licenseagreementmcdonald.htm


    
      

      

    
EXHIBIT 10.42


    EXCLUSIVE LICENSE
AGREEMENT

     

    This
Agreement is made effective the 24th day of  November, 1998 (the
“Effective Date”), by and between George B. McDonald, M.D. (hereinafter called
the “LICENSOR”), located at 1815 102nd Place S.E., Bellevue, WA 98004, and
Enteron Pharmaceuticals, Inc. (hereinafter called “LICENSEE”), located at 787
Seventh Avenue, 48th Floor, New York, NY 10019.

     

    WHEREAS,
LICENSOR owns the “Licensed Patents” defined below and is willing to grant a
license to LICENSEE under the Licensed Patents; and

     

    WHEREAS,
LICENSEE desires to obtain a license to the Licensed Patents upon the terms and
conditions hereinafter set forth.

     

    NOW,
THEREFORE, it is agreed as follows:

     

    Section
1. Definitions.

     

    As used
in the Agreement, the following capitalized terms, whether used in the singular
or plural, shall have the following meanings:

     

    A. “Affiliate”
means any corporation or other business entity controlled by, controlling, or
under common control with LICENSEE, but only for so long as such control
exists.  For purposes of this definition, “control” means (a) direct
or indirect beneficial ownership of at least fifty percent (50%) of the voting
stock of another corporation; or (b) the power, whether or not normally
exercised, to direct or cause the direction of the management, affairs and
policies of another corporation or other legal entity by contract, resolution,
or otherwise.

     

    B. “Clinical
Trial” means the enrollment of patients with graft-versus-host disease or
patients who have had (or will have had) a bone marrow transplant and,
therefore, are susceptible to graft-versus-host disease into a treatment
protocol whose primary endpoints are the safety and efficacy of the
treatment.

     

    C. “Calendar
Quarter” means each three-month period ending March 31, June 30, September 30
and December 31.

     

    D. “Confidential
Information” means all nonpublic technical and commercial information, including
all inventions, inventor or laboratory notebooks and records, formulae, methods,
plans, processes, specifications, experience and trade secrets relating to the
Technology (a) disclosed by one party to the other or (b) developed as a result
of research development or other activity conducted by either party prior to or
during the term of this Agreement,

     

    E. “Development
Report” means a written account of LICENSEE’s progress under a development plan
identified in Section 3A and Appendix C that contains the information specified
in Appendix B.

     

    F. “FDA”
means the United States Food and Drug Administration or any successor agency
having the administrative and regulatory authority to approve testing and
marketing of human pharmaceutical or biological prophylactic, therapeutic or
diagnostic products in the United States.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    G. “Know-how”
means all tangible information and data that is owned or controlled by either
party at any time before or during the term of the Agreement and that is related
to the Licensed Process(es) or is necessary or useful in the development,
registration, manufacture, use or sale of the Licensed Product(s), including,
but not limited to, items listed on Appendix D, pharmacological, toxicological,
clinical, analytical, and quality control data, and formulations, materials,
drawings and sketches, designs, testing and test results, and other regulatory
information.

     

    H. “Licensed
Field’’ means research and development of products for the prevention and
treatment of human diseases.

     

    I. “Licensed
Patents” shall mean (i) all U.S. and foreign patents and patent applications set
forth in Appendix I; (ii) any later-filed United States and/or foreign patent
applications based on the patent applications and/or patents listed in Appendix
I, or corresponding thereto, including any continuations, continuations-in-part,
divisional, reissues, reexaminations, or extensions thereof; and (iii) any
United Stales and/or foreign patents issuing from any of the
foregoing-

     

    J. “Licensed
Product” means (i) any product the relevant manufacture, use, sale or
importation of which would, in the applicable country and in the absence of this
License, infringe upon a Valid Claim under the Licensed Patents; or (ii) any
product that is manufactured or used according to any Licensed
Process.

     

    K. “Licensed
Process” means any method or process the practice of which would, in the
applicable country and in the absence of this License, infringe upon a Valid
Claim under the Licensed Patents.

     

    L. “NDA”
means a New Drug Application filed with the FDA.

     

    M. “Net
Sales” means the gross amounts actually received for the sale of Licensed
Product(s) less only the sum of the following:

     

    (i) Trade
discounts actually allowed to customers on Licensed Product(s);

     

    (ii) Sales,
tariff duties and/or use taxes directly imposed and paid with reference to sales
of Licensed Product(s) (excluding what is commonly known as income
taxes);

     

    (iii) Freight,
postage, and insurance charges and additional packaging charges for Licensed
Product(s);

     

    (iv) Amounts
actually allowed or credited on returns of Licensed Product(s);

     

    (v) Bad debt
deductions actually written off during the accounting period that directly
relate to Licensed Product(s); and

     

    (vi) Sales
commissions on sales of Licensed Product(s).

     

    N. “Orphan
Drug” means a product that is used to treat disease that affects relatively few
people and for which U.S. and foreign government authorities or agencies provide
tax credits or other incentives to make it possible to provide a safe and effect
medical product for the treatment of the disease.

     

    O. “Regulatory
Approval” means the receipt of notice by a party of approval by the FDA of a NDA
that is effective to permit the introduction of a Licensed Product into
interstate commerce pursuant to 21 U.S.C. 355.  “Regulatory Approval”
also includes the equivalent approval or licensure in a country other than the
United States.

     

    P. “Technology”
means the Know-how and the inventions disclosed or claimed in the Licensed
Patents.

     

    Q. ‘Third
Party” means any individual, corporation or other legal entity other than
LICENSOR, LICENSEE or an Affiliate.

     

    R. “Valid
Claim” means a claim of any pending patent application or unexpired patent, or
one whose expiration date has been extended by law, so long as such claim shall
withdrawn, canceled, disclaimed, nor held invalid by a court of competent
jurisdiction in an unappealed or unappealable decision.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
2. Grant of
License.

     

    A. Grant to
LICENSEE

     

    Subject
to the terms and conditions of this Agreement, LICENSOR hereby grants to
LICENSEE and LICENSEE accepts the following:

     

    (i) an
exclusive license under the Licensed Patents, including the right to grant
sublicenses to both Affiliates and Third Parties, to practice the Licensed
Process(es) and to make, have made, use, import and sell Licensed Product(s), in
each case worldwide, for use in the Licensed Field.

     

    (ii) an
exclusive license to the Know-how, including the right to grant sublicenses to
both Affiliates and Third Parties, to practice the Licensed Process(es) and to
make, have made, use, import and sell Licensed Product(s), in each case
worldwide, for use in the Licensed Field.

     

    B. Limitations

     

    The grant
in Section 2A shall be subject to, restricted by and non-exclusive with respect
to the following:

     

    (i) LICENSEE
shall use reasonable effort to introduce the Licensed Products for the
prevention of graft-versus-host disease and host-versus-graft disease into the
commercial market as soon as practicable, consistent with sound and reasonable
business practices and judgment, and thereafter endeavor to keep Licensed
Products reasonably available to the public.

