LICENSE AND SUPPLY AGREEMENT
 
THIS LICENSE AND SUPPLY AGREEMENT (this “Agreement”) is made and entered into as
of this 15th day of April, 2005 (the “Effective Date”), between Discus Dental
Inc., a corporation organized and existing under the laws of California
(“DISCUS”) and Access Pharmaceuticals, Inc., a corporation organized and
existing under the laws of Delaware (“ACCESS”).
 
RECITALS

WHEREAS, ACCESS has developed a proprietary oral paste and a proprietary oral
mucoadhesive, erodible patch that contains amlexanox as the active ingredient
for the prevention and treatment of canker sores, and has obtained United States
Patents No. 6,585,997 and No. 5,362,737 in connection therewith:

WHEREAS, DISCUS possesses substantial resources and expertise in the
commercialization and marketing of oral care products; and

WHEREAS, ACCESS desires to grant to DISCUS, and DISCUS desires to obtain from
ACCESS, certain licenses with respect to the Products (as defined below),
including, without limitation, certain marketing and distribution rights, all
under the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

1. DEFINITIONS

 
1.1
Definitions. As used in this Agreement, the following capitalized terms have the
meanings indicated below:

1.1.1  “Accepted Product” has the meaning set forth in Section 2.9.

1.1.2  “ACCESS” has the meaning set forth in the Preamble.

1.1.3  
“ACCESS Confidential Information” means all information, Specifications,
know-how and data pertaining to the Products and ACCESS’s business or its
Manufacturing operations disclosed to DISCUS or its Affiliates hereunder,
including, without limitation, all information, Specifications, know-how and
data related to the design, implementation, performance and manufacture of the
Products, and any correspondence with the FDA or any other Regulatory Authority,
clinical study data, new drug applications, analytical data, or operating
procedures.

1.1.4  
“ACCESS’s Third Party Manufacture” means with respect to each Product, the
manufacturer designated to be used in the Manufacture of such Product until such
time as DISCUS exercises any right that it may have to designate an alternative
manufacturer under this Agreement. ACCESS may designate itself as an ACCESS’s
Third Party Manufacturer provided that in such case ACCESS may not contract out
those responsibilities to a Third Party.

1.1.5  
“ACCESS Invention” has the meaning set forth in Section 11.2.4.

1.1.6  
“ACCESS Trademark” means any trademark, trade name, trade dress, slogan, logo,
or similar item used by ACCESS prior to or as of the Effective Date, or
subsequent to the Effective Date in connection with any ACCESS product other
than the Products.

1.1.7  
“Affiliate” means, in the case of either Party, any corporation, joint venture,
or other business entity which directly or indirectly controls, is controlled by
or is under common control with that Party. The term “control,” as used in this
definition, means having the power to direct, or cause the direction of, the
management and policies of an entity, whether through ownership of voting
securities, by contract or otherwise. Notwithstanding the foregoing, for
purposes of this Agreement, the term “Affiliate” does not include entities in
which a Party or its Affiliates owns a majority of the ordinary voting power to
elect a majority of the board of directors but is restricted from electing such
majority by contract or otherwise, until such time as such restrictions are no
longer in effect.

1.1.8  
“Aphthasol” means that certain ACCESS Aphthasol paste as more fully described in
Exhibit A.

1.1.9  
“Batch” means the volume of finished, packaged Products obtained from a
validated Manufacturing run.

1.1.10  
“Best Price” has the meaning set forth in the Section 5.2.3.

1.1.11  
“Certificate of Analysis” means the document identifying the results of the
Methods of Analysis for a specific Batch of Products in a form agreed to by the
Parties in writing but which shall include, without limitation, the applicable
Products Batch’s manufacturing date, expiration date, lot number and testing
results and data.

1.1.12  
“Confidential Information” means DISCUS Confidential Information, ACCESS
Confidential Information, or both, as the context requires.

1.1.13  
“Continuing Party” has the meaning set forth in the Section 11.4.2(c).

1.1.14  
“Contract Year” means each consecutive twelve (12) month period during the Term,
the first of which shall commence on the date of Launch and end on the first
anniversary thereof.

1.1.15  
“Control” or “Controlled” means, with respect to any item of information or
intellectual property right, the possession, whether by ownership or exclusive
license, of the right to grant a license or other right with respect thereto.

1.1.16  
“Declining Party” has the meaning set forth in the Section 11.4.2(c).

1.1.17  
“DISCUS” has the meaning set forth in the Preamble.

1.1.18  
“DISCUS Confidential Information” means all information, Specifications,
know-how and data pertaining to DISCUS’s business disclosed to ACCESS hereunder,
including, without limitation, marketing and sales plans, artwork, formats,
equipment, logos, drawings, customer lists, analytical data, operating
procedures and all ordering and sales information.

1.1.19  
“Effective Date” has the meaning set forth in the Preamble.

1.1.20  
“Extraordinary Event Increase” has the meaning set forth in Section 5.2.2.

1.1.21  
“Facility” means ACCESS’s Third Party Manufacturing facilities, and any
subsequent or replacement Third Party Manufacturing facility identified to
DISCUS in accordance with Section 2.7.

1.1.22  
“FDA” means the United States Food and Drug Administration, or any successor
entities thereto.

1.1.23  
“FD& C Act” means the Federal Food, Drug and Cosmetic Act, and all regulations
promulgated thereunder, as the same may be amended or supplemented from time to
time.

1.1.24  
“Field” means the diagnosis or treatment of oral aphthous ulcers or disease,
lesions, or malady in the oral cavity, including but not limited to the
alveolar, tongue, gums, jaws, or associated structures, with the Products.

1.1.25  
“Force Majeure Event” has the meaning set forth in Section 10.

1.1.26  
“Good Manufacturing Practice” or “GMP” means (a) the then current standards for
the manufacture of pharmaceuticals, as set forth in the FD&C Act, and (b) any
quality requirements set forth in this Agreement.

1.1.27  
“Indemnified Party” has the meaning set forth in Section 7.1.3.

1.1.28  
“Indemnifying Party” has the meaning set forth in Section 7.1.3.

1.1.29  
“Intellectual Property Rights” means Patents, designs, formulae, trade secrets,
know-how, inventions, industrial models, and technical information and whether
now existing or coming into existence during the Term and which are necessary
for and/or related to the use or distribution of the Products, including,
without limitation any research and development information, pre-clinical,
clinical and other technical data, in each case which are not generally known or
available and all information necessary or relating to development,
registration, and Manufacturing.

1.1.30  
“Invention” means any new or useful method, process, manufacture, compound or
composition of matter, whether or not patentable or copyrightable, or any
improvement thereof arising during the Term with respect to the Products, their
Manufacture and/or use.

1.1.31  
“Joint Patent Rights” has the meaning set forth in the Section 11.4.2(a).

1.1.32  
“Launch” means the date, following approval by FDA of the right of any of
ACCESS’s Third Party Manufacturers to Manufacture OraDisc A and DISCUS’s right
to sell OraDisc A, on which OraDisc A is sold by DISCUS for the first time to a
Third Party for commercial or consumer use or distribution in the Territory.

1.1.33  
“Manufacture,” “Manufactured” or “Manufacturing” means all activities involved
in the production of the Products, including, without limitation, the
preparation, formulation, finishing, testing, packaging, storage and labeling of
the Products and the handling, storage and disposal of any residues or wastes
generated thereby.

1.1.34  
“Materials” means all materials, including, without limitation, all raw
materials, ingredients, packaging supplies and labels, required for the
Manufacture of Products:

1.1.35  
“Methods of Analysis” means the methods of analysis for the Products which are
mutually agreed upon in writing between the Parties within ninety (90) days
after the Effective Date and attached hereto as Exhibit B.

1.1.36  
“Net Sales” means, with respect to the Products, the gross invoiced sales amount
of the Products sold by DISCUS or its Affiliates to non-affiliate Third Parties,
after deduction of the following items, to the extent that such deductions are
reasonable estimates accrued by Discus: (a) trade and quantity discounts, net of
any give-backs received by DISCUS in return; (b) refunds, rebates, retroactive
price adjustments and service allowances; (c) credits or allowances given for
rejection or return of previously sold Products or for wastage replacement
actually taken or allowed; (d) a reasonable credit or allowance for bad debt,
and (e) any tax, duties or government charge levied on the sale of Products and
borne by DISCUS and/or its Affiliates (excluding national, state or local taxes
based on income), provided that such amounts in (a) - (e) shall be subsequently
adjusted as necessary to an amount actually allowed, taken or incurred (and
provided that such items do not exceed reasonable and customary amounts). Such
amounts shall be determined from the books and records of DISCUS and its
Affiliates maintained in accordance with generally accepted accounting
principles, consistently applied. Sales of the Products by and between a Party
and its Affiliates for further distribution to a Third Party are not sales to
Third Parties and shall be excluded from Net Sales calculations for all
purposes.

1.1.37  
“Net Unit Sales” means, with respect to the Products, the gross number of
Product units shipped by DISCUS or its Affiliates to non- affiliate Third
Parties, after deduction of the following number of Product units: (a) Units
returned for credit or (b) Units delivered as samples or promotional purposes.
Such amounts shall be determined from the hooks and records of DISCUS and its
Affiliates maintained in accordance with generally accepted accounting
principles, consistently applied. Units of the Products delivered by a Party to
an Affiliate for further distribution to a Third Party are not Units and shall
be excluded from Net Unit Sales.

1.1.38  
“OraDisc A” means that certain ACCESS proprietary oral mucoadhesive, erodible
patch that contains amlexanox as the active ingredient for the prevention and
treatment of canker sores, as more fully described in Exhibit A.

1.1.39  
“OTC” or “Over-the Counter” means sale to consumers of Products without a
prescription.

1.1.40  
“Party” or “Parties” means DISCUS, ACCESS or both, as the context requires.

1.1.41  
“Patents” shall mean (a) U.S. Patent No. 6,585,997, (b) US Patent No. 5,362,737,
and (c) any and all patents, patent applications, patent disclosures awaiting
filing determination, patent divisionals, continuations, continuations-in-part,
reissues, re-examinations, renewals and extensions thereof Controlled by ACCESS
during the Term, within the Territory, which are necessary for to the use or
distribution of the Products.

1.1.42  
“Person” means any natural person, corporation, general partnership, limited
partnership, limited liability company, limited liability partnership
proprietorship, other business organization, trust, union, association or
governmental authority.

1.1.43  
“Pharmacy Channel” means sales to wholesalers within the Territory for ultimate
sale through pharmacies within the Territory.

1.1.44  
“PPI Adjustment” has the meaning set forth in Section 5.2.

1.1.45  
“Products” means Aphthasol, OraDisc A, and any Accepted Product.

1.1.46  
“Professional Channel” means direct sales to any Person licensed to provide
health care services, including but not limited to group practices, clinics,
hospitals, and managed care facilities, within the Territory, except for
pharmacies and pharmacists.

