amended by inserting the phrase
"Except as otherwise provided in Article 10 hereof," at the beginning of the
first sentence of such Section.
 
      Except as amended by this Amendment No. 2, the Plan shall remain in full
force and effect.
 
      IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
 
                                               ADAMS LABORATORIES, INC.
 
                                               By: /s/ David Becker
                                                  ____________________________
                                               Name: David Becker
                                                    __________________________
                                               Title: Chief Financial Officer
                                                     _________________________
 
<PAGE>
 
                             AMENDMENT NO. 3 TO THE
                            ADAMS LABORATORIES, INC.
                          1999 LONG-TERM INCENTIVE PLAN
 
      Pursuant to the provisions of Article 10 thereof, the Adams Laboratories,
Inc. 1999 Long-Term Incentive Plan (the "Plan") is hereby amended by replacing
"8,177,018" with "8,994,720" in Section 6.1 of the Plan.
 
      Except as amended by this Amendment No. 3, the Plan shall remain in full
force and effect.
 
      IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
 
                                             ADAMS LABORATORIES, INC.
 
                                             By: /s/ Walter E. Riehemann
                                                ____________________________
                                             Name: Walter E. Riehemann
                                                   _________________________
                                             Title: Vice President &
                                                  __________________________
                                                  General Counsel
                                                  __________________________
 
<PAGE>
 
                             AMENDMENT NO. 4 TO THE
                            ADAMS LABORATORIES, INC.
                          1999 LONG-TERM INCENTIVE PLAN
 
      Pursuant to the provisions of Article 10 thereof, the Adams Laboratories,
Inc. 1999 Long-Term Incentive Plan (the "Plan") is hereby amended by replacing
"8,994,720" with "9,300,000" in Section 6.1 of the Plan, effective as of April
1, 2004.
 
      Except as amended by this Amendment No. 4, the Plan shall remain in full
force and effect.
 
      IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
 
                                         ADAMS LABORATORIES, INC.
 
                                         By: /s/ David Becker
                                             ____________________________
                                         Name: David P. Becker
                                         Title: Chief Financial Officer
 
<PAGE>
 
                             AMENDMENT NO. 5 TO THE
                            ADAMS LABORATORIES, INC.
                          1999 LONG-TERM INCENTIVE PLAN
 
      Pursuant to the provisions of Article 10 thereof, the Adams Laboratories,
Inc. 1999 Long-Term Incentive Plan (the "Plan") is hereby amended by replacing
"9,300,000" with "11,500,000" in Section 6.1 of the Plan, effective as of
October 20, 2004.
 
      Except as amended by this Amendment No. 5, the Plan shall remain in full
force and effect.
 
      IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
 
                                           ADAMS LABORATORIES, INC.
 
                                           By: /s/ David Becker
                                              ____________________________
                                           Name: David P. Becker
                                           Title: Chief Financial Officer
 
<PAGE>
                                                                       EXHIBIT C
 
                            ADAMS LABORATORIES, INC.
 
                      EXECUTIVE AND STOCKHOLDERS' AGREEMENT
 
            THIS EXECUTIVE AND STOCKHOLDERS' AGREEMENT (this "AGREEMENT") is
made as of August 11, 2003, by and among Adams Laboratories, Inc., a Texas
corporation (the "COMPANY"), Michael J. Valentino (the "EXECUTIVE") and EGI-Fund
(02-04) Investors, L.L.C., EGI-Fund (00) Investors, L.L.C., EGI-Fund (99)
Investors, L.L.C., EGI-Fund (01) Investors, L.L.C. (collectively, "EGI"),
Perseus-Soros Biopharmaceutical Fund, LP ("PERSEUS-SOROS"), Tullis-Dickerson
Capital Focus III, L.P., TD Origen Capital Fund, L.P. and TD Lighthouse Capital
Fund, L.P. (collectively, "TD" and, together with EGI and Perseus-Soros, the
"STOCKHOLDERS"). Except as otherwise specified herein, capitalized terms used
herein are defined in paragraph 9 hereof.
 
            The Company and the Executive are, simultaneously herewith, entering
into an Executive Employment Agreement. As a material inducement to the
Executive entering into such agreement, the Company, the Stockholders and the
Executive have agreed to enter into this Agreement with the Executive for the
purposes, among others, of limiting the manner and terms by which the Shares may
be transferred.
 
            NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
 
            1. Restrictions on Transfer of Shares.
 
                  (a) Transfer of Shares. Neither the Executive nor any
Stockholder shall sell, transfer, assign, pledge (other than a pledge made in
connection with a commercial loan by an institutional stockholder) or otherwise
dispose of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law) any interest in such holder's Shares (a
"TRANSFER"), except pursuant to the provisions of this Section 1 or pursuant to
a Public Sale or a transfer to an Affiliate, stockholder, member or partner of
such Stockholder; provided that in no event shall any Transfer of Shares
pursuant to this Section 1 be made for any consideration other than cash payable
upon consummation of such Transfer and no Shares may be pledged (except for a
pledge of Shares (i) by a transferee to secure indebtedness to the transferor
thereof hereunder, (ii) to the Company or its Subsidiaries to secure payment of
any notes made by any Stockholder to the Company or its Subsidiaries, or (iii)
in an amount not exceeding 25% of the Shares owned by such holder; provided
that, in each case, any such pledge (or a pledge made in connection with a
commercial loan by an institutional investor) is made expressly subject to the
terms, restrictions and conditions contained in this Agreement).
 
 
                                       1
<PAGE>
                  (b) Tag-Along Rights. At least 30 days prior to any Transfer
of Shares (other than a Public Sale, a transfer to an Affiliate, stockholder,
member or partner of such Stockholder, or to another stockholder of the
Company), the Stockholder making such transfer (the "TRANSFERRING STOCKHOLDER")
shall deliver a written notice (the "SALE NOTICE") to the Executive, specifying
in reasonable detail the identity of the prospective transferee(s), the number
of shares to be transferred and the terms and conditions of the Transfer. The
Executive may elect to participate in the contemplated Transfer at the same
price per share and on the same terms by delivering written notice to the
Transferring Stockholder within 30 days after delivery of the Sale Notice. If
any other stockholders have elected to participate in such Transfer (including
stockholders exercising their rights under the Stockholders' Agreement), the
Transferring Stockholder, the Executive and such other stockholders shall be
entitled to sell in the contemplated Transfer, at the same price and on the same
terms, a number of Shares of the same class of Shares being transferred equal to
the product of (i) the quotient determined by dividing the percentage of Shares
of such class owned by such Person by the aggregate percentage of Shares of such
class owned by the Transferring Stockholder, the Executive and the other
stockholders participating in such sale and (ii) the number of Shares of such
class to be sold in the contemplated Transfer.
 
      For example, if the Sale Notice contemplated a sale of 100 Shares by the
      Transferring Stockholder, and if the Transferring Stockholder at such time
      owns 30% of all Shares, if the Executive elects to participate and owns 5%
      of all Shares and if one other stockholder elects to participate and owns
      15% of all Shares, the Transferring Stockholder would be entitled to sell
      60 shares ((30% / 50%) x 100 shares), the Executive would be entitled to
      sell 10 shares ((5% / 50%) x 100 and the other stockholder would be
      entitled to sell 30 shares ((15% / 50%) x 100 shares).
 
Each Transferring Stockholder shall use best efforts to obtain the agreement of
the prospective transferee(s) to the participation of the Executive in any
contemplated Transfer, and no Transferring Stockholder shall transfer any of its
Shares to any prospective transferee if such prospective transferee(s) declines
to allow the participation of the Executive. If the Executive exercises his
right to transfer Shares pursuant to this Section 1(b), the Executive shall pay
his pro rata share (based on the number of Shares to be sold) of the expenses
incurred by the Stockholders in connection with such transfer and shall be
obligated to join on a pro rata basis (based on the number of Shares to be sold)
in any indemnification or other obligations that the Transferring Stockholder
agrees to provide in connection with such transfer (other than any such
obligations that relate specifically to a particular stockholder such as
indemnification with respect to an amount in excess of the net cash proceeds
paid to such holder in connection with such Transfer).
 
            (c) Drag Along Rights. If at any time the Stockholders propose to
sell all of the Shares held by them, the Stockholders may give written notice
(the "WRITTEN NOTICE") thereof to the Executive. The Written Notice shall
specify the buyer or buyers and the time, date, place, sale price for the
Company, liquidation analysis (as defined below) and payment terms at and upon
which such sale shall take place. Upon the giving of the Written Notice, the
Executive shall be obligated to sell to the buyer or buyers
 
 
                                       2
<PAGE>
specified in the Written Notice all shares of capital stock owned or controlled
by him (including convertible securities, options, and other rights to acquire
shares) at the price per share determined as set forth in the liquidation
analysis and otherwise on the same terms as those upon which the Stockholders
are selling their shares to such buyer or buyers. Upon the receipt of the
Written Notice, the Executive shall cause to be surrendered to the Corporation,
for delivery to the buyer or buyers upon the closing of such sale by the
Stockholders against receipt of appropriate payment therefor, a certificate or
certificates evidencing ownership of Executive's shares of capital stock, duly
endorsed in blank with all requisite transfer stamps affixed, if any. For
purposes of this Section 1(c), the "LIQUIDATION ANALYSIS" shall be a
determination of the price per share payable to each stockholder if the
Corporation was sold for the aggregate purchase price proposed by the buyer or
buyers and the proceeds from such sale were utilized to pay (x) all creditors of
the Corporation, including trade payables and the costs of the sale and (y)
thereafter, the remaining proceeds were distributed to the stockholders of the
Corporation as described in the Amended and Restated Certificate of
Incorporation. For purposes of the liquidation analysis, (i) if a holder of
Preferred Stock would receive more consideration by converting his or its shares
of Preferred Stock into shares of Common Stock, then such holder will be
presumed to have converted such shares and (ii) if a holder holds a right to
acquire shares of capital stock which are then exercisable and if such holder
would receive more consideration upon exercise of such right than the exercise
price, then such holder will be presumed to have exercised such right and paid
such exercise price.
 
                  (d) Permitted Transfers. The restrictions set forth in this
Section 1 shall not apply with respect to any Transfer of Shares by the
Executive or any Stockholder (i) in the case of the Executive, (a) pursuant to
applicable laws of descent and distribution or by will, or (b) among the
Executive's Family Group or (ii) in the case of a Stockholder, among its
partners, directors, officers, stockholders, members or Affiliates (collectively
referred to herein as "PERMITTED TRANSFEREES"); provided that the restrictions
contained in this Section 1 shall continue to be applicable to the Shares after
any such Transfer and provided further that the transferees of such Shares shall
have agreed in writing to be bound by the provisions of this Agreement affecting
the Shares so transferred. "FAMILY GROUP" means the Person's spouse and
descendants (whether natural or adopted) and any trust solely for the benefit of
the Person and/or the Person's spouse and/or descendants, provided such Person
retains the possession, directly or indirectly, of the power to direct the
disposition and voting of such Shares. Notwithstanding the foregoing, the
restrictions set forth in this Section 1 shall not apply to any Transfer by EGI
to (x) any member of the Family Group of Mr. Sam Zell, (y) any trust established
for the benefit of Mr. Zell or members of his Family Group, or (z) any friends
and/or associates of Mr. Zell or EGI, provided that Mr. Zell, his Family Group,
EGI, and/or their respective trusts or Affiliates retain possession, directly or
indirectly, of the power to direct the disposition and voting of such Shares, it
being agreed and understood that each such transferee is a "PERMITTED
TRANSFEREE" hereunder.
 
                  (e) Sales to Competitors. Except as provided in Section 1(c),
the Executive and each Stockholder hereby agrees not to knowingly Transfer (and
agrees to use reasonable diligence to avoid the Transfer of) Shares to any
Person (other than
 
 
                                       3
<PAGE>
another stockholder) whose primary business is competitive with that of the
Company in geographic areas where the Company or Company Subsidiaries sell or
are actively planning to sell its products.
 
                  (f) Termination of Restrictions. Notwithstanding anything to
the contrary set forth in this Agreement, the restrictions set forth in this
Section 1 shall continue with respect to each Share until the earlier of (i) the
date on which such Share has been transferred in a Public Sale, and (ii) the
consummation of a Qualified Public Offering.
 
            2. Legend. Each certificate evidencing Shares and each certificate
issued in exchange for or upon the transfer of any Shares (if such shares remain
Shares after such transfer) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
 
            "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
            ISSUED ON OR AS OF __________, ________ AND ARE SUBJECT TO (I) AN
            EXECUTIVE AND STOCKHOLDERS' AGREEMENT DATED AS OF AUGUST 11, 2003
            AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF
            THE COMPANY'S STOCKHOLDERS, AS AMENDED AND MODIFIED FROM TIME TO
            TIME, AND THE COMPANY RESERVES THE RIGHT TO REFUSE TO REGISTER THE
            TRANSFER OF SUCH SECURITIES UNTIL THE TERMS AND CONDITIONS THEREOF
            HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
            AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE
            HOLDER HEREOF UPON WRITTEN REQUEST."
 
            "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
            REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
            AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
            REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
            REGISTRATION THEREUNDER."
 
The Company shall imprint such legend on certificates evidencing Shares
outstanding as of the date hereof, and the Executive and the Stockholders shall
cooperate with the Company in connection therewith. The legend set forth above
shall be removed from certificates evidencing any shares which cease to be
Shares in accordance with the definition thereof in Section 4 hereof.
 
 
                                       4
<PAGE>
            3. Transfer. Prior to Transferring any Shares (other than in a
Public Sale) to any Person (including members of a Family Group and other
Permitted Transferees), the transferring holders of Shares shall cause the
prospective transferee to be bound by this Agreement and to execute and deliver
to the Company and the other holders of Shares a counterpart of this Agreement.
 
            4. Definitions.
 
            "AFFILIATE" means any other Person, directly or indirectly
controlling, controlled by or under common control with such Person and any
partner of a Person which is a partnership.
 
            "COMMON STOCK" means the Company's Common Stock, par value $0.01 per
share.
 
            "PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity of any
department, agency or political subdivision thereof.
 
            "PREFERRED STOCK" means, collectively, the Series A Preferred, the
Series B Preferred and the Series C Preferred Stock, each $0.01 par value per
share, of the Company.
 
            "PUBLIC SALE" means any sale of Shares to the public pursuant to an
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 adopted under the
Securities Act.
 
            "QUALIFIED PUBLIC OFFERING" means a public offering described in
Section 6H of the Company's Amended and Restated Articles of Incorporation.
 
            "SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
 
            "SHARES" means (i) any Common Stock and any Preferred Stock
purchased or otherwise now held or subsequently acquired by the Executive or any
Stockholder, (ii) any Common Stock issued or issuable directly or indirectly
upon conversion of any series of Preferred Stock or any warrants issued by the
Company or the exercise of any stock options issued by the Company, and (iii)
any Common Stock issued with respect to the securities referred to in clauses
(i) and (ii) above by way of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization and in each such case, any such securities held in trust in
accordance with Section 4 of the Company's Amended and Restated Articles of
Incorporation. For purposes of this Agreement, any Person who holds any share of
Preferred Stock or warrants issued by the Company or any stock options to
acquire shares of Common Stock shall be deemed to be the holder of the Shares
issuable upon conversion of such Preferred Stock or warrants or exercise of such
options, whether in connection with the transfer thereof or otherwise and
regardless of any restriction or
 
 
                                       5
<PAGE>
limitation on the conversion or exercise thereof. As to any particular Shares,
such shares shall cease to be Shares when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (y) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or
any similar provision then in force).
 