     

    (ii) If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE-sponsored NDA for Licensed Product, LICENSOR shall have the
right to terminate or render this Agreement nonexclusive at any time after
eighteen (18) months from the effective date of this Agreement if, in LICENSOR’s
reasonable judgment, LICENSEE:

     

    a) is not
demonstrably and actively engaged in a research, development, manufacturing,
marketing or licensing program, as appropriate, and obtaining appropriate
Regulatory Approvals that are directed toward putting and keeping Licensed
Product(s) into the commercial market, or

     

    b) has not,
directly or through a sublicense, put Licensed Product(s) into commercial use or
kept Licensed Product(s) reasonably available to the public in a country or
countries where licensed.

     

    In making
this determination, LICENSOR shall take into account the normal course of such
programs conducted with sound and reasonable business practices and judgment and
shall take into account the reports provided hereunder by LICENSEE.

     

    (iii) If
LICENSEE does have to conduct Clinical Trials to obtain FDA approval of the
first LICENSEE-sponsored NDA for Licensed Product, LICENSOR shall have the right
to terminate or render this Agreement nonexclusive at any time after five (5)
years from the effective date of this Agreement if, in LICENSOR’s reasonable
judgment, LICENSEE:

     

    a) is not
demonstrably and actively engaged in a research, development, manufacturing,
marketing or licensing program, as appropriate, and obtaining appropriate
Regulatory Approvals that are directed toward putting and keeping Licensed
Product(s) into the commercial market, or

     

    b) has not,
directly or through a sublicense, put Licensed Product(s) into commercial use or
kept Licensed Product(s) reasonably available to the public in a country or
countries where licensed.

     

    In making
this determination, LICENSOR shall take into account the normal course of such
programs conducted with sound and reasonable business practices and judgment and
shall take into account the reports provided hereunder by LICENSEE.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iv) LICENSEE
shall, at least thirty (30) days prior to granting any sublicense to any
Affiliate or Third Party, identify such Affiliate or Third Party to
LICENSOR.  Concurrent with identifying such Affiliate or Third Parry,
LICENSEE shall provide to LICENSOR a copy of the sublicense
agreement.  Any sublicense shall be granted in a sublicense agreement
that is consistent with the terms of this Agreement and is in form and substance
acceptable to LICENSOR; provided, however, that a sublicense agreement that is
verified by Licensor to contain the relevant provisions of Sections 1, 2B, 3A,
3C, 4D, 4E, 5, 6, 7, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 shall
not require the pre-approval of LICENSOR.  In a sublicense agreement,
LICENSEE shall not grant any sublicensee the right to sublicense the Licensed
Patents or Know-how licensed in this Agreement.  LICENSEE shall be
liable to LICENSOR for performance by any sublicensee of such sublicenseers
obligations under the sublicense agreement.  Any sublicense agreement
shall provide for termination or assignment to LICENSOR, at the option of
LICENSOR, of LICENSEE’s interest therein upon the termination of this
Agreement.

     

    (v) If
LICENSEE is unable or unwilling to grant sublicenses, either as suggested by
LICENSOR or a potential sublicensee or otherwise, LICENSOR has the right to
directly license such potential sublicensee unless LICENSEE reasonably satisfies
LICENSOR that the granting of such license or sublicense would result in direct
or indirect competition with Licensed Product(s) sold, marketed, or under active
research and development by LICENSEE or would not materially increase the
availability to the general public of Licensed Products.

     

    (vi) A
nonexclusive, worldwide right to make and use the Technology by LICENSOR solely
for research purposes.

     

    (vii) It is
understood that if the United States Government (through any of its agencies or
otherwise) has funded research, during the course of or under which any of the
inventions of the Licensed Patents were conceived or made, the United States
Government is entitled, as a right, under the provisions of 35 U.S.C. §§200-212
and applicable regulations of Chapter 37 of the Code of Federal Regulations, to
a nonexclusive, nontransferable, irrevocable, paid up license to practice or
have practiced the invention of such Licensed Patents for government
purposes.  Any license granted to LICENSEE in this Agreement will be
subject to such right.

     

    Section
3. Consideration.

     

    A. Development.

     

    LICENSEE
agrees that it will (i) independently evaluate the Licensed Patents; (ii)
establish and actively pursue the development of the Licensed Patents to enable
Licensed Products to be sold and (iii) supply LICENSOR with a written
Development Report within one month following the end of each semi-annual period
ending on June 30 and December 31 during the term of this Agreement until
LICENSEE (a) obtains Regulatory Approvals of Licensed Product(s) for the
treatment of graft-versus-host disease and host-versus-graft disease and (b)
begins international commercial sales of such Licensed
Product(s).  All development activities and all aspects of Licensed
Product design and decisions to market are entirely at the discretion of
LICENSEE, and LICENSEE will rely entirely on its own
expertise.  LICENSOR’s review of LICENSEE’s development plan is solely
to verify the existence of LICENSEE’s commitment to Licensed Product development
activity.

     

    B. License
Fee.

     

    In
partial consideration for the grant of licenses in this Agreement to LICENSEE,
LICENSEE agrees to pay to LICENSOR a nonrefundable license fee of twenty
thousand dollars ($20,000) within seven (7) calendar days of the execution of
this agreement.

     

    C. Royalty.

     

    In
partial consideration for the grant of licenses in this Agreement to LICENSEE
and during the term of this Agreement, LICENSEE agrees to pay the following as
running royalties, which shall not be returnable in any event, to LICENSOR on a
country-by-country basis:

     

    (i) If
LICENSEE does have to conduct Clinical Trials to obtain FDA approval of the
first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay to
LICENSOR within forty-five (45) days of the end of each Calendar Quarter in an
amount equal to twenty-five percent (25%) of:  (a) any non-recurring
sublicense fees (including, but not limited to, signing, up-front, and lump-sum
fees) and annual license maintenance fees, if any, received from any Affiliate
or Third Party for the right to practice the Licensed Process(es) or make, use,
sell, or import Licensed Product(s); and (b) all royalties received by LICENSEE
from the sale of Licensed Product(s) by any sublicensed Third
Party.

     

    (ii) If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay
to LICENSOR within forty-five (45) days of the end of each Calendar Quarter in
an amount equal to thirty-three percent (33%) of:  (a) any
non-recurring sublicense fees (including, but not limited to, signing, up-front,
and lump-sum fees) and annual license maintenance fees, if any, received from
any Affiliate or Third Party for the right to practice the Licensed Process(es)
or make, use, sell, or import Licensed Product(s); and (b) all royalties
received by LICENSEE from the sale of Licensed Product(s) by any sublicensed
Third Party,

     

    (iii) If
LICENSEE does have to conduct Clinical Trials to obtain FDA approval of the
first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay
LICENSOR within forty-five (45) days from the end of each Calendar Quarter six
percent (6%) of all Net Sales of Licensed Products by LICENSEE or a sublicensed
Affiliate.

     

    (iv) If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE-sponsored NDA for Licensed Product, then LICENSEE shall pay
LICENSOR within forty-five (45) days from the end of each Calendar Quarter eight
percent (8%) of all Net Sales of Licensed Products by LICENSEE or a sublicensed
Affiliate.