1.1.47  
“Recall” means any action by any Party to recover title to or possession of any
Products sold or shipped to Third Parties or any action to prevent or interrupt
the sale or shipment by a Party of the Products to Third Parties that would have
been subject to recall if it had been sold or shipped.

1.1.48  
“Regulations” all FDA and any other Regulatory Authority laws and regulations,
occupational health and safety, and environmental laws and regulations, GMP and
warehousing practices and procedures.

1.1.49  
“Regulatory’ Approval” means all consents, permits, approvals, licenses,
authorizations, qualifications, notices or orders that are issued or granted by
Regulatory Authorities which are required for the manufacture, marketing,
promotion, pricing and sale of the Products in the Territory.

1.1.50  
“Regulatory Authority” means any domestic, federal, regional or other
administrative, legislative regulatory or other governmental authority, agency,
department, bureau, commission, or council involved in the granting of
Regulatory Approval for the Products in the Territory.

1.1.51  
“Rolling Forecast” means each of the forecasts described in Section 2.3.

1.1.52  
“Royalty” is as defined in Section 5.4.

1.1.53  
“Royalty Period” is as defined in Section 5.4.

1.1.54  
“Seizure” means any action by the FDA or any other Regulatory Authority to
detain or destroy the Products or prevent the release of the Products.

1.1.55  
“Short Fall” is as defined in Section 2.8.2.

1.1.56  
“Single Channel Period” means the first twelve months of the Term of this
Agreement, commencing on the Effective Date.

1.1.57  
“Specifications” means the specifications for the Products mutually agreed upon
by the Parties within six months after the Effective Date and attached hereto as
Exhibit C, as the same may be amended from time to time in accordance with the
provisions of Section 4.

1.1.58  
“Standard Cost” means no less than the delivered cost of the raw materials,
direct labor and direct overhead. Direct labor shall include the actual
employees costs associated with running the manufacturing line of the product
including salary, benefits, and other employee related costs directly associated
with the salary costs. Direct overhead shall include the occupancy costs
associated with the manufacturing area for the particular product, depreciation
of any specific equipment acquired to support the production of the product and
other costs directly related to the new product manufacturing that are
incremental to the current costs basis of the facility.

1.1.59  
“Term” means, the period commencing on the Effective Date and ending upon the
expiration of the last Patent to expire in the Territory, except as and if
sooner terminated in accordance with Section 8.

1.1.60  
“Territory” means the United States.

1.1.61  
“Third Party” means any Person other than DISCUS, ACCESS and their respective
Affiliates.

1.1.62  
“Trademark” means any trademark, trade name, trade dress, slogan, logo, or
similar item selected by DISCUS for use in connection with the Products.

1.2 Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires, (a) words of any gender include each other gender;
(b) words using the singular or plural number also include the plural or
singular number, respectively; (c) the terms “hereof,” “herein,” “hereby” and
derivative or similar words refer to this entire Agreement; (d) the terms
“Section” refer to the specified Section of this Agreement; and (e) Section
headings shall not affect the meaning or construction of any provision of this
Agreement.
 

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2.  SUPPLY

2.1 Grant of License.

 
2.1 .1
Subject to the terms and conditions of this Agreement, ACCESS hereby grants to
DISCUS the exclusive right and license for applications of Products in the
Field, in the Territory, under ACCESS’s Intellectual Property Rights during the
Term of this Agreement to (a) market, to offer for sale, sell and import
Aphthasol in the Professional Channel only, during the Single Channel Period,
(h) market, to offer for sale, sell and import Aphthasol for applications after
the Single Channel Period and for the remainder of the Term of this Agreement
and (c) market, to offer for sale, sell and import OraDisc A and all Products
except for Aphthasol; provided that all of such foregoing rights and licenses
are limited to such use as is necessary for DISCUS to market, offer for sale,
sell and import the Products for applications in the Field in the Territory in
accordance with this Agreement. Except as expressly granted herein. ACCESS
retains all rights in ACCESS’s Intellectual Property Rights and the Products.
Notwithstanding the foregoing, ACCESS specifically reserves for itself and its
agents and subcontractors the right under ACCESS’s Intellectual Property Rights
(i) to market, 0ffer for sale, sell and import Aphthasol for applications in the
Field, in the Territory in the Pharmacy Channel during the Single Channel
Period, and (ii) to develop, modify, and manufacture the Products, and to
perform its rights, activities and obligations under this Agreement, provided
that, subject to Section 2.9, all developments and modifications of the Products
for use in the Field shall be Products and shall be covered by the license
hereunder.

 
2.1.2
Except as specifically provided to the contrary in Section 2.1.1 and the rights
granted to DISCUS pursuant to Section 2.8, the licenses granted in Section 2.1.1
shall not be construed (a) to effect any sale of ACCESS’s Intellectual Property
Rights or any other proprietary ACCESS technology; (b) to grant any license
relating to ACCESS’s methods of formulating, fabricating and manufacturing the
Products, except as provided for in this Agreement; (c) to grant DISCUS any
rights in or to the use of the ACCESS Intellectual Property Rights by
implication or otherwise. DISCUS shall mark or have marked all containers or
packages of the Products in accordance with the patent marking laws of the
jurisdiction in which such units of Products are to be used or distributed.

 
2.2
Manufacture; Marketing. Subject to Section 2.3, ACCESS shall use commercially
reasonable efforts to create Specifications for the Manufacturing of the
Products with ACCESS’s Third Party Manufacturers, from which Person DISCUS shall
purchase Products in such quantities and at such times as may be ordered by
DISCUS in accordance with this Agreement. During the Term, ACCESS shall use
commercially reasonable efforts to cause all ACCESS’s Manufacturers to maintain
the resources necessary to Manufacture the Products and shall use commercially
reasonable efforts to ensure that ACCESS’s Third Party Manufacturers, at its own
expense, maintain all Materials and labor necessary to do so. DISCUS shall use
commercially reasonable efforts to market, sell, offer for sale and import the
Products in the Territory; provided that without limiting any other right or
remedy of ACCESS, if it is determined by a court of competent jurisdiction that
DISCUS has failed to use commercially reasonable efforts to market, offer for
sale, sell, and import the Products, ACCESS may convert the rights and licenses
granted to DISCUS hereunder to non-exclusive rights and licenses by delivery of
written notice to such effect.

 
2.3
Forecasts. At least ninety (90) days prior to the expected Launch as
communicated to DISCUS by ACCESS at least ninety (90) days prior to the expected
Launch, DISCUS shall submit to ACCESS a forecast of the quantity of Products
that DISCUS anticipates ordering from ACCESS prior to DISCUS’s anticipated
Launch of Products. At least ninety (90) days prior to the anticipated Launch
date, DISCUS shall submit to ACCESS and each ACCESS’s Third Party Manufacturer a
forecast of the quantity of OraDisc A that DISCUS anticipates ordering from
ACCESS during the twelve (12) month period (broken down by month) following
Launch and DISCUS shall update such forecast on a rolling twelve (12) months
basis every month thereafter. DISCUS shall use commercially reasonable efforts
to place purchase orders with ACCESS’S Third Party Manufacturers for at least
the quantity of the Products specified in the first three (3) months of each
such Rolling Forecast and the remaining nine (9) months shall be a non-binding
good faith estimate. For Aphthasol, DISCUS will follow the forecasting procedure
outlined in this Section 2.3 except that the First Rolling Forecast will not be
due until 30 days after the Effective Date.

 
 
 

 
2.4
Orders and Delivery. DISCUS shall place its firm orders for the Products with
ACCESS’s Third Party Manufacturers by submitting a purchase order, at least
ninety (90) days prior to the delivery date requested therein, which sets forth
(a) the quantity of the Products ordered for delivery; and (h) the delivery date
for that order. If any ACCESS’s Third Part)’ Manufacturer notifies DISCUS that
it is unable to fill such purchase order, it shall indicate the portion of such
purchase order it cannot supply by the requested delivery date and specify
alternate delivery dates. Except with respect to orders placed to satisfy the
binding portion of any Rolling Forecast, DISCUS may cancel or modify any firm
purchase order (in whole or in part) at any time prior to the delivery for any
quantity of Products for which Manufacturing has not been completed pursuant to
such purchase order at the time that notice of cancellation or modification is
received by any ACCESS’s Third Party Manufacturer; provided that if
Manufacturing has commenced but not completed pursuant to such firm purchase
order, DISCUS shall reimburse the applicable ACCESS’s Third Party Manufacturer
for Material and labor costs in respect of any works-in-progress pursuant to
such cancelled or modified purchase order (or part thereof) at the time notice
of cancellation or modification is received by such ACCESS’s Third Party
Manufacturer; and provided, further, that DISCUS shall reimburse such ACCESS’s
Third Party Manufacturer for the actual, reasonable out-of-pocket cost of any
other Material purchased by ACCESS’s Third Party Manufacturer to fill a
cancelled purchase order (or part thereof) that are unique to the Product and
cannot within a reasonable period of time otherwise be used in such ACCESS’s
Third Party Manufacturer’s operations. All Products shall be delivered F.O.B.
the Facility. Title, possession and risk of loss shall pass to DISCUS upon
delivery of Products to DISCUS’s designated carrier at the Facility’s loading
dock. The provisions of this Agreement shall prevail over any inconsistent
statement or provisions contained in any document related to this Agreement
passing between the parties hereto including, but not limited to, any purchase
order, acknowledgment, confirmation or notice.

 
2.5
Non-Compete. During the Term, neither DISCUS nor any Affiliate of DISCUS may
directly or indirectly market, offer for sale, sell, import or distribute in the
Territory any product with applications in the Field that competes with the
Products.

 
2.6
Third-Party Manufacturers. ACCESS will use its commercially reasonable efforts
to ensure that each ACCESS’s Third Party Manufacturer maintains a Manufacturing
Facility in compliance with all Regulations. ACCESS shall provide to DISCUS
written notice of each of Access’s Third Party Manufacturers. Such written
notice shall include (a) the identity of the Third Party ACCESS has entered into
agreement with, or with respect to any subsequent Third Party manufacturer,
desires to enter into an agreement with, and (b) the location of the Facilities
for each Access’s Third Party Manufacturer. ACCESS shall use commercially
reasonable efforts to promptly provide DISCUS with access to the Facility, as
reasonably requested by DISCUS for inspection purposes under Section 3.5. DISCUS
will only correspond and interact with ACCESS with respect to the Manufacture of
the Products and ACCESS shall be responsible for the performance by the Third
Parties of any obligations to be performed by such Third Parties.

 
2.7
Additional Responsibilities.

 

 
2.7.1
In the event that DISCUS elects, in its sole discretion, to seek Regulatory
Approval for the sale of any Product Over-the-Counter, DISCUS shall be
responsible, at DISCUS’s cost and expense, for any consumer product testing and
commercialization of the Products, including, without limitation, all sales and
marketing activities related to the Products and the design of all Product
packaging and related artwork, and the content and design of all labeling.
ACCESS shall provide any and all reasonable assistance to DISCUS with respect to
any of its efforts with regard to consumer product testing and commercialization
of the Products, including, without limitation, all sales and marketing
activities related to the Products and the design of all Product packaging and
related artwork, and the content and design of all labeling, including but not
limited to any efforts by DISCUS to obtain Regulatory Approval for the sale of
the Products Over-the-Counter.

