UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
Commission File Number 0-9314
ACCESS PHARMACEUTICALS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 83-0221517
- ------------------------ -------------------------
(State of Incorporation) (I.R.S. Employer I.D. No.)
2600 Stemmons Frwy, Suite 176, Dallas, TX 75207
-----------------------------------------------
(Address of principal executive offices)
Telephone Number (214) 905-5100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirement for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock outstanding as
of May 11, 1998 41,514,581 shares, $0.04 par value
------------ ----------
Total No. of Pages 12
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
The response to this Item is submitted as a separate section of this report.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
The Company, assisted by an investment bank, raised an aggregate of $1,200,000
in gross proceeds ($725,000 received on March 20, 1998 and $475,000 received
on April 11, 1998), less cash issuance costs of $22,250, from the placement of
48 units, each unit consisting of 166,667 shares Common Stock and warrants to
purchase 166,667 shares of Common Stock at $0.15 per share. The placement
agent elected to receive 905,555 shares of Common Stock in lieu of certain sales
commissions and expenses and warrants to purchase 890,555 shares of Common
Stock at an exercise price of $0.15 per share, per the offering terms. The
proceeds of the offering will be used to fund the Company's activities until
further funds are raised. The investment bank has been engaged to assist the
Company in raising up to an additional $7,800,000 to fund the Company's
research and development activities.
On April 14, 1998 the Company's Shareholders gave their approval to amend
Access' Certificate of Incorporation, as amended, to effect a recapitalization
of the Company through a one-for-twenty reverse stock split of Access common
stock, $.04 par value per share (the "Common Stock"), decrease the number of
authorized shares of Common Stock from 60.0 million to 20.0 million shares, par
value $0.01 per share, and decrease the authorized shares of preferred stock of
the Company from 10.0 million to 2.0 million (the "Recapitalization"). This
proposal, if and when effected, will decrease the number of outstanding shares
of Common Stock from approximately 41.5 million to 2.1 million.
In addition, if and when the Recapitalization becomes effective and if the
Company satisfies all listing requirements, the Company intends to submit an
application for listing on NASDAQ or an alternate exchange. There can be no
assurances that the market price of the Common Stock immediately after the
implementation of the proposed reverse stock split will increase, and if it
does increase, there can be no assurance that such increase can be
maintained for any period of time, or that such market price will approximate
twenty times the market price before the proposed reverse stock split. There
can be no assurances that the Company will be listed on NASDAQ or an alternate
exchange.
On February 26, 1998, the Company entered into a license agreement with
Strakan Limited ("Strakan") relating to the Company's zinc technology. Strakan
has agreed to fund the development costs of Zinc Clindamycin, for the treatment
of acne, and any additional compounds developed utilizing the zinc patent, and
will share equally with the Company all milestone payments received from the
sublicensing of the compound. In addition, Access will receive a royalty on
sales of products based on this technology.
2
<PAGE>
Liquidity and Capital Resources
As of April 30, 1998 the Company's principal source of liquidity is $295,000 of
cash and cash equivalents. Working capital deficit as of March 31, 1998 was
$(444,000), representing an increase in the deficit of $228,000 as compared to
the working capital deficit as of December 31, 1997 of $(216,000). The
decrease in working capital was due to the current year's operations, offset
partially by the $725,000 in gross proceeds received from the private
placement of units sold as of March 31, 1998.
Since its inception, the Company's expenses have significantly exceeded its
revenues, resulting in an accumulated deficit of $20,645,000 at March 31, 1998.
The Company has funded its operations primarily through private sales of its
equity securities, contract research payments from corporate alliances and the
merger of API and Chemex.
The Company has incurred negative cash flows from operations since its
inception, and has expended, and expects to continue to expend in the future,
substantial funds to complete its planned product development efforts. The
Company expects that its existing capital resources will be adequate to fund the
Company's operations through the next two to three months. The Company is
dependent on raising additional capital to fund its development of technology
and to implement its business plan. Such dependence will continue at least
until the Company begins marketing products from its new technologies.
If the anticipated revenues are delayed or do not occur or the Company is
unsuccessful in raising additional capital on acceptable terms, the Company
would be required to curtail research and development and general and
administrative expenditures.
The Company will require substantial funds to conduct research and development
programs, preclinical studies and clinical trials of its potential products. The
Company's future capital requirements and adequacy of available funds will
depend on many factors, including the successful commercialization of
amlexanox; the ability to establish and maintain collaborative arrangements for
research, development and commercialization of products with corporate partners;
continued scientific progress in the Company's research and development
programs; the magnitude, scope and results of preclinical testing and clinical
trials; the costs involved in filing, prosecuting and enforcing patent claims;
competing technological developments; and the cost of manufacturing and
scale-up.
The Company intends to seek additional funding through research and
development or licensing arrangements with potential corporate partners, public
or private financing, or from other sources. The Company does not have any
committed sources of additional financing and there can be no assurance that
additional financing will be available on favorable terms, if at all. In the
event that adequate funding is not available, the Company may be required to
delay, reduce or eliminate one or more of its research or development
programs or obtain funds through arrangements with corporate collaborators or
others that may require the Company to relinquish greater or all rights to
product candidates at an earlier stage of development or on less favorable
terms than the Company
3
<PAGE>
would otherwise seek. Insufficient financing may also require the Company to
relinquish rights to certain of its technologies that the Company would
otherwise develop or commercialize itself. If adequate funds are not
available, the Company's business, financial condition and results of
operations will be materially and adversely affected.
First Quarter 1998
Compared to
First Quarter 1997
The Company had $138,000 in licensing revenue in 1997 as compared to no
revenue in the first quarter 1998. First quarter 1997 revenues were comprised of
licensing income from an ongoing agreement with an emerging pharmaceutical
company which made certain milestone payments and provides for royalty
payments if a product is developed from the technology.
Total research spending for the first quarter of 1998 was $435,000, as compared
to $504,000 for the same period in 1997, a decrease of $69,000. The decrease in
expenses was the result of lower salary and related costs- $57,000; lower
equipment rent- $17,000; lower other costs- $22,000; offset by higher external
contract research costs- $27,000. If the Company is successful in raising
additional capital, research spending is expected to increase in future
quarters as the Company intends to hire additional scientific management and
staff and will accelerate activities to develop the Company's product
candidates. If the Company is not successful in raising additional capital,
research spending will be curtailed.
Total general and administrative expenses were $391,000 for the first quarter of
1998, a decrease of $14,000 as compared to the same period in 1997. The
decrease in spending was due primarily to the following: decreased general
business consulting fees- $49,000; other decreases- $10,000; offset by increased
patent costs due to the filing of new patents- $45,000. If the Company is not
successful in raising additional capital, general and administrative spending
will be curtailed.
Depreciation and amortization was $64,000 for the first quarter 1998 as compared
to $32,000 for the same period in 1997 reflecting the additional depreciation of
the assets acquired in the Tacora merger.
Interest and miscellaneous income was $2,000 for the first quarter of 1998 as
compared to $47,000 for the same period in 1997, a decrease of $45,000. The
decrease in interest income was due to lower cash balances in 1998.
Total expenses in the first quarter of 1998 were $899,000 with interest income
of $2,000, resulting in a loss for the quarter of $897,000 or ($0.03) basic and
diluted loss per share.
Certain statements in this Form 10-Q including Management's Discussion and
Analysis of Financial Condition and Results of Operations, are forward-looking
statements that involve risks and uncertainties. In addition to the risks and
uncertainties set forth in this Form 10-Q, other factors could cause actual
results to differ materially, including but not limited to the Company's
research and development focus, uncertainties associated with research and
development activities, future capital requirements, anticipated option and
licensing revenues, dependence on others, ability to raise capital, and other
risks detailed in the Company's reports filed under the Securities Exchange
Act, including but not limited to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
4
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES
On March 20 and April 1, 1998 the Company sold to several
individual investors an aggregate of 48 units, each unit
consisting of 166,667 shares of Common Stock and warrants to
purchase 166,667 shares of Common Stock at $0.15 per share.
The placement agent for
such offering was issued 905,555 shares of Common Stock and
warrants to purchase 890,555 shares of Common Stock at $0.15 per
share. The Company raised an aggregate of $1,200,000 in gross
proceeds. The shares issued in the Private Placement have not been
registered; however, the Company has agreed to file a registration
statement for the resale of such shares not later than August 30,
1998. The Company relied on Section 4(2) and or 3(b) of the 1933
Securities Act of 1933 and the provisions of Regulation D as
exemptions from the registration thereunder.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
A special meeting of stockholders was held on April 14, 1998 in
New York, NY. At that meeting the following matter was submitted
to a vote of the stockholders of record. The proposal was approved
by the stockholders, as follows:
A proposal to amend the Company's Certificate Incorporation to
effect the Recapitalization was approved with 22,481,235 -
For, 4,252,719 - Against and 42,230 - Abstain.
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibits: 10.12 License Agreement between Strakan Limited and
the Company dated February 26, 1998
(Confidential Treatment Requested)
27.1 Financial Data Schedule
Reports on Form 8-K: None
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ACCESS PHARMACEUTICALS, INC.
