Adolor (ADLR)

License Agreements

In November 1996, Roberts Laboratories, Inc. (Roberts) licensed from Lilly certain intellectual property rights relating to ENTEREG. In June 1998, we entered into an option and license agreement with Roberts under

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which we sublicensed these rights from Roberts. In December 2000, Shire U.S. Inc. (Shire) became the successor in interests to Roberts under our option and license agreement with Roberts. The Company has made license and milestone payments under this agreement totaling $2.5 million, including $0.9 million paid during 2008 as a result of the regulatory approval of ENTEREG. Our license to ENTEREG and our obligations to pay royalties to Shire and Lilly expire on the later of either the date of the last to expire of the licensed Lilly patents or November 5, 2011.

In September 2009, we acquired from Lilly the exclusive worldwide rights to ADL5945. ADL5945 is a potent opioid receptor antagonist, with potential use in multiple therapeutic indications. We intend to develop ADL5945 to treat OBD and began a Phase 1 clinical trial of this compound for this indication in February 2010. Under the terms of the agreement, we paid Lilly $2.0 million in September 2009. In addition to the $2.0 million payment, we will be required to pay milestones, which are contingent upon achievement of pre-defined, late-stage clinical and regulatory events and achievement of certain sales targets, and royalties on net sales of the product.

License Agreements

With regard to the Company’s commercial product, ENTEREG, the Company has commitments to Roberts Laboratories, Inc. (Roberts) and Eli Lilly and Company (Lilly). In November 1996, Roberts licensed from Lilly certain intellectual property rights relating to ENTEREG. In June 1998, the Company entered into an Option and License Agreement with Roberts under which the Company sublicensed these rights from Roberts. In December 2000, Shire U.S. Inc. (Shire) became the successor in interests to Roberts under the Company’s option and license agreement with Roberts. The Company has made license and milestone payments under this agreement totaling $2.5 million, including $0.9 million paid during 2008 as a result of the regulatory approval of ENTEREG. In addition to the license and milestone payments, the Company is obligated under the agreement to pay royalties on commercial sales of ENTEREG. For the years ended December 31, 2009 and 2008, the Company incurred $1.2 million and $0.1 million, respectively, of royalty expense related to sales of ENTEREG. The Company’s license to ENTEREG and its obligations to pay royalties to Shire and Lilly expire on the later of either the date of the last to expire of the licensed Lilly patents or November 5, 2011.

In August 2002, the Company entered into a separate exclusive license agreement with Lilly under which the Company obtained an exclusive license to six issued U.S. patents and related foreign equivalents and know-how relating to peripherally selective opioid antagonists. The Company paid Lilly $4.0 million upon signing the agreement and is subject to additional clinical and regulatory milestone payments and royalty payments to Lilly on sales, if any, of new products utilizing the licensed technology. Under this license agreement, the Company also paid Lilly $4.0 million upon acceptance for review of the Company’s ENTEREG NDA by the FDA, which payment was made in the third quarter of 2004. However, there are no ongoing royalties on commercial sales of ENTEREG due to Lilly under this agreement.

In September 2009, the Company acquired from Lilly the exclusive worldwide rights to ADL5945. ADL5945 is a clinical-stage opioid receptor antagonist. The Company intends to develop ADL5945 to treat OBD and initiated additional Phase 1 clinical trials of this compound in February 2010. Under the terms of the agreement, the Company paid Lilly $2.0 million. As a result of requiring additional research and development efforts and regulatory approval in order to commercialize this product candidate, the $2.0 million was recognized as acquired in-process research and development and recorded as research and development expense for the year

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ADOLOR CORPORATION

NOTES TO FINANCIAL STATEMENTS—(continued)

ended December 31, 2009. In addition to the $2.0 million payment, the Company will be required to pay milestones, which are contingent upon achievement of pre-defined, late-stage clinical and regulatory events and achievement of certain sales targets, and royalties on net sales of the product.

The Company charges to expense research and development milestone payments that are required to be made upon the occurrence of future events prior to receipt of applicable regulatory approval.

In 2004, lawsuits were filed in the U.S. District Court for the Eastern District of Pennsylvania against the Company, one of its directors and certain of its officers seeking unspecified damages on behalf of a putative class of persons who purchased Adolor common stock between certain specified periods in 2003 and 2004. These lawsuits were subsequently consolidated into a single complaint. In May 2009, the District Court granted the Company’s motion to dismiss the case in its entirety.

On August 2, 2004, two shareholder derivative lawsuits were filed in the U.S. District Court for the Eastern District of Pennsylvania, purportedly on behalf of the Company, against its directors and certain of its officers seeking unspecified damages for various alleged breaches of fiduciary duty and waste. The allegations were similar to those set forth in the consolidated class action complaint. In May 2009, the District Court granted the Company’s motion to dismiss the case in its entirety.