2.7.2  
DISCUS shall retain, at its own expense a selling and service organization with
adequate experience, ability and training for purposes of marketing and selling
the Products in the Territory.

 
2.8 Alternative Supply.
 

 
2.8.1
ACCESS hereby grants to DISCUS a limited, non-exclusive license for applications
in the Field in the Territory under ACCESS’s Intellectual Property Rights during
the Term of this Agreement to Manufacture Aphthasol for DISCUS’s distribution of
Aphthasol in the Field in the Territory. ACCESS shall provide to DISCUS (and if
designated by DISCUS, a designated alternative supplier) copies of or access to
all necessary know-how. Specifications, technology, formulations and ACCESS
Intellectual Property Rights necessary to Manufacture Aphthasol; provided that
to the extent that such technology and know-how constitutes ACCESS Confidential
Information (or any information constitutes Confidential Information of ACCESS’s
Third Party Manufacturers) it shall be subject to the provisions of Section 9
and DISCUS’s designated alternative supplier shall be required to enter into a
confidentiality agreement with ACCESS containing substantially the same terms as
Section 9.

 
2.8.2
In the event that (a) an ACCESS’s Third Party Manufacturer is in default of its
supply obligations under this Agreement with respect to three (3) firm purchase
orders within any twelve month period or five (5) firm purchase orders within
any three (3) year period of any Product (a “Shortfall”), or (b) the bankruptcy
or liquidation of ACCESS or such ACCESS’s Third Party Manufacturer, or (c)
DISCUS has achieved an aggregate of $15,000,000 in aggregate Net Sales of any
Product in any calendar year, or (d) DISCUS has achieved a cumulative aggregate
of $25,000,000 in Net Sales of any Product commencing as of the Effective Date,
or (e) an ACCESS’s Third Party Manufacturer is not able to meet the Best Price
for any Product as provided for in Section 5.2.3, then in any of such foregoing
events, subject to the provisions of Section 2.8.1., (i) DISCUS shall have the
right to Manufacture the Products Manufactured by such ACCESS’ Third Party
Manufacturer (or ACCESS as the case may be) or for which the foregoing Net Sales
thresholds were achieved or Best Price was not matched itself and/or qualify an
alternative supplier of OraDisc A, for distribution for applications in the
Field, in the Territory, (ii) ACCESS hereby grants to DISCUS a limited,
non-exclusive license for applications in the Field in the Territory under
ACCESS’s Intellectual Property Rights during the Term of this Agreement to
Manufacture, make, or have made for DISCUS’s OraDisc A; and (iii) ACCESS shall
provide to DISCUS (and if designated by DISCUS, a designated alternative
supplier) copies of or access to all necessary know-how, specifications,
technology, formulations and ACCESS Intellectual Property Rights necessary to
Manufacture OraDisc A for distribution by DISCUS; provided that to the extent
that such technology and know-how constitutes ACCESS Confidential Information
(or any information constitutes Confidential Information of ACCESS’s Third Party
manufacturer) it shall be subject to the provisions of Section 9 and DISCUS’s
designated alternative supplier shall be required to enter into a
confidentiality agreement with ACCESS containing substantially the same terms as
Section 9.

 
2.8.3
In the event that DISCUS (or a Third Party designated by DISCUS) exercises its
rights under this Section 2.8 and begins to Manufacture a Product, ACCESS shall
have no continuing obligations to Manufacture such Product or any liability with
respect to the manufacture thereof.

 
2.9
New Products. In the event that ACCESS develops any product (other than OraDisc
A or Apththasol) with applications in the Field that incorporates or is based on
the defined chemical structure amlexanox (a “New Product”), then prior to
selling or licensing such New Product in the Field in the Territory, it shall
provide DISCUS with written notice of such New Product including the uses and
applications of such New Product in the Field. Within 60 days of such notice,
DISCUS will provide ACCESS with notice as to whether it desires to accept such
New Product to be subject to the terms of this Agreement for sale in the
Territory (each such accepted New Product an “Accepted Product”).

3. COMPLIANCE, QUALITY AND ENVIRONMENTAL
 

 
3.1
Compliance with Law. ACCESS shall cause all Manufacturing operations hereunder
to be conducted in compliance with all applicable laws and regulations,
including without limitation, the Regulations, and in compliance with all
applicable provisions of this Agreement. ACCESS shall obtain and maintain in
full force and effect all necessary Regulatory Approvals with respect to the
Manufacture of the Products and the activities for which ACCESS is responsible
under this Agreement.

 
3.2
Manufacturing Quality: Storage. ACCESS shall ensure that ACCESS or ACCESS’s
Third Party Manufacturers shall sample and analyze all Materials upon receipt to
ensure that such Materials are unadulterated. Free of defects and meet the
applicable specifications therefore. ACCESS shall take all necessary steps to
attempt to prevent contamination and cross contamination of Products. The
Products shall be delivered to DISCUS in fully finished form and in their final,
FDA-approved packaging configuration(s), including all applicable labeling and
package inserts, and with a minimum shelf-life remaining for each lot of Product
delivered therein to DISCUS of three months less than the approved shelf life.
All Products Manufactured by ACCESS shall be certified by ACCESS. ACCESS shall
or shall cause ACCESS’s Third Party Manufacturers to (i) meet the standards for
identity, quality, safety, strength and purity of the ingredients as specified
in the approved New Drug Application for Products, and that the Products and
their raw materials were handled and manufactured such that they meet FDA
standards for identity and purity of the Product as specified in the approved
New Drug Application for the Product, (ii) certify that each lot of Product has
been manufactured in full compliance with Good-Manufacturing Practices
(GMP)/Good Laboratory Practices (GLP) and all ISO regulations applicable to the
manufacture, testing and release of pharmaceuticals, and certify that each lot
of Product is unadulterated and free from contamination, dilutents and foreign
matter in any amount in accordance with the Products specifications and
generally accepted pharmaceutical standards, (iii) perform the quality control
tests (both when the Products are in-process and when they are finished) with
respect to the Products in accordance with the Methods of Analysis, the cost of
such to be included in the price hereinafter specified, and shall promptly, upon
completion of such tests, deliver to DISCUS a Certificate of Analysis for each
Batch of Products which lists the results of such tests and demonstrates that
the products meet identify and purity standards approved by the FDA in ‘s
approved New Drug Application for the Product and (v) deliver a representative
sample from each Batch of Products to DISCUS’s designated representative at the
same time each batch is delivered to DISCUS.

 

 
3.3
Testing by DISCUS. DISCUS may test the Products samples in accordance with the
applicable Methods of Analysis. If the analysis of any Products performed by or
for DISCUS differs from ACCESS’ s analysis of the same Batch, DISCUS shall
advise ACCESS and ACCESS and DISCUS agree to consult with each other in order to
explain and resolve the discrepancy between each other’s determination. If,
after good faith attempt by the Parties to do so, such consultation does not
resolve the discrepancy, an independent, reputable laboratory as mutually agreed
by the Parties shall repeat the applicable Methods of Analysis on representative
samples from such Batch provided by or for DISCUS. The costs of the independent
laboratory referred to above shall be borne by (a) DISCUS if such laboratory
determines that the Products conforms to the Specifications or (b) ACCESS if
such laboratory determines that the Products do not conform to the
Specifications. If so requested by DISCUS in writing, ACCESS shall promptly send
a new Batch of the Products (of similar quantity as to the amount of such
Products being analyzed as set forth above) to DISCUS. DISCUS shall not be
obligated to pay for any of the Products (and if DISCUS has paid for such
Products ACCESS shall promptly reimburse DISCUS for the cost of replacing such
Products, including, without limitation, related costs such as testing and
transportation costs) that such laboratory determines does not conform to the
Specifications, but shall be obligated to pay for any new Batch of Products that
is sent as specified above; provided that DISCUS must return to ACCESS such
non-conforming Products.

 

 
3.4
Samples and Record Retention. ACCESS shall or shall cause any ACCESS’s Third
Party Manufacturers to retain records and retention samples, as defined in 21
CER 211.170, of each Batch of the Products for at least thirty-six (36) months
after the expiration date the last lot of the drug product containing the active
ingredient in that Batch and shall make the same available to DISCUS upon
request. Retention samples shall only be destroyed after the required holding
period. During and after the Term of this Agreement, ACCESS shall reasonably
assist DISCUS with respect to any complaint, issue or investigation relating to
the Products.

 
3.5
Inspection. ACCESS shall or shall cause all ACCESS’s Third Party Manufacturers
to give access to representatives of DISCUS, at all reasonable times during
regular business hours, to all Facilities and any other facility in which
Products is Manufactured, tested, packaged and/or stored, and to all
Manufacturing and Distribution records with respect to the Products, for the
purpose of compliance inspection. DISCUS shall have the right while at any such
Facility to inspect ACCESS and ACCESS’s Third Party Manufacturers’ records, new
drug application files, problem files, complaint files, and Regulatory Approvals
to evaluate work practices and compliance with all applicable FDA and other
Regulatory Authority laws and regulations, occupational health and safety, and
environmental laws and regulations, GMP and warehousing practices and
procedures. The conduct of (or right to conduct) any inspection under this
Section 3.5 does not impose upon DISCUS responsibility or liability for the
operation of the Facility. Such inspection shall be conducted after thirty (30)
days’ prior written notice to ACCESS or ACCESS’s Third Party Manufacturers, will
be conducted in a manner that is not disruptive to ACCESS’s or any ACCESS’s
Third Party Manufacturer’s operations, and shall not be more frequent than is
reasonable. ACCESS’s Third Party Manufacturers, upon written request by DISCUS,
shall provide DISCUS with evidence of continued compliance with current
GMP/GLP/ISO regulations as well as a copy of the updated GMP/GLP/ISO compliance
certificates for ACCESS’s Third Party Manufacturers. ACCESS shall allow or
ACCESS shall cause each ACCESS’s Third Party Manufacturer to allow DISCUS to
conduct periodic reviews of any of ACCESS or any ACCESS’S Third Party
Manufacturers’ Operations and records pertaining to Manufacturing/Testing,
Inspection/Laboratory Assay/Release/Warehousing and Distribution and associated
documentation and to forward to DISCUS documentation regarding traceability for
Products purchased by DISCUS from ACCESS. DISCUS shall provide written notice of
request for review and will agree to a date for inspection within thirty (30)
days of the written request for inspection. ACCESS’ s Third Party Manufacturers
will not be required to divulge any proprietary information related to items not
related to the Products to DISCUS and DISCUS shall limit the scope of such
reviews to information needed for DISCUS to determine that ACCESS’s Third Party
Manufacturer is in compliance with current GMP/GLP/ISO regulations. DISCUS shall
maintain adequate records that allow tracking of the storage and shipment
history of the Products sufficient to determine the location of all Products
according to ACCESS ‘s Third Party Manufacturer’s lot numbers up through the
point of purchase by DISCUS’ customers. DISCUS shall provide that data to
ACCESS’s Third Party Manufacturer upon request but only in the event that a
field corrective action or recall, in the opinion of Access, becomes necessary.
DISCUS will not be required to divulge to ACCESS’s Third Party Manufacturer any
proprietary data regarding DISCUS’ customers or pricing for the Products.