Date: May 15, 1998 By: /s/ Kerry P. Gray
------------ --------------------
Kerry P. Gray
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 1998 By: /s/ Stephen B. Thompson
------------ -----------------------
Stephen B. Thompson
Chief Financial Officer
(Principal Financial and Accounting Officer)
6
<PAGE>
ACCESS PHARMACEUTICALS, INC. AND SUBSIDIARY
a development stage company
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets March 31, 1998 December 31, 1997
- ------- --------------- ---------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 105,000 $ 438,000
Accounts receivable 12,000 1,000
Prepaid expenses and other current assets 45,000 51,000
--------------- ---------------
Total Current Assets 162,000 490,000
Property and Equipment, at cost 1,047,000 1,047,000
Less accumulated depreciation (677,000) (625,000)
--------------- ---------------
370,000 422,000
Licenses, net 463,000 475,000
Other Assets 59,000 60,000
--------------- ---------------
Total Assets $ 1,054,000 $ 1,447,000
=============== ===============
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 390,000 $ 434,000
Royalties payable 58,000 53,000
Accrued insurance premium 26,000 38,000
Current portion of obligations under
capital leases 132,000 181,000
--------------- ---------------
Total Current Liabilities 606,000 706,000
--------------- ---------------
Obligations under capital leases,
net of current portion 116,000 142,000
--------------- ---------------
Total Liabilities 722,000 848,000
--------------- ---------------
Stockholders' Equity
Preferred stock, $.01 par value,
authorized 10,000,000 shares, none
issued or outstanding - -
Common stock, $.04 par value,
authorized 60,000,000 shares,
37,442,353 and 32,609,010, issued and
outstanding at March 31, 1998 and
December 31,1997, respectively 1,498,000 1,304,000
Additional paid-in capital 19,479,000 19,043,000
Deficit accumulated during the
development stage (20,645,000) (19,748,000)
--------------- ---------------
Total Stockholders' Equity 332,000 599,000
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 1,054,000 $ 1,447,000
=============== ===============
</TABLE>
- --------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements
7
<PAGE>
ACCESS PHARMACEUTICALS, INC. AND SUBSIDIARY
a development stage company
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months ended March 31, February 24, 1988
---------------------------- (inception) to
1998 1997 March 31, 1998
------------ ------------ -------------
<S> <C> <C> <C>
Revenues
Research and development $ - $ - $ 2,711,000
Option income - - 2,149,000
Licensing revenues - 138,000 325,000
------------ ------------ -------------
Total Revenues - 138,000 5,185,000
------------ ------------ -------------
Expenses
Research and development 435,000 504,000 9,044,000
General and administrative 391,000 405,000 7,254,000
Depreciation and amortization 64,000 32,000 1,120,000
Write-off of excess purchase price - - 8,894,000
------------ ------------ -------------
Total Expenses 890,000 941,000 26,312,000
------------ ------------ -------------
Loss From Operations (890,000) (803,000) (21,127,000)
------------ ------------ -------------
Other Income (Expense)
Interest and miscellaneous income 2,000 47,000 776,000
Interest expense (9,000) (8,000) (167,000)
------------ ------------ -------------
(7,000) 39,000 609,000
------------ ------------ -------------
Loss Before Income Taxes (897,000) (764,000) (20,518,000)
Provision for Income Taxes - - 127,000
------------ ------------ -------------
Net Loss $ (897,000) $ (764,000) $(20,645,000)
============ ============ =============
Basic and Diluted Loss Per
Common Share $ (0.03) $ (0.02)
============ ============
Weighted Average Basic and Diluted
Common Shares Outstanding 32,562,805 31,391,324
============ ============
</TABLE>
- ---------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements
8
<PAGE>
ACCESS PHARMACEUTICALS, INC. AND SUBSIDIARY
a development stage company
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months ended March 31, February 24, 1988
--------------------------- (inception) to
1998 1997 March 31, 1998
------------ ------------ -------------
<S> <C> <C> <C>
Cash Flows form Operating Activities
Net Loss $ (897,000) $ (764,000) $(20,645,000)
Adjustments to reconcile net loss to
cash used in operating activities:
Write-off of excess purchase price - - 8,894,000
Consulting expense related to
warrants granted - - 532,000
Research expenses related to
common stock granted - - 100,000
Depreciation and amortization 64,000 32,000 1,120,000
Unearned revenue - - (110,000)
Change in operating assets
and liabilities:
Accounts receivable (11,000) (1,000) (13,000)
Prepaid expenses and other
current assets 6,000 19,000 (46,000)
Other assets 1,000 - (7,000)
Accounts payable and accrued
expenses (51,000) (186,000) 181,000
----------- ------------ -------------
Net Cash Used In Operating Activities (888,000) (900,000) (9,994,000)
----------- ------------ -------------
Cash Flows From Investing Activities
Capital expenditures - (5,000) (1,164,000)
Sales of capital equipment - - 6,000
Purchase of Tacora, net of cash acquire - - (124,000)
Other investing activities - - (50,000)
----------- ------------ -------------
Net Cash Used In Investing Activities - (5,000) (1,332,000)
----------- ------------ -------------
Cash Flows From Financing Activities
Proceeds from notes payable - - 721,000
Payments of principal on obligations under
capital leases (75,000) (38,000) (529,000)
Cash acquired in merger with Chemex - - 1,587,000
Proceeds from stock issuances, net 630,000 - 9,652,000
------------ ------------ -------------
Net Cash Provided By (Used In)
Financing Activities 555,000 (38,000) 11,431,000
------------ ------------ -------------
Net Increase (Decrease) in Cash and
Cash Equivalents (333,000) (943,000) 105,000
Cash and Cash Equivalents at
Beginning of Period 438,000 4,428,000 -
------------ ------------ -------------
Cash and Cash Equivalents at
End of Period $ 105,000 $ 3,485,000 $ 105,000
============ ============= =============
Cash paid for interest $ 9,000 $ 8,000 $ 164,000
Cash paid for income taxes - - 127,000
Supplemental disclosure of
noncash transactions
Payable accrued for fixed
asset purchase $ - $ - $ 47.000
Elimination of note payable
to Chemex Pharmaceuticals
due to merger - - 100,000
Stock issued for License on patents - - 500,000
Equipment purchases financed
through capital leases - - 82,000
Net liabilities assumed in
acquisition of Tacora Corporation - - 455,000
</TABLE>
- ---------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements
9
<PAGE>
ACCESS PHARMACEUTICALS, INC. AND SUBSIDIARY
a development stage company
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 1998 and 1997
(unaudited)
(1) Interim Financial Statements
The consolidated balance sheet as of March 31, 1998 and the consolidated
statements of operations and cash flows for the three months ended March 31,
1998 and 1997 were prepared by management without audit. In the opinion of
management, all adjustments, including only normal recurring adjustments
necessary for the fair presentation of the financial position, results of
operations, and changes in financial position for such periods, have been
made. Certain reclassifications have been made to prior year
financial statements to conform with the March 31, 1998 presentation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997. The results of operations for the period ended
March 31, 1998 are not necessarily indicative of the operating
results which may be expected for a full year. The consolidated balance sheet
as of December 31, 1997 contains financial information taken from the audited
financial statements as of that date.
In 1997, the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share." In accordance with SFAS No. 128, the Company has
presented basic loss per share, computed on the basis of the weighted average
number of common shares outstanding during the period, and diluted
loss per share, computed on the basis of the weighted average number of
common shares and all dilutive potential common shares outstanding during the
period. The adoption of this new accounting standard, which required the
restatement of all presented periods' earnings per share data, did not have
a material impact on previously reported earnings per share. Potentially
dilutive effect of the Company's outstanding options and common stock warrants
has not been considered in the computation of diluted net loss per
common share since their inclusion would be anti-dilutive.
Effective with fiscal years beginning after December 15, 1997, companies are
required to adopt Statement of Financial Accounting Standards ("SFAS") No.
130 "Reporting Comprehensive Income." The Statement establishes standards for
the reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Comprehensive income
includes net income and other comprehensive income, which comprises certain
specific items previously reported directly in stockholders' equity. Other
comprehensive income comprises items such as unrealized gains and losses
on debt and equity securities classified as available-for-sale securities,
minimum pension liability adjustments, and foreign currency translation
adjustments. Since the Company does not currently have any of these other
comprehensive income items, SFAS No. 130 has no impact on the way the Company
reports or has reported its financial statements.
10
<PAGE>
(2) Liquidity
The Company has incurred negative cash flows from operations since its
inception, and has expended, and expects to continue to expend in the future,
substantial funds to complete its planned product development efforts. The
Company expects that its existing capital resources will be adequate to fund
the Company's operations through the next two to three months. The Company
is dependent on raising additional capital to fund its development of
technology and to implement its business plan. Such dependence will continue
at least until the Company begins marketing products from its new technologies.
If the anticipated revenues are delayed or do not occur or the Company is
unsuccessful in raising additional capital on acceptable terms, the Company
would be required to curtail research and development and general and
administrative expenditures.
The Independent Auditor's Report on the Company's 1997 consolidated financial
statements included an emphasis paragraph regarding the uncertainty of the
Company's ability to continue as a going concern.
(3) Private Placement
The Company, assisted by an investment bank, raised an aggregate of $1,200,000
in gross proceeds ($725,000 received on March 20, 1998 and $475,000 received
on April 1, 1998), less cash issuance costs of $22,250, from the placement of
48 units, each unit consists of 166,667 shares Common Stock and warrants to
purchase 166,667 shares of Common Stock at $0.15 per share. The placement
agent elected to receive 905,555 shares of Common Stock in lieu of certain sales
commissions and expenses and warrants to purchase 890,555 shares of Common
Stock at an exercise price of $0.15 per share, per the offering terms. The
proceeds of the offering will be used to fund the Company's activities until
further funds are raised. The investment bank has been engaged to assist the
Company in raising up to an additional $7,800,000 to fund the Company's
research and development activities.