     

    (v) The
royalty rates in (i), (ii), (iii) and (iv) above shall be reduced by fifty
percent (50%) in any country where a competitor is selling any oral formulation
of the Licensed Product(s) for any indication.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (vi) No
royalty shall accrue on sales among LICENSEE, its sublicensed Affiliates or
sublicensed Third Parties.  Royalties shall only accrue on sales by
LICENSEE, its sublicensed Affiliates or sublicensed Third Parties to parties
other than LICENSEE, its sublicensed Affiliates or sublicensed Third Parties and
shall be payable only once for any given unit of Licensed Product
sold.

     

    (vii) To the
extent that LICENSEE or any Affiliate of LICENSEE is required, by order or
judgment of any court, to obtain in any country any license from a Third Party
in order to practice the rights purported to be granted hereunder to LICENSEE by
LICENSOR under the Third Party’s issued patents in such country, then fifty
percent (50%) of the royalties payable under such license in such jurisdiction
may be deducted from royalties otherwise payable to LICENSOR hereunder, provided
that in no event shall the aggregate royalties payable to LICENSOR in any
Calendar Quarter in such country be reduced by more than fifty per cent (50%) as
a result of any such deduction.

     

    D. Milestone
Payments.

     

    LICENSEE
agrees to pay to LICENSOR three hundred thousand dollars ($300,000) within seven
(7) calendar days of the FDA’s approval of the first LICENSEE-sponsored NDA
incorporating the Technology.

     

    E. Equity
Participation.

     

    (i) In
partial consideration for the grant of licenses in this Agreement to LICENSEE,
LICENSEE shall issue to LICENSOR a number of shares (the “Initial Shares”) of
common stock (the “Common Stock”) of LICENSEE, par value $.001 per share,
representing eight percent (8%) of the outstanding Common Stock as of the date
of execution of the License Agreement, LICENSEE shall issue the Initial Shares
to LICENSOR pursuant to the exemption from registration provided by Section 4(2)
under the Securities Act of 1933, as amended (the “Securities
Act”).  The Initial Shares shall be protected from dilution in
connection with any financing transaction by LICENSEE until such time as
LICENSEE has received at least two million dollars ($2,000,000) in gross
proceeds from the issuance of equity securities of LICENSEE.  LICENSOR
shall be entitled to receive, in partial consideration for the grant of licenses
this Agreement to LICENSEE, additional shares of Common Stock so as to maintain
his respective percentage ownership of LICENSEE immediately prior to the
applicable financing.

     

    (ii) If
LICENSEE does not have to conduct any Clinical Trials prior to FDA approval of
the first LICENSEE sponsored NDA for Licensed Product, then LICENSEE also shall
issue to LICENSOR, in partial consideration for the grant of licenses in this
Agreement to LICENSEE, a number of new shares of Common Stock of LICENSEE equal
to the Initial Shares, which shall have the same dilution protection as the
Initial Shares set forth in E(i) above.

     

    F. Penalty
Payments.

     

    In the
event LICENSEE has not (i) initiated recruitment of patients for a Phase III
Clinical Trial for the Licensed Products, or (ii) initiated the filing of a NDA
within six (6) months of signing this Agreement, LICENSEE shall pay LICENSOR one
hundred thousand dollars ($100,0,00) within seven (7) calendar days of the six
(6) month anniversary of the Effective Date of this Agreement.

     

    G. Payments by
Equity.

     

    (i) Upon the
request of LICENSOR, LICENSEE shall have the obligation to fulfill any of
LICENSEE’s payment obligations due under this Section 3 through the issuance of
an amount of shares of Common Stock equal to the cash value of any such payment
obligation.  Any such issuances of Common Stock shall be made only to
the extent that an exemption from the registration requirements of the
Securities Act exists or the shares are duly registered under the Securities
Act.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (ii) For
purposes of calculating the cash value of the Common Stock under Section 3G(i),
the then-current market price of the Common Stock will be deemed to be the
average closing price of the Common Stock for the ten (10) consecutive trading
days prior to the date on which any payment pursuant to this Section 3 accrues,
on the principal national securities exchange on which the Common Stock is
admitted to trading or listed, or if not listed or admitted to trading on any
such national exchange, then the representative average closing bid price of the
Common Stock as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System (“Nasdaq”) or other similar organization, or, if the
Common Stock is not reported on Nasdaq or by a similar organization, then the
average per share bid price for the Common Stock in the over-the-counter market
as reported by the National Quotation Bureau or similar organization, or if not
so available, then the fair market price of the Common Stock as determined in
good faith by the Board of Directors of LICENSEE.  In connection with
this calculation, LICENSOR, or his representative, shall have access to the
books and records of LICENSEE at any time upon twenty-four (24) hour notice to
LICENSEE.  Such access shall occur during normal business hours of
LICENSEE.

     

    (iii) LICENSEE
agrees that, at any time, and from time to time during the period commencing two
(2) years after the Effective Date hereof, or one (1) year after LICENSEE’S
initial public offering of Common Stock registered under the Securities Act,
whichever is later, and ending on the date that is five (5) years after the
Effective Date hereof, if the Board of Directors of LICENSEE authorizes the
filing of a registration statement under the Securities Act (other than the
initial public offering of LICENSEE’s Common Stock, or a registration statement
on Form S-8, Form S-4 or any other form that does not include substantially the
same information as would be required in a form for the general registration of
securities) in connection with the proposed offer of any of its securities by it
or any of its stockholders, then LICENSEE shall (a) promptly notify LICENSOR
that such registration statement will be filed and that the Common Stock then
held by LICENSOR will be included in such registration statement at LICENSOR’s
request, (b) cause such registration statement to cover all of such Common Stock
issued to LICENSOR and requested for inclusion, (c) use its reasonable best
efforts to cause such registration statement to become effective as soon as
practicable and (d) take all other action necessary under any federal or state
law or regulation of any governmental authority to permit all such Common Stock
that has been issued to LICENSOR and requested by LICENSOR for inclusion in such
proposed registration statement to be sold or otherwise disposed of and shall
maintain such compliance with each such federal and state law and regulation of
any governmental authority for the period necessary to effect the proposed sale
or other disposition of any Common Stock that has been issued to LICENSOR and
requested by LICENSOR for inclusion in the proposed registration
statement.

     

    To the
extent that officers or directors of LICENSEE are permitted to have registered
shares of Common Stock held by any of them included in an initial public
offering of LICENSEE’S Common Stock, LICENSOR shall also have the right to
include the Common Stock then held by LICENSOR in the registration statement
prepared in connection with such an offering.

     

    (iv) In the
event that LICENSEE grants to any investor(s) the right to require LICENSEE to
effect a registration of Common Stock held by such investors, LICENSOR shall
have the right to require LICENSEE to include the Common Stock held by LICENSOR
in any such registration on the same terms applicable to such
investor(s).

     

    a) If the
Common Stock owned by LICENSOR is or becomes freely tradable, then LICENSOR
shall have no right to the above described registration rights.

     

    b) LICENSEE
may at any time, abandon or delay any registration commenced by
LICENSEE.