            "STOCKHOLDERS' AGREEMENT" means the Third Amended and Restated
Stockholders Agreement dated as of May 16, 2003, among the Company and certain
stockholders of the Company, as the same may be amended from time to time.
 
            "SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing director or general partners
of such limited liability company, partnership, association or other business
entity.
 
            5. Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Shares in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books or treat any
purported transferee of such Shares as the owner of such shares for any purpose.
 
            6. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against any party hereto unless such modification, amendment or waiver
is approved in writing by such party. The failure of any party to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
 
            7. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this
 
 
                                       6
<PAGE>
Agreement shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.
 
            8. Entire Agreement. Except as otherwise expressly set forth herein,
this Agreement embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
 
            9. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Executive and the Stockholders
and any subsequent holders of Shares and the respective successors and assigns
of each of them, so long as they hold Shares.
 
            10. Counterparts. This Agreement may be executed in multiple
counterparts (any one of which may be by facsimile), each of which shall be an
original and all of which taken together shall constitute one and the same
agreement.
 
            11. Remedies. The parties shall be entitled to enforce their rights
under this Agreement specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing in
their favor. The parties hereto agree and acknowledge that money damages would
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party hereto may in its sole discretion apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting a bond or other security) in order to enforce or prevent
any violation of the provisions of this Agreement.
 
            12. Notices. Any notice, request or other communication given in
connection with this Agreement shall be in writing and shall be deemed to have
been given (i) when personally delivered to the recipient or (ii) provided that
a written acknowledgement of receipt is obtained, three days after being sent by
prepaid certified or registered mail, or two days after being sent by a
nationally recognized overnight courier, to the address specified in this
Section 12 (or such other address as the recipient shall have specified by ten
(10) days' advance written notice given in accordance with this Section 12).
Such communication shall be addressed to the Executive at the Executive's home
address; to the Company at its corporate headquarters; and to the Stockholders
at the addresses set forth below (unless such address is changed in accordance
with this Section 12):
 
                  EGI-Fund (99) Investors, L.L.C.
                  EGI-Fund (00) Investors, L.L.C.
                  EGI-Fund (01) Investors, L.L.C.
                  EGI-Fund (02-04) Investors, L.L.C.
                  c/o Equity Group Investments, L.L.C.
                  Two North Riverside Plaza, Suite 600
                  Chicago, Illinois  60606
 
 
                                       7
<PAGE>
                  Attention:  President  and
                  Attention: General Counsel
                  Facsimile:  (312) 902-1512
 
                  Perseus-Soros Biopharmaceutical Fund, L.P.
                  888 Seventh Avenue, 29th Floor
                  New York, NY 10106
                  Attention: Steve Elms
                  Attention: Andrew N. Schiff
 
                  With a copy to:
 
                  Perseus-Soros Biopharmaceutical Fund, L.P.
                  c/o Soros Fund Management LLC
                  888 Seventh Avenue, 31st Floor
                  New York, NY 10106
                  Attention:  Richard D. Holahan, Jr., Esq.
 
                  and
 
                  Paul, Weiss, Rifkind, Wharton & Garrison LLP
                  1285 Avenue of the Americas
                  New York, New York 10019-6064
                  Attention: Bruce A. Gutenplan, Esq.
 
 
                  Tullis-Dickerson Capital Focus III, L.P.
                  TD Origen Capital Fund, L.P.
                  TD Lighthouse Capital Fund, L.P.
                  c/o Tullis-Dickerson & Co., Inc.
                  Two Greenwich Plaza, 4th Floor
                  Greenwich, CT 06830
                  Attn: Joan Neuscheler
                  Facsimile: (505) 982-7008
 
                  With a copy to:
 
                  Law Offices of Gloria M. Skigen
                  Two Greenwich Plaza, 4th Floor
                  Greenwich, CT 06830
                  Attn: Gloria M. Skigen
                  Facsimile: (203) 861-2498
 
            13. Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Texas, without regard to conflicts of law principles
to the extent that such principles would require the application of the laws of
another jurisdiction. This Agreement may be executed in one or more
 
 
                                       8
<PAGE>
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument. Signatures delivered by
facsimile shall be effective for all purposes.
 
            14. Business Days. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the company's chief executive office is located, the time
period shall automatically be extended to the business day immediately following
such Saturday, Sunday or legal holiday.
 
 
                                       9
<PAGE>
            IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement on the day and year first above written.
 
                              ADAMS LABORATORIES, INC.
 
                              By:
                                    ------------------------------------
 
                              Its:
                                    ------------------------------------
 
 
 
                              STOCKHOLDERS:
 
                              EGI-FUND (02-04) INVESTORS, L.L.C.,
 
                              By:   EGI Managing Member (02-04), L.L.C.,
                                    its Managing Member
 
                              By:   SZ Investments, L.L.C.,
                                    its Managing Member
 
                              By:   Zell General Partnership, Inc.,
                                    its Managing Member
 
                                    By:
                                          ------------------------------
                                    Its:
                                          ------------------------------
 
 
                              EGI-FUND (00) INVESTORS, L.L.C.,
 
                              By:   SZ Investments, L.L.C.,
                                    its Managing Member
 
                              By:   Zell General Partnership, Inc.,
                                    its Managing Member
 
                                    By:
                                          ------------------------------
                                    Its:
                                          ------------------------------
<PAGE>
                              EGI-FUND (99) INVESTORS, L.L.C.,
 
                              By:   SZ Investments, L.L.C.,
                                    its Managing Member
 
                              By:   Zell General Partnership, Inc.,
                                    its Managing Member
 
                                    By:
                                          ------------------------------
                                    Its:
                                          ------------------------------
 
 
 
 
                              EGI-FUND (01) INVESTORS, L.L.C.,
 
                              By:   EGI Managing Member (01), L.L.C.,
                                    its Managing Member
 
                              By:   Zell General Partnership, Inc.,
                                    its Managing Member
 
                                    By:
                                          ------------------------------
                                          Name:
                                               -------------------------
                                          Title:
                                                ------------------------
 
                              PERSEUS-SOROS BIOPHARMACEUTICAL FUND, LP
 
                              By:   Perseus-Soros Partners, LLC
                                    Its:  General Partner
 
                              By:   SFM Participation, L.P.
                              Its:  Managing Member
 
                              By:   SFM AH, LLC
                              Its:  General Partner
 
                              By:   Soros Private Funds
                              Management LLC
                              Its:  Managing Member
 
                              By:
                                 ---------------------------------
                              Title: Attorney-in-Fact
<PAGE>
                              TULLIS-DICKERSON CAPITAL FOCUS III, L.P.
 
                              By:   Tullis-Dickerson Partners III, L.L.C.
                                    Its General Partner
 
                              By:
                                  --------------------------------------------
                              Name:
                              Title:
 
                              TD ORIGEN CAPITAL FUND, L.P.
 
                              By:   TD II Regional Partners, Inc.
                                    Its General Partner
 
                              By:
                                  --------------------------------------------
                              Name:
                              Title:
 
                              TD LIGHTHOUSE CAPITAL FUND, L.P.
 
                              By:   TD II Regional Partners, Inc.
                                    Its General Partner
 
                              By:
                                  --------------------------------------------
                              Name:
                              Title:
 
                              EXECUTIVE:
 
                              ------------------------------------------------
                              Michael J. Valentino
 
 
 
 
 
<PAGE>
                                                                       EXHIBIT D
 
                                 MUTUAL RELEASE
 
     THIS MUTUAL RELEASE (the "Release") is entered into between Michael J.
Valentino (the "Executive") and Adams Laboratories, Inc., a Texas corporation
(together with its successors and assigns, the "Company").
 
     WHEREAS, the Executive and the Company entered into an employment
agreement dated as of August 11, 2003 (the "Employment Agreement");
 
     WHEREAS, the Executive's employment has been terminated by the Company
without Cause or by the Executive for Good Reason (as each term is defined in
the Employment Agreement) and as such the Executive is due certain payments and
entitlements pursuant to the Employment Agreement subject to the Executive's
executing this Release; and
 
     WHEREAS, upon the Executive's execution and delivery of this Release, the
Company has agreed pursuant to the Employment Agreement to execute and deliver
this Release to the Executive in accordance herewith.
 
     NOW, THEREFORE, in consideration of the payments set forth in the
Employment Agreement and other good and valuable consideration, including, but
not limited to, the Company's agreement to execute this Release in accordance
herewith, the Executive and the Company agree as follows:
 
     1.   The Executive, on behalf of himself and his dependents, heirs,
administrators, agents, executors, successors and assigns (the "Executive
Releases"), hereby irrevocably and unconditionally releases, waives, and forever
discharges the Company and its affiliated companies and their past and present
parents, subsidiaries, affiliated corporations, partnerships, joint ventures,
and their successors and assigns (the "Company Affiliated Parties") and all of
the Company Affiliated Parties' past and present directors, officers, employees,
agents and their representatives, successors and assigns (but as to any such
individual, agent or representative, only in connection with, or in relationship
to, his or its capacity as a director, officer, employee, agent, representative,
successor or assign of any Company Affiliated Party and not in connection with,
or in relationship to, his or its personal capacity unrelated to any Company
Affiliated Party) (collectively, the "Company Releasees"), from any and all
actions, claims, demands, obligations, liabilities and causes of action of any
kind or description whatsoever, in law, equity or otherwise, whether known or
unknown, whether past or present, that any Executive Releasee had, may have had
or now has against the Company or any other Company Releasee, as of the date of
the execution of this Release by the Executive, arising out of or relating to
the Executive's employment relationship, or the termination of that
relationship, with the Company or any affiliate, including, but not limited to,
any action, claim, demand, obligation, liability or cause of action arising
under any Federal, state, or local employment law or ordinance (including, but
not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Acts
of 1866, 1871, 1964 and 1991, the Equal Pay Act, the Americans with Disabilities
Act of 1990, the National Labor Relations Act, the Fair Labor Standards Act of
1938, the Workers Adjustment and Retraining Notification Act, the Employee
Retirement Income Security
 
 
 
                                       1
<PAGE>
Act of 1974, as amended (other than any claim for vested benefits), the Family
and Medical Leave Act of 1993, the Age Discrimination in Employment Act of
1967, as amended, the Older Workers' Benefit Protection Act of 1990 and the
Consolidated Omnibus Budget Reconciliation Act of 1985), tort, contract or any
alleged violation of any other legal obligation. Anything to the contrary
notwithstanding in this Release or the Employment Agreement, nothing herein
shall release any Company Releasee from any claims or damages based on (i) any
right or claim that arises after the date the Executive executes this Release,
(ii) any right the Executive may have to payments, benefits or entitlements
under the Employment Agreement or any applicable plan, policy, program or
arrangement of, or other agreement with, the Company or any affiliate, (iii)
the Executive's eligibility for indemnification in accordance with applicable
laws or the articles of incorporation or by-laws of the Company, or under any
applicable insurance policy with respect to any liability the Executive incurs
or has incurred as a director, officer or employee of the Company or (iv) any
right the Executive may have to obtain contribution as permitted by law in
the event of entry of judgment against the Executive as a result of any act or
failure to act for which the Executive and any Company Releasee are jointly
liable.
 
          2.   The Company, on behalf of itself and any other Company Releasee,
hereby irrevocably and unconditionally releases, waives and forever discharges
the Executive and any other Executive Releasee, from any and all actions,
claims, demands, obligations, liabilities and causes of action of any kind or
description whatsoever, in law, equity or otherwise, whether known or unknown,
whether past or present, that any Company Releasee had, may have had or now has
against the Executive or any other Executive Releasee, as of the date of the
execution of this Release by the Company, arising out of or relating to the
Executive's employment relationship, or the termination of that relationship,
with the Company or any affiliate, including, but not limited to, any action,
claim, demand, obligation, liability or cause of action arising under any
Federal, state, or local employment law or ordinance, tort, contract, or alleged
violation of any other legal obligation. Anything to the contrary
notwithstanding in this Release or the Employment Agreement, nothing herein
shall release any Executive Releasee from any claims or damages based on (i) any
act or omission by the Executive constituting fraud or dishonesty relating to
the business of the Company, (ii) any right or claim that arises after the date
on which the Company executes this Release of (iii) any right the Company may
have to obtain contribution as permitted by law in the event of entry of
judgment against the Company as a result of any act or failure to act for which
the Executive and the Company are jointly liable.
 
          3.   The Executive represents that as of the date he has executed
this Release he has not assigned to any other party, and agrees not to assign,
any claim released by the Executive herein. In addition, the Executive promises
never to file a lawsuit or an arbitration claim against the Company or any
other Company Releasee asserting any claim released by any Executive Releasee
herein and, to the extent that the Executive has commenced such a proceeding
prior to the execution of this Release by the Executive, the Executive agrees
to withdraw such proceeding with prejudice on or before the date on which the
Executive executes this Release.
 
          4.   The Company represents that as of the date it has executed this
Release it has not assigned to any other party, and agrees not to assign, any
claim released by the Company herein. In addition, the Company promises never
to file a lawsuit or an arbitration claim against the Executive or any other
Executive Releasee asserting any claim released by any Company
<PAGE>
Release herein and, to the extent that the Company has commenced such a
proceeding prior to the execution of this Release by the Company, the Company
agrees to withdraw such proceeding with prejudice on or before the date on
which the Company executes this Release.
 
          5.   The Executive acknowledges that he has been provided a period of
at least 21 calendar days in which to consider and execute this Release. The
Executive further acknowledges and understands that he has seven calendar days
from the date on which he executes this Release to revoke his agreement by
delivering to the Company written notification (in accordance with Section 9(a)
of the Employment Agreement) of his intention to revoke this Release. This
Release becomes effective when signed by the Executive unless revoked in writing
by the Executive in accordance with this seven-day provision. To the extent that
the Executive has not otherwise done so, the Executive is advised to consult
with an attorney prior to executing this Release.
 
          6.   Upon the Executive's execution and delivery of this Release to
the Company in accordance with Section 4(a)(1) of the Employment Agreement and
provided that the Executive has not revoked this Release pursuant to Paragraph 5
hereof during the seven-day revocation period set forth therein, the Company
agrees immediately following the end of such seven-day revocation period to
execute an original of this Release and to deliver such executed Release to the
Executive in accordance with Section 4(a)(1) of the Employment Agreement.
 
          7.   This Release may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
 
          8.   This Release shall be governed by and construed and interpreted
in accordance with the laws of the State of Texas without reference to
principles of conflicts of law.
 
     IN WITNESS WHEREOF, the Executive and the Company have executed this
Release each of the date indicated below
 
                                                  _____________________________
                                                  Michael J. Valentino
 
                                                  Date:________________________
 
 
                                                  ADAMS LABORATORIES, INC
 
                                                  _____________________________
                                                  By:
                                                  Its:
 
                                                  Date:________________________
 
 
 
                                       3
<PAGE>
                                                                       EXHIBIT E
 
                  CONFIDENTIALITY AND NONCOMPETITION AGREEMENT
 
            This Confidentiality and Noncompetition Agreement is entered into as
of August 11, 2003 between Adams Laboratories, Inc., a Texas corporation
(together with its successors and assigns, "Employer") and Michael J. Valentino
("Executive").
 