(4) Recapitalization
On April 14, 1998 the Company's Shareholders gave their approval to amend
Access' Certificate of Incorporation, as amended, to effect a
recapitalization of the Company through a one-for-twenty reverse
stock split of Access common stock, $.04 par value per share (the "Common
Stock"), decrease the number of authorized shares of Common Stock from 60.0
million to 20.0 million shares, par value $0.01 per share, and decrease the
authorized shares of preferred stock of the Company from 10.0 million to
2.0 million (the Recapitalization"). This proposal, when effective, will
decrease the number of outstanding shares of Common Stock from approximately
41.5 million to 2.1 million.
In addition, if and when the Recapitalization becomes effective and if the
Company satisfies all listing
11
<PAGE>
requirements, the Company intends to submit an application for listing on
NASDAQ or an alternate exchange. There can be no assurances that the market
price of the Common Stock immediately after the implementation of the
proposed reverse stock split will increase, and if it does increase, there
can be no assurance that such increase can be maintained for any period of
time, or that such market price will approximate twenty times the market
price before the proposed reverse stock split. There can be no assurances
that the Company will be listed on NASDAQ or an alternate exchange.
12
TABLE OF CONTENTS
ITEM PAGE NO
1. Definitions 2-6
2. Grant of License 6-7
3. Technology & Know-How Transfer & Research 7-8
4. Strakan Development & Diligence 8-10
5. Patent Rights 10-11
6. Payments & Royalties 12-14
7. Confidentiality 14-17
8. Third Party Infringement Claims 17-18
9. Patent Enforcement & Litigation 18-21
10. U.S. Export Control & Government Licenses 21-22
11. Product Liability & Indemnification 22-23
12. Warranties & Repreesntations 24-25
13. Term & Termination 25-28
14. Force Majeure 29
15. Notices 29-31
16. Dispute Resolution 31-33
17. Assignment 34
18. Miscellaneous Provisions 34-35
19. Signature Page 36
Appendix A-Patents
Appendix B-Major Markets
Appendix C-Option Agreement
Appendix D-Market Approval
Appendix E-Clinical Trials Insurance
<PAGE>
ZINC COMPOUND LICENSE AGREEMENT
THIS license agreement (hereinafter "LICENSE") is made between Access
Pharmaceuticals, Inc. (hereinafter "ACCESS"); a corporation duly formed and
existing under the laws of the State of Delaware, having a place of business at
2600 Stemmons Freeway, Suite 176, Dallas, TX 75207-2107; and Strakan Ltd.
(hereinafter "STRAKAN"); a corporation duly formed and existing under the laws
of Bermuda, having a place of business at 22 Church Street, Hamilton HM11,
Bermuda;
WITNESSETH:
WHEREAS, ACCESS is engaged in certain research and development involving
a certain zinc compound patent for use in dermatological and topical products;
and
WHEREAS, ACCESS has proprietary rights in technology relating to said zinc
compound patent, including: patent rights and know-how; and
WHEREAS, STRAKAN desires to undertake the further development and
commercial exploitation of said zinc compound patent for human use in
dermatological and topical products; and
WHEREAS, STRAKAN desires to obtain an exclusive global license; and
WHEREAS, ACCESS is willing to grant said license to STRAKAN; and
WHEREAS, ACCESS and STRAKAN have signed a Zinc Compound
Development and Option Agreement, effective July 22, 1996, which terms are
included in and superseded by this License.
<PAGE>
2
NOW, THEREFORE, ACCESS and STRAKAN, in consideration of the mutual
covenants contained herein, the sufficiency thereof is accepted and
acknowledged, agree as follows:
ARTICLE 1 - DEFINITIONS
When used in this License, the following terms shall have the meanings set out
below, unless the context requires otherwise. The singular shall be interpreted
as including the plural and vice versa, unless the context clearly indicates
otherwise.
1.1 "AFFILIATE" means :
any corporation, firm, partnership or other entity which directly or
indirectly owns, is owned by or is under common ownership with
a PARTY, to the extent of at least fifty percent (50%) of the
equity (or such lesser percentage which is the maximum allowed
to be owned of a foreign corporation in a particular
jurisdiction) having the power to vote on or direct the
affairs of the entity, or any person, firm, partnership,
corporation or other entity actually
CONTROLLED by, CONTROLLING or under common
CONTROL with a PARTY.
1.2 "APPROVAL" means final approval by a REGULATORY AUTHORITY
in any country where applicable in the TERRITORY, for commercial
marketing of any DEVELOPMENT PRODUCTS, as the case may, be
including for example approval of final labeling and price
reimbursement approval.
1.3 "CONFIDENTIAL INFORMATION" means any information of either
PARTY regarding TECHNOLOGY, PATENTS, any samples of
PRODUCT, financial terms of this LICENSE, and business development
plans for the PRODUCT, but does not include information excluded
under Article 7.2.
<PAGE>
3
1.4 "CONTROL", "CONTROLLING" or "CONTROLLED" shall mean, in
the case of a corporation, ownership or control, directly or
indirectly, of more than fifty percent (50%) of the shares of stock
entitled to vote for the election of directors and, in the case of
an entity other than a corporation, ownership or control, directly or
indirectly, of more than 50% of the assets or the ability to direct
the management and affairs of such entity.
1.5 "DEVELOPMENT PRODUCTS" means the first three (3) dermatological
or topical PRODUCTS, including LEAD PRODUCT, developed by
STRAKAN.
1.6 "EFFECTIVE DATE" means the date of the last signature of the
PARTIES to this LICENSE.
1.7 "EUROPEAN COMMUNITY APPROVAL" shall mean regulatory
approval in the European Community Countries (EC) either through the
Mutual Recognition Procedure or Centralized Procedure.
1.8 "FDA" means the United States Food and Drug Administration or any
successor US governmental agency performing similar functions.
1.9 "FIELD" shall mean dermatological and topical products for human use.
1.10 "KNOW HOW" means all factual knowledge and proprietary information
pertaining to the PRODUCT and of a nature held in the pharmaceutical
industry as trade secrets or otherwise as confidential information,
including without limitation formulation, pharmacological, preclinical,
clinical, chemical, biochemical, toxicological and pharmacokinetics
information whether or not capable of precise separate description and
certain manufacturing, business, financial, formulation and scientific
research data or information.
<PAGE>
4
1.11 "LEAD PRODUCT" means a combination of * .
1.12 "MAJOR MARKETS" shall mean countries listed in Appendix B.
1.13 "MANUFACTURE" means using the TECHNOLOGY or PATENTS to
make PRODUCT , or instructions for preparing PRODUCT for use in the
FIELD.
1.14 "MARKET EXCLUSIVITY" means no identical competing brands or
generic entrant with the same identical constituents as the Product.
1.15 "NET SALES" shall mean the gross proceeds from sales of the
PRODUCT by STRAKAN, its AFFILIATES and any sublicensees to
unaffiliated THIRD PARTIES:
allowances for returns, chargebacks and product discounts actually
given to customers;
value added tax or other similar taxes collected on such sales;
rebates under the medical prescription drug rebate and improved access
to medicine requirements of the US Omnibus Budget
Reconciliation Act of 1990 and comparable US Federal and State
requirements and such similar legislation in any other country
of the TERRITORY.
1.16 "OPTION AGREEMENT" means a Zinc Compound Development and
Option Agreement signed by both PARTIES expressing their intent for
this LICENSE, effective July 22 1996, a copy of which is provided as
Appendix C.
1.17 "PARTY or PARTIES" shall mean either ACCESS or STRAKAN or
collectively ACCESS and STRAKAN.
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
5
1.18 "PATENT or PATENTS" means:
Patents owned by ACCESS and patent applications applied for by
ACCESS as listed in Appendix A attached hereto.
any patent issuing therefrom or any division, continuation,
continuation-in-part, patent of addition, renewal, reissue or
extension of such patents as long as it covers the PRODUCT, and
any subsequently filed ACCESS patent application or patent covering any
invention resulting from the DEVELOPMENT PRODUCTS.
Appendix A shall be updated from time to time, at STRAKAN's request,
but not more
frequently than once yearly, unless required to provide information to
compute the
payments due under this LICENSE.
1.19 "PRODUCT" means any dermatological or topical products for human use
developed pursuant to the terms of this LICENSE utilizing the PATENTS,
TECHNOLOGY, KNOW-HOW or MANUFACTURE.
1.20 "REGULATORY AUTHORITY" means the agency corresponding to the
FDA in each country of the TERRITORY
1.21 "TECHNOLOGY" shall mean technology owned or controlled by
ACCESS relating to pharmaceutical vehicles incorporating zinc salts for
reducing transdermal flux.
<PAGE>
6
1.22 "TERRITORY" means the world.
1.23 "THIRD PARTY or PARTIES" means anyone, other than STRAKAN,
ACCESS and their AFFILIATES. Thus THIRD PARTY includes, without
limitation, physicians, hospitals, clinics, hospice facilities,
patients, STRAKAN sub-licensees and distributors.
ARTICLE 2 - GRANT OF LICENSE
2.1 Grant of License - ACCESS hereby grants to STRAKAN, and STRAKAN
hereby accepts an exclusive license to use the KNOW-HOW and the
TECHNOLOGY to make, have made, use, develop, modify, market, sell and
have sold PRODUCT in the TERRITORY in the FIELD, and an exclusive license
under the PATENTS to make, have made, use, develop, market, sell and have
sold PRODUCT in the TERRITORY in the FIELD. This LICENSE shall be
fully exclusive, to the exclusion of ACCESS and its AFFILIATES.
2.2 Sublicensing - The exclusive license under Article 2.1 to STRAKAN includes
the right to sublicense, including the right to enter into distributor
contracts or co-development agreements. STRAKAN shall be free to sub-
license the exclusive rights granted under Article 2.1 to its
AFFILIATES, without ACCESS' approval, and to THIRD PARTIES subject to
ACCESS approval, not to be unreasonably withheld or delayed. ACCESS
will receive * percent of any sub-licensing milestone payments. If
STRAKAN receives milestone payments other than in cash or an equity
investment as part of a license agreement, the PARTIES agree to
negotiate in good faith what portion should be received by ACCESS.