     

    c) LICENSOR
represents to LICENSEE that the Common Stock will be acquired by LICENSOR for
investment purposes only, for an indefinite period of time, for its own account,
not as a nominee or agent for any other entity, and not with a view to the sale
or distribution of all or any part thereof, and LICENSOR has no present
intention of selling, granting any participation in, or otherwise distributing,
any or all of the Common Stock.  LICENSOR does not have any contract,
undertaking, agreement or arrangement with any entity to sell, transfer or grant
participation to such person, firm or corporation, with respect to any or all of
the Common Stock.

     

    d) LICENSEE
represents to LICENSOR that LICENSEE shall rely on Section 4(2) under the
Securities Act in connection with the issuance of the Initial Shares to
LICENSOR.  In addition, LICENSEE represents to LICENSOR that LICENSEE
shall conduct any further issuances of Common Stock to LICENSOR (under this
Section 3) only in compliance with registration under the Securities Act or an
available exemption from such registration requirements.

     

    e) The
parties agree to execute such further instruments and to take such further
action as may reasonably be necessary to carry out the intent of this Section
3G.

     

    f) LICENSOR
agrees that, in connection with each underwritten public offering of shares of
Common Stock or other equity securities of LICENSEE registered under the
Securities Act by or on behalf of LICENSEE, LICENSOR will not sell or transfer,
or offer to sell or transfer, any equity securities of LICENSEE, to the extent
all officers, directors and greater than five percent (5%) shareholders of
LICENSEE are also subject to this restriction for such period as the managing
underwriter of such offering determines is necessary to effect the underwritten
public offering, not to exceed one hundred and eighty (180) days, and LICENSOR
further agrees that it will sign an agreement as requested by the managing
underwriter of such offering to effect the requirements of this Section
3G(iv)(f).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
4. Certain Warranties of
LICENSOR and LICENSEE.

    
       

    

    A. To
LICENSOR’s knowledge and belief, LICENSOR has all right, title, and interest in
and to the Licensed Patents and Know-How, including exclusive, absolute,
irrevocable right, title and interest thereto, free and clear of all liens,
charges, encumbrances or other restrictions or limitations of any kind
whatsoever and to LICENSOR’s knowledge and belief there are no licenses,
options, restrictions, liens, rights of third parties, disputes, royalty
obligations, proceedings or claims relating to, affecting, or limiting
LICENSOR’s rights licensed to LICENSEE under this Agreement.

     

    B. As of the
Effective Date, to LICENSOR’s knowledge and belief, there is no claim pending or
threatened, of infringement, interference or invalidity regarding any part or
all of the Licensed Patents or the use of the inventions as contemplated in the
underlying patent applications as presently drafted.

     

    C. LICENSOR,
by this License Agreement, makes no representations or warranties as to the
validity and/or scope of the claims contained in the Licensed Patents or that
such Licensed Patents may be exploited by LICENSEE or its sublicensees without
infringing other patents and LICENSEE so acknowledges.

     

    D. EXCEPT AS
MAY BE EXPRESSLY PROVIDED IN THIS SECTION 4, LICENSOR DOES NOT MAKE, AND
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, ORAL OR
WRITTEN, AS TO ANY OF THE LICENSED PATENTS, KNOW-HOW, OR TECHNOLOGY, INCLUDING
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

     

    E. LICENSEE
represents and warrants to LICENSOR the following:

     

    (i) LICENSEE
is a corporation duly organized„ validly existing and in good standing under the
laws of the State of New York and has all necessary corporate power to enter
into and perform its obligations under this Agreement.

     

    (ii) The
execution, delivery and performance of this Agreement by LICENSEE have been duly
authorized and approved by all necessary corporate action, and that the
Agreement is binding upon and enforceable against LICENSEE in accordance with
its terms (subject to bankruptcy and similar laws affecting the rights of
creditors generally).

     

    (iii) At all
times during the term of this Agreement, LICENSEE and all its sublicensees will
obtain, maintain and comply with all licenses, permits and authorizations
necessary to LICENSEE’S complete and timely performance of its obligations under
this Agreement, which are required under any applicable statutes, laws,
ordinances, rules and regulations of the United States as well as those of all
applicable foreign governmental bodies, agencies and subdivisions, having,
asserting or claiming jurisdiction over LICENSEE or any sublicensee or
LICENSEE’s sublicensee’s performance of the terms of this
Agreement.  In particular, LICENSEE.

     

    (iv) LICENSEE
will be responsible for obtaining all necessary United States FDA approvals and
all approvals required by similar governmental bodies or agencies of all
applicable foreign countries.

     

    (v) LICENSEE
understands and acknowledges that the transfer of certain commodities and
technical data is subject to United States laws and regulations controlling the
export of such commodities and technical data, including all Export
Administration Regulations of the United States Department of
Commerce.  These laws and regulations, among other things, prohibit or
require a license for the export of certain types of technical data to certain
specified countries.  LICENSEE hereby agrees and gives written
assurance that it will comply with all United States laws and regulations
controlling the export of commodities and technical data, that it will be solely
responsible for any violation of such by LICENSEE or its AFFILIATES or
sublicensees, and that LICENSEE will defend and hold LICENSOR harmless of any
legal action of any nature occasioned by such violation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
5. Record Keeping, Reporting,
Accounting and Payments.

     

    A. LICENSEE
shall report to LICENSOR the date of first sale of each Licensed Product in each
country within thirty (30) days of occurrence.

     

    B. LICENSEE
will keep, maintain and require each of its sublicenses to keep and maintain, in
accordance with generally accepted accounting principles, proper and complete
books and records sufficient to verify the accuracy and completeness of
LICENSEE’s and each sublicensee’s accounting of all sales of Licensed
Product.  The books and records will be preserved for a period not
less than three years after they are created.

     

    C. Amounts
owing to LICENSOR under Section 3C will be paid on a quarterly basis for the
periods ending March 31, June 30, September 30 and December 31, within
forty-five days of the end of the Calendar Quarter.  The balance of
any such amounts that remain unpaid more than thirty days after they are due to
LICENSOR will accrue interest until paid at the rate of one percent (1%) per
month.  In no event, however, will this interest provision be
construed as a grant of permission for any payment delays.

     

    D. All
amounts owing to LICENSOR under this Agreement will be paid in U.S. dollars to
LICENSOR at the address provided in Section 13.  All royalties owing
with respect to Net Sales stated in currencies other than U.S. dollars will be
converted at the rate shown in the Federal Reserve Noon Valuation - Value of
Foreign Currencies on the last day of the Calendar Quarter for which payment is
due or, if the last day is not a business day, the closest preceding business
day.  All amounts payable by LICENSEE to LICENSOR shall be made
without any deduction for conversion or remittance fees or other charges imposed
outside of the United States or any taxes levied on such amounts by non-U.S. tax
authorities, all of which shall be borne by LICENSEE.  LICENSOR shall
pay any conversion or remittance fees or other charges imposed in the United
States or any taxes levied by U.S. tax authorities.