 
3.6
Adverse Drug Experience Reporting. Each Party shall fully, accurately and
promptly provide the other Party with all data known to it at any time during
the Term of this Agreement or thereafter, which data indicate that any Products
is or may be unsafe, lacks utility, or otherwise does not meet the
Specifications. ACCESS will act as the sole correspondent with the F.D.A. for
adverse event reporting and ACCESS accepts all responsibility for submitting
such reports to the F.D.A. ACCESS will provide to DISCUS copies of all such
reports within 10 days of submission to the F.D.A.

 
3.7
Recalls and Seizure. In the event that a product complaint, field corrective
action or product recall requires remedial action to remove the Products from
the field, DISCUS will have final authority to decide whether such an action is
needed and will manage and conduct all field actions. Both DISCUS and ACCESS
agree to cooperate in such field corrective actions or recalls and share all
pertinent product history records and distribution records as needed so that
both sides can demonstrate to the FDA or other pertinent regulatory authorities
that all affected product has been identified and satisfactorily removed from
the field in compliance with 21 CR 7 and other applicable FDA regulations
governing product recalls and/or field corrective actions. In the event that a
field corrective action or product recall is required, DISCUS will manage the
associated activities and provide a report of all activities to ACCESS within
thirty (30) days of completion of the field corrective action or product recall.
In case of notification to DISCUS of an accident or injury or serious health
risk to a patient caused by the Products, DISCUS will inform ACCESS immediately
by telephone or if not applicable by fax or email in this sequence to discuss,
what is to be done.

4.  
MANUFACTURING CHANGES

 

 
4.1
Voluntary Changes. Subject to Section 4.2, ACCESS shall not and ACCESS shall
ensure all ACCESS’s Third Party Manufacturers shall not make any material
changes to the Manufacturing process, the Manufacturing equipment, the
Specifications, the Product, the Materials, or the Methods of Analysis without
the prior written consent of DISCUS, which shall not be unreasonably withheld or
delayed and without prior written approval from the U.S. F.D.A if such prior
approval is legally required. If either Party, or any of ACCESS’s Third Party
Manufacturers, requests in writing a change in the Manufacturing process, the
Manufacturing equipment, the Specifications, the Materials, or methods of
Analysis with respect to the Products that is not the result of a requirement of
the FDA or any other Regulatory Authority, the Parties shall use commercially
reasonable efforts to make or accept such change, as the case may be. The
requesting Party shall provide the Parties with a detailed written report of all
proposed changes to the Manufacturing process, the Manufacturing equipment, the
Specifications, the Materials, the sources of Materials or the Methods of
Analysis.

4.2  
Required Changes. If the FDA or any other Regulatory Authority requests or
requires, or takes any action that requires, any change in the Manufacturing
process, the Manufacturing equipment, the Specifications, the Materials, or
Methods of Analysis with respect to the Products, the Parties shall meet and
discuss an implementation plan for such change and use commercially reasonable
efforts to accommodate as soon as practicable such change to meet the FDA’s or
such other Regulatory Authority’s requirements. Each Party will bear its
respective costs associated with, or incurred as a result of, such change. Each
Party agrees to promptly forward to the other copies of any written
communication received by such Party from the FDA or any other Regulatory
Authority that may affect the Manufacture, supply, or distribution of the
Products as contemplated herein.

 

5.  
PRICE AND PAYMENT

 

 
5.1
Price. For so long as either ACCESS or ACCESS’s Third Party Manufacturer is the
Manufacturer of OraDisc A for DISCUS, ACCESS’s Third Party Manufacturer shall
invoice DISCUS for OraDisc A supplied to DISCUS hereunder at no more than the
applicable price per Product set forth on Exhibit D.

 
5.2 Price Adjustment.
 
5.2.1 Commencing on any date in the second Contract Year, ACCESS may adjust the
then-current price to reflect documented increases in labor costs or the
acquisition cost of Materials per unit of Products at the beginning of the
Contract Year in question as compared to the acquisition cost of such labor or
Materials per unit of Products at the beginning of the immediately preceding
Contract Year; provided that ACCESS gives DISCUS not less than ninety (90) days’
prior written notice of any price increase and that ACCESS may not increase the
price more than once during any Contract Year; and provided, further, that
except as provided in Section 5.2.2, any price increase per unit of Products
shall not exceed the PPI Adjustment for the Contract Year in question. “PPI
Adjustment” will be the change over the prior year of the Bureau of Labor
Statistics Producer’s Price Index for Pharmaceutical Preparations (Code 2834)

5.2.2 Notwithstanding anything to the contrary in Section 5.2.1, in the event of
an extraordinary event that results in the increase in the collective cost of
manufacturing and distributing to DISCUS the Products ordinarily and necessarily
incurred by ACCESS during any annual period (an “Extraordinary Event Increase”),
ACCESS need not wait until the next annual period to adjust the pricing for the
Products. Upon ACCESS’s determination that an Extraordinary Event Increase has
occurred, ACCESS shall notify DISCUS in writing of the applicable price
adjustment, together with supporting documentation evidencing such change
including without limitation, evidence that ACCESS shall have used its
commercially reasonable efforts to secure alternative sources of supply for any
components or consumables, at lesser costs without detracting from the quality
or efficacy of the Products. Any such pricing adjustment will become effective
thirty (30) days following the date of ACCESS’s written notice thereof.

 
5.2.3
DISCUS shall have the right, at any time. to solicit proposals from Third Party
manufacturers (and/or to provide a proposal from one of its Affiliates which
shall he at a cost of at least the Affiliate’s Standard Cost) as to the cost
that such Person would charge DISCUS for the Manufacture of OraDisc A. DISCUS
may deliver the proposal that it would like to accept (the “Best Price”) to
ACCESS’s Third Party Manufacturer and ACCESS’s Third Party Manufacturer shall
have the option to meet the same terms as the Best Price, \which option must be
communicated to DISCUS in writing within thirty (30) business days.

 
5.3
License Payments. During the Tenn. the license payments set forth in Exhibit E
shall be due and payable from DISCUS to ACCESS no later than within thirty (30)
days after the quarter in which the occurrence of the applicable event/milestone
set forth in Exhibit E occurred; provided that the Launch milestone payment
shall be made within thirty (30) days after Launch. For purposes of clarity, in
the event that either party shall terminate this Agreement in accordance with
its rights set forth in Section 8, no further amounts shall be payable with
respect to this Section 5.3 other than for events/milestone(s) which occurred
prior to such termination.

 
5.4
Royalty Payments. In addition to the payments set forth above, DISCUS shall pay
to ACCESS a royalty (the “Royalty”), as outlined on Exhibit F, on Net Sales of
the Products during each calendar quarter (or portion thereof) during the Term
(each such period, a “Royalty Period”), commencing as of the date on which the
Products are sold by DISCUS for the first time to a Third Party for commercial
or consumer use or distribution. Each Royalty will be payable not later than
thirty (30) days following the expiration of each applicable Royalty Period.
DISCUS shall pay the Royalty for so long as the license granted by ACCESS under
Section 2.1 remains in effect. DISCUS will include with each such payment a
written report detailing (a) the number of Products units and the sales price of
such Products units by DISCUS and its Affiliates; and (ii) Net Sales of the
Products during the applicable Royalty Period, all in a manner consistent with
DISCUS’s internal sales reporting. In the event that (i) Discus is not the only
Person selling an oral mucoadhesive, erodible patch for use on apthous ulcers
within the Territory (other than oral mucoadhesive, erodible patches currently
under license by ACCESS), the royalty on OraDisc A shall be reduced in
proportion to the market share in dollars of DISCUS’ sales of OraDisc A and the
market share of the competitive product (ii) Discus is not the only Person
selling amlexanox in the treatment of oral lesions within the Territory, the
royalty on both OraDisc A and Aphthasol shall both be reduced in proportion to
the market share in dollars of DISCUS’ sales of OraDisc A and the market share
of the competitive product. In the event that both conditions (i) and (ii)
herein are met, the royalty on OraDisc A shall be reduced by both percentages.

 

 
5.5
Payment. DISCUS shall pay invoices under Section 5.1 for Products delivered
hereunder that are Manufactured directly by ACCESS not later than thirty (30)
days after the later of receipt of delivery of Products covered by such invoice
or receipt of such invoice.

 

 
5.6
Taxes and Other Charges. All Products prices are exclusive of taxes, shipping
costs to the point of delivery, customs duties and other charges, and DISCUS
agrees to bear and be responsible for the payment of all such charges imposed,
excluding taxes based upon ACCESS’s net income.

 
5.7
Audit Rights.

5.7.1 DISCUS shall maintain books of account with respect to its sales of the
Products in each country in the Territory. ACCESS shall have the right, not more
than once during each calendar year, to have an independent certified public
accountant selected and retained by ACCESS to inspect and examine such books of
DISCUS during regular business hours for the purpose of verifying the statements
of the aggregate Net Sales resulting from sales of Products and determining the
correctness of the Royalties paid. If such independent certified public
accountant’s report properly shows any underpayment by DISCUS, DISCUS shall pay
to ACCESS within thirty (30) days after DISCUS’s receipt of such report, (a) the
amount of such underpayment, and (b) if such underpayment exceeds five percent
(5%) of the total amount owed for the period then being audited, the reasonable
fees and expenses of any independent accountant performing the audit on behalf
of ACCESS. Any audit or inspection conducted under this Agreement by ACCESS or
its agents or contractors will be subject to the confidentiality provisions of
this Agreement, and ACCESS will be responsible for compliance with such
confidentiality provisions by such agents or contractors.

 
5.7.2
ACCESS shall maintain books of account with respect to the Manufacture of the
Products. DISCUS shall have the right, not more than once during each calendar
year, to have an independent certified public accountant selected and retained
by DISCUS to inspect and examine such books of ACCESS during regular business
hours for the purpose of verifying the that ACCESS is not making money from any
ACCESS Third Party Manufacturer from is Manufacture of the Products, except as
provided for in Exhibit F. If such independent certified public accountant’s
report properly shows any prohibited payments or compensation to ACCESS, ACCESS
shall (a) pay to DISCUS within thirty (30) days after DISCUS’s receipt of such
report the amount of such prohibited payments or compensation, and (b) DISCUS
shall have the right to audit all previous years and (ii) the amount of any
prohibited payments or compensation from such previous years. Any audit or
inspection conducted under this Agreement by DISCUS or its agents r contractors
will be subject to the confidentiality provisions of this Agreement, and DISCUS
will be responsible for compliance with such confidentiality provisions by such
agents or contractors.