STRAKAN will make and will be responsible for all payments to ACCESS
as a result of all activities by such a sublicensee, AFFILIATE,
distributor or co-developer for sales of PRODUCT in the FIELD in the
TERRITORY. STRAKAN will also use its commercially reasonable efforts
to cause all sublicenses and AFFILIATES to
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
7
observe the covenants in this LICENSE (i.e., regarding confidentiality,
maintenance of records and reporting of NET SALES and royalty
payments). If a STRAKAN
sublicensee or AFFILIATE behaves in a manner outside the scope of the
LICENSE, then STRAKAN and ACCESS shall discuss the best approach
to settle these issues using their
commercially reasonable efforts. All such sublicenses shall be in
writing and copies of such sub-licenses will be provided to ACCESS
promptly.
ARTICLE 3 - TECHNOLOGY AND KNOW-HOW TRANSFER AND RESEARCH
3.1 TECHNOLOGY and KNOW-HOW Transfer - The TECHNOLOGY and
the KNOW-HOW as it exists at the EFFECTIVE DATE has been
transferred to STRAKAN regarding PRODUCT in FIELD under the
provisions in the OPTION AGREEMENT, which shall be superseded by
this LICENSE as of its EFFECTIVE DATE. All TECHNOLOGY and
KNOW-HOW hereto disclosed by either PARTY regarding PRODUCT
(regardless of field of use) shall be deemed to have been disclosed
pursuant to this LICENSE and shall be subject to the provisions of this
LICENSE (including, but not limited to, Article 7 hereof).
TECHNOLOGY transfer may be carried out by oral, written or electronic
means. ACCESS shall disclose to STRAKAN from time to time after the
EFFECTIVE DATE during the term of the LICENSE all KNOW-HOW
developed or coming into the possession of ACCESS after the
EFFECTIVE DATE.
If STRAKAN desires that any sublicensee participate or receive
TECHNOLOGY, STRAKAN shall be responsible for any required
governmental export license.
The PARTIES may arrange for meetings of their respective legal personnel
regarding the PATENTS and/or any agreements required to be
licensed or obtained for PRODUCT.
3.2 Restricted Information - Neither PARTY shall be obligated to disclose
to the other any information that it is contractually or legally
prohibited from disclosing to the other. In
<PAGE>
8
the event such restriction applies, the affected PARTY will notify the
other PARTY, and the PARTIES will use their good faith efforts,
including obtaining necessary consents or permits, to accomplish
disclosure of such information by consent or lawful means.
3.3 ACCESS' Assistance to STRAKAN - After submission of an application
for APPROVAL in a country of the TERRITORY, STRAKAN may ask
for ACCESS' expertise to answer questions from the REGULATORY
AUTHORITY. If reasonably possible, ACCESS shall provide such
reasonable assistance, at no cost to STRAKAN. In the event that such
assistance from ACCESS to answer requests will require unexpected
amounts of time, resources and effort by ACCESS, then the PARTIES
shall agree the cost to be incurred by STRAKAN in asking ACCESS to
expend such time, resources and efforts prior to the commencement
thereof.
3.4 Future Research - Upon the EFFECTIVE DATE, STRAKAN agrees that
any research conducted by ACCESS on PRODUCT at STRAKAN's
request shall be paid by STRAKAN. Any resulting patents shall be
treated in accord with Article 5.1.
ARTICLE 4 - STRAKAN DEVELOPMENT AND DILIGENCE
4.1 Development and Marketing Efforts for DEVELOPMENT PRODUCTS -
STRAKAN will undertake at its own cost, the timely performance of all
formulation/clinical development work, regulatory actions and filings
necessary to obtain APPROVAL for DEVELOPMENT PRODUCTS in
markets listed in Appendix D.
STRAKAN will promptly notify ACCESS of the occurrence of all
applications for APPROVALS under Article 4.1.
<PAGE>
9
4.2 Development Progress Reports - STRAKAN will provide ACCESS with
quarterly progress reports (reports to be verbal with two written
biannual annual reports per year) of its development and registration
activity, including submission(s) and grant(s) for APPROVAL(s) in the
TERRITORY on the DEVELOPMENT PRODUCTS.
4.3 Failure to Obtain Approval - In those markets listed in Appendix D
where STRAKAN, its AFFILIATES or sub-licensees declines or fails to
obtain APPROVAL for any one of the DEVELOPMENT PRODUCTS within
* years of the EUROPEAN COMMUNITY APPROVAL, with the
exception of Japan which will be * years, the commercial rights to
any one of the DEVELOPMENT PRODUCTS in any specific country
listed in Appendix D of the TERRITORY shall revert to ACCESS.
STRAKAN will provide ACCESS with the available APPROVAL dossier
free of charge necessary to pursue the APPROVAL of such one of the
DEVELOPMENT PRODUCTS in the relevant markets.
4.4 Clinical and Preclinical Studies - STRAKAN shall carry out such further
studies of PRODUCT as it deems necessary or advisable to develop the
PRODUCT and in order to file such forms for APPROVAL. STRAKAN
and ACCESS shall use good faith efforts to cooperate with respect to
any issues that concern the development of the PRODUCT under this
LICENSE.
4.5 STRAKANS' Responsibility - STRAKAN shall be solely responsible
for the planning, design and execution of all its developmental work
and commercialization of the DEVELOPMENT PRODUCTS for the
TERRITORY after the EFFECTIVE DATE.
4.6 Regulatory Costs - STRAKAN shall be responsible, at its own expense
(including without limitation, the cost of PRODUCT required in
connection therewith) for obtaining such registration and maintaining
APPROVALS in the TERRITORY after the EFFECTIVE DATE.
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
10
4.7 Marketing Obligations - Following the grant of APPROVAL for any one
of the DVELOPMENT PRODUCTS in a country of the TERRITORY,
STRAKAN and its sublicensees will launch such DEVELOPMENT
PRODUCT within * months. STRAKAN and sub-licensees shall use
reasonable commercial efforts to promote the commercialization and
sales of such DEVELOPMENT PRODUCT, subject to compliance with all
applicable laws and regulations to promote and market the
DEVELOPMENT PRODUCT. STRAKAN and its sublicensees shall
maintain a competent marketing and sales organization including
permitted sub-distributors for this purpose. STRAKAN shall be
responsible for determining the resale price of such DEVELOPMENT
PRODUCT in the TERRITORY.
4.8 STRAKAN's Trademarks-STRAKAN shall choose and own all trademarks
and trade names which are specific to the PRODUCT in the TERRITORY
and STRAKAN shall apply for and maintain such trademarks at its own
cost.
ARTICLE 5 - PATENT RIGHTS
5.1 ACCESS to File, Prosecute and Maintain PATENTS - ACCESS shall be
responsible for the filing and prosecution of all patent applications
for PATENTS relating to the PRODUCT and for maintaining the Zinc
Compound Patent in the United States of America and Europe and
extending the PATENTS listed in Appendix A. STRAKAN agrees to
reasonably cooperate with ACCESS in the application and prosecution of
the patent/patent applications relating to the PRODUCT. ACCESS shall
use good faith efforts to prosecute, issue and maintain all PATENTS in
Appendix A. In the event ACCESS shall elect to abandon or not to
maintain any patent ACCESS shall so advise STRAKAN in writing and
STRAKAN shall have the right at its sole cost to maintain such PATENT
in part or in full by giving a pre-written notice to ACCESS.
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
11
Except as provided in Section 5.1, ACCESS agrees to fund present and
subsequent patent costs associated with the Patents in the countries
of the United States and members of the European Patent Convention
("EPC"). Should STRAKAN request the filing, prosecution and
maintenance of PATENTS relating to the PRODUCT in additional countries
within the TERRITORY, ACCESS will use commercially reasonable efforts
to extend the patent coverage at STRAKAN's direction and cost.
Specific patent applications requested or initiated related to
products developed under this LICENSE will be subject to this
provision.
Any new or improved technology, or KNOW-HOW (and any subsequently
filed patent applications or patents covering any such invention or
improvement) resulting from the efforts of ACCESS shall be the
exclusive property of ACCESS. Other inventions
or improvements resulting from
the efforts of STRAKAN and/or PARTIES shall be the co-exclusive
property of ACCESS and STRAKAN, patent costs will be shared and
shall be used co-exclusively by ACCESS and STRAKAN in accordance
with each of their rights under this LICENSE including being subject to
license payments in Article 6.1.
5.2 STRAKAN to Assist ACCESS in extension or restoration of PATENTS -
Although ACCESS shall be responsible for extension or restoration of
PATENTS STRAKAN agrees to provide ACCESS with reasonably
requested records, information and assistance to achieve the
extension or restoration of any PATENTS in the TERRITORY, if possible.
5.3 Notice of Patent Lapse - ACCESS shall advise STRAKAN of the grant,
extension, restoration, lapse, nullification, revocation, surrender, or
invalidation of any of the PATENTS at the annual update of the Appendix
A.
<PAGE>
12
ARTICLE 6 - PAYMENTS AND ROYALTIES
6.1 Royalties for Patent License - STRAKAN will pay ACCESS a royalty of
* Percent of NET SALES in each country for the PRODUCT in the
TERRITORY where there is PATENT protection for the life of the
PATENT or where there is MARKET EXCLUSIVITY for the period of
such MARKET EXCLUSIVITY and * percent of NET SALES in
each country for the PRODUCT in the TERRITORY if there is no
PATENT protection or MARKET EXCLUSIVITY.