                                   BACKGROUND
 
            Executive agrees and accepts that Employer is engaged in a highly
competitive industry, and must protect its proprietary and confidential
information and trade secrets against unauthorized use or disclosure, which
would irreparably harm Employer's interests. Executive recognizes that the
disclosure by Employer of certain of Employer's confidential information will be
necessary and useful to Executive's performance of job duties for Employer. As a
result, Executive will have access to Confidential Information which could be
used by Employer's competitors in a manner that would irreparably harm
Employer's competitive position in the marketplace.
 
            Executive also recognizes and acknowledges that it would be
virtually impossible for Executive to ignore all knowledge of Employer's
confidential information if Executive were to engage in competition with
Employer. It is, therefore, reasonable and proper for Employer to protect
against the intentional or inadvertent use of such specialized knowledge in
competition with Employer.
 
            Accordingly, Executive agrees that the prohibitions against
Executive from competing with Employer or soliciting employees of Employer
during the employment relationship as set forth in this Agreement and for a
reasonable period of time thereafter within a reasonable geographic area is
appropriate and necessary for the protection of Employer's proprietary and
confidential information, trade secrets, good will, and other legitimate
business interests. Executive therefore agrees with the Employer as follows:
 
            1. CONFIDENTIALITY.
 
            (a) By executing this Agreement, Employer promises to provide some
or all of its Confidential Information to Executive without regard to the
duration of Executive's employment, including specialized training concerning
some of all of the following: Executive's use of Employer's confidential
databases, Employer's unique sales and business methods, Employer's confidential
product information and Employer's confidential pricing and profit margin
information.
 
            (b) Executive hereby agrees that, other than in the ordinary course
of performing his duties for the Company, he shall not divulge to any person or
entity other than Employer, its employees and persons connected with Employer,
without Employer's express prior written
 
 
                                   Page 1 of 1
 
                                                          Initial _____ - ______
<PAGE>
authorization, any information obtained by Executive during the course of his
employment with the Company and known by him to constitute trade secrets or
proprietary information belonging to Employer, or other confidential
information, including without limitation, confidential financial information,
operating budgets, strategic plans, or research methods, projects or plans of
Employer, commercial, scientific or technical information, market research and
marketing strategies, information related to Employer's products and proposed
products, clinical trials, and applications and communications with the United
States Food and Drug Administration, obtained by Executive in the course of his
employment by Employer ("Confidential Information"). Except as otherwise
provided herein, Executive hereby agrees that he shall not, directly or
indirectly, use any Confidential Information for Executive's own benefit or for
the benefit of any third party to the detriment of Employer. Anything herein to
the contrary notwithstanding, the provisions of this paragraph shall not apply
(i) when disclosure is required by law, (ii) when disclosure is required by any
order of any court, arbitrator, mediator or administrative or legislative body
(including any committee thereof) with actual or apparent jurisdiction to order
Executive to disclose or make accessible any information, provided that
Executive shall first have given notice to Company and, to the extent permitted
by law, shall cooperate with Employer, at Employer's sole expense, in order to
permit Employer to obtain a protective order requiring that the Confidential
Information so disclosed be used only for the purposes for which the order was
issued; (iii) with respect to any other litigation, arbitration or mediation
involving this Agreement, the Employment Agreement or any other agreement
between Executive and Employer, including, but not limited to, the enforcement
of such agreements, or (iv) as to Confidential Information that becomes
generally known to the public or within the relevant trade or industry other
than due to Executive's violation of this paragraph.
 
            2. RETURN OF CONFIDENTIAL INFORMATION AND OTHER COMPANY PROPERTY.
Executive agrees that, upon termination of Executive's employment, Executive
will return to Employer all property of Employer of any nature, including
without limitation all property pertaining to Employer's Confidential
Information, within his possession or under his control. Anything to the
contrary notwithstanding, Executive shall be entitled to retain (but not for use
in violation of Section 1 hereof): (i) papers and other materials of a personal
nature, including, but not limited to, photographs, correspondence, personal
diaries, calendars and Rolodexes, personal files and phone books, (ii)
information showing his compensation or relating to reimbursement of expenses,
(iii) information that he reasonably believes may be needed for tax purposes,
(iv) copies of plans, programs and agreements relating to his employment, or
termination thereof, with the Company and (v) minutes, presentation materials
and personal notes from any meeting of the Board, or any committee thereof,
while he was a member of the Board.
 
            3. NON-DISPARAGEMENT. Executive agrees not to knowingly make any
public statement, whether oral or written, that would disparage Employer, any of
its investors or its executive officers. Employer agrees that it shall not, and
it shall cause each executive officer and director of Employer not to, knowingly
make any public statement, whether oral or written, that would disparage
Executive. Notwithstanding the foregoing, nothing in this paragraph shall
prevent
 
 
                                   Page 2 of 2
 
                                                          Initial _____ - ______
<PAGE>
any person from (i) responding publicly to incorrect or disparaging public
statements to the extent reasonably necessary to correct or refute such public
statement or (ii) making any truthful statement to the extent (x) necessary with
respect to any litigation, arbitration or mediation involving this Agreement or
any other agreement between Executive and Employer, including, but not limited
to, the enforcement of such agreements, or (y) required by law or by any court,
arbitrator, mediator or administrative or legislative body (including any
committee thereof) with actual or apparent jurisdiction to order such person to
disclose or make accessible such information.
 
            4. NONCOMPETE AGREEMENT. Ancillary to the confidentiality agreement
set forth in paragraph 1 above, and in order to aid in the enforcement of
paragraph 1, Executive agrees that:
 
            (a) at all times while an employee of Employer or Employer's
successor in interest, Executive will not, anywhere that Employer engages or
actively proposes to engage in business, directly or indirectly, maintain any
ownership in, serve as an officer, director, independent consultant, independent
contractor, or as an employee, for any business which is directly and materially
competitive with the business of the Employer; and
 
            (b) for a period of twenty-four (24) months following the
termination of Executive's employment with Employer or Employer's successor in
interest, Executive will not, anywhere that Employer engages or actively
proposes to engage in a Respiratory Pharmaceutical Business (as defined below)
on the date of termination of Executive's employment:
 
            (i) directly or indirectly, maintain any ownership interest in,
      serve as an officer, director, independent consultant, independent
      contractor, or as an employee, for any specialty pharmaceutical business
      if (x) a substantial portion of the products or activities of such
      business are the manufacture or sale of products which are directly and
      materially competitive with the products of the Employer as such products
      exist both on the date of termination of Executive's employment and on the
      date of the alleged competitive activity, including products in
      development or under active consideration by the Employer (collectively
      "Respiratory Pharmaceutical Business") and (y) as such officer, director,
      independent consultant, independent contractor or employee, Executive
      provides material services with respect to, or has direct day-to-day
      supervisory or management responsibilities with respect to, such
      business's Respiratory Pharmaceutical Business; and
 
            (ii) serve as an officer, director, independent consultant,
      independent contractor, or as an employee, for any pharmaceutical business
      if (x) such business engages, among other things, in the Respiratory
      Pharmaceutical Business and (y) as such officer, director, independent
      consultant, independent contractor or employee, Executive provides
      material services with respect to, or has direct day-to-day supervisory or
      management responsibilities with respect to, such business's Respiratory
      Pharmaceutical Business.
 
provided, however, that anything herein to the contrary notwithstanding, but
always subject to the terms of Section 1, 3 and 5 hereof, Executive shall not be
prevented from (i) serving as a member of
 
 
                                   Page 3 of 3
 
                                                          Initial _____ - ______
<PAGE>
the board of directors of any entity on which he was serving prior to the
termination of Executive's employment nor (ii) owning not more than two percent
(2%) of any private or public entity.
 
            5. NON-SOLICITATION OF EMPLOYEES. Executive agrees that at all times
while an employee of Employer or Employer's successors in interest, and for a
period of twenty-four (24) months thereafter, Executive will not, directly or
indirectly, other than in the ordinary course of performing his duties for the
Employer, knowingly solicit, entice, or otherwise induce any employee of
Employer to leave the employment of Employer. Anything herein to the contrary
notwithstanding, it shall not be a violation of this paragraph 5 for Executive
to provide a personal reference for any employee of the Employer setting forth
his personal views about such employee. The Employer acknowledges that its
employees may be hired by entities with which Executive is affiliated and that
that event will not constitute a violation of this paragraph 5 if Executive was
not involved in hiring or identifying the Employer's employee as a potential
recruit or did not assist in the recruitment of the Employer's employee.
 
            6. AGREEMENT TO REFORMATION. In the event that any provisions of
this Agreement are ever deemed by a court of law to exceed the limits permitted
by any applicable law, Executive agrees that the provisions shall be, and are,
reformed to the maximum limitations permitted by any applicable law; provided
that in no event shall such provisions be reformed to be broader than as set
forth in this Agreement. Executive expressly agrees that the restrictions set
forth in this Agreement are reasonable and enforceable by Employer and do not
impose a greater restraint than necessary to protect Employer's goodwill and
business interests.
 
            7. REMEDIES. Executive agrees that Employer will be entitled to seek
injunctive relief to enjoin and prohibit any violation of the terms and
provision of this Agreement in addition to any other remedies to which Employer
may be entitled. Employer agrees that Executive will be entitled to seek
injunctive relief to enjoin and prohibit any violation of the terms and
provision of this Agreement in addition to any other remedies to which Executive
may be entitled.
 
            8. NOT AN EMPLOYMENT CONTRACT. Executive agrees that this Agreement
shall not be construed to limit the ability of either party to terminate the
employment relationship at will.
 
            9. MUTUAL UNDERSTANDING. Executive has read foregoing Agreement,
fully understands the contents thereof, has had the opportunity to obtain
independent legal advice regarding the Agreement's legal effect, and is under no
duress regarding its execution.
 
            10. TEXAS LAW. This Agreement shall be construed, enforced and
governed by and in accordance with the laws of the State of Texas, without
regard to principles of conflicts of law.
 
            11. ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior or contemporaneous
 
 
                                   Page 4 of 4
 
                                                          Initial _____ - ______
<PAGE>
agreements concerning the subject matter hereof whether written or oral. No
change or modification of this Agreement shall be valid unless it is in writing
and executed by or on behalf of Employer and Executive.
 
            12. SEVERABILITY. If any provision of this Agreement shall be
determined to be invalid or unenforceable, the remaining provisions of this
Agreement shall not be affected thereby, shall remain in full force and effect
and shall be enforceable to the fullest extent permitted by applicable law.
 
            13. ASSIGNABILITY. Executive agrees that Employer may assign this
Agreement in accordance with Section 9(c) of the employment agreement between
the parties dated as of August 11, 2003.
 
            14. HEADINGS. The headings appearing in this Agreement are inserted
only for convenience of reference and in no way shall be construed to define,
limit or describe the scope or intent of any provision of this Agreement.
 
 
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
 
 
                                    EMPLOYER:
 
                                    ADAMS LABORATORIES, INC.
 
 
                                    By:__________________________________
 
                                    Its:_________________________________
 
 
                                    EXECUTIVE:
 
 
                                    _____________________________________
                                    MICHAEL J. VALENTINO
 
 
                                   Page 5 of 5
 
                                                          Initial _____ - ______

 

 

CHANGE IN CONTROL AGREEMENT

 

 

EXHIBIT 10.1

Tier II CIC Agreement

 

CHANGE IN CONTROL AGREEMENT

BETWEEN

 

AND

ADAMS RESPIRATORY THERAPEUTICS, INC.

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

 

CHANGE IN CONTROL AGREEMENT

             

1.    Certain Definitions      1  

2.    Change in Control      2  

3.    Termination of Employment      3  

          (a) Death or Disability      3  

          (b) Cause      4  

          (c) Good Reason      4  

          (d) Notice of Termination      5  

          (e) Date of Termination      6  

4.    Obligations of the Company upon Termination      6  

          (a) Termination by Executive for Good Reason; Termination by the Company Other Than for

          Cause or Disability      6  

          (b) Death or Disability      7  

          (c) Cause; Other than Good Reason      7  

          (d) Expiration of Protection Period      7  

5.    Non-exclusivity of Rights      8  

6.    Full Settlement; No Mitigation      8  

7.    Enforcement      8  

8.    Certain Additional Payments by the Company      9  

9.    Restrictions on Conduct of Executive      12  

          (a) General      12  

          (b) Definitions      12  

          (c) Restrictive Covenants      14  

          (d) Enforcement of Restrictive Covenants      15  

10.    Successors      16   

11.    Code Section 409A      16  

12.    Miscellaneous      17  

          (a) Governing Law      17  

          (b) Captions      17  

          (c) Amendments      17  

          (d) Notices      17  

 

 

 

 

 

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          (e) Severability      18  

          (f) Withholding      18  

          (g) Waivers      18  

          (h) Status Before and After Change in Control Date      18  

 

-ii-

 

 

 

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CHANGE IN CONTROL AGREEMENT

     AGREEMENT by and between Adams Respiratory Therapeutics, Inc., a Delaware corporation (the “Company”), and ___ (“Executive”), dated as of the ___ day of ___, 2007.

     The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control, to encourage Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, to encourage Executive to view the impact of a pending or threatened Change in Control with the highest degree of objectivity and independence, and to provide Executive with compensation and benefits arrangements upon a Change in Control that are reasonably competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.

     NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

     1. Certain Definitions.

          (a) The “Agreement Term” shall mean the period commencing on the date hereof and ending on the second anniversary of the date hereof; provided, however, that commencing on the second anniversary of the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously terminated, the Agreement Term shall be automatically extended so as to terminate one year from such Renewal Date, unless at least one year prior to the Renewal Date the Company shall give notice to Executive that the Agreement Term shall not be so extended. Notwithstanding the foregoing, the Agreement Term shall not extend beyond the Protection Period (as defined in Section 1(c)).

          (b) The “Change in Control Date” shall mean the first date during the Agreement Term (as defined in Section l(a)) on which a Change in Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if Executive’s employment with the Company is terminated within 12 months prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control, then for all purposes of this Agreement the “Change in Control Date” shall mean the date immediately prior to the date of such termination of employment.

 

 

 

 

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          (c) The “Protection Period” shall mean the period commencing on the Change in Control Date and ending on the second anniversary of the Change in Control Date.