 
5.8
Late Payments. If any payment due to ACCESS under this Agreement is not made
when due, then, commencing from the date on which such payment was due, the
amount of such payment shall accrue interest calculated at an annual rate equal
to the prime rate plus three percent (3%) until such time as payment of the
overdue amount is made in full; provided that no interest shall accrue on any
amounts being disputed in good faith by DISCUS with respect to which DISCUS is
making diligent and good faith efforts to resolve.

6.  
REPRESENTATIONS AND WARRANTIES

 
6.1
Representation and Warranties of Each Party. Each of DISCUS and ACCESS hereby
represents, warrants and covenants to the other Party hereto as follows:

 
6.1.1
it is a corporation or entity duly organized and validly existing under the laws
of the state or the jurisdiction of incorporation or formation;

 
6.1.2
the execution, delivery and performance of this Agreement by such Party has been
duly authorized by all requisite corporate action and do not require any
shareholder action or approval;

 
6.1.3
it has the power and authority to execute and deliver this Agreement and to
perform its obligations hereunder;

 
6.1.4
the execution, delivery and performance by such Party of this Agreement and its
compliance with the terms and provisions hereof does not and will not conflict
with or result in a breach of any of the terms and provisions of or constitute a
default under (a) a loan agreement, guaranty, financing agreement, agreement
affecting a product or other agreement or instrument binding or affecting it or
its property; (b) the provisions of its charter or operative documents or by
laws; or (c) any order, writ, injunction or decree of any court or governmental
authority entered against it or by which any of its property is bound; and

 
6.1.5
it shall comply with all applicable laws and regulations relating to its
activities under this Agreement.

 
6.2
Representations and Warranties of ACCESS. ACCESS hereby further represents and
warrants to DISCUS as follows:

 
6.2.1
As of delivery of each shipment of Products Manufactured by ACCESS or an ACCESS
Third Party Manufacturer to a carrier, such Product (a) has been Manufactured,
stored and shipped in accordance with GMPs, all applicable laws, rules,
regulations or requirements and all applicable Regulatory Approvals in effect at
the time of Manufacture; (b) conforms to the Specifications, and is free from
defects and are merchantable; (c) is not adulterated or misbranded; and (d) has
been stored in accordance with procedures set forth in this Agreement, if any;
and (d) ACCESS has good and marketable title to the Products and the Products
are free from all liens, charges, encumbrances and security interests;

 
6.2.2
As of the Effective Date and as of the date of the delivery of each shipment of
Products. U.S. Patent No. 6.585,997 and US Patent No. 5,362,737 are (a) existing
and have not been held to be invalid or unenforceable, in whole or in part and
(b) ACCESS owns or has full and exclusive rights to use and exploit under
licenses (and to license or sublicense) all their rights under the Patents and
the Patents are not encumbered by any claims, liens, mortgages or security
interests;

 
6.2.3
As of the Effective Date and as of the date of delivery of each shipment of
Products, (a) ACCESS has received no actual notice or any basis to reasonably
conclude that any of ACCESS’s Intellectual Property Rights relating to or
incorporated as a part of the Products is subject to an infringement claim of
any issued patent owned or possessed by any Third Party within the Territory,
and (b) no Third Party has any right, title or interest in or to the
Intellectual Property Rights relating to, incorporated as a part of or used in
the Manufacture of the Products, and

 
6.2.4
As of the Effective Date, ACCESS has received no actual notice or any basis to
reasonably conclude that OraDisc A has less than reasonable chance to receive
Regulatory Approval to be sold Over-the Counter.

 
6.3
No Presumption. Each Party hereto represents that it has been represented by
legal counsel in connection with this Agreement and acknowledges that it has
participated in the drafting hereof. In interpreting and applying the terms and
provisions of this Agreement, the Parties agree that no presumption shall exist
or be implied against the Party which drafted such terms and provisions.

 
6.4
Remedy. In addition to any other remedy DISCUS may have hereunder, upon request
from DISCUS, as a remedy for any breach of Section 6.2.1, ACCESS shall promptly
replace, at its sole cost and expense, any Products which fail to comply with
the representations set forth in Section 6.2.1; provided that such
non-conforming Products are returned to ACCESS in accordance with ACCESS’s
return procedures, and only if after ACCESS’s inspection, such Products are
determined to have been non-conforming.

 
6.5
DISCUS Responsibility. DISCUS shall not be responsible for any loss or cost
incurred by ACCESS during Manufacture of the Products in compliance with the
requirements of Section 6.2, except with respect to procedures, instructions, or
directions unilaterally imposed upon ACCESS by DISCUS under this Agreement.

6.6 Disclaimer.

 
6.6.1
THE FOREGOING WARRANTIES ARE THE SOLE AND EXCLUSIVE WARRANTIES GIVEN BY ACCESS
WITH RESPECT TO THE PRODUCTS PROVIDED HEREUNDER, AND ACCESS GIVES AND MAKES NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, OTHER THAN THE
FOREGOING. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING EXCEPT FOR THE
WARRANTIES EXPRESSLY PROVIDED IN SECTION 6, NO IMPLIED WARRANTY OF
MERCHANTABILITY, VALIDITY, NON-INFRINGEMENT, TITLE, FITNESS FOR ANY PARTICULAR
PURPOSE, AND NO IMPLIED WARRANTY ARISING BY USAGE OF TRADE, COURSE OF DEALING OR
COURSE OF PERFORMANCE IS GIVEN OR MADE BY ACCESS OR SHALL ARISE BY OR IN
CONNECTION WITH ANY SALE OR PROVISION OF PRODUCTS OR SERVICES BY ACCESS, OR
DISCUS’ USE OR SALE OF THE PRODUCT, OR ACCESS’ AND/OR DISCUS’ CONDUCT IN
RELATION THERETO OR TO EACH OTHER. NO REPRESENTATIVE OF ACCESS IS AUTHORIZED TO
GIVE OR MAKE ANY OTHER REPRESENTATION OR WARRANTY OR TO MODIFY THE FOREGOING
WARRANTY IN ANY WAY OTHER THAN PURSUANT A WRITTEN AMENDMENT OF THIS AGREEMENT
THAT IS EXECUTED BY ACCESS.

 
6.6.2
The limited warranties set forth in this Section 6 do not apply to any
non-conformity of the Product resulting from (a) repair, alteration, misuse,
negligence, abuse, accident, mishandling or storage in an improper environment
by any party other than ACCESS (or its contract manufacturer), or (b) use,
handling, storage or maintenance other than in accordance with Product
specifications or Product label.

6.7  
Limitation of Liability.

ACCESS’ LIABILITY, AND THE EXCLUSIVE REMEDY, IN CONNECTION WITH THE SALE OR USE
OF THE PRODUCT (WHETHER BASED ON CONTRACT, NEGLIGENCE, BREACH OF WARRANTY.
STRICT LIABILITY OR ANY OTHER LEGAL THEORY), SHALL BE STRICTLY LIMITED TO
ACCESS’ OBLIGATIONS AND DISCUS’ RIGHTS AS SPECIFICALLY AND EXPRESSLY PROVIDED IN
THIS AGREEMENT.

EXCEPT WITH RESPECT TO CLAIMS OR LIABILITY TO THIRD PARTIES, IN NO EVENT
WHATSOEVER SHALL EITHER PARTY HAVE ANY LIABILITY, OBLIGATION OR RESPONSIBILITY
TO THE OTHER PARTY OR SUCH OTHER PARTY’S AFFILIATES FOR ANY INDIRECT,
INCIDENTAL. CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES ARISING IN ANY
WAY IN CONNECTION WITH ANY PRODUCT OR ITS PURCHASE, SALE, USE OR INAJ31LITY TO
USE.

7.  
INDEMNIFICATION AND INSURANCE

7.1 Indemnification.

 
7.1.1
ACCESS shall defend, indemnify and hold harmless DISCUS, its Affiliates,
directors, officers, employees and agents from and against all damages, losses,
liabilities, expenses, claims, demands, suits, penalties or judgments or
administrative or judicial orders (including, without limitation, reasonable
attorneys’ fees and expenses) incurred, assessed or sustained by or against
DISCUS, its Affiliates, directors, officers, employees or agents with respect to
a claim by a third party arising out of (a) the negligent acts or omissions of
ACCESS; (b) any breach by ACCESS of this Agreement or its representations,
warranties or covenants hereunder; (c) any Recall or Seizure attributable to
ACCESS’s performance (including, without limitation, amounts DISCUS is legally
required to pay or credit to its customers for Products so Recalled or Seized);
(d) any allegation that the manufacture, importation, sale, offer for sale or
use of the Products infringes any patent or other Intellectual Property Rights,
proprietary or protected right within the United States; provided that ACCESS
will not be obligated to indemnify DISCUS if and to only to the extent that the
alleged infringement is caused by DISCUS’s (including its Affiliates, agents,
contractors, and sub-distributors) or its customers misuse, mis-handling,
mis-storage or modification of the Products; or (ii) DISCUS’s (including its
Affiliates, agents, contractors, and sub-distributors) or its customers use of
the Products in combination with any products or materials not provided by
ACCESS; and further provided that the foregoing indemnification obligation shall
not apply in the event and to the extent that such claim arose as a result of
any indemnitee’s gross negligence, intentional misconduct or breach of this
Agreement. Alternatively, ACCESS may terminate this indemnification provision
with respect to any subsequent exploitation of DISCUS’ rights hereunder if any
claim is made that the Manufacture, storage, importation, sale, offer for sale
or use of the Products infringes any patent or other proprietary or protected
right of any Third Party and ACCESS determines that it no longer desires to be
involved in the continued sale, offer for sale or use of the Products, provided
that such a determination by ACCESS shall terminate any and all rights that
ACCESS may otherwise have to any payments from DISCUS under either Section 5.2
or 5.3 and provided that ACCESS shall only be required to continue in the
Manufacture, storage, importation, of the Products should DISCUS elect to
defend, indemnify and hold harmless ACCESS from any loss resulting from those
ongoing activities, provided that such termination will not change, alter or
modify ACCESS’ obligations or liabilities with respect to any Products
Manufactured, delivered or distributed prior to such termination or any other
breach by ACCESS occurring prior to such termination. The provisions of this
Section shall survive the termination or expiration of this Agreement.