These payments are to be made in accord with Articles 6.2 and 6.3.
6.2 Payments and Report -. STRAKAN shall send to ACCESS a calendar
quarterly report within sixty (60) days after the close of each
calendar quarter, including: the amount of payment with the date
the payment was made by wire transfer to a bank account nominated
in writing by ACCESS; an itemized payment listing; and date of this
LICENSE under which payment is being made.
6.3 Quarterly Royalty Reports and Payments - STRAKAN shall pay all sums
due under Article 6.1 in United States Dollars. The NET SALES for each
country of the TERRITORY shall be converted into United States Dollars
at the relevant U.S. dollar spot exchange rate in the London Financial
Times at the end of the calendar quarter. Within sixty (60) days after
the close of each calendar quarter, STRAKAN shall
submit a written report on the NET SALES for the
TERRITORY in sufficient detail to enable a calculation of
the royalty due in accord with Article 6 and payment of the
royalty (if any) due. Prior to commercialization one written biannual
report and quarterly oral reports are due from the EFFECTIVE DATE at
the close of each calendar quarter. Once commercialization has begun,
then there must be quarterly written reports from the close of each
calendar quarter.
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
13
6.4 Books of Account - STRAKAN and sub-licensees shall maintain true and
complete books of account containing an accurate record of all data
necessary for the proper computation of royalty payments due from it or
on behalf of any AFFILIATE. Such records shall be maintained for at
least Five (5) years after the date of the pertinent royalty payment.
6.5 Audit Right - ACCESS shall have the right, either through a certified
public accountant employed by ACCESS or through a firm of independent
public accountants to whom STRAKAN has no reasonable objection, to
examine the books of account of STRAKAN at reasonable times and upon
reasonable advance notice (but not more than once in each calendar
year) for the purpose of verifying the correctness
of any report concerning payment of royalties or
milestone payments under Article 6. Such
examination shall be made during normal business hours at the place of
business of STRAKAN. The information furnished as a result of any such
examination shall be maintained in confidence on the terms specified in
Article 7. The fees and expenses of such an audit shall be borne by
ACCESS. If any such audit shows any underpayment or overcharge, a
correcting payment or refund shall be made within thirty (30) days of
STRAKAN's receipt of the auditors' statement. If such error is material
(meaning +5%), then if STRAKAN owes ACCESS from such material
error, STRAKAN shall be subject to a penalty of the amount due plus
interest of eighteen per cent (18%) and accounting fees. Should
STRAKAN fail to make any correcting payment within sixty (60) days
from receipt of the auditors' statement, then ACCESS shall have the
right to terminate this LICENSE under Article 13.6.
6.6 Withholding Tax Payments - If any taxes for ACCESS' account,
withholding or otherwise, are levied by any taxing authority in the
TERRITORY in connection with the receipt by ACCESS of any amounts
payable under Article 6 of this License according to any tax treaty or
agreement between the United States and a country in the TERRITORY,
<PAGE>
14
then STRAKAN shall have the right to pay such taxes to the local tax
authorities and the payment to ACCESS of the net amount due after
reduction by the amount of such taxes, together with
evidence of payment of such taxes and a translation thereof
into English,
indication of the amount of such tax paid, and
indication of the country in the TERRITORY and the authority to
whom it was paid, and
(i) comply with STRAKAN's royalty reporting obligations
under this License.
However, if ACCESS still requires further information, STRAKAN shall
promptly provide that information, if such information is reasonably
available.
6.7 Late Payments-Any payments not remitted or deposited by the due date
shall bear interest at the current prime rate plus two (2%) percent
established by a leading New York Bank, such as Citibank, as published
in the Wall Street Journal. Should STRAKAN fail to make any late
payment within (90) days from its due date, then ACCESS shall have the
right to
terminate this LICENSE under Article 13.5 upon fifteen (15) working
days written notice to STRAKAN to allow cure.
.ARTICLE 7 - CONFIDENTIALITY
7.1 Each PARTY shall use good faith efforts to retain in confidence and not
disclose to any THIRD PARTY each other's CONFIDENTIAL
INFORMATION disclosed pursuant to the terms of this LICENSE. Such
good faith efforts shall mean the same degree of care, but no less than
a reasonable degree of care, as the receiving PARTY uses to protect its
own confidential information of a like nature. STRAKAN and ACCESS
shall use the same good faith efforts with respect to the TECHNOLOGY,
and PRODUCT(s) already
<PAGE>
15
in its possession. This Article 7 supersedes the OPTION AGREEMENT
as of the EFFECTIVE DATE.
7.2 Excepted from the obligation of confidence under Article 7.1 is that
information which:
is available, or becomes available, to the general public without
fault of the receiving PARTY; or
is obtained by the receiving PARTY without an obligation of confidence
from a THIRD PARTY (other than a governmental agency or
REGULATORY AUTHORITY) who is rightfully in possession of
such information and is under no obligation of confidentiality
to the disclosing PARTY concerning such information; or
is required by law or by court order to be disclosed by the receiving
PARTY in which case the receiving PARTY will use good faith
efforts to limit such disclosure to that required by law and to
maintain the confidentiality of the disclosed information to
the extent possible; or
must be necessarily disclosed to REGULATORY AUTHORITIES by
STRAKAN when applying for APPROVAL; or
is released from confidentiality in writing by the disclosing PARTY.
For the purpose of Article 7.1, a specific item of TECHNOLOGY shall
not be deemed to be within the foregoing exceptions merely because it
is embraced by more general information in the public domain, or in the
possession of the receiving PARTY. In addition, any combination of
features shall not be deemed to be within the foregoing exceptions
merely because individual features are in the public domain or in the
<PAGE>
16
possession of the receiving PARTY, but only if the combination itself
and its principle of operation are in the public domain or in the
possession of the receiving PARTY
7.3 Notwithstanding the provisions of Article 7.1, if the receiving PARTY
becomes legally compelled to disclose any of the disclosing PARTY's
CONFIDENTIAL INFORMATION, the receiving PARTY shall promptly advise
the disclosing PARTY of such required disclosure in order that the
disclosing PARTY may seek a protective order or such other remedy as
the disclosing PARTY may consider appropriate in the circumstances. The
receiving PARTY shall disclose only that portion of the CONFIDENTIAL
INFORMATION, which is legally required to disclose. Such a disclosure
shall not release the receiving PARTY with respect to the
CONFIDENTIAL INFORMATION so disclosed except to the extent of
permitting the required disclosure.
7.4 Disclosure to AFFILIATES, Contractors - STRAKAN may disclose
CONFIDENTIAL INFORMATION to its AFFILIATES, sublicensees,
consultants and, when permitted herein, its clinical investigators,
contractors (parties under contract with STRAKAN or its AFFILIATES
for the custom manufacturing or shipping of PRODUCT, conduct of
clinical studies or for the intention of applying for APPROVAL) as may
be necessary to exercise the rights granted hereunder and to obtain
APPROVAL and prepare for commercialization of PRODUCT, and to
commercialize PRODUCT under this LICENSE, under conditions of
confidentiality at least as stringent as those set out in Articles
7.1, 7.2 and 7.3.
7.5 Document Return - In the event of termination of this LICENSE under
Article 13.3, 13.4 (if the breach is by STRAKAN), 13.5 or 13.6 prior to
its normal expiration, STRAKAN and ACCESS will cease their use of the
other PARTY's TECHNOLOGY and other PARTY's CONFIDENTIAL
INFORMATION provided hereunder and, on request, within sixty (60)
days either return all such CONFIDENTIAL INFORMATION, including
any copies thereof, in accord with Article 13.7 or will promptly
destroy the
<PAGE>
17
same and certify such destruction to the disclosing PARTY; except that
such CONFIDENTIAL INFORMATION is or has become no longer
subject to confidentiality under Article 7.1 need not be returned or
destroyed. Notwithstanding the foregoing, STRAKAN may retain such
copies of documents as may be necessary for the defense of product
liability or other litigation or similar proceedings relating to
PRODUCT, and both PARTIES may retain one copy thereof in its legal
department as a record of what was transmitted.
7.6 Survival of Confidentiality Termination of this LICENSE for any reason
shall not relieve the PARTIES of their obligations under Article 7. The
provisions of Article 7 shall survive termination of this License for
ten (10) years.
ARTICLE 8 - THIRD PARTY INFRINGEMENT CLAIMS
8.1 Defense of Third Party Patent Claims - If a claim is made or brought by
a THIRD PARTY that manufacture (by STRAKAN or its nominated
custom manufacturer), development, use, marketing or the sale of
PRODUCT in the TERRITORY (regardless of use) infringes a patent of
such THIRD PARTY, STRAKAN will give prompt written notice to
ACCESS of such claim. ACCESS shall have the sole discretion and right
to seek to dispose of said claim or to conduct the defense of any suit
resulting from such claim if outside the FIELD in the TERRITORY.
STRAKAN at its option and expense may participate in any suit resulting
from such claim that may directly affect its market in the FIELD in the
TERRITORY.
8.2 Mutual Decisions - From the EFFECTIVE DATE and using their good
faith efforts, STRAKAN and ACCESS shall discuss any claim or suit,
made or brought by a THIRD PARTY for patent infringement that such
THIRD PARTY's patent is infringed by the manufacture (by STRAKAN
or its nominated custom manufacturer), development, use,
<PAGE>
18
marketing or sale of PRODUCT by STRAKAN or its AFFILIATES in the
FIELD in the TERRITORY. Specifically, STRAKAN and ACCESS
shall mutually try to agree on:
the strategy for such suit or claim, e.g. whether to negotiate a
settlement, sue or withdraw from the country in the
TERRITORY in which infringement is claimed;
the basis to be determined for sharing the costs of litigation, damages
awarded, and royalty, if any, to be paid to the THIRD PARTY;
which Party should conduct the defense or if both STRAKAN and
ACCESS should jointly defend; and
the consequences of such decisions, such as amendment to this LICENSE
with regard to royalties due to ACCESS or termination of this
LICENSE
If STRAKAN and ACCESS cannot mutually agree with regard to one or
more of (a)-(d) above, the dispute shall be resolved in accord to
Article 17.