     2. Change in Control For the purposes of this Agreement, a “Change in Control” shall mean the occurrence of any of the following events:

     (a) if during any period of 24 months, individuals who, at the beginning of such period, constitute the Board of Directors of the Company (the “Incumbent Directors”) cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director during such period and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “Person” (such term for purposes of this definition being as defined in Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) and 14(d)(2) of the 1934 Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or

     (b) any Person is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of either (A) 40% or more of the then-outstanding shares of common stock of the Company (“Company Common Stock”) or (B) securities of the Company representing 40% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of directors (the “Company Voting Securities”); provided, however, that for purposes of this subsection (b), the following acquisitions of Company Common Stock or Company Voting Securities shall not constitute a Change in Control: (w) an acquisition directly from the Company, (x) an acquisition by the Company or any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company (a “Subsidiary”), (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (c) below); or

     (c) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a Subsidiary (a “Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets (a “Sale”) or the acquisition of assets or stock of another corporation (an “Acquisition”), unless immediately

-2-

 

 

 

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following such Reorganization, Sale or Acquisition: (A) the outstanding Company Common Stock and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition represents more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Reorganization, Sale or Acquisition (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries, the “Surviving Entity”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no Person (other than (x) the Company or any Subsidiary, (y) the Surviving Entity or its ultimate parent entity, or (z) any executive benefit plan (or related trust) sponsored or maintained by any of the foregoing is the beneficial owner, directly or indirectly, of 40% or more of the total common stock or 40% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Entity, and (C) at least a majority of the members of the board of directors of the Surviving Entity were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

     (d) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

     3. Termination of Employment.

          (a) Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death during the Protection Period. If the Company determines in good faith that the Disability of Executive has occurred during the Protection Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice of its intention to terminate Executive’s employment. In such event, Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. For purposes of this Agreement, “Disability” shall mean the inability of Executive, as determined by the Board, to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental impairment that has lasted (or can reasonably be expected to last) for a period of 12 consecutive months. At the request of Executive or his personal representative, the Board’s determination that the Disability of Executive has occurred shall be certified by a

-3-

 

 

 

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physician mutually agreed upon by Executive, or his personal representative, and the Company. Failing such independent certification (if so requested by Executive), Executive’s termination shall be deemed a termination by the Company without Cause and not a termination by reason of his Disability.

          (b) Cause. The Company may terminate Executive’s employment during the Protection Period for Cause. For purposes of this Agreement, “Cause” shall mean:

               (i) the willful and continued failure of Executive to perform substantially Executive’s duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, or following Executive’s delivery of notice of termination for Good Reason, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive’s duties, or

               (ii) willful misconduct or gross negligence by Executive in his office with the Company that is demonstrably likely to lead to material injury to the Company, as determined by the Board acting reasonably and in good faith; or

               (iii) Executive’s willful disregard or violation of published Company policies and procedures or codes of ethics that is demonstrably likely to lead to material injury to the Company, as determined by the Board acting reasonably and in good faith, or

               (iv) the conviction of Executive of, or plea of guilty or nolo contendere by Executive to, a felony or other crime involving moral turpitude.

          The termination of employment of Executive shall not be deemed to be for Cause under clause (i) or (ii) above unless the Board shall have delivered to Executive notice setting forth with specificity (A) the conduct deemed to qualify as “Cause”, (B) reasonable action that would remedy such objection, and (C) a reasonable time (not less than 30 days) within which Executive may take such remedial action, and Executive shall not have taken such specified remedial action within the specified time.

          (c) Good Reason. Executive’s employment may be terminated by Executive for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:

               (i) the assignment to Executive of any duties inconsistent in materially adverse respect with Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as in effect immediately prior

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to the Change in Control Date, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities; or

               (ii) a material reduction by the Company in Executive’s Annual Base Salary as in effect immediately prior to Change in Control Date, as the same may be increased from time to time, other than an across-the-board reduction of not more than 10% applicable to all senior executive officers of the Company; or

               (iii) a material reduction by the Company in Executive’s Target Annual Bonus opportunity as in effect immediately prior to the Change in Control Date, as the same may be increased from time to time, other than an across-the-board reduction applicable to all senior executive officers of the Company; or

               (iv) a material reduction in Executive’s benefits, in the aggregate (in terms of benefit levels) from those provided to Executive under any employee benefit plan, program and practice in which Executive was participating at any time within 120 days preceding the Change in Control Date or at any time thereafter; or

               (iv) the Company’s requiring Executive to be based at any office or location other than the location where Executive was employed immediately preceding the Change in Control Date or any office or location that is less than 50 miles from such location or does not increase Executive’s commute from Executive’s principal residence by more than 50 miles; or

               (v) any failure by the Company to comply with and satisfy Section 10(c) of this Agreement.

          A termination by Executive shall not constitute termination for Good Reason unless Executive shall first have delivered to the Company, not later than 90 days after the initial occurrence of an event deemed to give rise to a right to terminate for Good Reason, written notice setting forth with specificity the occurrence of such event, and there shall have passed a reasonable time (not less than 30 days) within which the Company may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by Executive.

          (d) Notice of Termination. Any termination by the Company or Executive shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(d) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not

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waive any right of the Company hereunder or preclude the Company from asserting such fact or circumstance in enforcing the Company’s rights hereunder.

          (e) Date of Termination. “Date of Termination” means (i) in the case of a termination for Cause or resignation for Good Reason, the expiration of any applicable cure period, as the case may be, (ii) in the case of Executive’s death or termination by reason of Disability, the date of death of Executive or the Disability Effective Date, as the case may be, and (iii) in any other case, the date of the receipt of the Notice of Termination or any later date specified therein, not to exceed 60 days after the delivery of such Notice of Termination.

     4. Obligations of the Company upon Termination.

          (a) Termination by Executive for Good Reason; Termination by the Company Other Than for Cause or Disability. If, during the Protection Period, the Company shall terminate Executive’s employment other than for Cause or Disability, or Executive shall terminate employment for Good Reason, then and, with respect to the payments and benefits described in clauses (i) and (ii) below, only if Executive executes a release in substantially the form of Exhibit A hereto:

               (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination (or such later date as may be required by Section 11 of this Agreement) the aggregate of the following amounts:

                    A. the sum of (1) Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) Executive’s target annual incentive bonus for the year in which the Date of Termination occurs (“Target Annual Bonus”) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and (3) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the “Accrued Obligations”); and

                    B. a severance payment equal to the sum of (1) Executive’s Annual Base Salary and (2) the average annual incentive bonus received by Executive in the two years preceding the year in which the Date of Termination occurs or, if Executive was not eligible for an annual bonus for such full two-year period, the Target Annual Bonus (the “Severance Payment”); and

               (ii) subject to Section 11 hereof, if Executive elects to continue participation in any group medical, dental, vision and/or prescription drug plan benefits to which Executive and/or Executive’s eligible dependents would be entitled under Section 4980B of the Code (COBRA), then during the period that Executive is entitled to such coverage under COBRA (the “Coverage Period”), the Company shall pay the excess of (i) the COBRA cost of such coverage over (ii) the amount that Executive would have

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had to pay for such coverage if he had remained employed during the Coverage Period and paid the active employee rate for such coverage, provided, however, that if Executive becomes eligible to receive group health benefits under a program of a subsequent employer or otherwise (including coverage available to Executive’s spouse), the Company’s obligation to pay the cost of health coverage as described herein shall cease, except as otherwise provided by law, and provided, further, that the cost so paid on behalf of Executive by the Company will be deemed taxable income to Executive to the extent required by law; and

               (iii) subject to Section 11 hereof, to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies, including without limitation applicable retirement benefits, in each case in accordance with the terms of such other plan, program, policy or practice or contract or agreement (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”); provided, however, that if and to the extent that Executive becomes entitled to any amounts payable under Section 4(a)(i) and (ii) of this Agreement, such payments and benefits shall be in lieu of any severance payments or benefits otherwise payable to Executive or his dependents under the Adams Respiratory Therapeutics, Inc. Severance Pay Plan or any other severance pay arrangement maintained by the Company.

          (b) Death or Disability. If Executive’s employment is terminated by reason of Executive’s death or Disability during the Protection Period, this Agreement shall terminate without further obligations to Executive or Executive’s legal representatives under this Agreement, other than for payment of Annual Base Salary through the Date of Termination, any accrued vacation pay to the extent not theretofore paid, and the timely payment or provision of Other Benefits. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 4(b) shall include without limitation, and Executive or Executive’s estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death or disability, if any, as are applicable to Executive on the Date of Termination.

          (c) Cause; Other than for Good Reason. If Executive’s employment shall be terminated for Cause during the Protection Period, or if Executive voluntarily terminates employment during the Protection Period (excluding a resignation for Good Reason), this Agreement shall terminate without further obligations to Executive other than the obligation to pay to Executive his Annual Base Salary and accrued unpaid vacation pay through the Date of Termination and any Other Benefits, in each case to the extent theretofore unpaid.

          (d) Expiration of Protection Period. If Executive’s employment is terminated by the Company (other than for Cause) in conjunction with the normal expiration of the Protection Period, such termination shall be deemed a termination

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without Cause for purposes of this Agreement. However, the expiration of this Agreement due to the normal expiration of the Protection Period shall not of itself serve as termination of Executive’s employment. If Executive’s employment does not terminate at the end of the Protection Period, Executive will serve as an employee at will thereafter unless and until an agreement has been entered into to evidence the terms of his employment.

     5. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any employee benefit plan, program, policy or practice provided by the Company or its affiliated companies and for which Executive may qualify, except as specifically provided herein. Amounts that are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement.

     6. Full Settlement; No Mitigation. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and, except as explicitly provided herein, such amounts shall not be reduced whether or not Executive obtains other employment.

     7. Enforcement.

          (a) Arbitration. Any claim or dispute arising under or relating to this Agreement or the breach, termination, or validity of any term of this Agreement shall be subject to arbitration, and prior to commencing any court action, the parties agree that they shall arbitrate all controversies; provided, however, that nothing in this Section 7 shall prohibit the Company from exercising its right under Section 9 to pursue injunctive remedies with respect to a breach or threatened breach of the Restrictive Covenants. The arbitration shall be conducted in the State of New Jersey in accordance with the Employment Dispute Rules of the American Arbitration Association (“AAA”) and the Federal Arbitration Act, 9 U.S.C. §1, et. seq., without application of any supplementary rules promulgated by the AAA. Judgment may be entered on the arbitrators’ award in any court having jurisdiction over the parties and each party consents to the jurisdiction of the court of the State of New Jersey for such purpose. By this provision it is the intent of each party to waive any right to a jury trial on any dispute or controversy arising under or in conjunction with this Agreement.

          (b) Cost of Enforcement. The Company shall reimburse Executive, on a current basis, for all reasonable legal fees and related expenses incurred by Executive in connection with this Agreement, including without limitation, all such fees and expenses,

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if any, incurred (i) by Executive in contesting or disputing any termination of Executive’s employment, or (ii) Executive’s seeking to obtain or enforce any right or benefit provided by this Agreement, provided, in each case, that Executives is successful on at least one material issue raised in such contest, dispute or enforcement proceeding. In addition, Executive shall be entitled to be paid all reasonable legal fees and expenses, if any, incurred in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) to any payment or benefit hereunder. All such payments shall be made within 10 business days after delivery of Executive’s respective written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.

     8. Certain Additional Payments by the Company.

          (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 8) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

          Notwithstanding the foregoing provisions of this Section 8(a), if the Parachute Value (as defined below) of all Payments does not exceed 110% of Executive’s Safe Harbor Amount (as defined below), then the Company shall not pay Executive a Gross-Up Payment, and the Payments due under this Agreement shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount; provided, that if even after all Payments due under this Agreement are reduced to zero, the Parachute Value of all Payments would still exceed the Safe Harbor Amount, then no reduction of any Payments shall be made and the Gross -Up Payment shall be made. The reduction of the Payments due hereunder, if applicable, shall be made by first reducing the Severance Payment under Section 4(a)(i), unless an alternative method of reduction is elected by Executive, and in any event shall be made in such a manner as to maximize the economic present value of all Payments actually made to Executive, determined by the Accounting Firm (as defined in Section 8(b) below) as of the date of the change of control for purposes of Section 280G of the Code using the discount rate required by Section 280G(d)(4) of the Code. For purposes of this Section 8,

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the “Parachute Value” of a Payment means the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment. For purposes of this Section 8, Executive’s “Safe Harbor Amount” means one dollar less than three times Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code.

          (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be used in arriving at such determination, shall be made by the Company’s independent auditing firm or such other certified public accounting firm as may be designated by Executive (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and Executive within 15 business days after the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall-be paid by the Company to Executive within five business days after the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 8(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive, but no later than December 31 of the year after the year in which Executive remits the Excise Tax.

          (c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:

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               (i) give the Company any information reasonably requested by the Company relating to such claim,

               (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

               (iii) cooperate with the Company in good faith in order effectively to contest such claim, and

               (iv) permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 8(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

          (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 8(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company’s complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If,

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after the receipt by Executive of an amount advanced by the Company pursuant to Section 8(c), a determination is made that- Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

     9. Restrictions on Conduct of Executive.

          (a) General. Executive and the Company understand and agree that the purpose of the provisions of this Section 9 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to impair or infringe upon Executive’s right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that Executive has received good and valuable consideration for the post-employment restrictions set forth in this Section 9 in the form of the compensation and benefits provided for herein. Executive hereby further acknowledges that the post-employment restrictions set forth in this Section 9 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement.

          Therefore, Executive shall be subject to the restrictions set forth in this Section 9.

          (b) Definitions. The following capitalized terms used in this Section 9 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:

          “Competitive Position” means any employment or consulting arrangement with a Competitor in which Executive has duties for such Competitor that involve Competitive Services and that are the same or substantially similar to those services actually performed by Executive for the Company;

          “Competitive Services” means the research and development, or manufacture, of respiratory pharmaceuticals.

          “Competitor” means any Person engaged, wholly or in part, in Competitive Services.

          “Confidential Information” means all information regarding the Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, but that does not rise to the level of a Trade Secret. “Confidential Information” shall include, but is not limited to, financial plans and data concerning the Company; management planning information; business

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plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; customer lists; customer files, data and financial information, details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. “Confidential Information” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company. This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law.

          “Determination Date” means the Date of Termination or any earlier date (during the Protection Period) of an alleged breach of the Restrictive Covenants by Executive.

          “Person” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

          “Principal or Representative” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

          “Protected Customers” means any Person to whom the Company has sold its products or services or solicited to sell its products or services, other than through general advertising targeted at consumers, during the 12 months prior to the Determination Date.

          “Protected Employees” means employees of the Company who were employed by the Company or its affiliates at any time within six months prior to the Determination Date, other than those who were discharged by the Company or such affiliated employer without cause.

          “Restricted Period” means the Protection Period plus 12 months.

          “Restricted Territory” means the United States of America.

          “Restrictive Covenants” means the restrictive covenants contained in Section 9(c) hereof.

          “Trade Secret” means all information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, distribution lists or a list of actual or potential customers, advertisers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other

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persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Without limiting the foregoing, Trade Secret means any item of confidential information that constitutes a “trade secret(s)” under the common law or statutory law of the State of New Jersey.

          (c) Restrictive Covenants.

               (i) Restriction on Disclosure and Use of Confidential Information and Trade Secrets. Executive understands and agrees that the Confidential Information and Trade Secrets constitute valuable assets of the Company and its affiliated entities, and may not be converted to Executive’s own use. Accordingly, Executive hereby agrees that, throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive shall not directly or indirectly, for himself or for others, without the prior written consent of the Company: (A) reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information or Trade Secret, or (B) use or make use of any Confidential Information or Trade Secret in connection with any business activity other than that of the Company. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices.

               Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information or any Trade Secret that is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive.

               Executive acknowledges that any and all Confidential Information and Trade Secrets are the exclusive property of the Company and agrees to deliver to the Company on the Date of Termination, or at any other time the Company may request in writing, any and all Confidential Information and Trade Secrets which he may then possess or have under his control in whatever form same may exist, including, but not by way of limitation, hard copy files, soft copy files, computer disks, and all copies thereof.

               (ii) Nondisparagment. Executive hereby agrees that, throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive shall not disparage, criticize or otherwise publish or communicate any statements or opinions that are derogatory to or could otherwise harm the business or reputation of the Company. Anything herein to the contrary notwithstanding, Executive shall not be restricted from making any factual statement that is required to be disclosed by law, subpoena, court order or other legal process.