 
7.1.2
DISCUS small defend, indemnify and hold harmless ACCESS, its directors,
officers, employees and agents from and against all damages, losses,
liabilities, expenses, claims, demands, suits, penalties or judgments or
administrative or judicial orders (including, without limitation, reasonable
attorneys’ fees and expenses) incurred. Assessed or sustained by or against
ACCESS. its directors, officers, employees or agents with respect to or arising
out of (a) the negligent acts or omissions of DISCUS; (b) any breach by DISCUS
of this Agreement or of its representations, warranties or covenants hereunder;
(c) any allegation that the Manufacture, importation, sale, offer for sale or
use of the Products under the Trademarks or DISCUS packaging or marketing
materials infringes any patent or other proprietary or protected right of any
Third Party; (d) any Recall or Seizure attributable to DISCUS’s or its
Affiliates’ performance or activities; (e) any enforcement or other action by
any Regulatory Authority relating to the distribution, the pricing of the
Products by DISCUS or sale of the Products by DISCUS to Third Parties; (f)
DISCUS’s failure to comply with any applicable law, regulation or order
(including, without limitation, environmental laws, regulations and orders); or
(g) is otherwise caused by or arises out of a claim of the Manufacture (if
DISCUS exercises any of its rights under Section 2.8), marketing, distribution,
sale and use of the Products by DISCUS or its Affiliates, contract
manufacturers, or sub-distributors. The foregoing indemnification obligation
shall not apply in the event and to the extent that such claim arose as a result
of any indemnitee’s negligence, intentional misconduct or breach of this
Agreement. The provisions of this Section shall survive the termination or
expiration of this Agreement.

 
7.1.3
To receive the benefit of indemnification under this Section 7.1, the Party and
its Affiliates, directors, officers, employees or agents seeking indemnification
(an “Indemnified Party”) shall promptly notify the other Party (the
“Indemnifying Party”), in writing, of any claim asserted or threatened against
such Indemnified Party for which such Indemnified Party is entitled to
indemnification hereunder from the Indemnifying Party. With respect to any such
claim the Indemnified Party shall, at no out-of-pocket expense to it, reasonably
cooperate with and provide such reasonable assistance to such Indemnifying Party
as such Indemnifying Party may reasonably request. Such reasonable assistance
may include, without limitation, providing copies of all relevant correspondence
and other materials that the Indemnifying Party may reasonably request. The
obligations of an Indemnifying Party under Sections 7.1.1 and 7.1.2 are
conditioned upon the delivery of written notice to the Indemnifying Party of any
asserted or threatened claim promptly after the Indemnified Party becomes aware
of such claim; provided that the failure of the Indemnified Party to give such
notice or any delay thereof shall not affect the Indemnified Party’s right to
indemnification hereunder, except to the extent that such failure or delay
impairs the Indemnifying Party’s ability to defend or contest any such claim.
The Indemnified Party may participate in the defense thereof at its sole cost
and expense. An Indemnifying Party may not settle a suit or claim without the
consent of the Indemnified Party if (a) such settlement would impose any
monetary obligation on the Indemnified Party for which indemnification is not
provided hereunder, (b) or require the Indemnified Party to submit to an
injunction or otherwise limit the Indemnified Party’s rights under this
Agreement, or (c) does not include a release of the Indemnified Party from all
liability arising out of such suit or claim. Any payment made by an Indemnifying
Party to settle any such suit or claim shall be at its own cost and expense.

7.1.4 The indemnification provided by this Section 7 shall be the Parties’ sole
and exclusive remedy in connection with any third party claim.
 

8.  
TERM AND TERMINATION

 

 
8.1
Term. This Agreement shall commence on the Effective Date and continue, unless
sooner terminated as set forth below in this Section 8 or as otherwise
specifically stated in this Agreement, for the duration of the Term.

 
8.2
Termination Without Cause. DISCUS may terminate this Agreement (a) at any time
prior to the last day of the twelfth full month after Launch immediately upon
giving written notice to ACCESS if DISCUS, in its complete and unfettered
discretion, determines to cease marketing the Products; or (b) during the six
(6) month period after the completion of the third Contract Year upon giving
written notice to ACCESS if DISCUS, in its complete and unfettered discretion,
determines to cease marketing the Products as a result of not meeting DISCUS’s
commercial objectives with respect to the Products; provided, however, that in
the event that DISCUS terminates this Agreement in accordance with this Section
8.2 or Section 8.3, then DISCUS shall transfer to ACCESS any data, excluding any
customer specific data, relating to the Products that DISCUS generated (through
marketing studies or otherwise) prior to such termination. Such termination
shall not give rise to the payment of any penalty or damages by either Party.

 
8.3
Termination for Regulatory Action or Claim of Infringement. DISCUS may terminate
this Agreement in its entirety immediately if either (i) the FDA or any other
Regulatory Authority takes any action, the result of which is to prohibit or
permanently or otherwise restrict the Manufacture, storage, importation, sale,
offer for sale or use of the Products in any way that will have a material,
adverse effect on the sale price or sales volumes of the Products (ii) any claim
is made that the Manufacture, storage, importation, sale, offer for sale or use
of the Products infringes any patent or other proprietary or protected right of
any Third Party. Such termination shall not give rise to the payment of any
penalty or damages by either Party.

 

 
8.4
Termination for Breach. If either Party has at any time failed to discharge any
of its obligations hereunder and failed to correct such default within thirty
(30) days after the other Party having given written notice to the non-aggrieved
Party thereof, the aggrieved Party shall be entitled to notify the non-aggrieved
Party that it intends to terminate this Agreement unless such default is
corrected and may so terminate ten (10) days after the end of such thirty (30)
day period if such default is continuing; provided that (i) if such default by
the other Party shall be a recurring default and the other Party does not
reasonably satisfy the aggrieved party that such defaults shall cease to occur,
the aggrieved Party shall be entitled to terminate this Agreement upon the
occurrence of such default and the other Party shall not be entitled to correct
such default and (ii) the non-aggrieved Party shall have the right to contest
the aggrieved Party’s ability to terminate this Agreement by bringing an action
for declaratory judgment in a court of competent jurisdiction and the
termination shall not be effective until the court rules. Such termination shall
not give rise to the payment of any penalty or damages by the terminating Party.

 

 
8.5
Termination for Bankruptcy. If either Party by voluntary or involuntary action
goes into liquidation, dissolves or files a petition for bankruptcy or
suspension of payments, is adjudicated bankrupt, has a receiver or trustee
appointed for its property or estate, becomes insolvent or makes an assignment
for the benefit of creditors, the other Party shall be entitled by notice in
writing to such Party to terminate this Agreement forthwith. Such termination
shall not give rise to the payment of any penalty or damages by the terminating
Party.

 
8.6
Effect of Termination. Termination or expiration of this Agreement, in whole or
in part, shall be without prejudice to the right of either Party to receive all
payments accrued and unpaid at the effective date of such termination or
expiration, without prejudice to the remedy of either Party in respect to any
previous breach of any of the representations, warranties or covenants herein
contained and without prejudice to any other provisions hereof which expressly
or necessarily call for performance after such termination or expiration. The
following provisions shall survive the expiration or termination of this
Agreement: Sections 3.4,3.6,3.7,5.5,5.6,5.7,5.8,6,7.1,8.6,9, 11 (except Section
11.6), 12 and 13.

9.  
CONFIDENTIALITY

 

 
9.1
Nondisclosure Obligation. Each of ACCESS and DISCUS shall use only in accordance
with this Agreement and shall not disclose to any Third Party the Confidential
Information received by it from the other Party pursuant to this Agreement,
without the prior written consent of the other Party. The foregoing obligations
shall survive for a period of five (5) years after the termination or expiration
of this Agreement. These obligations shall not apply to Confidential Information
that: (a) is known by the receiving Party at the time of its receipt, and not
through a prior disclosure by the disclosing Party, as documented by business
records; (b) is at the time of disclosure or thereafter becomes published or
otherwise part of the public domain without breach of this Agreement by the
receiving Party; (c) is subsequently disclosed to the receiving Party by a Third
Party who has the right to make such disclosure; (d) is developed by the
receiving Party independently of the Confidential Information received from the
disclosing Party and such independent development can be documented by the
receiving Party; or (e) is required by law, regulation, rule, act or order of
any governmental authority or agency to be disclosed by a Party, provided that
notice is promptly delivered to the other Party in order to provide an
opportunity to seek a protective order or other similar order with respect to
such Confidential Information and thereafter the disclosing Party discloses to
the requesting entity only the minimum Confidential Information required to be
disclosed in order to comply with the request, whether or not a protective order
or other similar order is obtained by the other Party.

 

 
9.2
Permitted Disclosures. Each Party may disclose the other Party’s Confidential
Information to us employees and Affiliates on a need-to-know basis and to its
agents or consultants to the extent required to accomplish the purposes of this
Agreement; provided that the recipient Party obtains prior agreement from such
agents and consultants to whom disclosure is to be made to hold in confidence
and not make use of such Confidential Information for any purpose other than
those permitted by this Agreement. Each Party will use at least the same
standard of care as it uses to protect proprietary or confidential information
of its own to ensure that such employees, agents, consultants, and Affiliates do
not disclose or make any unauthorized use of the other Party’s Confidential
Information.

 

 
9.3
Disclosure of Agreement. Neither ACCESS nor DISCUS shall release to any Third
Party or publish in any way any non-public information with respect to the terms
of this Agreement without the prior written consent of the other Party, which
consent shall not be unreasonably withheld or delayed, provided that either
Party may disclose the terms of this Agreement (a) to the extent required to
comply with applicable laws, including, without limitation, the rules and
regulations promulgated by the United States Securities and Exchange Commission;
provided, further, that prior to making any such disclosure, the Party intending
to so disclose the terms of this Agreement shall (i) provide the nondisclosing
Party with written notice of the proposed disclosure and an opportunity to
review and comment on the intended disclosure which is reasonable under the
circumstances and (ii) shall seek confidential treatment for as much of the
disclosure as is reasonable under the circumstances, including, without
limitation, seeking confidential treatment of any information as may be
requested by the other Party; or (b) to one or more Third Parties and/or their
advisors in connection with a proposed spin-off, joint venture, divestiture,
merger or other similar transaction involving all, or substantially all, of the
Products, assets or business of the disclosing Party to which this Agreement
relates or to lenders, investment bankers and other financial institutions of
its choice solely for purposes of financing the business operations of such
Party; provided, further, that either (i) the other Party has consented to such
disclosure or (ii) such Third Parties have signed confidentiality agreements
with respect to such information on terms no less restrictive than those
contained in this Section 9; or (c) to its legal counsel.

 

 
9.4
Publicity. All publicity, press releases and other announcements relating to
this Agreement or the transactions contemplated hereby shall be reviewed in
advance by, and shall be subject to the approval of, both Parties.