     

    E. With each
payment due under Section 3C, the accounting will be summarized on the form
shown in Appendix A of this Agreement on a country-by-country basis for each
Licensed Product sold by LICENSEE or a sublicensed Affiliate or sublicensed
Third Party.  Such accounting summaries shall be certified as correct
by an officer of LICENSEE and shall include a detailed listing of all deductions
from gross sales and be accompanied by a listing of all payments made by each
sublicensee to LICENSOR.  In the event no payment is owed to LICENSOR,
a statement setting forth that fact will be supplied to LICENSOR and certified
as correct by an officer of LICENSEE.

     

    F. LICENSEE
will take all steps necessary so that LICENSOR may, within thirty (30) days of
LICENSOR’s request, review the books and records at a single U.S. location to
verify the accuracy of LICENSEE’s and each sublicensee’s
accounting.  The review may be performed by any attorney or registered
CPA mutually agreed upon by LICENSOR and LICENSEE with the cost being borne
solely by LICENSOR, upon reasonable notice and during regular business hours and
not more than twice per calendar year.  If a royalty payment
deficiency is determined, LICENSEE will pay the royalty deficiency outstanding
within thirty (30) days of receiving written notice thereof, plus interest on
outstanding amounts as described in Section 5C.  If a royalty payment
deficiency for a calendar year exceeds five percent (5%) of the royalties paid
for any consecutive twelve (12) months, then LICENSEE will be responsible for
paying LICENSOR’s out-of-pocket expenses incurred with respect to such
review.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
6. Term and
Termination.

     

    A. If not
terminated sooner pursuant to Sections 2B, 8C, 10B, or the provisions in this
Section 6, this Agreement shall terminate:  (i) on the date of the
last to expire claim contained in the Licensed Patents; or (ii) in the event
that no patent shall issue, upon the expiration of the Orphan Drug status, if
achieved.

     

    B. Subject
to the provisions of the federal bankruptcy laws that limit rights of
termination, if LICENSEE shall become bankrupt, or shall file a petition in
bankruptcy, or if the business of LICENSEE shall he placed in the hands of a
receiver, assignee or trustee for the benefit of creditors, whether by the
voluntary act of LICENSEE or otherwise, this License Agreement shall
automatically terminate.

     

    C. Should
LICENSEE fail to make payment to LICENSOR of royalties due in accordance with
the terms of this Agreement that are not the subject of a bona fide dispute
between LICENSOR and LICENSEE, LICENSOR shall have the right to terminate this
License Agreement within thirty (30) days after giving said notice of
termination unless LICENSEE shall pay to LICENSOR, within the 30-day period, all
such royalties and interest due.  Upon the expiration of the 30-day
period, if LICENSEE shall not have paid all such royalties and interest due, the
rights, privileges and license granted hereunder shall, at the option of
LICENSOR, immediately terminate.

     

    D. Upon any
material breach or default of this Agreement by LICENSEE, other than as set
forth in Section 6C herein above, LICENSOR shall have the right to terminate
this Agreement and the rights, privileges and licenses granted hereunder upon
giving thirty (30) days written notice to LICENSEE.

     

    E. LICENSEE
shall have the right at any time to terminate this Agreement in whole by giving
ninety (90) days notice thereof in writing to LICENSOR.

     

    F. Upon
termination of this Agreement for any reason, nothing herein shall be construed
to release either party from any obligation that matured prior to the effective
date of such termination or obligations under Sections 3, 5, 10, 11, 15, and 16
hereof.  LICENSEE and/or any sublicensee thereof may, however, after
the effective date or such termination and continuing for a period not to exceed
three (3) months thereafter, sell all Licensed Products completed as of the date
of notice of such termination and sell any Licensed Products in the process of
manufacture as of the date of notice of such termination, provided that LICENSEE
shall pay or cause to be paid to LICENSOR the royalties thereon as required by
Article 3 of this License Agreement and shall submit the reports and
certifications required on the sales of Licensed Products outlined in Section 5E
hereof.

     

    G. LICENSOR
shall have the right to terminate this Agreement upon termination of the
Consulting Agreement entered into by and between LICENSOR and LICENSEE that
relates to LICENSOR’s providing consulting services to LICENSEE in connection
with LICENSEE’s business.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
7. Binding Effect and
Assignability.

     

    The
rights, benefits, duties and obligations under this Agreement shall inure to,
and be binding upon LICENSOR and LICENSEE and their respective successors,
assigns, and legal representatives, This Agreement and the rights and duties
hereunder may not be assigned by either party without first obtaining the
written consent of the other, which consent will not be unreasonably
withheld.  Any such purported assignment, without the written consent
of the other party, will be null, void and of no effect, Notwithstanding the
foregoing, LICENSEE may assign this Agreement, without the written consent of
LICENSOR, to either (i) a purchaser, merging or consolidating corporation, or
acquirer of substantially all of LICENSEE’s assets or business and/or pursuant
to any reorganization qualifying under section 368 of the internal Revenue Code
of 1986 as amended and may be in effect at such time, or (ii) an Affiliate of
LICENSER

     

    Section
8. Patent
Prosecution.

     

    A. Subject
to the provisions of section 8(C) hereof, LICENSEE, within ninety (90) days from
receipt of appropriate documentation, shall reimburse LICENSOR in the
approximate amount of Six Thousand Eight Hundred Thirty-Three Dollars and Three
Cents ($6,833.03) representing all reasonable out-of-pocket expenses LICENSOR
has incurred for the preparation, filing, prosecution and maintenance of
Licensed Patents for to execution of this Agreement and shall reimburse LICENSOR
for all such future reasonable out-of-pocket expenses within sixty (60) days
from receipt by LICENSEE of appropriate documentation of such expenses by
LICENSOR.

     

    B. LICENSOR
shall diligently prosecute and maintain the Licensed Patents as set forth
Section 1 hereof and Appendix I (as the same may be amended or supplemented from
time to time after the Effective Date), utilizing such patent counsel as
LICENSOR is using as of the Effective Date of this Agreement or patent counsel
as may be mutually agreed upon by the parties hereto.  LICENSOR agrees
to keep LICENSEE reasonably well informed with respect to the status and
progress of any such applications, prosecutions and maintenance activities,
including consulting in good faith with LICENSEE and taking into account
LICENSEE’s comments and requests with respect thereto.  Both parties
agree to provide reasonable cooperation to each other to Facilitate the
application and prosecution 01-patents pursuant to this Agreement.

     

    C. LICENSEE
may, in its discretion, elect to not reimburse LICENSOR for reasonable
out-of-pocket expenses of patent prosecution set forth in Section 8B, in which
case LICENSEE shall provide LICENSOR with at least ninety (90) days notice
thereof and LICENSOR shall have the right to treat such notice as a notice of
termination of this Agreement under Section 6E hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
9. Infringement and Other
Actions.

     

    A. LICENSEE
and LICENSOR shall promptly provide written notice, to the other party, of any
alleged infringement by a Third Party of the Licensed Patents and provide such
other party with any available evidence of such
infringement.  LICENSOR and the officers of LICENSEE shall confer to
determine in good faith an appropriate course of action to enforce such Licensed
Patents or other wise abate the infringement thereof.  LICENSEE and
LICENSOR shall promptly provide written notice, to the other party, of any
potential or actual declaratory judgment challenge to the Licensed Patents and
shall confer to determine in good faith an appropriate course of action in
response to such challenge.