License Agreements

In November 1996, Roberts licensed from Eli Lilly certain intellectual property rights relating to Entereg. In June 1998, we entered into an option and license agreement with Roberts under which we licensed from Roberts the rights Roberts had licensed from Eli Lilly for Entereg. We have made license and milestone payments under this agreement totaling $1.6 million. If Entereg receives regulatory approval, we are obligated to make a milestone payment of $900,000 under this agreement, as well as royalties on commercial sales of Entereg. Our license to Entereg expires on the later of either the life of the last to expire of the licensed Eli Lilly patents or fifteen years from November 5, 1996, following which we will have a fully paid up license.

In August 2002, we entered into a separate license agreement with Eli Lilly under which we obtained an exclusive license to six issued U.S. patents and related foreign equivalents and know-how relating to peripherally selective opioid antagonists. We paid Eli Lilly $4.0 million upon signing the agreement and are subject to additional clinical and regulatory milestone payments and royalty payments to Eli Lilly on sales, if any, of new products utilizing the licensed technology. Under this license agreement, we also agreed to pay Eli Lilly $4.0 million upon acceptance for review of our NDA by the FDA, which payment was made in the third quarter of 2004.

We are a party to various license agreements that give us rights to use technologies and biological materials in our research and development processes. We may not be able to maintain such rights on commercially reasonable terms, if at all. Failure by us or our licensors to maintain such rights could harm our business.

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License Agreements

In November 1996, Roberts licensed from Eli Lilly certain intellectual property rights relating to Entereg^®. In June 1998, we entered into an Option and License Agreement with Roberts under which we licensed from Roberts the rights Roberts had licensed from Eli Lilly for Entereg^®. We have made license and milestone

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payments under this agreement totaling $1.6 million. If Entereg^® receives regulatory approval, we are obligated to make a milestone payment of $900,000 under this agreement, as well as royalties on commercial sales of Entereg^®. Our license to Entereg^® expires on the later of either the life of the last to expire of the licensed Eli Lilly patents or fifteen years from November 5, 1996, following which we will have a fully paid up license.

In August 2002, we entered into a separate exclusive license agreement with Eli Lilly under which we obtained an exclusive license to six issued U.S. patents and related foreign equivalents and know-how relating to peripherally selective opioid antagonists. We paid Eli Lilly $4.0 million upon signing the agreement and are subject to additional clinical and regulatory milestone payments and royalty payments to Eli Lilly on sales, if any, of new products utilizing the licensed technology. Under this license agreement, we also agreed to pay Eli Lilly $4.0 million upon acceptance for review of our NDA by the FDA, which payment was made in the third quarter of 2004.

In July 2003, we entered into a license agreement with EpiCept Corporation under which we licensed exclusive rights to develop and commercialize in North America a sterile lidocaine patch which is being developed for management of postoperative incisional pain. We made a $2.5 million payment to EpiCept upon execution of the agreement, a $0.5 million payment to EpiCept in September 2005 and may make up to $20 million in additional milestone payments if certain clinical and regulatory goals are achieved. This license requires us to pay royalties on commercial sales, if any, of the sterile lidocaine patch.

We are a party to various license agreements that give us rights to use technologies and biological materials in our research and development processes. We may not be able to maintain such rights on commercially reasonable terms, if at all. Failure by us or our licensors to maintain such rights could harm our business.

License Agreements

In November 1996, Roberts licensed from Eli Lilly certain intellectual property rights relating to Entereg^™. In June 1998, we entered into an Option and License Agreement with Roberts under which we licensed from Roberts the rights Roberts had licensed from Eli Lilly for Entereg^™. We have made license and milestone payments under this agreement totaling $1.6 million. If Entereg^™ receives regulatory approval, we are obligated to make a milestone payment of $900,000 under this agreement, as well as royalties on commercial sales of Entereg^™. Our license to Entereg^™ expires on the later of either the life of the last to expire of the licensed Eli Lilly patents or fifteen years from November 5, 1996, following which we will have a fully paid up license.

In August 2002, we entered into a separate exclusive license agreement with Eli Lilly under which we obtained an exclusive license to six issued U.S. patents and related foreign equivalents and know-how relating to peripherally selective opioid antagonists. We paid Eli Lilly $4.0 million upon signing the agreement and are subject to additional clinical and regulatory milestone payments and royalty payments to Eli Lilly on sales, if any, of new products utilizing the licensed technology. Under this license agreement, we also agreed to pay Eli Lilly $4.0 million upon acceptance for review of our NDA by the FDA, which payment was made in the third quarter of 2004.

We are a party to various license agreements that give us rights to use technologies and biological materials in our research and development processes. We may not be able to maintain such rights on commercially reasonable terms, if at all. Failure by us or our licensors to maintain such rights could harm our business.