8.3 Third Party License-The Parties shall use their good faith efforts
(either individually or together) to negotiate any necessary
agreement for royalty payment to THIRD PARTIES with a view to
enabling the PRODUCT to be commercialized in the FIELD in the
TERRITORY. As of the EFFECTIVE DATE, ACCESS is not aware of the need
for any such THIRD PARTY license.
ARTICLE 9 - PATENT ENFORCEMENT AND LITIGATION
9.1 Prosecution by ACCESS - ACCESS, at its sole discretion, may take
action on its own behalf and expense to institute any action
or proceeding by reason of infringement of any of
the PATENTS. If either PARTY
learns of any infringement of a PATENT by a THIRD PARTY, it shall
promptly notify the other PARTY
<PAGE>
19
ACCESS shall have the first right, at its own expense, to prosecute all
litigation against a THIRD PARTY infringer who may be infringing a
PATENT. STRAKAN shall provide all reasonable cooperation, including
any necessary use of its name, required to prosecute such litigation.
STRAKAN shall be consulted concerning the litigation. ACCESS will
bear the cost and shall be entitled to any recovery obtained from such
litigation, settlement or compromise thereof until recovery of all
expenses for such litigation has been met. If ACCESS requests STRAKAN
to participate, then ACCESS shall pay all of STRAKAN's reasonable
expenses, including reasonable counsel fees. Any further recovery
above such expenses of the PARTIES shall be mutually agreed upon
based on the particular claim(s) in suit with an equitable division
based on each of the PARTIES interests (e.g., PATENTS, PRODUCT).
9.2 Prosecution by STRAKAN - If ACCESS does not prosecute such
infringer or otherwise abate such infringement within ninety (90) days
after giving or receiving notification of such infringement in the
TERRITORY, unless an extension of the term is mutually agreed upon by
the PARTIES, then, STRAKAN shall have the right to prosecute such
infringer at its own expense in the FIELD in the TERRITORY in accord
with Article 9.5 and shall be entitled to retain any recovery
obtained from such litigation, settlement or compromise thereof.
STRAKAN's cost of litigation in any quarter may be credited against
up to * percent of the royalties due to ACCESS under Article
6.1 in the following quarter until fully recaptured. However,
STRAKAN shall place all royalties due to ACCESS in escrow from
the date of filing the suit until the action or
proceeding is finally concluded whereupon:
if the PATENT in the country in the TERRRITORY is held valid
(whether infringed or not), then the royalties in escrow (after
deduction of STRAKAN's cost of litigation as referred to
hereinabove) shall be paid to ACCESS; or
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
20
if the PATENT in the country in the TERRITORY is held invalid
(whether infringed or not), then (a) the royalties in escrow
shall be paid to STRAKAN and
(b) ACCESS shall reimburse STRAKAN's cost of such litigation
up to * dollars in each country in the TERRITORY where suit
was determined that a PATENT is invalid.
At STRAKAN's request, ACCESS shall cooperate with STRAKAN in such
litigation, including joining in said litigation. ACCESS shall also
cooperate, at STRAKAN's expense, including reasonable counsel fees, by
way of providing access to evidence and witnesses available to ACCESS.
9.3 Prosecution by neither STRAKAN or ACCESS - If the PARTIES
mutually agree that neither ACCESS nor STRAKAN will defend a
particular PATENT in the FIELD in the particular country in the
TERRITORY, then the royalty for that PATENT in that country becomes
* percent upon that decision date if the PRODUCT does not secure
MARKET EXCLUSIVITY for the remainder of the time during which a
royalty is payable in that country.
9.4 Invalidity - In the event that a PATENT in the TERRITORY is finally
declared invalid or unenforceable in a judicial or administrative
proceeding from which no appeal is or can be taken, then from and after
that date royalties of * Percent shall be paid on the basis of that
PATENT in the relevant country of the TERRITORY, for the remainder of
the time during which a royalty is payable in that country, subject to
the provisions of Article 9.2, provided, however, that royalties due
for other PATENTS in the TERRITORY not so held invalid or
unenforceable shall not be affected. If as a result of the
invalidation of a PATENT, the competition for STRAKAN in the
TERRITORY significantly increases or significant market share is
lost by STRAKAN, then in good
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
21
faith STRAKAN and ACCESS shall discuss the relevant facts and
determine whether an amendment to this License is required or if
termination under Article 13 should result.
9.5 Settlement - Any settlement of any litigation, whether brought by
ACCESS or by STRAKAN, shall be subject to the prior written consent
of both PARTIES, which consent shall not be unreasonably withheld or
delayed.
9.6 Cooperation - Each Party shall cooperate with the other PARTY to the
extent reasonably requested in any legal action:
brought by a THIRD PARTY against one Party or
brought by a THIRD PARTY against both of them or
taken against a THIRD PARTY by either PARTY regarding PATENTS
in the FIELD in the TERRITORY, and each PARTY shall have the
right to participate in any defense, compromise or settlement
to the extent that, in its judgement, it may be
prejudiced thereby. In addition, STRAKAN shall
not settle any claim or suit in any
manner that shall adversely affect any PATENTS, require any
payment by ACCESS or reduce the royalty due to ACCESS
hereunder without the prior written consent of ACCESS,
except as provided in Article 9.2.
ARTICLE 10 - U.S. EXPORT CONTROL AND GOVERNMENT LICENSES
10.1 Compliance - STRAKAN agrees to comply with all applicable United
States governmental regulations with respect to export of TECHNOLOGY
and any PRODUCT, in the TERRITORY. STRAKAN agrees to not
export or re-export any TECHNOLOGY or PRODUCT, received from
ACCESS or the direct products of such TECHNOLOGY to any prohibited
country listed in the U.S. Export Administration Regulations unless
properly authorized by the U.S. Government. STRAKAN shall be
responsible for the acts of its AFFILIATES, contractors, consultants
and sublicensees. STRAKAN assumes
<PAGE>
22
all liability if it or its AFFILIATES or sublicensees fails to
obtain any of the necessary licenses or commits any violations of
the United States Export Laws or Regulations (15
C.F.R. paragraph 700 et seq.). STRAKAN shall indemnify ACCESS for
such acts and for any breach of compliance.
ARTICLE 11- PRODUCT LIABILITY AND INDEMNIFICATION
11.1 Indemnity by ACCESS - ACCESS shall indemnify and hold STRAKAN,
its AFFILIATES and sub-licensees, and their respective agents,
directors, officers and employees harmless from and against any and
all liabilities, claims, demands, damages, costs, expenses or money
judgements (including reasonable attorneys' fees and
expenses)incurred by or rendered against any of them for personal
injury, sickness,
disease or death or property damage which directly arise out of :
the intentional misconduct or negligence of ACCESS; or
the breach by ACCESS of its representations, warranties or covenants
contained in this LICENSE; or
any activity carried out with PRODUCT by ACCESS other than through
STRAKAN and its AFFILIATES under this LICENSE or other
written agreements between the PARTIES; provided, however,
that STRAKAN shall give ACCESS notice in writing in accord
with Article 16 as soon as practicable of any such claim or
lawsuit and shall permit ACCESS to undertake the defense
thereof at ACCESS expense. However,
STRAKAN will cooperate in such defense, subject to payment of reasonable
out-of-pocket expenses, by providing access to witnesses and
evidence available to it. STRAKAN shall have the right to
participate in any defense to the extent that in its reasonable
judgement, STRAKAN may be prejudiced thereby; and
<PAGE>
23
in any claim or suit in which STRAKAN seeks indemnification by
ACCESS, STRAKAN shall not settle, offer to settle or admit
liability or damages in any such claim or suit without the
prior written consent of ACCESS which shall not be
unreasonably withheld or delayed.
11.2 Indemnity by STRAKAN - STRAKAN shall indemnify and hold ACCESS
and its AFFILIATES, and their respective agents, directors, officers,
and employees harmless from and against any all liabilities, claims,
demands, damages, costs, expenses or money judgements (including
reasonable attorneys' fees and expenses) incurred by or rendered
against any of them for personal injury, sickness, disease or death
or property damage which arise out of:
the manufacturing, testing, use, promotion, sale or distribution of
PRODUCT by STRAKAN or its AFFILIATES, except for those
instances provided in Article 11.1 for which ACCESS is
obligated to indemnify STRAKAN or
(a) the breach by STRAKAN of any of its representations, warranties
or covenants contained in this LICENSE and provided, however,
that ACCESS shall give STRAKAN notice in writing in accord
with Article 16 as soon as practicable of any such claim or
lawsuit
and shall permit STRAKAN to undertake the defense thereof at
STRAKAN's expense. However,
ACCESS will cooperate in such defense, subject to payment of reasonable
out-of-pocket expenses, by providing access to witnesses and
evidence available to it. ACCESS shall have the right to
participate in any defense to the extent that in its reasonable
judgment, ACCESS may be prejudiced thereby; and
in any claim or suit in which ACCESS seeks indemnification by
STRAKAN, ACCESS shall not settle, offer to settle or admit
liability or damages in any such claim or suit without the
prior written consent of STRAKAN which shall not be
unreasonably withheld or delayed.