 

10.  
FORCE MAJEURE

 

 
10.1
If the production, delivery, acceptance or use of Products specified for
delivery under this Agreement or if the performance of any other obligation
hereunder is prevented, restricted or interfered with by reason of fires,
accidents, explosions, earthquakes, floods, embargoes, government ordinances or
requirements, civil or military authorities, acts of God or of the public enemy,
or other similar causes beyond the reasonable control of the Party whose
performance is affected (any of the foregoing a “Force Majeure Event”), then the
Party affected, upon giving prompt written notice to the other Party, shall be
excused from such performance on a day-for-day basis to the extent of such
prevention, restriction, or interference (and the other Party shall likewise be
excused from performance of its obligations on a day-for-day basis to the extent
such Party’s obligations relate to the performance so prevented, restricted or
interfered with); provided that the Party so affected shall use commercially
reasonable efforts to avoid or remove such causes of non-performance and both
Parties shall proceed to perform their obligations with dispatch whenever such
causes are removed or cease. If such Force Majeure Event continues for a period
of ninety (90) consecutive days or more and as a result either party has been
unable to perform its obligations under this Agreement for such ninety (90) day
period, the other Party may terminate this Agreement effective immediately, upon
delivery of a notice of termination in writing, provided that such event of
Force Majeure Event is continuing.

 
 

11.  
INTELLECTUAL PROPERTY

 

 
11.1
Trademarks: DISCUS Intellectual Property. DISCUS may advertise, promote, market
and sell the Products either separately or as part of other products under any
of DISCUS’s Trademarks, the OraDisc A Trademark, amlexanox trademark and/Or
DISCUS’s trade dress, whether registered or unregistered, in its sole
discretion; provided that DISCUS may not use or adopt any other ACCESS Trademark
or trade dress, or any such item confusingly similar thereto used or intended to
be used prior to the first use of such Trademark. ACCESS shall have no right,
title or interest in or to any DISCUS Trademark or trade dress, and DISCUS shall
have no right, title or interest in or to any ACCESS Trademark, except as
provided for herein. So long as DISCUS or any Affiliate of DISCUS shall have any
interest in any such Trademark or trade dress, whether registered or
unregistered, whether as proprietor, owner, or licensee in any country of the
world, ACCESS shall not adopt, use, apply for registration, register or own such
Trademark or trade dress, or any such item confusingly similar thereto in the
Territory, or take any action which weakens or undermines DISCUS’s proprietary
rights therein. So long as ACCESS or any Affiliate of ACCESS shall have any
interest in any such ACCESS Trademark or trade dress, whether registered or
unregistered, whether as proprietor, owner, or licensee in any country of the
world, DISCUS shall not adopt, use, apply for registration, register or own such
ACCESS Trademark or trade dress, or any such item confusingly similar thereto in
any country of the world, or take any action which weakens or undermines
ACCESS’s proprietary rights therein.

 
11.2 Inventions.
 
11.2.1 Except as otherwise provided for in this Section 11.2, each Party shall
own all Inventions made solely by employees of such Party (or Third Parties
acting on behalf of such Party) and shall jointly own with the other Party any
Invention made jointly by employees of both Parties (or Third Parties on behalf
of one or both Parties); provided that such Inventions were made without
violation of any term or condition of this Agreement. All determinations of
inventorship under this Agreement shall be made in accordance with United States
law.
 

 
11.2.2
With respect to any Inventions or know-how Controlled by DISCUS or is part of
DISCUS’s Intellectual Property Rights specifically relating to the Products,
DISCUS hereby grants to ACCESS a (subject to retained rights in DISCUS),
royalty-free license to use such Invention for the Manufacture of the Products
exclusively for DISCUS during the Term.

 

 
11.2.3
With respect to any Inventions or know-how owned jointly by DISCUS and ACCESS
relating to the Products (but not including the Products), DISCUS hereby grants
to ACCESS and ACCESS hereby grants to DISCUS an exclusive (subject to retained
rights in each Party), royalty-free license to use such Invention or know-how.

 

 
11.2.4
During the Term of this Agreement both Parties shall require their employees and
personnel involved in the performance of its duties under this Agreement to
deliver such assignments, confirmations of assignments or other written
instruments as are necessary to vest in the respective Party clear and
marketable title to the Inventions.

 
11.2.5
All rights, title and interest in and to the ACCESS Intellectual Property Rights
shall remain exclusively owned by ACCESS. The Inventions owned by ACCESS under
this Section shall be referred to herein as “ACCESS Inventions”.

 
11.2.6
All rights, title, and interest in and to know-how, which is developed jointly
by the Parties during the Term of this Agreement and related to the Products,
its Manufacture and/or use shall be owned jointly by the Parties. All rights,
title, and interest in and to any Regulatory Approval shall be owned exclusively
by ACCESS.

 
11.3 Confidentiality of Information related to Intellectual Property. Any and
all information and material, including any and all Intellectual Property Rights
therein and thereto, assigned to a Party pursuant to the terms of this Agreement
shall constitute Confidential Information of such Party which shall be deemed
the Disclosing Party with respect to such Confidential Information.
 
11 .4 Patent Rights to New Inventions.
 

 
11.4.1
ACCESS, at its own expense, shall use commercially reasonable efforts to
prepare, file, prosecute and maintain its Intellectual Property Rights in the
Territory, in a manner determined in ACCESS’s sole discretion.

 
11.4.2
(a)
The Parties shall mutually agree in good faith on a case-by-case-basis on which
of the Parties shall have the first right to prepare, file, prosecute and
maintain any jointly owned Invention and patent rights thereon (“Joint Patent
Rights”) throughout the world as well as on the split of the applicable expenses
and costs.

 
(b)
The acting Party shall keep the other Party completely informed during the whole
application procedure as well as during the whole patent duration. The acting
Party shall provide the other Party advance copies of any official
correspondence related to the filing, prosecution and maintenance of such patent
filings, and shall provide the other Party a reasonable opportunity to comment
on all correspondence received from and all submission to be made to any
government patent office or authority with respect to any such patent
application or patent, and shall consider in good faith the other Party’s
suggestions with respect to all submission made to any government office or
authority.

 
(c)
If either Party (the “Declining Party”) at any time declines to share in the
costs of filing, prosecuting and maintaining any such Joint Patent Right, the
Declining Party shall provide the other Party (the “Continuing Party”) with
thirty (30) days prior written notice to such effect, in which event, the
Declining Party shall (i) have no responsibility for any expenses incurred in
connection with such Joint Patent Right and (ii) if the Continuing Party elects
to continue prosecution or maintenance, the Declining Party, upon the Continuing
Party’s request, shall execute such documents and perform such acts, at the
Continuing Party’s expense, as may be reasonably necessary (x) to assign to the
Continuing Party all of the Declining Party’s right, title and interest in and
to such Joint Patent Rights and (y) to permit the Continuing Party to file,
prosecute and/or maintain such Joint Patent Right.

 
(d)
If DISCUS is (i) the sole owner of a Joint Patent Right or (ii) the Continuing
Party, such Joint Patent Right shall no longer be considered to be part of the
ACCESS Intellectual Property Rights for purposes of this Agreement and
thereafter shall be part of DISCUS’s intellectual property. (e) If ACCESS is (i)
the sole owner of a Joint Patent Right or (ii) is the Continuing Party, such
Joint Patent Rights shall no longer be considered to be part of DISCUS’s
intellectual property for purposes of this Agreement and thereafter shall be
part of the ACCESS Intellectual Property Rights.

 

 
11.4.3
Each Party shall, and shall cause its Affiliates, employees, attorneys and
agents to, cooperate fully with the other Party and provide all information and
data and execute any documents reasonably required or requested in order to
allow the other Party to prosecute, file, and maintain patents and patent
applications pursuant to this Section 11.4. Neither Party shall require the
other Party to make any payment or reimburse for any expenses in connection with
such operation, provision of information and data and execution of documents.
Each Party shall agree, if possible, to wave the Attorney-Client privilege with
respect to the prosecution of any patents related to the Products and the
attorney representing the acting Party shall be deemed to be the attorney of
both Parties and shall share equally his or her comments regarding the
applications freely with either Party.

 
11.5 Enforcement of Intellectual Property Rights.
 
11.5.1 If either Party becomes aware of any infringement of any of the
Intellectual Property Rights, or the validity of any of the Intellectual
Property Rights, which is the subject of this Agreement is challenged by a Third
Party in the Territory, such Party will notify the other Party in writing to
that effect. Any such notice shall include, as applicable, evidence to support
an allegation of infringement by such Third Party.

11.5.2 ACCESS shall have the first right, but not the obligation, to take action
to obtain a discontinuance of infringement or bring suit against a Third Party
infringer of ACCESS’s Intellectual Property Rights in the Territory. Such right
shall remain in effect until ninety (90) days after the date of notice given
under Section 11.5.1. In the event that ACCESS exercises such right, then ACCESS
shall bear all the expenses of any such suit brought by ACCESS claiming
infringement of any Intellectual Property Rights. If, after the expiration of
the ninety (90) day period, ACCESS has not obtained, or is not diligently
pursuing, a discontinuance of infringement of the Intellectual Property Rights,
filed suit against any such Third Party infringer of the Intellectual Property
Rights, or provided DISCUS with information and arguments demonstrating to
DISCUS’s reasonable satisfaction that there is insufficient basis for the
allegation of such infringement of the Intellectual Property Rights, then DISCUS
shall have the right, but not the obligation, to bring suit against such Third
Party infringer of the Intellectual Property Rights and to join ACCESS as a
party plaintiff, provided that DISCUS shall bear all the expenses of such suit.
In such event, DISCUS shall not consent to the entry of any judgment or enter
into any settlement with respect to such an action or suit without the prior
written consent of ACCESS (which consent shall not unreasonably be withheld) if
such judgment or settlement includes a finding or agreement that such
Intellectual Property Right is invalid or would enjoin or grant other equitable
relief against ACCESS. Provided that the Parties agree to split the expenses of
any action, in the event of monetary recovery by either ACCESS or DISCUS, the
Parties shall share such money, after deduction of all expenses related to their
recovery (including but not limited to legal expenses) in proportion to the net
income (as that term is generally defined) of each party from the sale of the
Products under this Agreement. The Parties shall hire a Third Party audit firm
to determine in confidence the respective net incomes of the Parties from the
sale of the Products and shall deliver to the Parties its determination. The
cost of the auditor shall be considered an expense related to recovery and shall
be deducted from the proceeds.
 
11.5.3 Each Party shall cooperate (including, without limitation, by executing
any documents reasonably required to enable the other Party to initiate such
litigation, testifying when requested or providing relevant documents) with the
other Party in any suit for infringement of Intellectual Property Rights brought
by the other Party against a Third Party in accordance with this Section and
shall have the right to consult with the other Party and to participate in and
be represented by independent counsel in such litigation at its own expense.
 
11.5.4 Neither Party shall be required pursuant to this Section 11.5 to
undertake any activities, including, without limitation, legal discovery at the
request of a Third Party except as may be required by lawful process of a court
of competent jurisdiction.
 
11.5.5 Neither Party shall incur any liability to the other Party as a
consequence of any such litigation or any unfavorable decision resulting there
from, including any decision holding any of the patents within ACCESS’s
Intellectual Property Rights invalid or unenforceable.