     

    B. During
the term of this Agreement, LICENSEE will have the right, but not the obligation
at its own expense and utilizing counsel of its choice, to prosecute any
infringement of and/or defend any declaratory judgment challenge to, the
Licensed Patents.  In furtherance of such right, LICENSOR hereby
agrees that LICENSEE may join LICENSOR as a party in any such suit, without
expense to LICENSOR, No settlement, consent judgment or other voluntary final
disposition of any such suit that would adversely affect the rights of LICENSOR
may be entered into without the written consent of LICENSOR, which consent shall
not be unreasonably withheld.  LICENSEE will indemnify and hold
LICENSOR harmless against any and all damages, settlements, costs, expenses,
penalties, tines or liability (including, without limitation, reasonable
attorneys’ fees) that may be found or assessed against LICENSOR in any such suit
other than those resulting from LICENSOR’s gross negligence or willful
misconduct,

     

    C. Any
recovery, award or damages for infringement or other moneys derived by LICENSEE
in any suit under Section 9B, whether by judgment or settlement, shall be
applied first in satisfaction of any unreimbursed expenses and legal fees of
LICENSEE relating to the suit and then to LICENSOR for any royalties credited in
accordance with Section 9D.  The balance remaining from any such
recovery will be treated as royalties received by LICENSEE from a sublicensee
and shared by LICENSOR and LICENSEE in accordance with Section 3C(i)
hereof.

     

    D. LICENSEE
may credit up to fifty percent (50%) of any out-of-pocket litigation costs
incurred by LICENSEE in any country pursuant to Section 9B against royalties
thereafter payable to LICENSOR hereunder for such country and apply the same
toward one-half of its actual, reasonable out-of-pocket litigation
costs.  If fifty percent (50%) of such out-of-pocket litigation costs
in such country exceeds fifty percent (50%) of royalties payable to LICENSOR for
such country in any year in which such costs are incurred, then the portion of
the fifty percent (50%) of the out-of-pocket litigation costs in excess of’ such
fifty percent (50%) of the royalties payable will be carried over and credited
against royalty payments in future years for such country.

     

    E. If within
two (2) months after receiving notice of any alleged infringement of the
Licensed Patents, LICENSEE has not notified in writing LICENSOR of LICENSEE’S
intended action, or if LICENSEE notifies LICENSOR at any time prior thereto, of
its intention not to bring suit against the alleged infringer or to defend the
Licensed Patents in a declaratory judgment action, then, and in those events
only, LICENSOR will have the right, but not the obligation, at its own expense
and utilizing counsel of its choice, prosecute any infringement of, and/or
defend any declaratory judgment challenge to, the Licensed
Patents.  LICENSOR may, for such purposes, join LICENSEE as a party
plaintiff.  LICENSOR will keep any recovery, award or damages for
infringement or other moneys derived therefrom, whether by judgment or
settlement, and such will not be applicable to any royalty obligation of
LICENSEE.

     

    F. In any
suit to enforce and/or defend the Licensed Patents pursuant to this Section 9,
the party not in control of such suit shall, at the request and expense of the
controlling party, cooperate in all respects and, to the extent possible, have
its employees testify when requested and make available relevant records,
papers, information, samples, specimens, and the like.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
10. Product Liability; Conduct
of Business.

     

    A. LICENSEE
will, at all times during the term of this Agreement and thereafter, indemnify,
defend and hold LICENSOR, his successors and assigns, harmless from and against
all liabilities, damages, losses, settlements, claims, actions, suits,
penalties, fines, costs or expenses, including without limitation, legal
expenses and reasonable attorneys fees (any of the foregoing, a “Claim”)
incurred by or asserted against LICENSOR, his successors and assigns of whatever
kind or nature, including, without limitation, any Claim based upon negligence,
warranty, strict liability, violation of government regulation, arising from or
occurring as a result of (i) the use of the Technology by LICENSEE or any of its
Affiliates, agents or sublicensees or (ii) the production, manufacture, sale,
use, consumption or advertisement of Licensed Product(s) or the practice of
Licensed Process(es), except to the ex-tent such Claims are the result of
LICENSOR’s gross negligence or willful misconduct No settlement, consent
judgment or other voluntary final disposition of any such Claim may be entered
into without the written consent of the LICENSOR, which consent shall not be
unreasonably withheld.  LICENSOR at all times reserves the right to
select and retain, at LICENSOR’s sole expense, counsel of its own to defend
LICENSOR’s interests,

     

    B. No later
than the earlier of (i) testing or use of Licensed Product in human subjects or
(ii) sale of a Licensed Product, LICENSEE shall obtain and maintain product
liability insurance policies in amounts acceptable to LICENSOR and have LICENSOR
named as an additional insured on such policies.  LICENSEE shall
provide LICENSOR with evidence of such coverage at least ten (10) days before
the commencement of the earlier of (i) or (ii) of this Section 10B and from time
thereafter upon LICENSOR’s request.  If LICENSOR’s insurance costs can
be shown to have increased solely because of this Agreement, and such increases
are verified by an independent certified public accountant, LICENSEE shall
reimburse LICENSOR for such increase within thirty (30) days of receiving
written notice from LICENSOR requesting such reimbursement.  If
LICENSEE does not reimburse LICENSOR, LICENSOR shall have the right to terminate
this Agreement thirty (30) days after written notice of termination unless
LICENSEE shall reimburse LICENSOR within the 30-day period.  This
Section 10B shall survive any termination of this Agreement.

     

    Section
11. Use of
Names.

     

    Nothing
contained in this Agreement shall be construed as granting any right to LICENSEE
or its Affiliates to use in advertising, publicity, or other commercial or
promotional activities any name, trade name, trademark, or other designation of
LICENSOR (including contraction, abbreviation or simulation of any of the
foregoing) without the prior written consent of LICENSOR; provided, however,
that LICENSOR acknowledges and agrees that LICENSEE may use the names of
LICENSOR in various documents used by LICENSER for capital raising and financing
without such prior written consent or where the use of such names may be
required by law.

     

    Section
12. Independent Contractor
Status.

     

    The
parties to this Agreement recognize and agree that each is operating as an
independent contractor and nothing herein shall be deemed to establish a
relationship of principal and agent between LICENSOR and LICENSEE, nor any of
their agents or employees for any purpose whatsoever.  This Agreement
shall not be construed as creating a partnership or joint venture between
LICENSOR and LICENSEE, or as creating any other form of legal association or
arrangement that would impose liability upon one party for the act or failure to
act of the other party.

     

    Section
13. Notices.

     

    Any
notice required to be given pursuant to the provisions of this Agreement will be
in writing and will be deemed to have been given at the earlier
of:  when delivered personally against receipt therefor; one (1) day
after being sent by Federal Express or similar overnight delivery; or three (3)
days after being mailed registered or certified mail, postage prepaid, to a
party hereto at the address set forth below, or to such other address as such
party shall give by notice hereunder to the other party to this
Agreement

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    If to
LICENSOR:

     

    George B.
McDonald, M.D.