<PAGE>
24
ARTICLE 12 - WARRANTIES AND REPRESENTATIONS.
12.1 Belief of Accuracy -
12.1.1 ACCESS warrants and represents that the TECHNOLOGY and the
CONFIDENTIAL INFORMATION, transferred or provided to
STRAKAN hereunder are believed to be accurate and complete as of their
current status at ACCESS at the EFFECTIVE DATE. However, ACCESS
does not warrant or represent that such information is or will be
sufficient to obtain APPROVAL or to commercially produce PRODUCT or to
commercialize PRODUCT in the TERRITORY.
12.1.2 ACCESS warrants and represents that it is the beneficial owner
of the PATENTS and has full power and authority to enter into this
LICENSE and grant the licenses granted hereunder.
12.1.3 ACCESS warrants and represents that it has not assigned or
licensed the rights to the PATENTS for the PRODUCT in the FIELD to
a THIRD PARTY.
12.1.4 ACCESS warrants and represents that to the best of its
knowledge the PATENTS and KNOW-HOW or the license and use by STRAKAN
under this LICENSE will not infringe any THIRD PARTY patents.
12.2 STRAKAN Representations to ACCESS-
12.2.1 STRAKAN represents that it will be solely relying on its own
evaluation of the TECHNOLOGY and the other CONFIDENTIAL
INFORMATION transferred or provided to it hereunder and on its own
medical and scientific expertise in using the same in its
development and commercialization of PRODUCT.
12.2.2 STRAKAN warrants and represents that it has the full power and
authority to enter into the LICENSE.
<PAGE>
25
12.3 Insurance - STRAKAN will obtain an insurance policy for their
operations for clinical trials and sales of PRODUCT prior to
beginning such clinical trials or sale of PRODUCT in an amount
typical in this industry to protect
ACCESS from liability under STRAKAN's activities. Such insurance
policy must be maintained for the term of this LICENSE and a copy of
the policy provided to ACCESS and attached as Appendix E. Failure to
obtain such insurance and supply a copy of the policy to ACCESS shall
be deemed a breach under Article 13.3
ARTICLE 13 - TERM AND TERMINATION
13.1 Term - Unless terminated under the provisions of this Article 13, the
term of the LICENSE shall commence on the EFFECTIVE DATE and shall
continue in full force and effect until the expiration date of the
last-to-expire PATENTS or the expiration date of the last to expire
of MARKET EXCLUSIVITY in a country of the TERRITORY or for a
period of * years from the date of the first commercial sale in
* major markets in the TERRITORY listed in Appendix B whichever is
the longer. Thereafter, this License shall be automatically
extended for subsequent one-year periods unless terminated by
either party by written notice given at least one-hundred and
eighty (180) days prior to the end
of the initial term or any extension thereof.
13.2 Regulatory Milestones - If due to STRAKAN failure, STRAKAN has
been unable to obtain APPROVAL for the LEAD PRODUCT within
* months of the EFFECTIVE DATE in at least * MAJOR
MARKETS, then, unless such failure is due to technical failure of its
LEAD PRODUCT or failure of ACCESS to provide necessary
information on a timely basis, ACCESS strictly in the following order
shall (a) have the unilateral right either to extend the time for
obtaining APPROVAL for the LEAD PRODUCT (b) after consultation with
STRAKAN receive a * financial penalty, the payment of which shall
automatically extend the time to obtain APPROVAL by * months or
(c) if STRAKAN has not paid ACCESS
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
26
* pursuant to sub-article (b) aforesaid ACCESS shall have the right
to terminate the LICENSE. For the avoidance of doubt, if STRAKAN
makes payment to ACCESS of the * financial penalty under sub-
article (b) then ACCESS shall have no right to terminate the LICENSE
hereunder in accordance with Article 13.2 unless STRAKAN shall have
failed to obtain the APPROVAL for the LEAD PRODUCT as above
within the * month extension of time.
13.3 Failure to Use License - If STRAKAN, its AFFILIATES or sub-licensees
shall in a country of the TERRITORY have:
discontinued selling DEVELOPMENT PRODUCTS in commercial
quantities for a continuous period of * months; or
not commercialized DEVELOPMENT PRODUCTS in accord with Article
4.1, then either STRAKAN or ACCESS shall have the right to
terminate the license granted under Article 2.1 in respect of
such country upon *
months written notice, unless the discontinuance or failure to
commercialize is remedied in such notice period.
Upon termination of the license in respect of such country, STRAKAN
shall promptly supply to ACCESS all registration information for
REGULATORY AUTHORITIES that is available to STRAKAN or its
AFFILIATES for use by ACCESS, its AFFILIATES or sublicensees in
such country without compensation to STRAKAN by ACCESS.
13.4 Termination for Breach - In the event of a material breach by either
ACCESS or STRAKAN of any of the obligations contained in License,
the other PARTY shall be entitled to terminate this LICENSE by notice
in writing under Article 16.1 provided that such notice shall
specify the breach or breaches complained of. If the
said breach or breaches are capable of remedy, the PARTY
committing such breach or breaches shall be entitled to a
period of sixty (60) days (fifteen (15) working days for payment
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
27
breaches) from the delivery of such notice in which to remedy or to
undertake to remedy the same. In the case the defaulting PARTY shall
fail to remedy the breach or to undertake to remedy the breach to the
satisfaction of the injured PARTY, the injured PARTY shall have the
right to terminate this LICENSE in whole or only terminate those rights
and obligations relating to the particular breach by notice of
writing to the PARTY in default. Failure of a PARTY to exercise
its rights under this Article 13.4 shall not be construed as a
waiver as to future breaches whether or not they are similar.
13.5 Termination by ACCESS - ACCESS shall have the further right to
terminate this License immediately on written notice to STRAKAN if:
STRAKAN shall cease to carry on business or shall go into liquidation
or a receiver shall be appointed to STRAKAN's assets; or
STRAKAN shall become bankrupt or insolvent or unable to meet any of
its financial obligations on their due dates; or
STRAKAN fails (without curing within fifteen (15) working days of
receipt of a notice specifying the failure to pay) to meet any of its
payments in accord with Article 6; or
STRAKAN breaches without cure any of the Export regulations of Article
10.
13.6 On Termination - Upon termination of the license in respect of a
particular country of the TERRITORY under Article 13.3 or upon
termination of this LICENSE by ACCESS under Articles 13.4 or 13.5,
STRAKAN shall in relation to a particular country or the TERRITORY
as a whole, as the case may be, have a period of * months in
which to sell its inventory of PRODUCT and during the course thereof
STRAKAN shall:
return to ACCESS all copies of CONFIDENTIAL INFORMATION and
any materials received from ACCESS;
(a) pay to ACCESS all payment and royalties due or accrued at the
termination date or accruing thereafter in accord with
Article 6.1.
* - Confidential portions have been omitted and are on file separately with the
Commission
<PAGE>
28
other than in relation to selling its stock of supplies of the PRODUCT
as aforesaid, make no further use of any kind of any and all
TECHNOLOGY disclosed hereunder by ACCESS, except to the
extent such information has become public knowledge other than
through fault of STRAKAN, and make no further use of the
surviving PATENTS; and
(d) take all steps necessary and execute any instruments required
to assign all the rights relative to any APPROVALS held by
STRAKAN to ACCESS or to ACCESS' designee, and if such new
APPROVALS are obtained by ACCESS or its designee,
STRAKAN agrees to notify the REGULATORY AUTHORITIES
to
transfer all those APPROVALS of PRODUCTS which are in the
name of STRAKAN to ACCESS; and
(e) assign to ACCESS any distributorships, PRODUCT manufacturing
agreements and sublicense agreements, to the extent they are
specific to the PRODUCT and are assignable and to the extent
such agreements were previously agreed with ACCESS to survive
termination of this LICENSE; or, at ACCESS' option, terminate
such agreements. ACCESS makes no commitment to maintain any
of STRAKAN's sublicensee agreements upon termination of this
LICENSE.
13.7 Survival of Certain Obligations - On termination of this LICENSE: the
obligations of confidentiality set forth in Article 7 shall
survive for the time stated therein; payments accrued and
due under Article 6 shall survive; Export Control compliance
set forth in Article 10 shall survive; the indemnification
obligations set forth in Article 11 shall also survive
as to all claims or actions arising from events which occurred before
termination; and the dispute resolution set forth in Article 16.
<PAGE>
29
ARTICLE 14 - FORCE MAJEURE
If either PARTY shall be delayed, hindered, interrupted in or prevented
from the performance of any obligation hereunder by reason of force
majeure (hereinafter referred to as "Force Majeure"), including
earthquake, flood, famine or other act of God, fire, war (declared or
undeclared), public disaster, riots, strike or labor differences,
governmental enactment, rule or regulation or any other cause beyond
such PARTY's reasonable control, such PARTY shall not be liable to the
other therefor; and the time for performance of such obligation shall
be extended for a period equal to the duration of the contingency which
occasioned the delay, interruption or prevention. The PARTY invoking
such Force Majeure rights under this Section must notify the other
PARTY by registered letter setting forth the nature of the occurrence,
its expected duration and how that PARTY's performance
is affected within a period of fifteen (15) days, from
the first and the last day of the Force Majeure unless the Force
Majeure renders such notification impossible in which case notification
will be made as soon as possible. If the delay resulting from the Force
Majeure exceeds six (6) months, the PARTIES commit to consult together
in good faith to find an appropriate solution. The affected PARTY shall
resume the performance of its obligations as soon as practicable after
the Force Majeure event ceases.