               (iii) Nonsolicitation of Protected Employees. Executive understands and agrees that the relationship between the Company and each of its

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Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive’s own use. Accordingly, Executive hereby agrees that during the Restricted Period, Executive shall not directly or indirectly on Executive’s own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his employment relationship with the Company or to enter into employment with any other Person.

               (iv) Restriction on Relationships with Protected Customers. Executive understands and agrees that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to Executive’s own use. Accordingly, Executive hereby agrees that, during the Restricted Period, Executive shall not, without the prior written consent of the Company, directly or indirectly, on Executive’s own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services; provided, however, that the prohibition of this covenant shall apply only to Protected Customers with whom Executive had Material Contact on the Company’s behalf during the 12 months immediately preceding the Date of Termination; and, provided further, that the prohibition of this covenant shall not apply to the conduct of general advertising activities. For purposes of this Agreement, Executive had “Material Contact” with a Protected Customer if (a) he had business dealings with the Protected Customer on the Company’s behalf; (b) he was responsible for supervising or coordinating the dealings between the Company and the Protected Customer; or (c) he obtained Trade Secrets or Confidential Information about the customer as a result of his association with the Company.

               (v) Noncompetition with the Company. In consideration of the compensation and benefits being paid and to be paid by the Company to Executive hereunder, Executive hereby agrees that, during the Restricted Period, Executive will not, without prior written consent of the Company, directly or indirectly seek or obtain a Competitive Position in the Restricted Territory with a Competitor. Executive acknowledges that in the performance of his duties for the Company he is charged with operating on the Company’s behalf throughout the Restricted Territory and he hereby acknowledges, therefore, that the Restricted Territory is reasonable.

          (d) Enforcement of Restrictive Covenants.

               (i) Rights and Remedies Upon Breach. In the event Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court or tribunal of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Such right and remedy

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shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.

               (ii) Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws.

     10. Successors.

          (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.

          (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

          (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

     11. Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or distributable under this Agreement by reason of Executive’s separation from service during a period in which he is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):

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          (a) if the payment or distribution is payable in a lump sum, Executive’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Executive’s death or the first day of the seventh month following Executive’s separation from service; and

          (b) if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following Executive’s separation from service will be accumulated and Executive’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of Executive’s death or the first day of the seventh month following Executive’s separation from service, whereupon the accumulated amount will be paid or distributed to Executive and the normal payment or distribution schedule for any remaining payments or distributions will resume.

          In the case of any such delayed payment, the Company shall pay interest on the deferred amount at 100% of the short-term applicable federal rate as in effect for the month in which the Date of Termination occurred. For purposes of this Agreement, the term “Specified Employee” has the meaning given such term in Code Section 409A and the final regulations thereunder (“Final 409A Regulations”), provided, however, that, as permitted in the Final 409A Regulations, the Company’s Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board of Directors, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Agreement.

     12. Miscellaneous.

          (a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without reference to principles of conflict of laws.

          (b) Captions. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

          (c) Amendments. This Agreement may be amended or modified by the Company at any time prior to the occurrence of a Change in Control without the consent of Executive; provided, however, that no such amendment or modification shall be effective if a Change in Control occurs within one year after such amendment.

          (d) Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

-17-

 

 

 

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If to Executive:    ________________________

     ________________________

     ________________________

     

If to the Company:    Adams Respiratory Therapeutics, Inc.

     4 Mill Ridge Lane

     Chester, New Jersey 07930

     Attention: General Counsel

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

          (e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

          (f) Withholding. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

          (g) Waivers. Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

          (h) Status Before and After Change in Control Date. Executive and the Company are parties to that certain Executive Employment Agreement dated as of August 11, 2003 (the “Prior Agreement”). Except as may otherwise be provided under the Prior Agreement or any other written agreement between Executive and the Company, the employment of Executive by the Company is “at will” and, subject to Section 1(a) hereof, Executive’s employment and/or this Agreement may be terminated by either Executive or the Company at any time prior to the Change in Control Date, in which case Executive shall have no further rights under this Agreement. From and after the Change in Control Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, including without limitation the Prior Agreement or any other employment agreement between the Company and the Executive.

     IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

         

     

      

      

 

         

  ADAMS RESPIRATORY THERAPEUTICS, INC.

   

  By:      

       

       

 

-18-

 

 

 

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EXHIBIT A

RELEASE AGREEMENT

     This Release Agreement (this “Release”) is made this ___ day of ___, 20___, by and between Adams Respiratory Therapeutics, Inc. (the “Company”) and ___ (“Executive”).

     Executive and the Company entered into an Change in Control Agreement dated ___, 2007 (the “Change in Control Agreement”). The Change in Control Agreement requires that as a condition to the Company’s obligation to pay payments and benefits under the Change in Control Agreement (the “Severance Benefits”), Executive must provide a release and agree to certain other conditions as provided herein.

     NOW, THEREFORE, the parties agree as follows:

     1. Executive has been offered twenty-one (21) days from receipt of this Release Agreement within which to consider this Release Agreement. The effective date of this Release Agreement shall be eight (8) days after the date on which Executive signs this Release Agreement (the “Effective Date”). For a period of seven (7) days following Executive’s execution of this Release Agreement, Executive may revoke this Release Agreement, and this Release Agreement shall not become effective or enforceable until such seven (7) day period has expired. Executive must communicate the desire to revoke this Release Agreement in writing. Executive understands that he may sign this Release Agreement at any time before the expiration of the twenty-one (21) day review period. To the degree Executive chooses not to wait twenty-one (21) days to execute this Release Agreement, it is because Executive freely and unilaterally chooses to execute this Release Agreement before that time. Executive’s signing of this Release Agreement triggers the commencement of the seven (7) day revocation period.

     2. In exchange for Executive’s execution of this Release Agreement and in full and complete settlement of any and all claims, the Company will provide Executive with the Severance Benefits.

     3. Executive acknowledges and agrees that this Release Agreement is in compliance with the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act and that this releases set forth in this Release Agreement shall be applicable, without limitation, to the any claims brought under these acts.

     The releases given by Executive in this Release Agreement is given solely in exchange for the consideration set forth in this Release Agreement and such consideration is in addition to anything of value that Executive was entitled to receive prior to entering into this Release Agreement.

     Executive has been advised to consult an attorney prior to entering into this Release Agreement and this provision of this Release Agreement satisfies the

 

 

 

 

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requirement of the Older Workers Benefit Protection Act that Executive be so advised in writing.

     By entering into this Release Agreement, Executive does not waive rights or claims that may arise after the date this Release Agreement is executed.

     4. This Release Agreement shall in no way be construed as an admission by the Company that it has acted wrongfully with respect to Executive or any other person or that Executive has any rights whatsoever against the Company. The Company specifically disclaims any liability to or wrongful acts against Executive or any other person on the part of itself, its employees or its agents.

     5. As a material inducement to the Company to enter into this Release Agreement, Executive hereby irrevocably releases the Company and each of the owners, stockholders, predecessors, successors, directors, officers, employees, representatives, attorneys, affiliates (and agents, directors, officers, employees, representatives and attorneys of such affiliates) of the Company and all persons acting by, through, under or in concert with them (collectively the “Releasees”), from any and all charges, claims, liabilities, agreements, damages, causes of action, suits, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred) of any nature whatsoever, known or unknown, including, but not limited to, rights arising out of alleged violations of any contracts, express or implied, any covenant of good faith and fair dealing, express or implied, or any tort, or any legal restrictions on the Company’s right to terminate employees, or any federal, state or other governmental statute, regulation, or ordinance, including, without limitation: (1) Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991 (race, color, religion, sex, and national origin discrimination); (2) the Employee Retirement Income Security Act (“ERISA”); (3) 42 U.S.C. Section 1981 (discrimination); (4) the Americans with Disabilities Act (disability discrimination); (5) the Equal Pay Act; (6) the Age Discrimination in Employment Act; (7) the Older Workers Benefit Protection Act; (8) Executive Order 11246 (race, color, religion, sex, and national origin discrimination); (9) Executive Order 11141 (age discrimination); (10) Section 503 of the Rehabilitation Act of 1973 (disability); (11) negligence; (12) negligent hiring and/or negligent retention; (13) intentional or negligent infliction of emotional distress or outrage; (14) defamation; (15) interference with employment; (16) wrongful discharge; (17) invasion of privacy; or (18) violation of any other legal or contractual duty arising under the laws of the State of New Jersey or the laws of the United States (“Claim” or “Claims”), which Executive now has, or claims to have, or which Executive at any time heretofore had, or claimed to have, or which Executive at any time hereinafter may have, or claim to have, against each or any of the Releasees, in each case as to acts or omissions by each or any of the Releasees occurring up to and including the Effective Date.

     6. The release in the preceding paragraph of this Release Agreement does not apply to (a) all benefits and awards (including without limitation cash and stock components) which pursuant to the terms of any compensation or benefit plans,

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programs, or agreements of the Company are earned or become payable, but which have not yet been paid, and (b) pay for accrued but unused vacation that the Company is legally obligated to pay Executive, if any, and only if the Company is so obligated, (c) unreimbursed business expenses for which Executive is entitled to reimbursement under the Company’s policies, and (d) any rights to indemnification that Executive has from the Company or under any directors and officers or other insurance policy the Company maintains.

     7. Executive will cooperate with the Company and its affiliates if the Company requests Executive’s testimony. To the extent practicable and within the control of the Company, the Company will use reasonable efforts to schedule the timing of Executive’s participation in any such witness activities in a reasonable manner to take into account Executive’s then current employment, and will pay the reasonable documented out-of-pocket expenses that the Company pre-approves and that Executive incurs for travel required by the Company with respect to those activities.

     8. Executive agrees not to disclose the existence or terms of this Release Agreement or the Change in Control Agreement to anyone. However, Executive may disclose them to a member of his immediate family or legal or financial advisors if necessary and on the condition that the family member or advisor similarly does not disclose these terms to anyone. Executive understands that he will be responsible for any disclosure by a family member or advisor as if he had disclosed it himself. This restriction does not prohibit Executive’s disclosure of this Release Agreement or its terms to the extent necessary during a legal action to enforce this Release Agreement or to the extent Executive is legally compelled to make a disclosure. However, Executive will notify the Company promptly upon becoming aware of that legal necessity and provide it with reasonable details of that legal necessity.

     9. Executive has not filed or caused to be filed any lawsuit, complaint or charge with respect to any Claim he releases in this Release Agreement. Executive promises never to file or pursue a lawsuit, complaint or charge based on any Claim released by this Release Agreement, except for an administrative charge and except that Executive may participate in an investigation or proceeding conducted by an agency of the United States Government or of any state. Executive also has not assigned or transferred any claim he is releasing, nor has he purported to do so.

     10. Executive acknowledges that if Executive breaches any of the conditions set forth herein or in Article 11 of the Change in Control Agreement, Executive shall not be entitled to any of the Severance Benefits, and shall be obligated to return to Company upon demand an amount equal to all Severance Benefits that Executive has received, and reimburse Company for any legal fees incurred in connection with the breach or enforcement of these provisions, but this shall not limit any other remedies available to the Company.

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     11. The Company and Executive agree that the terms of this Release Agreement shall be final and binding and that this Release Agreement shall be interpreted, enforced and governed under the laws of the State of New Jersey. The provisions of this Release Agreement can be severed, and if any part of this Release Agreement is found to be unenforceable, the remainder of this Release Agreement will continue to be valid and effective.

     12. This Release Agreement, together with the Change in Control Agreement, sets forth the entire agreement between the Company and Executive pertaining to the subject matter hereof, and fully supersedes any and all prior agreements or understandings, written and/or oral, between the Company and Executive pertaining to the subject matter of this Release Agreement and the Change in Control Agreement.

     Executive’s signature below indicates Executive’s understanding and agreement with all of the terms in this Release Agreement.

     Executive should take this Release Agreement home and carefully consider all of its provisions before signing it. Executive may take up to twenty-one (21) days to decide whether he wants to accept and sign this Release Agreement. Also, if Executive signs this Release Agreement, Executive will then have an additional seven (7) days in which to revoke his acceptance of this Release Agreement after Executive has signed it. This Release Agreement will not be effective or enforceable, nor will any consideration be paid, until after the seven (7) day revocation period has expired. Again, Executive is free and encouraged to discuss the contents and advisability of signing this Release Agreement with an attorney of Executive’s choosing.

     Executive should read carefully. This Release Agreement includes a release of all known and unknown claims. Executive is strongly advised to consult with an attorney before executing this document.

     IN WITNESS WHEREOF, Executive and the Company have executed this Release Agreement effective as of the date first written above.

         

  EXECUTIVE

   

      

      

 

         

     

      

       

 

EXHIBIT 10.2

ADAMS RESPIRATORY THERAPEUTICS, INC.

SEVERANCE PAY PLAN

Effective July 1, 2007

 

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TABLE OF CONTENTS

 

 

 

 

 

INTRODUCTION & BACKGROUND

 

 

1

 

ARTICLE I DEFINITIONS

 

 

1

 

ARTICLE II BENEFITS

 

 

4

 

2.01 Severance Benefits

 

 

4

 

2.02 Eligibility

 

 

7

 

2.03 Manner and Form of Payment

 

 

8

 

2.04 Timing of Payment

 

 

8

 

2.05 Reemployment

 

 

9

 

2.06 Impact on Other Benefits

 

 

10

 

2.07 Conditions on Payment of Benefits

 

 

10

 

2.08 Offset For Other Severance Benefits

 

 

10

 

2.09 Maximum Benefits

 

 

11

 

ARTICLE III CLAIMS PROCEDURE

 

 

11

 

3.01 Right to File a Claim

 

 

11

 

3.02 Denial of a Claim

 

 

11

 

3.03 Claim Review Procedure

 

 

12

 

3.04 Requirement to Follow Claims Procedure

 

 

12

 

ARTICLE IV ADMINISTRATION

 

 

12

 

4.01 Named Fiduciary

 

 

12

 

4.02 The Committee

 

 

13

 

4.03 Standard of Fiduciary Duty

 

 

14

 

4.04 Compensation and Expenses of Committee

 

 

14

 

4.05 Records

 

 

14

 

4.06 Consistency of Determination

 

 

15

 

4.07 Indemnification of Committee

 

 

15

 

4.08 No Action with Respect to Own Benefit

 

 

15

 

ARTICLE V AMENDMENT AND TERMINATION

 

 

15

 

ARTICLE VI MISCELLANEOUS

 

 

16

 

6.01 Right to Assets

 

 

16

 

6.02 No Inducement, Contract or Guarantee of Employment

 

 

16

 

6.03 Spendthrift

 

 

16

 

6.04 Conclusiveness of Records

 

 

16

 

6.05 Adoption by Affiliate

 

 

17

 

6.06 Payment of Expenses

 

 

17

 

6.07 Governing Law

 

 

17

 

6.08 Right to Require Information and Reliance Thereon

 

 

17

 

6.09 Construction

 

 

17

 

6.10 Special Rules under Section 409A

 

 

18

 

ADOPTION OF PLAN

 

 

18

 

APPENDIX A SEPARATION AGREEMENT AND GENERAL RELEASE

 

 

A-1

 

 

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ADAMS RESPIRATORY THERAPEUTICS, INC.
SEVERANCE PAY PLAN

INTRODUCTION & BACKGROUND

     Adams Respiratory Therapeutics, Inc. (the “Company”) established this Adams Respiratory Therapeutics, Inc. Severance Pay Plan (the “Plan”) in order to provide transitional income to certain employees who are involuntarily terminated under certain conditions. The Plan supersedes all prior written or unwritten severance pay plans, notice pay plans, practices or programs offered or established by the Company or any other Participating Employer except for individual employment contracts, change in control agreements or other similar arrangements providing severance pay or similar benefits. The Plan is intended to be a “welfare plan,” but not a “pension plan,” as defined in ERISA Sections 3(1) and 3(2), respectively, and the Company intends that the Plan comply with all applicable provisions of ERISA.