     

    1815
102nd Place,
S.E.

     

    Bellevue,
WA 98004

     

    Phone:  425-453-9936

     

    If to
LICENSEE:

     

    Enteron
Pharmaceuticals, Inc.

     

    787
Seventh Avenue, 48th
Floor

     

    New York,
NY 10019

     

    Attn:  Baruch
Runner, M.D.

     

    Phone:  212-554-4543

     

    Fax:  212-554-4338

     

    Section
14. Governing Law and
Severability.

     

    This
Agreement will be construed in accordance with the laws of the State of New
York.  If any provisions of this Agreement conflicts with the laws or
regulations of any jurisdiction or any governmental entity having jurisdiction
over the parties or this Agreement, those provisions will he deemed
automatically waived in that jurisdiction but shall not affect the validity,
legality or enforceability of such provision in any other
jurisdiction.  If the waiver is allowed by relevant law, the remaining
terms and conditions of this Agreement will remain in full force and
effect.  If a waiver is not so allowed or if a waiver leaves terms and
conditions clearly illogical or inappropriate in effect, the parties agree to
substitute new terms as similar in effect to the present terms of this Agreement
as may be allowed under the applicable laws and regulations.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
15. Confidentiality.

     

    A. LICENSEE
and LICENSOR agree that they will not use the Confidential Information for any
purpose unrelated to this Agreement, and will hold it in confidence during the
term of this Agreement and for a period of five (5) years after the termination
or expiration date of this Agreement.  Each party will exercise with
respect to such Confidential Information the same degree of care as that party
exercises with respect to its own confidential or proprietary information of a
similar nature, and will not disclose it or permit its disclosure to any Third
Party (except to those of its employees, consultants, agents, Third Party
sublicensees and potential sublicensees, and Affiliates who are bound by the
same obligation of confidentiality as the party is bound by pursuant to this
Agreement and who need the Confidential Information to carry out the purposes of
this Agreement).  However, such undertaking of confidentiality will
not apply to any information or data that:

     

    (i) was known
to receiving parry prior to the receipt of the Confidential Information; or is
developed independently without breach of this Agreement by the receiving
party;

     

    (ii) becomes
known to the public not as a result of any action or inaction by the receiving
party;

     

    (iii) receiving
party receives at any time from a Third Party who is lawfully in possession of
same and has the right to disclose same; or

     

    (iv) is
required to be disclosed by law, regulation or order in a judicial or
administrative proceedings, provided that the receiving party, to the fullest
extent permitted or reasonably feasible under the circumstances, shall have
secured confidential treatment of the Confidential Information
disclosed.

     

    B. Notwithstanding
the provisions of Section 15A hereof, a party may, to the extent necessary,
disclose and use Confidential Information disclosed to it by the other
party:

     

    (i) for
purposes of securing institutional or government approval to clinically test or
market any Licensed Product(s) or practice any Licensed Process(es), provided
that the party that originally disclosed the Confidential Information shall have
been notified of such disclosure; or

     

    (ii) where the
disclosure and use of the Confidential Information will be useful or necessary
to the application or prosecution of patents for any Licensed Process(es),
Licensed Product(s), or Technology, provided that the party that originally
disclosed the Confidential Information shall have been notified of such
disclosure.

     

    (iii) where the
disclosure and use of the Confidential Information is in the opinion of outside
counsel for the Company, required for financial reporting and disclosure under
applicable securities laws.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
16. Mediation and
Arbitration.

     

    If any
dispute arises from or relating to this Agreement, the parties must submit the
dispute to mediation in Seattle, Washington, by a sole mediator who is selected
by the parties or, at any time, to mediation by the American Arbitration
Association (“AAA”).  If not thus resolved, the dispute will be
determined before a sole arbitrator selected by the parties or in accordance
with the rules of the AAA.  The arbitration shall be in Seattle,
Washington, and governed by the Federal Arbitration Act.  The
requirement for mediation and arbitration shall not be deemed a waiver of any
right of termination under this Agreement and the arbitrator is not empowered to
act or make any award other than based solely on the rights and obligations of
the parties prior to any such termination.  The arbitrator shall not
limit, expand or modify the terms of the Agreement nor award damages in excess
of compensatory damages, and each party waives any claim to such excess
damages.  Any arbitration award made (i) shall be a bare award limited
to, a holding for or against a party and affording such remedy as is deemed
equitable, just and within the scope of this Agreement; (ii) shall be without
findings as to issues (including, but not limited to patent validity and/or
infringement); (iii) may in appropriate circumstances (other than patent
disputes) include injunctive relief; (iv) shall be made within four (4) months
of the appointment of the arbitrator and (v) may be entered by any court of
competent jurisdiction.  A request by a party to a court for interim
protection shall not affect either party’s obligation hereunder to mediate or
arbitrate.  Each party shall bear its own expenses and an equal share
of all cost and fees of the mediation and/or arbitration.  Any
arbitrator selected shall be competent in the legal and technical aspects of the
subject matter of this Agreement.  The existence, content and result
of mediation and/or arbitration shall be held in confidence by all participants,
each of whom shall be bound by an appropriate confidentiality
agreement.

     

    Section
17. Integration and
Modification.

     

    This
Agreement constitutes the full understanding between the parties with reference
to the subject matter hereof, and no statements or agreements by or between the
parties, whether orally or in writing, made prior to or at the signing hereof,
will vary or modify the written terms of this Agreement.  Neither
party can claim any amendment, modification, or release from any provisions of
this Agreement by mutual agreement, acknowledgment, or otherwise, unless such
mutual agreement is in writing, signed by the other party, and specifically
states that it is an amendment to this Agreement.

     

    Section
18. Non-Waiver.

     

    The
failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not he construed as a
waiver or relinquishment of future compliance therewith, and said terms,
conditions and provisions shall remain in full force and effect.  No
waiver of any term or condition of this Agreement on the part of either party
shall be effective for any purpose whatsoever unless such waiver is in writing
and signed by such party.

     

    Section
19. Remedies For Breach of
Confidentiality.

     

    A. The
parties agree that any breach of Section 15 of this Agreement by either
LICENSOR, or LICENSEE could cause irreparable damage to the non-breaching party,
and that monetary damages alone would not be adequate and, if such breach or
threat of breach occurs, the non-breaching party shall have, in addition to any
and all remedies at law and without the posting of a bond or other security, the
right to an injunction, specific performance or other equitable relief necessary
to prevent or redress the violation of the confidentiality obligations of
Section 15..  If a proceeding is brought in equity to enforce Section
15, the breaching party shall not urge as a defense that there is an adequate
remedy at law nor shall the non-breaching parry be prevented from seeking any
other remedies that may be available to it,

     

    B. If either
party is required to bring suit or otherwise seek enforcement of its rights
under Sections 15 and 19 hereof, the prevailing parry in any such action or
proceeding shall be entitled to recover reasonable attorneys’ fees and expenses
incurred in such action or proceeding.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
20. Headings.

     

    The
headings of the sections are inserted for convenience of reference only and
shall not affect any interpretation of this Agreement.