11.5.6 Any recovery obtained by either Party as a result of any such proceeding
against a Third Party infringer shall be allocated as follows: (a) such recovery
shall first be used to reimburse each Party for all litigation costs in
connection with such litigation paid by that Party; and (b) the Party bringing
the action shall receive the remaining portion of such recovery after payment of
the amounts specified in clause (a).

11.6 Trademarks. Subject to the restrictions in Section 11.1, DISCUS shall
select and own all of the Product- related trademarks, trade dress, copyrights
and names to be used by DISCUS in connection with the marketing, promotion and
sale of the Products in the Territory. DISCUS hereby grants to ACCESS a limited,
non-exclusive, non-transferable, fully paid, royalty free, sublicensable license
in and to all DISCUS Trademarks and copyrights to be contained in any such
labeling for the sole purpose of manufacturing and applying such labels to the
Products in the conduct of ACCESS’S obligations hereunder; provided, however,
that ACCESS agrees to cooperate with and offer reasonable assistance to DISCUS
in facilitating DISCUS’s control of the quality of the Products branded with
DISCUS’s trademarks hereunder; but further provided that in no event is ACCESS
obligated to provide such cooperation or assistance in any way that will (i)
lower the quality of the Products below that which ACCESS deems acceptable for
general commercial distribution, (ii) be contrary to or in violation of any
regulatory or statutory obligations, or (iii) increase the cost of manufacturing
and delivering the Products hereunder beyond that contemplated by the parties as
of the Effective Date.

12.  
NOTICES

 
12.1
Ordinary Notices. Correspondence, reports, documentation, and any other
communication in writing between the Parties in the course of ordinary
implementation of this Agreement shall be delivered by hand, sent by facsimile
or by overnight courier to the employee or representative of the other Party who
is designated by such other Party to receive such written communication at the
address or facsimile numbers specified by such employee or representative.

 
12.2
Extraordinary Notices. Extraordinary notices and communications (including,
without limitation, notices of termination, Force Majeure Event, material
breach, change of address, requests for disclosure of Confidential Information,
claims or indemnification) shall be in writing and shall be delivered by hand,
sent by facsimile or by overnight courier (and shall be deemed to have been
properly served to the addressee upon receipt of such written communication) to
the address set forth in Section 12.3 or such other address as notified in
writing by such Party to the other Party.

 

 
12.3
Addresses.

If to Discus:
If to Access:
Discus Dental, Inc.
2600 Stemmons Freeway
8550 Higuera Street
Suite 176
Culver City, CA 90232
Dallas, Texas 75207-2 107
Attention: President
Attention: President
Facsimile No.: (310) 845-1513
Facsimile No.: (214) 905-5101
   
With a copy to:
With a copy to:
C.N. Franklin Reddick, Esq.
John J. Concannon, Esq.
Akin Gump Strauss Hauer & Feld LLP
Bingham McCutchen LLP
2029 Century Park East
15 Federal Street
Suite 2400
Boston, MA 02110
Los Angeles, CA 90067
Facsimile No.: 617-951-8736
Facsimile No. 3l0~229-100l
 

 

13.  
GENERAL

 
13.1
Governing Law. This Agreement shall be construed in accordance with and governed
by the law of the State of Texas, without giving effect to its conflict of laws
provisions, and to the exclusion of the provisions of the United Nations
Convention on Contracts for the International Sale of Goods.

 
13.2
Assignment. This Agreement shall not be assignable or transferable by either
Party without the prior written consent of the other Party (which consent shall
not be unreasonably withheld); provided that either Party may assign this
Agreement and its rights and obligations hereunder without the other Party’s
consent in connection with the transfer or sale of all or substantially all of
the business of such party to which this Agreement relates (or, if applicable,
the business unit or division of such Party primarily responsible for
performance under this Agreement) to another party, whether by merger, sale of
stock, sale of assets or otherwise. The rights and obligations of the parties
under this Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties. Any attempted assignment in
violation of this Section 13.2 shall be null and void, without any force or
effect.

 
13.3
Entire Agreement. This Agreement and all Exhibits attached hereto (as the same
may be amended from time to time by the written agreement of the Parties)
constitute the entire agreement between the Parties with respect to the subject
matter hereof and supersedes all other documents, agreements, verbal consents,
arrangements and understandings between the Parties with respect to the subject
matter hereof. This Agreement shall not be amended orally, but only by an
agreement in writing, signed by both Parties that states that it is an amendment
to this Agreement.

 
13.4
Severability. If any term of this Agreement shall be found to be invalid,
illegal or unenforceable, it is the intention of the parties that the remainder
of this Agreement shall not be affected thereby; provided that neither Party”:
rights under this Agreement are materially adversely affected. It is further the
intention of the parties that in lieu of each such provision which is invalid,
illegal or unenforceable, there be substituted or added as part of this
Agreement a provision which shall be as similar as possible in the economic and
business objectives intended by the Parties to such invalid, illegal or
unenforceable provision, but which shall be valid, legal and enforceable. In the
event that either Party’s rights are materially adversely affected as a result
of a change in this Agreement as contemplated by this Section. Such Party may
terminate this Agreement by notice in writing to the other Party given no later
than sixty (60) days after such change.

 
13.5
Independent Contractor. Each Party shall act as an independent contractor and
neither Party shall have any authority to represent or bind the other Party in
any way.

 
13.6
No Waiver. Any waiver by one Party of any right of such Party or obligation of
the other Party must be in writing and shall not operate as a waiver of any
subsequent right or obligation.

 
13.7
Counterparts. This Agreement may be executed in two or more counterparts
(including, without limitation, by facsimile transmission), each of which when
so executed and delivered shall be an original, but all of which together shall
constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.

DISCUS DENTAL, INC.
ACCESS PHARMACEUTICALS, INC.
   
By: /s/ Ken Rosenblood 
By: /s/ Kerry P. Gray
Name: Ken Rosenblood
Title: COO
Name: Kerry Gray
Title: President & CEO

EXHIBIT A
Products

Aphthasol® is an approved prescription pharmaceutical product comprising 5%
amlexanox as the active ingredient in a mucoadhesive, hydrophobic paste vehicle.
The vehicle consists of benzyl alcohol, gelatin, glyceryl monostearate, mineral
oil, pectin, petrolatum, and sodium carboxymethylcellulose. This product is
approved by the FDA (NDA2O-5 11) for the treatment of aphthous ulcers in people
with normal immune systems. The approved product is currently supplied in 5 gram
glaminate tubes.

OraDisc™ A is an approved prescription pharmaceutical product comprising 2mg
amlexanox as the active ingredient in an erodible mucoadhesive half-inch
diameter disc. The product is manufactured as three laminated layers; a
mucoadhesive layer, which contains the active ingredient plus mucoadhesive and
film-forming polymers, a formulated pre-formed film layer, and third layer
comprising a blend of hydrophilic and hydrophobic polymers to control erosion
rate. OraDisc™A (NDA 21-727) is indicated for the treatment of aphthous ulcers
in adults and adolescentsl2 years of age and older.

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

EXHIBIT B
Methods of Analysis

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

EXHIBIT C
Specifications

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

EXHIBIT D
PRICES

ORADISC A: DISCUS guaranteed a per unit price of $1.00 for 20 discs and
packaging (finished goods) with reasonable package design and layout approval
rights held by DISCUS.

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

EXHIBIT E
LICENSE PAYMENTS
 
 
 
Upon Launch of OraDisc A
$750,000 Payment
Milestones:
 
$10 Million in Net Sales of OraDisc A in a particular calendar year
$500,000 Payment
$15 Million in Net Sales of OraDisc A in a particular calendar year
$750,000 Payment
$20 Million in Net Sales of OraDisc A in a particular calendar year
$1,000,000 Payment
$30 Million in Net Sales of OraDisc A in a particular calendar year
$2,000,000 Payment
$50 Million in Net Sales of OraDisc A in a particular calendar year
$2,000,000 Payment
$25 Million in aggregate Net Sales of OraDisc A during the Term of this
Agreement, commencing as of the Effective Date
$2,000,000 Payment

Notwithstanding the foregoing, the parties agree that DISCUS shall not be
obligated to pay more than one milestone payment in a single Contract Year. In
the event that more than one of the foregoing milestone payments is payable by
DISCUS during a single Contract Year of the term of this agreement, such
milestone payment(s) will be deferred to the anniversary of the previous
milestone payment and such twelve month deferral shall apply similarly for any
additional milestone payments; provided that in the event of a termination of
this agreement all milestone payments that have been earned shall remain
payable.

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

EXHIBIT F
Royalties
 
 

A.  
Royalties for prescription OraDisc A.

·  
15% of Net Sales of OraDisc A

B.  
Royalties for OraDisc A sold Over-the-Counter.

·  
7% of Net Sales of OraDisc A

C.  
Royalties for Aphthasol.

 

·  
During the Single Channel Period: $3.70 multiplied by the total Net Unit Sales
of the 5 gram tube of Aphthasol or $3.45 multiplied by the total Net Unit Sales
of the 3 gram tube of Aphthasol, provided that DISCUS may, in its sole
discretion, create and distribute portions of Aphthasol to third parties in
packages containing 3 grams or less (“Samples”) on a royalty free basis provided
that such Samples are (i) provided to third parties free of charge and (ii)
clearly marked as “sample not for resale”. ACCESS agrees that Samples will be
supplied to DISCUS at no more than Standard Cost.

 

·  
After the Single Channel period but prior to expiration or invalidation of U.S.
Patent No. 5,362,737: (i) 15% of Net Sales of Aphthasol achieved through the
Pharmacy Channel, (ii) 10% of Net Sales of Aphthasol achieved through the
Professional Channel, and (iii) 7% of Net Sales of Aphthasol achieved through
Over-the-Counter sales.

 

·  
After expiration or invalidation of U.S. Patent No. 5,362,737: No royalty on
Aphthasol

 

D.  
Upfront Royalties.

 

·  
Within thirty (30) days after the Effective Date, DISCUS shall pay to ACCESS an
upfront royalty in the amount of $500,000. Such amount shall be applied as a
credit against accrued Royalties until the entire $500,000 is recouped.

·  
Within thirty (30) days after Launch, DISCUS shall pay to ACCESS an upfront
royalty in the amount of $500,000. Such amount shall be applied as a credit
against accrued Royalties until the entire $500,000 is recouped.

·  
In the event of termination of this Agreement prior to full recoupment by DISCUS
of either of the foregoing upfront royalty payments, the unapplied remainder of
such upfront royalty payments will be refunded to DISCUS within thirty (30) days
after the effective date of termination.

 

E.  
Royalties for Products other than Apthasol and OraDisc A.

 

·  
Subject to negotiation, but no more than an amount consistent with rates on the
existing products.

 

F.  
Equity Investment.

Within thirty (30) days after Launch, DISCUS shall make an equity investment in
ACCESS of $750,000 (at then-current market value) on terms and conditions to be
mutually agreed upon by DISCUS and ACCESS, provided, that the parties agree that
such terms will provide for demand registration rights for any equity issued in
connection with such investment and customary minority shareholder protections.