ARTICLE I
DEFINITIONS

For purposes of the Plan, the following terms shall have the meaning set forth below unless a different meaning is plainly required by the context.

Affiliate means any entity which is a member of a group which includes the Company and is defined in Code §414(b) or (c).

Code means the Internal Revenue Code of 1986, as amended from time to time.

Committee means the group of persons responsible for Plan administration. See Section 4.02. This term is interchangeable with “Plan Administrator.”

Company means Adams Respiratory Therapeutics, Inc., a Delaware corporation.

Compensation Committee means the Compensation Committee of the Board of Directors of the Company.

Effective Date means July 1, 2007.

Eligible Employee means an Employee who is a full-time employee (as classified by the Company or a Participating Employer under its standard personnel practices) of a Participating Employer. Notwithstanding the foregoing, the following Employees shall not be Eligible Employees: (i) leased employees who, pursuant to an agreement between a Participating Employer and any other person or leasing organization, has performed services for the Participating Employer (or for the Participating Employer and related persons determined in accordance with Code Section 414(n)(6)) on a substantially full-time basis for a period of at least one year, and such services are performed under the

 

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primary direction or control of the Participating Employer, (ii) individuals classified by a Participating Employer as temporary employees or casual employees, (iii) individuals classified by a Participating Employer as independent contractors (including those who are at any time reclassified as employees by the Internal Revenue Service or a court of competent jurisdiction), (iv) individuals whose terms and conditions of employment are governed by a collective bargaining agreement, unless such collective bargaining agreement expressly provides that benefits are provided under this Plan and the applicable collective bargaining agreement is in effect at the time an Employee otherwise becomes eligible under this Plan, (v) employees of any joint venture (regardless of legal characterization and as determined in the exclusive discretion of the Plan Administrator), (vi) employees employed by any entity which is not designated as a Participating Employer, and (vii) any other employee or person designed by the Committee as not being eligible to participate.

Employee means any person who is within the meaning of “employee” for federal tax withholding purposes and who is receiving compensation for services rendered to a Participating Employer. The following individuals shall not be considered Employees hereunder:

     (a) Any person serving as a corporate director only; or

     (b) Any person who is an independent contractor and/or for whom the Participating Employer is not required to make Social Security contributions. This also includes any person who the Participating Employer classifies as an independent contractor with the person’s consent and who later becomes classified as an Employee. Any person who pays or agrees to pay self-employment tax in lieu of withholding shall be deemed to have consented to his or her designation as an independent contractor. If an independent contractor subsequently becomes classified as an Employee, such person will be designated an Employee for purposes of this Plan prospectively from the date such classification is changed and agreed upon by the Participating Employer rather than from the effective date of such change. Such person shall not be designated an Eligible Employee unless otherwise determined by the Participating Employer.

ERISA means the Employee Retirement Income Security Act of 1974, as amended, including any regulations issued thereunder.

Fiduciary means a fiduciary, as defined in ERISA section (3)(21)(A).

Job Elimination as a reason for termination of employment includes a reduction in work force, completion of assignment, job restructuring, corporate divestiture, corporate reorganization, or other job elimination or qualifying event, all as determined in the discretion of the Committee.

Misconduct means the following, as determined by the Committee in its sole discretion: (i) the commission of any criminal offense on the job or relating to the ability of the employee to carry out the job, as a representative of the Company or a Participating

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Employer, (ii) violation of policies, rules or regulations of the Company or the employee’s Participating Employer, (iii) dishonesty, including theft or misappropriation of the property of an employee or of the Company or a Participating Employer, (iv) falsification of personnel or other records, (v) misuse or unauthorized removal from the Company’s or a Participating Employer’s premises or property of any records of information, (vi) bribery, (vii) unlawful manufacture, distribution, dispensing, possession or use of a controlled substance or alcoholic beverage in the work place, (viii) impairment on the job or on the Company’s or a Participating Employer’s premises from the use of a controlled substance or alcoholic beverages, (ix) fighting on the Company’s or a Participating Employer’s premises or while working off premises, (x) insubordination, (xi) defacing or damaging property or equipment of the Company or a Participating Employer, or (xii) any other misconduct adversely affecting or detrimental to the Company’s or a Participating Employer’s operation or reputation. Misconduct does not mean mere failure by an Employee, after best efforts, to meet performance expectations.

Notice means the date the Company or a Participating Employer notifies the Eligible Employee that his or her employment with the Participating Employer will be involuntarily terminated either immediately or effective as of a future date.

Pay means the Eligible Employee’s regular base straight-time compensation (but excluding overtime, bonuses or other compensation not considered to be base straight-time compensation by the Committee in its full discretion) in effect as of the date the Eligible Employee receives Notice, unless the Participating Employer determines otherwise.

Participating Employer means the Company and any other entity related to the Company who is deemed by the Compensation Committee, in its exclusive discretion, as able to offer the benefits of this Plan to any one or more of its Employees. Until otherwise designated by the Compensation Committee, the following subsidiaries of the Company are approved as Participating Employers: Adams Respiratory Products, Inc. and Adams Respiratory Operations, Inc.

Plan means the Adams Respiratory Therapeutics, Inc. Severance Pay Plan, as amended from time to time.

Plan Year means the calendar year.

Separation Agreement means an agreement between an Eligible Employee and a Participating Employer (in substantially the form attached hereto as Appendix A, or any other form specified by the Participating Employer, as such form may be determined from time to time and at the Participating Employer’s full discretion) that includes a waiver of all claims the Eligible Employee might have against the Company, a Participating Employer, the Plan Administrator, and any other parties designated in the Separation Agreement, and certain restrictive covenants relating to the Participant’s post-termination activities. Signing of this Separation Agreement is a condition of the Eligible

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Employee’s receipt of benefits under this Plan.

Separation Date means the date that an Eligible Employee’s employment with the Company or a Participating Employer terminates as determined in accordance with the Participating Employer’s personnel records.

Severance Benefits means that payment and benefits, if any, calculated under Article II of this Plan which are payable to an Eligible Employee in accordance with the terms and conditions of this Plan.

Severance Pay means the payments, if any, calculated under Section 2.01 of this Plan which are payable to an Eligible Employee in accordance with the terms and conditions of this Plan.

Specified Employee has the meaning given such term in Section 409A of the Code and the final regulations thereunder, provided, however, that, as permitted in such regulations, the Company’s Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board of Directors of the Company, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Plan.

Target Annual Bonus means, with respect to a Participant, the Participant’s target bonus opportunity under the annual bonus plan applicable to the Participant for the year in which the Participant’s Separation Date occurs, or if no target bonus opportunity has been established for the year in which the Participant’s Separation Date occurs, the year immediately preceding, but in no event greater than one times the Participant’s base salary.

Years of Service means continuous years of employment from last date of hire. Only Years of Service as a full-time Employee shall be counted. Years of Service shall mean full years only, with no credit for partial years.

ARTICLE II
BENEFITS

2.01 Severance Benefits.

     (a) Upon termination of employment, an Eligible Employee who signs and does not revoke his or her signature on a Separation Agreement shall be eligible to receive those benefits determined under this Section 2.01. Any decision, award, action or determination made by the Committee as to amount of benefit shall be made in its sole discretion, although the Committee may, if it chooses, delegate determination of benefits to any other person or party. Although the Committee may, for its own convenience, draft or create award matrices or other standard award practices, such matrices and practices shall not be binding on the Committee. Past awards or determinations shall in

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no way be determinative of future awards.

     (b) Subject to the provisions of 2.01(a), Severance Pay for Eligible Employees is determined in accordance with the following schedule based on an Eligible Employee’s Years of Service. Determination of employment status (for example, full-time or part-time) shall be made in the full discretion of the Committee. For purposes of this Section 2.01(b), a “Week” shall be measured as 40 hours, regardless of the number of hours actually worked by the Eligible Employee in the typical workweek.

Involuntary Termination due to Job Elimination

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance Pay (Weeks of Pay per Year of Service)

Position

 

Severance Formula

 

1 Year

 

2 Years

 

3 Years

 

4 Years

 

5 Years

 

Etc.

Section 16 Officer

 

52 weeks Pay (26 weeks Pay if less than 6 months after hire)

 

 

52

 

 

 

52

 

 

 

52

 

 

 

52

 

 

 

52

 

 

 

52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Vice
President or Vice
President

 

26 weeks Pay (13 weeks Pay if less than 6 months after hire)

 

 

26

 

 

 

26

 

 

 

26

 

 

 

26

 

 

 

26

 

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Director
or Director

 

2 weeks Pay per Year of Service (minimum of 8 weeks, maximum of 26 weeks)

 

 

8

 

 

 

8

 

 

 

8

 

 

 

8

 

 

 

10

 

 

+2; max of 26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manager or other
Exempt Employee

 

2 weeks Pay per Year of Service (minimum of 4 weeks, maximum of 26 weeks)

 

 

4

 

 

 

4

 

 

 

6

 

 

 

8

 

 

 

10

 

 

+2; max of 26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-exempt Employee

 

1 week Pay per Year of Service (minimum of 2 weeks, maximum of 13 weeks)

 

 

2

 

 

 

2

 

 

 

3

 

 

 

4

 

 

 

5

 

 

+1; max of 13

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Involuntary Termination other than due to Job Elimination

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance Pay (Weeks of Pay per Year of Service)

Position

 

Severance Formula

 

1 Year

 

2 Years

 

3 Years

 

4 Years

 

5 Years

 

Etc.

Section 16 Officer

 

26 weeks Pay (13 weeks Pay if less than 6 months after hire)

 

 

26

 

 

 

26

 

 

 

26

 

 

 

26

 

 

 

26

 

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Vice
President or Vice
President

 

13 weeks Pay (7 weeks Pay if less than 6 months after hire)

 

 

13

 

 

 

13

 

 

 

13

 

 

 

13

 

 

 

13

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Director
or Director

 

1 week Pay per Year of Service (minimum of 4 weeks, maximum of 13 weeks)

 

 

4

 

 

 

4

 

 

 

4

 

 

 

4

 

 

 

5

 

 

+1; max of 13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manager or other
Exempt Employee

 

1 week Pay per Year of Service (minimum of 2 weeks, maximum of 13 weeks)

 

 

2

 

 

 

2

 

 

 

3

 

 

 

4

 

 

 

5

 

 

+1; max of 13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-exempt Employee

 

1 week Pay per Year of Service (minimum of 1 week, maximum of 7 weeks)

 

 

1

 

 

 

2

 

 

 

3

 

 

 

4

 

 

 

5

 

 

+1; max of 7

     (c) Accrued Vacation. Subject to the provisions of 2.01(a), a Participant shall be entitled to payment for any accrued vacation as of the Separation Date.

     (d) Prorated Annual Bonus. Subject to the provisions of 2.01(a), a Participant who is involuntarily terminated by reason of a Job Elimination (but not otherwise) shall be entitled to a prorated annual bonus for which the Participant would have been eligible under the annual bonus plan applicable to the Participant (the “Incentive Plan”) but for the Participant’s termination of employment with a Participating Employer (a “Pro Rata Bonus”), calculated as follows: (i) if the Separation Date occurs during the first six months of a Plan Year, the bonus payment shall equal the Participant’s Target Annual Bonus under the Incentive Plan multiplied by a fraction (the “Prorating Factor”), the numerator of which is the number of days in the Plan Year through the Separation Date and the denominator of which is 365, or (ii) if the Separation Date occurs during the last six months of a Plan Year, the bonus payment shall equal the annual bonus the Participant would have received under the Incentive Plan for the year based on actual performance through the end of the Plan Year, multiplied by the Prorating Factor.

     (e) Medical Benefits. Subject to the provisions of 2.01(a), if the Participant elects to continue participation in any group medical, dental, vision and/or prescription drug plan benefits under Section 4980B of the Code (COBRA), then for the same number of weeks following a termination of employment for which a Participant is entitled to Severance Pay pursuant to Section 2.01(b) but not to exceed the period that the

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Participant is entitled to such coverage under COBRA (the “Coverage Period”), the Participating Employer shall pay the excess of (i) the COBRA cost of such coverage over (ii) the amount that the Participant would have had to pay for such coverage if he or she had remained employed during the Coverage Period and paid the active employee rate for such coverage, provided, however, that if the Participant becomes eligible to receive group health benefits under a program of a subsequent employer or otherwise (including coverage available to the Participant’s spouse), the Participating Employer’s obligation to pay the cost of health coverage as described herein shall cease, except as otherwise provided by law, and provided, further, that the cost so paid on behalf of the Participant by the Participating Employer will be deemed taxable income to the Participant to the extent required by law.

     (f) Outplacement Services. Subject to the provisions of 2.01(a), for Participants at the level of Manager of above, the Participating Employer shall provide outplacement services though one or more outplacement organizations approved by the Committee. The level and type of outplacement services that each Participant is eligible to receive shall be determined in the sole discretion of the Committee on a case by case basis and the Committee is not bound by prior determinations.

2.02 Eligibility.

     (a) Eligible Employees will be eligible to receive Severance Benefits under this Plan if all of the following are satisfied: (i) the Eligible Employee is employed by a Participating Employer at the time that the Eligible Employee’s employment is involuntarily terminated; (ii) the Committee determines that the Eligible Employee is eligible for Severance Benefits; (iii) the Eligible Employee signs and delivers to the Company or his or her Participating Employer a Separation Agreement, and allows any permitted or required revocation period to expire without revoking or causing his or her Separation Agreement to be revoked; and (iv) none of the restrictions listed under subsection (b) applies.

     (b) An Eligible Employee will not have a qualifying termination of employment, and will not be approved for payment of benefits, if the Eligible Employee:

     (i) Voluntarily terminates employment with the Company or a Participating Employer, even if such voluntary termination is in anticipation of involuntary termination;

     (ii) Is involuntarily terminated, and is offered substantially similar employment (as determined in the discretion of the Committee) with the Company, a Participating Employer, or one of either of their affiliates, whether or not the Eligible Employee accepts such substantially similar employment;

     (iii) Is involuntarily terminated in connection with the sale or transfer of any portion of the Company’s or a Participating Employer’s business or assets, and is offered reasonably comparable (as determined in the discretion of the

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Committee, without needing to be identical) employment with the buyer or transferee of such business or assets, whether or not such offered employment is accepted by the Eligible Employee;

     (iv) Is transferred or reassigned by the Company or a Participating Employer to a position of substantially similar employment (as determined in the discretion of the Committee); or

     (v) The Company or Participating Employer terminates the Eligible Employee’s employment for Misconduct or otherwise “for cause.” For purposes of this Plan, “for cause” means as described in the company’s policies and procedures (Administrative Bulletins) regarding classification of terminations.