     

    Section
21. Contract Formation and
Authority.

     

    A. No
agreement between the parties exists unless a duly authorized representative of
LICENSEE and of LICENSOR have signed this document.

     

    B. The
persons signing on behalf of LICENSOR and LICENSEE warrant and represent that
they have authority to execute this Agreement on behalf of the party for whom
they have signed.

     

    IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
dates indicated below.

     

    George
B. McDonald, M.D.

     

    /s/ George B.
McDonald                                                                Date:    November
23,
1998                                                                

     

    LICENSEE

     

    


     

    ENTERON
PHARMACEUTICALS, INC.

     

    
      	
              By:
      /s/ Steve H.
      Kanzer

            	
              Date:
        November
      24, 1998

            	 	 


    

     

    
      	
               
      

            	
              Steve
      H. Kanzer, Chairman

            


    

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    APPENDIX
A

     

    ROYALTY
REPORT

     

    LICENSEE:                                                                Agreement No.:

     

    Inventor:                                                      Technology:

     

    Period
Covered:  From      /  /
1999                                                                           Through:   /  /
199

     

    Prepared
By:                                                                Date:

     

    Approved
By:                                                                Date:

     

    If
license covers several major product lines, please prepare a separate report for
each line.

     

    Then
combine all product lines into a summary report.

     

    Report
Type:                                                      Single Product Line
Report:

     

     Multiproduct Summary
Report.  Page 1
of                                                                                                           
Pages

     

     Product Line
Detail.  Line:                                                                             Tradename:                                             Page:

     

    Report
Currency:                                                                            U.S.
Dollars                                            Other

     

    
      	 
      	
              Gross

            	
              *
      Less:

            	
              Net

            	
              Royalty

            	
              Period
      Royalty Amount

            
	
              Country

            	
              Sales

            	
              Allowances

            	
              Sales

            	
              Rate

            	
              This
      Year

            	
              Last
      Year

            
	
              U.S.A.

            	 
      	 
      	 
      	 
      	 
      	 
      
	
              Canada

            	 
      	 
      	 
      	 
      	 
      	 
      
	
              Europe:

               

            	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
              Japan

               

            	 
      	 
      	 
      	 
      	 
      	 
      
	
              Other:

               

            	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
              TOTAL:

            	 
      	 
      	 
      	 
      	 
      	 
      


    

    Total
Royalty:                                 Conversion
Rate:                                                      
Royalty in U.S Dollars:  $

     

    * Provide
a detailed listing of all deductions from Gross Sales.

     

    


     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    APPENDIX
B

     

    DEVELOPMENT
REPORT

     

    Development
Report (4-8 paragraphs) including time period covered by this
report.

     

    
      	
              1.  

            	
              Pertinent
      information since last report including progress of the research and
      development and completed results.

            


    

     

    
      	
              2.  

            	
              Activities
      currently under investigation and projected date of
      completion.

            


    

     

    
      	
              3.  

            	
              Status
      of regulatory compliance, approvals and permits or licenses for using
      Licensed Product(s) for the prevention and treatment of graft-versus-host
      disease and host-versus-graft
disease.

            


    

     

    Future
Development Activities (4-8 paragraphs).

     

    
      	
              1.  

            	
              Activities
      to be undertaken before next report and their projected starting and
      completion dates.

            


    

     

    
      	
              2.  

            	
              Estimated
      total development time remaining before Licensed Product(s) will be
      commercialized for the prevention and treatment of graft-versus-host
      disease and host-versus-graft
disease.

            


    

     

    Changes
to initial development plan (2-4 paragraphs).

     

    
      	
              3.  

            	
              Reasons
      for change.

            


    

     

    
      	
              4.  

            	
              Variables
      that may cause additional changes.

            


    

     

    Items to
be provided if applicable:

     

    
      	
              5.  

            	
              Information
      relating to Licensed Product(s) that has become publicly available, e.g.,
      published articles, competing products, patents,
  etc.

            


    

     

    
      	
              6.  

            	
              Descriptions
      and result of any research or development work being performed by Third
      Parties or Affiliates (including name of such Third Party or Affiliate and
      reasons for use of Third Parties or Affiliates) and planned future uses of
      Third Parties or Affiliates (including name of such Third Parties or
      Affiliates, reasons for use of Third Parties or Affiliates, and
      description of type of work).

            


    

     

    
      	
              7.  

            	
              Update
      of each of the following:  competitive information trends in
      industry, sublicensing activity, changes in government compliance
      requirements (if applicable) and market
plan.

            


    

     

    


     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    APPENDIX
C

     

    DEVELOPMENT
PLAN

     

    The plan
should provide LICENSOR with an overview of the activities that LICENSEE
believes arc necessary to bring Licensed Products to the marketplace
worldwide.  Include estimated start date and completion date for each
item.

     

    
      	
              I.  

            	
              Development
      program for international Regulatory Approvals and sales of Licensed
      Product(s) for the prevention and treatment of graft-versus-host disease
      and host-versus-graft disease.

            


    

     

    
      	
              A.  

            	
              Development
      activities to be undertaken, including major
  milestones.

            


    

     

    1.

     

    2.

     

    
      	
              B.  

            	
              Estimated
      Total Development Time

            


    

     

    
      	
              II.  

            	
              Governmental
      approvals, if required, including types of submissions required by each
      government agency (e.g. FDA, EPA,
etc.).

            


    

     

    
      	
              III.  

            	
              Proposed
      marketing approach for international sales of Licensed Product(s) for the
      prevention and treatment of graft-versus-host disease and
      host-versus-graft disease.

            


    

     

    
      	
              IV.  

            	
              Competitive
      information including potential competitors, potential competitive devices
      or compositions, developments, technical achievements, anticipated dates
      of LICENSEE’s and competitor’s respective products launches for the
      prevention and treatment of graft-versus-host disease, host-versus-graft
      disease or other diseases.

            


    

     

    


     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    APPENDIX
D

     

    KNOW-HOW

     

    
      	
              1.

            	
              IND#
      20,212

            


    

     

    
      	
               
      

            	
              Oral
      Formulations of Beclomethasone Dipropionate for the treatment of
      inflammatory, diseases of the intestinal
tract.

            


    

     

    
      	
              2.

            	
              Orphan
      Drug Designation Application
#98-1111

            


    

     

    
      	
               
      

            	
              FDA’s
      acknowledgment of an orphan drug designation for oral administration of
      beclomethasone dipropionate for the treatment of intestinal
      graft-versus-host disease is attached hereto as “Appendix
      D—Attachment.”

            


    

     

    


     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    APPENDIX
I

     

    LICENSED
PATENTS

     

    
      	
              1.

            	
              U.S.
      Patent Application Serial Number 09/103,762, entitled “Method for
      preventing tissue damage following hematopoietic cell transplantation” and
      filed June 24, 1998.

            


    

     

    
      	
              2.

            	
              U.S.
      Patent Application Serial Number 09/151,388, entitled “Method for
      preventing tissue damage associated with graft-versus-host or
      host-versus-graft disease following transplantation” and filed September
      10, 1998.