ARTICLE 15 - NOTICES
15.1 Official - Any notice, request or communication specifically
provided for or permitted to be given under this LICENSE must
be in writing and may be delivered by hand delivery, courier
service, or facsimile transmission, provided that a hard copy
of any facsimile transmission is sent by first class pre-paid
post within twenty four (24) hours of such transmission, and
shall be deemed effective as of the time of actual delivery thereof
to the addressee. For purposes of notice the addresses of the
PARTIES shall be as follows:
<PAGE>
30
ACCESS:
Access Pharmaceuticals, Inc.
2600 Stemmons Freeway
Suite 176
Dallas, TX 75207-2107
Attention: Kerry P. Gray
President & CEO
Telephone: 214-905-5100
Facsimile: 214-905-5101
With a copy to:
Bingham Dana LLP
150 Federal Street
Boston, MA 02110-1726
Attention: John J. Concannon, III
Telephone: 617-951-8874
Facsimile: 617-951-8736
STRAKAN:
Strakan Ltd.
22 Church Street
Hamilton HM 11
Bermuda
Attention: Michel Drew
Telephone: 441-292-2363
Facsimile: 441-295-4614
<PAGE>
31
With a copy to:
Strakan Pharmaceuticals Limited
Melrose Station
Palma Place
Melrose
Scotland TD6 9PR
United Kingdom
Attention: Andrew McLean
Telephone: 011-44-1896-823836
Facsimile: 011-44-1896-823837
15.2 Each PARTY may change its address and its representatives for notice by
the giving of notice thereof in the manner hereinafter provided.
ARTICLE 16 - DISPUTE RESOLUTION
16.1 Agreement to Arbitrate - The PARTIES will endeavor to settle amicably
any dispute which may arise out of this Agreement. Failing settlement
within three (3) months of such dispute having arisen, any dispute
shall be finally settled by arbitration on the initiation in
writing of either PARTY, in accordance with the rules then
in effect of the International Chamber of Commerce. The
arbitration will be held in Dallas when it is initiated by
STRAKAN and in London when it is initiated by ACCESS. The dispute
or difference shall be referred to a single arbitrator, if the
PARTIES agree upon one, or otherwise three (3) arbitrators, one to be
appointed by each PARTY and the third to be appointed by the first two
(2) arbitrators selected by the PARTIES. If a PARTY shall refuse or
neglect to appoint an arbitrator within thirty (30) days after the
other PARTY shall have served a written notice such other PARTY's
choice and requesting that the
<PAGE>
32
first-mentioned PARTY make its choice, then the arbitrator
first appointed shall, at the request of the PARTY appointing
him, proceed to hear and determine the matters in difference
as if he were a single arbitrator appointed by both PARTIES.
16.2 Arbitration Decision - The arbitrators shall base their decision in
accordance with and based upon all the provisions of this LICENSE or
subsequent agreements between the PARTIES. In making their decision,
the arbitrators shall apply the substantive law of the State of
Delaware and the United States of America, including the United
Nations Convention on the International Sale of Goods. The
decision of a majority of the arbitrators shall be final and
binding upon each PARTY, and judgement
upon the award may be entered in any court of competent jurisdiction.
16.3 Pre-Decision Settlement - Before rendering their final decision, the
arbitrators will first act as friendly, disinterested PARTIES for the
purpose of helping the PARTIES attempt to reach a compromise
settlement on the points in dispute
16.4 Payment of Costs - The cost of arbitration will be in the discretion
of the arbitrators.
16.5 Injunctive Relief-Each of the PARTIES hereto acknowledges and agrees
that damages may not be an adequate remedy for any material breach or
violation of this Agreement if such material breach or violation would
cause immediate and irreparable harm (an "Irreparable Breach").
Accordingly, in the event of a threatened or ongoing Irreparable
Breach, each PARTY hereto shall be entitled to seek, in any state
or federal court in the State of Delaware, equitable relief of a
kind appropriate in light of the nature of the ongoing threatened
Irreparable Breach, which relief may include, without limitation,
specific performance or injunctive relief; provided however,
that if the PARTY bringing such action is unsuccessful in obtaining
the relief sought, the moving PARTY shall pay
<PAGE>
33
the non-moving PARTY's reasonable costs, including attorney's fees,
incurred in connection with defending such action. Such remedies shall
not be the PARTIES' exclusive remedies, but shall be in addition to all
other remedies provided in this Agreement.
ARTICLE 17- ASSIGNMENT
17.1 Assignment - Neither this LICENSE nor any of the rights, interests or
obligations hereunder may be assigned by either of the PARTIES hereto
without the prior written consent of the other PARTY, which consent
shall not be unreasonably withheld or delayed. Notwithstanding
anything to the contrary herein, STRAKAN may delegate to an
AFFILIATE any of its duties and obligations hereunder without
the consent of ACCESS but ACCESS must be notified in writing.
17.2 Consolidation, Reorganization or Merger - Should STRAKAN be
consolidated, reorganized or merged with another entity, this LICENSE
may not be assigned to the successor entity or the assignee of all or
substantially all of STRAKAN'S business and assets related to PRODUCT
without ACCESS' prior written consent, which consent will not be
unreasonably withheld or delayed. It being understood for consent to
be obtained that provisions for payments to ACCESS by such entity must
remain as in Article 6.
17.3 Effect on Successors and Assignees - This LICENSE shall inure to the
benefit of and be binding upon such successors and permitted assignees.
<PAGE>
34
ARTICLE 18 - MISCELLANEOUS PROVISIONS
18.1 Amendments - This LICENSE may be amended only in writing executed
by both PARTIES.
18.2 Publications - Any publications shall require the mutual consent of
STRAKAN and ACCESS which consent shall not be unreasonably
withheld.
18.3 Press Releases - Neither PARTY shall issue any press release in
whatever form, or make public, in whatever form, information
regarding the OPTION AGREEMENT or this LICENSE without prior
written approval of the other PARTY, except as required by
applicable law and regulations.
18.4 Entirety of Agreement - This LICENSE sets forth the entire agreement
and understanding between the PARTIES hereto with respect to
PRODUCT in the FIELD for its commercialization in the TERRITORY.
The PARTIES agree that this LICENSE is in compliance with the
OPTION AGREEMENT and that the confidentiality provisions contained
in the OPTION AGREEMENT are in force until the EFFECTIVE DATE
and thereafter this LICENSE supersedes and replaces the OPTION
AGREEMENT..
18.5 Severability - If any term or provision under this LICENSE is deemed
invalid under the laws of a particular country or jurisdiction, the
invalidity shall not invalidate the whole LICENSE but it shall be
construed as if not containing that particular term or provision
and the rights and obligations
of the PARTIES shall be construed and enforced accordingly. The
PARTIES shall negotiate in good faith a substitute provisions in
compliance with the law to as nearly as possible retain the PARTIES'
intent in legally valid language.
<PAGE>
35
18.6 Waivers, Cumulative Remedies - A waiver by either PARTY of any term
or condition of this LICENSE in any one instance shall not be deemed
construed to be a waiver of such term or condition for any similar
instance in the future or of any subsequent breach hereof. All rights,
remedies, undertakings, obligations and agreements contained in this
LICENSE shall be cumulative and none of them shall be a limitation of
any other remedy, right, undertaking, obligation or agreement of either
PARTY.
18.7 Independent Contractor - This LICENSE shall not create an agency,
partnership, joint venture or employer/employee relationship between
the PARTIES. ACCESS and STRAKAN each hereby agrees not to represent
itself in any of such capabilities in any manner whatsoever. The sole
relationship established by this LICENSE is that of independent
contractors, and nothing hereunder shall be construed to give either
PARTY the power or authority to act for, represent, bind, or commit the
other PARTY or any of its AFFILIATES.
18.8 Headings - Headings in this LICENSE are included herein for ease of
reference and shall not affect the meaning of the provisions of this
LICENSE, nor shall they have any other legal effect.
18.9 Other Documents - Each PARTY agrees to execute, as reasonably
required, such additional papers or documents in customary legal
form and to make such governmental filings or applications as may
be necessary or desirable to effect the purposes of this LICENSE
and carry out its provisions.
<PAGE>
36
IN WITNESS WHEREOF, the PARTIES have duly executed duplicate originals
of this LICENSE by their appropriate authorized representative.
ACCESS PHARMACEUTICALS, INC. STRAKAN LTD
By: /s/ Kerry P. Gray By: /s/ Harry Stratford
- ------------------------------- -----------------------------
Name: Kerry P. Gray Name: Harry Stratford
Title: President & CEO Title: Chief Executive
Date: Febraury 26, 1998 Date: February 26, 1998
Place: Dallas, Texas Place: Dallas, Texas
<PAGE>
APPENDIX A - PATENTS
Confidential portions have been omitted and are on file separately with the
Commission.
<PAGE>
APPENDIX B-MAJOR MARKETS
MAJOR MARKETS
Confidential portions have been omitted and are on file separately with the
Commission.
<PAGE>
APPENDIX C- OPTION AGREEMENT
Confidential portions have been omitted and are on file separately with the
Commission.
<PAGE>
APPENDIX D-MARKET APPROVAL
Confidential portions have been omitted and are on file separately with the
Commission.
<PAGE>
APPENDIX E-
CLINICAL TRIALS INSURANCE
Confidential portions have been omitted and are on file separately with the
Commission.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
FROM THE CONSOLIDATED BALANCE SHEET AND THE
CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF
THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT
ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 105
<SECURITIES> 0
<RECEIVABLES> 12
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 162
<PP&E> 1,047
<DEPRECIATION> 677
<TOTAL-ASSETS> 1,054
<CURRENT-LIABILITIES> 606
<BONDS> 0
0
0
<COMMON> 1,498
<OTHER-SE> (1,166)
<TOTAL-LIABILITY-AND-EQUITY> 1,054
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 890
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (897)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (897)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>