2.03 Manner and Form of Payment.

     Unless another method is chosen by the Plan Administrator, all benefits payable under this Plan shall be paid to Participants in accordance with the Company’s normal payroll practices. However, certain situations may impact the form or manner of payment, including:

     (a) Payment Upon Death of Eligible Employee. If an Eligible Employee dies after his or her Notice, but prior to being paid benefits awarded under this Plan, such benefits shall be paid to the Eligible Employee’s estate, unless directed by the Eligible Employee in writing to pay such benefits in a different manner.

     (b) Withholding. Any payment of benefits to an Eligible Employee shall be subject to withholding for state, local and federal income taxes and Social Security taxes.

     (c) Reductions. Amounts payable as benefits under the Plan shall be reduced by any amounts (1) owed by the Eligible Employee to his or her Participating Employer; and/or (2) paid to the Eligible Employee due to a plant closing or mass layoff under the Worker Adjustment and Retraining Notification (“WARN”) Act, as amended, or any state or local law. Benefits payable under this Plan shall not be reduced by amounts received under any salary continuation plan or short-term disability plan.

     In addition, any severance benefit amount to which any Participant may otherwise be entitled under the Plan shall be reduced by the amount of any salary, wages or other compensation (as determined by the Committee) such Participant receives from a Participating Employer with respect to any period of paid leave of absence of such Participant that immediately precedes any permanent termination of the Participant’s employment with a Participating Employer.

2.04 Timing of Payment.

     Except as provided in this paragraph, payment of benefits under this Plan shall commence as soon as administratively feasible after the Eligible Employee’s Separation

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Date, and the expiration of any applicable revocation period for the release of claims in the Separation Agreement; provided that the conditions listed in Section 2.07 are met. Payment of Pro Rata Bonus under Section 2.01(d) will be paid at the same time as annual bonuses are paid to active employees with respect to the year in which the Participant’s Separation Date occurred, but not beyond the period ending on the later of (i) March 15 of the first calendar year beginning after the Separation Date, or (ii) the 15th day of the third month following the end of the Company’s fiscal year in which the Separation Date occurred. For example, assuming the Company’s fiscal year ends on June 30:

 

 

if the Separation Date occurred between July 1, 2007 and December 31, 2007, the payment must be made no later than September 15, 2008, and

 

 

 

 

 

 

if the Separation Date occurred between January 1, 2008 and June 30, 2008, the payment must be made no later than March 15, 2009.

     Notwithstanding anything in this Plan to the contrary, if any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or distributable under this Plan to a Participant who is a Specified Employee as of his or her “separation from service” within the meaning of Code Section 409A, then, subject to any permissible acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):

          (a) if the payment or distribution is payable in a lump sum, the Participant’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s separation from service within the meaning of Code Section 409A; and

          (b) if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following the Participant’s separation from service will be accumulated and the Participant’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s separation from service within the meaning of Code Section 409A, whereupon the accumulated amount will be paid or distributed to the Participant and the normal payment or distribution schedule for any remaining payments or distributions will resume.

2.05 Reemployment.

     Notwithstanding any other provision of this Plan to the contrary, a Participant who is re-employed by a Participating Employer (a) prior to his or her receipt of benefits under this Plan, or (b) while he or she is currently receiving payments or benefits under this Plan, shall not be entitled to any further benefits under the Plan after the date of re-employment and all benefit payments under the Plan will end immediately upon the

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Participant’s re-employment date.

2.06 Impact on Other Benefits.

     As of an Eligible Employee’s Separation Date, the Eligible Employee’s active participation in any employee benefit plan, program or policy sponsored or subsidized by a Participating Employer shall cease unless otherwise continued pursuant to the terms of such plan, program or policy.

2.07 Conditions on Payment of Benefits.

     Payment of benefits under this Plan shall be subject to and conditioned upon the Eligible Employee’s compliance with each of the following requirements:

     (a) The Eligible Employee must return his or her employer’s property on or before his or her last day worked;

     (b) The Eligible Employee must continue to work in a satisfactory manner during any notice period through the Separation Date or, if the Eligible Employee is released from performing job-related duties earlier by his or her manager, through his or her last day worked;

     (c) The Eligible Employee must cooperate in transitioning all of the Eligible Employee’s work in consultation with his or her manager or other designated official; and

     (d) The Eligible Employee must refrain from taking any action that would violate the terms and conditions of the Separation Agreement.

2.08 Offset For Other Severance Benefits.

     To the extent permitted by law, benefits hereunder shall be reduced by any severance pay or similar payments required under federal, state, local or foreign law (each individually and collectively a “Local Law”), to which an Eligible Employee is, or in the future becomes, entitled (other than government paid unemployment benefits). In the event that the Eligible Employee has already received partial payment hereunder, and is subsequently entitled to any severance or similar payment under any Local Law, the amount subsequently paid under this Plan shall be reduced by the amount of such payment under such Local Law. Furthermore, to the extent an Employee receives severance or other termination payments, or benefits from a Participating Employer pursuant to an individually negotiated employment or severance agreement, resolution of litigation, offer letter, or any other similar individual arrangement (“Individual Arrangement”), unless the Committee provides otherwise, any payments and/or benefits otherwise payable to the Employee under this Plan shall be reduced by the amount of any such payments or benefits provided to the Employee under such Individual Arrangement.

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2.09 Maximum Benefits.

     Notwithstanding anything to the contrary herein, in order to assure that the Plan is not a “pension plan” for purposes of ERISA, in no event shall the benefit available to a Participant under Article II exceed two times such Participant’s annual compensation from the Participating Employer for the preceding year (annualized in the case of a partial year of service during such preceding year), nor shall payment extend beyond 24 months after the Participant’s Separation Date. For purposes of this Section 2.09, annual compensation shall mean straight time pay plus the Participant’s target annual bonus as of the Separation Date. When necessary, the Committee shall reduce the severance benefits to comply with this Section 2.09.

ARTICLE III
CLAIMS PROCEDURE

3.01 Right to File a Claim.

     Any former Eligible Employee who believes that he or she is entitled to a benefit hereunder which has not been received or which is different than that which has been officially communicated to the former Eligible Employee may file a claim in writing with the most senior official responsible for human resource matters at his or her former Participating Employer (the “Human Resources Manager”). Failure to submit such claim within 180 days of the Eligible Employee’s Separation Date will result in the denial of the claim, and may result in disqualification for payment of benefits under the Plan. Employees who do not receive official communication of eligibility (and a release) in connection with their termination shall be considered to have had their claim hereunder denied.

3.02 Denial of a Claim.

     The Human Resources Manager at the former Eligible Employee’s Participating Employer shall make an initial determination of eligibility or shall delegate the responsibility for such initial determination to any other party. Any claimant whose claim to any benefit hereunder has been denied in whole or in part shall normally receive a notice from the Human Resources Manager within 90 days of the date the claim is submitted. If, however, the Human Resources Manager, or his or her delegee, determines that an extension of time is required, the claimant will be notified in writing of the need for the extension within 90 days after receipt of the claim. The extension notice will also include the date by which the Human Resources Manager expects to make the benefit determination. Any notice of the denial of the claim will set forth the specific reasons for such denial, specific references to the Plan provisions on which the denial was based, what information or materials would be required in order to reverse the denial and an explanation of the procedure for review of the denial.

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3.03 Claim Review Procedure.

     A claimant may appeal the denial of his or her initial claim to the Plan Administrator by written request for review to be made within 60 days after receiving the initial notice of the denial from the Human Resources Manager of the former Eligible Employee’s Participating Employer. The request for review shall set forth all grounds on which it is based, together with supporting facts and evidence which the claimant deems pertinent, and the Plan Administrator shall give the claimant the opportunity to review relevant Plan documents in preparing the request. The Plan Administrator may require the claimant to submit such additional facts, documents or other material as it deems necessary or advisable in making its review. The Plan Administrator will provide the claimant a written or electronic notice of the decision within 60 days after receipt of the request for review, except that, if there are special circumstances requiring an extension of time for processing, the 60-day period may be extended for an additional 60 days. If the Plan Administrator determines that an extension of time is required, the claimant will be notified in writing of the extension within 60 days after the Plan Administrator’s receipt of the request for review. The extension notice will also include the date by which the Plan Administrator expects to complete the review. The Plan Administrator shall communicate to the claimant in writing its decision, and if the Plan Administrator confirms the denial, in whole or in part, the communication shall set forth the reasons for the decision and specific references to the Plan provisions on which the decision is based. Any suit for benefits must be brought within six months after the date the Plan Administrator (or his or her designee) has made a final denial (or deemed denial) of the claim.

3.04 Requirement to Follow Claims Procedure.

     Utilization of the claims procedures set forth in this Article III is a condition of payment of benefits under the Plan. Failure to follow the claims procedure described in Article III will result in the denial of an Eligible Employee’s claim, and may result in the Eligible Employee’s disqualification for payment of benefits under the Plan.

ARTICLE IV
ADMINISTRATION

4.01 Named Fiduciary.

     The Committee is named as the Fiduciary for operation of the Plan and shall have the authority to control and manage the operation and administration of the Plan. The Committee in the exercise of its authority shall discharge its duties with respect to the Plan in accordance with ERISA and corresponding regulations, as amended from time to time.

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4.02 The Committee.

     (a) The Committee shall consist of those certain officers and employees of the Company as appointed by the Company’s president or chief executive officer. All members shall serve as such without compensation. Upon termination of his or her employment with the Company, or upon replacement by the Company’s president or chief executive officer, an individual shall cease to be a member of the Committee. A member may resign at any time by written notice to the Committee.

     (b) The Committee shall have complete control of the administration of the Plan with all powers necessary to enable it to properly carry out the provisions of the Plan. In addition to all implied powers and responsibilities necessary to carry out the objectives of the Plan and to comply with the requirements of ERISA, the Committee shall have the following specific powers and responsibilities, all of which may be exercised or delegated in its sole discretion:

     (i) To construe the Plan and to determine all questions arising in the administration, interpretation and operation of the Plan, including questions of fact;

     (ii) To exercise such powers of amendment and termination as are granted to it pursuant to Article IV of the Plan;

     (iii) To decide all questions of interpretation or of fact relating to the eligibility to participate in the benefits of the Plan;

     (iv) To determine the benefits of the Plan to which any Eligible Employee or former Eligible Employee may be entitled;

     (v) To keep records of all acts and determinations of the Committee, and to keep all such records, books of accounts, data and other documents as may be necessary for the proper administration of the Plan;

     (vi) To prepare and distribute information concerning the Plan as required by applicable law, including, but not limited to, all information which is required to be distributed by ERISA, the regulations thereunder, or by any other applicable law;

     (vii) To file with the Secretary of Labor such reports and additional documents as may be required by ERISA and regulations issued thereunder, including, but not limited to, summary plan description, modifications and changes, annual reports, terminal reports and supplementary reports;

     (viii) To file with the Secretary of the Treasury all reports and information required to be filed by the Internal Revenue Code, ERISA and regulations issued under each;

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     (ix) To delegate any duty or administrative function to any third party;

     (x) To appoint Affiliate administrators and to delegate such duties to each Affiliate administrator or person as the Committee deems appropriate;

     (xi) To pay the expenses of administering the Plan or reimburse the Company or other person performing administrative services with respect to the Plan if the Company or such other person directly pays such expenses at the request of the Committee; and

     (xii) To do all things necessary to operate and administer the Plan in accordance with its provisions and in compliance with applicable provisions of federal law.

4.03 Standard of Fiduciary Duty.

     Any Fiduciary, or any person designated by a Fiduciary to carry out Fiduciary responsibilities with respect to the Plan, shall discharge his duties solely in the interests of the Eligible Employees and beneficiaries for the exclusive purpose of providing them with benefits and defraying the reasonable expenses of administering the Plan. Any Fiduciary shall discharge his duties with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matter would use in the conduct of an enterprise of a like character and with like aims. Any Fiduciary shall discharge his duties in accordance with the documents and instruments governing the Plan insofar as such documents and instruments are consistent with the provisions of ERISA. Notwithstanding any other provisions of the Plan, no Fiduciary shall be authorized to engage in any transaction that is prohibited by Sections 408 and 2003(a) of ERISA or Code Section 4975 in the performance of its duties hereunder.

4.04 Compensation and Expenses of Committee.

     The members of the Committee shall receive no compensation for its duties hereunder, but the Committee shall be reimbursed for all reasonable and necessary expenses incurred in the performance of its duties, including counsel fees and expenses. Such expenses of the Committee, including the compensation of administrators, actuaries, counsel, agents or others that the Committee may employ, shall be paid by Company.

4.05 Records.

     The Committee shall keep or cause to be kept books and records with respect to the operations and administration of this Plan.

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4.06 Consistency of Determination.

     In rendering its determination on any matter within its discretion under any section of this Plan, the Committee shall not be bound by past interpretations and is not required to be consistent regarding its determinations.

4.07 Indemnification of Committee.

     To the extent permitted under ERISA, the Plan shall indemnify the Committee and its members against any cost or liability that it or its members may incur in the course of administering the Plan and executing the duties assigned pursuant to the Plan. The Company shall indemnify the Committee and its members against any personal liability or cost not provided for in the preceding sentence which it or its members may incur as a result of any act or omission in relation to the Plan or its Eligible Employees. The Company may purchase fiduciary liability insurance to insure its obligation under this Section.

4.08 No Action with Respect to Own Benefit.

     No member of the Committee shall take part in any discretionary action in connection with his participation as an Eligible Employee under the Plan. All such action shall be taken by the remaining Committee members, if any, or otherwise by the Company through the Company’s president or chief executive officer.

ARTICLE V
AMENDMENT AND TERMINATION

     The Company’s Board of Directors or the Compensation Committee shall be authorized to adopt or terminate the Plan on behalf of the Company, and to approve and execute any amendment or amendments to the Plan required by law or which are otherwise deemed advisable. Notwithstanding the above language or any other limitation in this Plan, the Committee may modify, on a retroactive or prospective basis, any provision of the Plan, or any Appendix to the Plan, without the consent of the Board of Directors or the Compensation Committee, unless such amendment would significantly increase or decrease the liabilities of the Plan. The Committee may make such modifications without need of a formal amendment or formal resolution by substituting a revised Appendix in place of a former Appendix.

     The Company has the exclusive authority to amend the Plan and no Affiliate shall have any right to amend the Plan. Any amendment to the Plan by the Company shall be binding upon every Participating Employer without further action by such Participating Employer. No Participating Employer other than the Company shall have the right to terminate the Plan. Upon termination or discontinuance of the Plan, all payments with respect to benefits shall be made only with respect to claims incurred on or prior to the date of the Plan’s termination.

     The Committee also may amend the Summary Plan Description at any time by

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preparation and publication of a revised SPD (or SMM). Any amendment will apply to those currently receiving benefits as well as future benefit recipients.

     Nothing in this Plan, any Summary Plan Description issued in connection with this Plan, or any other document describing, interpreting or relating to the Plan shall be construed to provide vested, nonforfeitable, nonterminable, or nonchangeable benefits or rights thereto. No communication, written or oral may modify, supersede, or void the written terms of the Plan unless such communication constitutes a valid amendment of the Plan executed by a person or persons granted authority hereunder to do so.

ARTICLE VI
MISCELLANEOUS

6.01 Right to Assets.

     Neither the establishment of the Plan, creation of any fund or account, nor the payment of Severance Benefits under the Plan shall be construed as giving any legal or equitable right to any Eligible Employee, former Eligible Employee or other person against the Company, any Participating Employer or their officers or employees except as expressly provided herein, and all rights under any Plan shall be satisfied, if at all, only out of the general assets of the Company.

6.02 No Inducement, Contract or Guarantee of Employment.

     The Plan does not constitute inducement or consideration for the employment of any Eligible Employee, nor is it a contract between any Participating Employer and Eligible Employee. Participation in the Plan shall not give any Eligible Employee any right to continued employment with any Participating Employer, and each Participating Employer retains the right to hire and discharge any Eligible Employee at any time, with or without cause, as if the Plan had never been adopted.

6.03 Spendthrift.

     Except as permitted by law and this section, no assignment of any rights or benefits arising under the Plan shall be permitted or recognized. No rights or benefits are subject to attachment or other legal or equitable process or subject to the jurisdiction of any bankruptcy court. If any Eligible Employee is adjudicated bankrupt or attempts to assign any benefits, then in the Company’s discretion, those benefits may cease. If that happens, the Committee may apply those benefits for that Eligible Employee or his or her dependents as the Committee sees fit. Neither the Company nor any Participating Employer shall be liable for or subject to the debts, contracts, liabilities, or torts of any person entitled to benefits under this Plan.

6.04 Conclusiveness of Records.

     The Plan Administrator shall be permitted to rely on the records of the Company

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or any Participating Employers with respect to age, service, employment history, employment termination, compensation, absences, illnesses and all other relevant matters, without further investigation. Such records shall be presumed correct and conclusive for purposes of the Plan Administrator’s duties in administration of, and the resolution of claims arising under, the Plan.

6.05 Adoption by Affiliate.

     Upon adoption of this Plan by the Company and thereafter, Affiliates designated as Participating Employers by the Company, either formally or informally, will automatically become Participating Employers for purposes of this Plan without any further action on their part.

6.06 Payment of Expenses.

     The Company and, to the extent deemed appropriate by the Committee, the Participating Employers shall pay all the expenses of administration of the Plan and the expenses of the Committee, and any other expenses incurred at the direction of the Committee.

     6.07 Governing Law.

     The Plan shall be governed, construed, administered and regulated in all respects under the laws of the State of Delaware, to the extent not preempted by ERISA.

6.08 Right to Require Information and Reliance Thereon.

     As a condition precedent to the receipt of benefits under this Plan, the Committee and Participating Employers may each require Eligible Employees to provide them and their agents with such information, in writing, and in such form as they deem necessary. In addition, the Committee and each Participating Employer may rely on such information supplied by Eligible Employees without need of further investigation for the purpose of carrying out their duties or any other function under the Plan. Any payment to an Eligible Employee in accordance with the provisions of the Plan in good faith reliance upon any written information provided by the Eligible Employee shall be in full satisfaction of all claims by the Eligible Employee, his heirs, estate or any other interested party.

6.09 Construction.

     One gender includes the other, and the singular and plural include each other when the meaning would be appropriate. The Plan’s headings and subheadings have been inserted for convenience of reference only and must be ignored in any construction of the provisions. If a provision of this Plan is illegal or invalid, that illegality or invalidity does not affect other provisions. Any term with an initial capital not expected by capitalization rules is a defined term according to Article I. This Plan shall be construed

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according to the applicable provisions of ERISA and any regulations promulgated thereunder.

6.10 Special Rules under Section 409A.

     Notwithstanding anything in the Plan to the contrary, to the extent that any amount or benefit would constitute “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or distributable under the Plan by reason of a Eligible Employee’s termination of employment, such amount or benefit will not be payable or distributable to the Eligible Employee unless: (i) such termination of employment meets the description or definition of “separation from service” in Section 409A of the Code and applicable regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise.

ADOPTION OF PLAN

     As evidence of the adoption of the Adams Respiratory Therapeutics, Inc. Severance Pay Plan, this document is signed by its duly authorized officer, and effective as of July 1, 2007.

 

 

 

 

 

 

ADAMS RESPIRATORY THERAPEUTICS, INC.
 

 

Date: __________________, 2007 

By:  

 

 

 

 

Name:  

 

 

 

 

Title:  

 

 

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APPENDIX A

(for employees other than in a Reduction in Force
NOT FOR USE IN A REDUCTION IN FORCE)

SEPARATION AGREEMENT AND GENERAL RELEASE

______________________ (Date Given to Employee)

This Separation Agreement and General Release (this “Agreement”) is entered into by and between Adams Respiratory Therapeutics, Inc. (the “Company”) and the undersigned employee (“Employee”).

Notice to Employee:

Under the Adams Respiratory Therapeutics, Inc. Severance Pay Plan you are eligible to receive severance pay if you agree to waive all your potential claims against the Company and agree to the other terms in this Separation Agreement. This means that you cannot sue or pursue any other claim against the Company if you sign this release. PLEASE READ THIS DOCUMENT CAREFULLY BEFORE YOU SIGN IT. ALSO, PLEASE FEEL FREE TO CONSULT AN ATTORNEY OR OTHER REPRESENTATIVE BEFORE SIGNING THIS DOCUMENT. YOU HAVE TWENTY-ONE (21) DAYS TO THINK ABOUT IT AND CONSULT WHOMEVER YOU WISH.

For purposes of this Agreement, the term “Company” means Adams Respiratory Therapeutics, Inc., its subsidiaries and affiliates, all of its officers, directors, employees, attorneys and agents (including your supervisor). This means that, if you sign this Agreement, you cannot sue the Company or any of its employees or agents.

1.

 

You are entitled to receive severance pay and benefits under the Severance Pay Plan. See the Summary Plan Description for details.

2.

 

IF YOU SIGN THIS AGREEMENT, YOU ARE PERMANENTLY WAIVING (GIVING UP) YOUR RIGHT TO SUE THE COMPANY FOR ANY REASON. YOUR WAIVER WILL INCLUDE ANY RIGHTS YOU HAVE TO SUE THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT, TITLE VII OF THE CIVIL RIGHTS ACT, THE AMERICANS WITH DISABILITIES ACT, STATE WRONGFUL TERMINATION LAWS, AND ALL OTHER LAWS AND REGULATIONS UNDER WHICH YOU MIGHT BE ABLE TO ASSERT ANY CLAIM AGAINST THE COMPANY.

 

3.

 

You will be waiving all claims which have arisen or may arise in the future, whether known or unknown, that are based on acts or events that have occurred up until the date of signing of this Agreement.

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4.

 

Because this waiver involves your legal rights, you should consider talking with an attorney before signing this Agreement. You have twenty-one (21) days from the date listed at the top of this page to make your decision. If you have not signed this Agreement by the end of the twenty-first day after the date listed above, you will be ineligible to receive any severance pay.

 

5.

 

In addition, you will have seven (7) days from the date you sign this Agreement to revoke it. This means that if you change your mind for any reason after signing the Agreement, you can revoke it if you notify the Company within seven (7) days. You must notify the Company in writing and the notice must be received by the Company within seven (7) days of the date you sign this Agreement. You will receive your severance pay under this Agreement on the eighth (8th) day after you sign the Agreement. Any revocation of this Agreement must be made in writing and delivered within the seven-day revocation period to: Director of Human Resources, Adams Respiratory Therapeutics, Inc., 4 Mill Ridge Lane, Mill Ridge Farm, Chester, NJ 07930.

Part I Release of Claims.

In consideration of the severance pay from the Company set forth above, the receipt and sufficiency of which are hereby acknowledged, the undersigned Employee hereby releases and forever discharges the Company and all of its affiliates, agents and representatives, from any and all claims and causes of action (including but not limited to costs and attorney’s fees), of whatever kind or nature, under any federal, state or local statute, ordinance or under the common law, including, but not limited to the Age Discrimination in Employment Act of 1967 (“ADEA”), as amended, 29 U.S.C. § 621, et seq., the Civil Rights Act of 1964 (“Title VII”), as amended (including amendments made through the Civil Rights Act of 1991), 42 U.S.C. § 2000e, et seq., 42 U.S.C. § 1981, as amended, the Americans With Disabilities Act (“ADA”), as amended, 42 U.S.C. § 12101, et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701, et seq., the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. § 301, et seq., the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, et seq., the Family and Medical Leave Act of 1993 (“FMLA”), as amended, 29 U.S.C. § 2601 et seq., the Fair Labor Standards Act (“FLSA”), as amended, 29 U.S.C. § 201 et seq., and the Employee Polygraph Protection Act of 1988, 29 U.S.C. § 2001, et seq., that Employee has now or may have in the future, whether known or unknown, which are based on acts or facts arising or occurring prior to the date of this Agreement.

Part II Restrictions on Employee’s Conduct.

          (a) General. Employee and the Company understand and agree that the purpose of the provisions of this Part II is to protect legitimate business interests of the Company, as more fully described below, and is not intended to impair or infringe upon Employee’s right to work or earn a living. Employee hereby acknowledges and agrees (i) that Employee has received good and valuable consideration for the post-employment restrictions set forth in this Part II in the form of the compensation and benefits provided for in the Severance Pay Plan, and (ii) that the post-employment restrictions set forth in this Part II are reasonable and that they do not, and will not, unduly impair Employee’s ability to earn a living.

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          (b) Definitions. The following capitalized terms used in this Part II shall have the following meanings:

          “Competitive Position” means any employment or consulting arrangement with a Competitor in which Employee has duties for such Competitor that involve Competitive Services and that are the same or substantially similar to those services actually performed by Employee for the Company;

          “Competitive Services” means the research and development, or manufacture, of respiratory pharmaceuticals.

          “Competitor” means any Person engaged, wholly or in part, in Competitive Services.

          “Confidential Information” means all information regarding the Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, including but not limited to trade secrets. “Confidential Information” shall include, but is not limited to, financial plans and data concerning the Company; management planning information; business plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; customer lists; customer files, data and financial information, details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. “Confidential Information” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company. This definition shall not limit any definition of “confidential information” or “trade secrets” or any equivalent term under state or federal law.

          “Person” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

          “Principal or Representative” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

          “Protected Customers” means any Person to whom the Company has sold its products or services or solicited to sell its products or services, other than through general advertising targeted at consumers, during the 12 months prior to the Separation Date.

          “Protected Employees” means employees of the Company who were employed by the Company or its affiliates at any time within six months prior to the Separation Date, other than those who were discharged by the Company or such affiliated employer without cause.

          “Restricted Period” means the number of weeks after the Separation Date for which Employee is entitled to Severance Pay under the Severance Pay Plan.

          “Restricted Territory” means the State in which Employee’s principal place of

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work for the Company was located as of the Separation Date.

          “Restrictive Covenants” means the restrictive covenants contained in Part II of this Agreement.

          “Separation Date” means the date of Employee’s termination of employment from the Company or it affiliates.

          “Severance Pay Plan” means the Adams Respiratory Therapeutics, Inc. Severance Pay Plan, as amended from time to time.

          (c) Restrictive Covenants.

               (i) Restriction on Disclosure and Use of Confidential Information. Employee understands and agrees that the Confidential Information constitute valuable assets of the Company and its affiliated entities, and may not be converted to Employee’s own use. Accordingly, Employee hereby agrees that Employee shall not directly or indirectly, for himself or for others, without the prior written consent of the Company reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information. This covenant is not intended to, and does not, alter either the Company’s rights or Employee’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. However, Employee is not restricted from disclosing or using Confidential Information that is required to be disclosed by law, court order or other legal process.

               (ii) Nondisparagment. Employee hereby agrees that he shall not disparage, criticize or otherwise publish or communicate any statements or opinions that are derogatory to or could otherwise harm the business or reputation of the Company. However, Employee is not restricted from making any factual statement that is required to be disclosed by law, subpoena, court order or other legal process.

               (iii) Nonsolicitation of Protected Employees. Employee agrees that during the Restricted Period, Employee shall not directly or indirectly on Employee’s own behalf or on behalf of any other Person or otherwise, solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into employment with any other Person.

               (iv) Restriction on Relationships with Protected Customers. Employee hereby agrees that, during the Restricted Period, Employee shall not, without the prior written consent of the Company, directly or indirectly, on Employee’s own behalf or on behalf of any other Person or otherwise, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services. However, the prohibition of this covenant shall apply only to Protected Customers with whom Employee had Material Contact on the Company’s behalf during the 12 months immediately preceding the Separation Date, and it does not apply to the conduct of general advertising activities. For purposes of this Agreement, Employee had “Material Contact” with a Protected Customer if (a) Employee had business dealings with the Protected Customer on the Company’s behalf; (b) Employee was responsible for supervising or coordinating the dealings between the Company and the Protected Customer; or (c) Employee obtained Confidential Information about the customer as a result of my association with the Company.

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               (v) Noncompetition with the Company. Employee hereby agree that, during the Restricted Period, Employee will not, without prior written consent of the Company, directly or indirectly seek or obtain a Competitive Position in the Restricted Territory with a Competitor. Employee acknowledge that the Restricted Territory is reasonable.

          (d) Enforcement of Restrictive Covenants.

               (i) Rights and Remedies Upon Breach. In the event Employee breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the right and remedy to enjoin Employee, preliminarily and permanently, from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court or tribunal of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Such right and remedy shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. Without limiting the foregoing sentence, in the event Employee breaches any of the provisions of the Restrictive Covenants, (i) Employee shall cease to have any rights to payments and benefits under the Severance Pay Plan, (ii) all payments and benefits thereunder to Employee shall cease, and (iii) Employee shall repay to the Company any payments or benefits under the Severance Pay Plan that had already been provided to Employee prior to such breach, including both cash payments and the value of benefits continuation (calculated as the difference between COBRA benefits cost and the actual amount charged to Employee for such coverage).

               (ii) Severability of Covenants. Employee acknowledges and agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in Part II of this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Employee in agreeing to the provisions of Part II of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws.

          (e) Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without regard to principles of conflicts of laws. Employee hereby irrevocably consents to the exclusive jurisdiction of the state and federal courts of the State of New Jersey, which shall have jurisdiction to hear and determine any claim, cause of action or controversy arising from or relating to this Agreement.

(signatures on following page)

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SIGNATURE BY EMPLOYEE

I acknowledge that I have been advised to consult with an attorney prior to signing this Agreement. I further acknowledge that the consideration for signing this Agreement is a benefit to which I otherwise would not have been entitled had I not signed this Agreement.

I have read this entire document and I understand and agree to each of its terms. SPECIFICALLY, I AGREE THAT BY SIGNING THIS DOCUMENT, I AM WAIVING MY RIGHTS TO SUE THE COMPANY AS SET FORTH ABOVE IN PARAGRAPHS 2 AND 3. I also understand that this is the entire Agreement between the Company and me regarding severance pay and the termination of my employment and that no other agreements or promises about those matters, written or oral will be enforceable.

 

 

 

 

 

(Signature of Employee)

 

 

 

(Date Signed)

 

 

 

 

 

(Print Employee Name)

 

 

 

(Witness)

ACCEPTANCE BY THE COMPANY

The Company hereby enters into and accepts this Agreement as set forth above.

 

 

 

 

 

 

ADAMS RESPIRATORY THERAPEUTICS, INC.
 

 

 

By:  

 

 

 

 

Name:  

 

 

 

 

Title:  

 

 

 

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