Sample Business Contracts


Sublicense Agreement - Epitome Pharmaceuticals Ltd. and American Pharmed Labs Inc.


                              SUBLICENSE AGREEMENT

            This Sublicense Agreement (this "Agreement"), dated as of August 27,
1999, is entered into by and between EPITOME PHARMACEUTICALS LIMITED, a
corporation organized under the laws of Nova Scotia, Canada and having its
principal place of business at 5162 Duke Street, Suite 501, Halifax, NS B3J 1N7
Canada ("Sublicensor") and AMERICAN PHARMED LABS, INC., a corporation organized
under the laws of Delaware and having its principal place of business at 270
Sylvan Avenue, Englewood Cliffs, New Jersey 07632 ("Sublicensee").

                                    RECITAL:

            Sublicensor is the licensee of certain United States patent
applications, and foreign counterparts of such patent applications, covering the
topical use of tricyclic anti-depressants as topical analgesics for neuralgia
and Sublicensor is willing to grant an exclusive sublicense in such technology
to Sublicensee pursuant to terms and conditions hereinafter set forth.

            NOW, THEREFORE, in consideration of the premises set forth herein
and such good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

      1.1 Affiliate. The term "Affiliate" means, with respect to any person or
entity, any other person or entity that directly or indirectly controls, is
under common control with or is controlled by that person or entity. For
purposes of this definition, "control" (including, with correlative meaning, the
terms "controlled by" and "under common control with"), as used with respect to
any person or entity, means the possession, directly or indirectly, of the power
to direct or to cause the direction of the management and policies of such
person or entity, whether through the ownership of voting securities, by
contract or otherwise.

      1.2 Effective Date. The term "Effective Date" means the date set forth in
the preamble to this Agreement.

      1.3 Excluded Field of Use. ***

      1.4 Field of Use. ***

      1.5 First Commercial Sale. The term "First Commercial Sale" means the
initial transfer by Sublicensee of a Licensed Product to a third party customer
in exchange for cash or some cash equivalent to which value can be assigned for
the purposes of determining Net Sales.

      1.6 Frome Patent Application. The term "Frome Patent Application" means
that certain United States patent application more particularly described as
U.S. Patent Appl. No.

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08/531,760 (abandoned), Dr. Bruce M. Frome, "The Preparation of Topical Regional
Compositions for the Relief of Pain."

      1.7 Licensed Product. The term "Licensed Product" means any composition of
matter, material, device, apparatus or system within the Field of Use utilizing
any Patent Rights.

      1.8 Net Sales. ***

      1.9 Other Technology. The term "Other Technology" means any technology
acquired by or licensed to Sublicensee or any of its Affiliates other than
pursuant to this Agreement.

      1.10 Patent Rights. The term "Patent Rights" means any rights to any of
the patent applications listed on Exhibit A attached hereto, together with all
patents issued pursuant to such applications.

      1.11 PTO. The term "PTO" means the United States Patent and Trademark
Office.

      1.12 Territory. The term "Territory" means a territory consisting of the
entire world.

                                   ARTICLE II

                               GRANT OF SUBLICENSE

      2.1 Exclusive, Worldwide Sublicense.

            (a) Right and Sublicense. Sublicensor hereby grants to Sublicensee
the exclusive right and sublicense under the Patent Rights to make, use,
develop, sell, market and otherwise dispose of Licensed Products in the Field of
Use during the term hereof throughout the Territory, subject to all of the terms
and conditions of this Agreement.

            (b) Sublicense. Sublicensor also grants to Sublicensee the right to
grant sublicenses of any right and sublicense under Section 2.1(a) hereof to
third parties (including Affiliates of Sublicensee) provided that (i) any such
sublicense agreement is consistent with the terms and provisions of this
Agreement; (ii) Sublicensee remains fully liable for the performance of its
obligations hereunder; (iii) Sublicensee notifies Sublicensor of any grant of a
sublicense and provides to Sublicensor upon Sublicensor's request a copy of any
sublicense agreement; and (iv) Sublicensor consents to such sublicense, which
consent Sublicensor will provide so long as it obtains the approval of Dalhousie
University ("Dalhousie").

      2.2 Improvements.

            (a) Sublicensor's Improvements. All right, title and interest in and
to any improvements of the Patent Rights invented solely by Sublicensor,
Dalhousie and/or any of their respective Affiliates ("Sublicensor Parties")
after the Effective Date (any such improvements, the "Sublicensor Improvements")
shall remain the exclusive property of the Sublicensor (or Dalhousie, as the
case may be).

            (b) Sublicensee's Improvements or Joint Improvements. All right,
title and interest in and to any improvements of the Patent Rights in the Field
of Use invented after the

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Effective Date (I) solely by (i) Sublicensee, (ii) any of Sublicensee's
Affiliates or (iii) any permitted sublicensee hereunder ("Sublicensee Parties")
or (II) jointly by any of the Sublicensor Parties and any of the Sublicensee
Parties, shall be the joint property of Sublicensee and Sublicensor.

            (c) Other Technology. In the event Sublicensee desires to use, sell,
lease, or rent a product, information or material derived from a combination of
Patent Rights and Other Technology, Sublicensor will (i) not unreasonably
withhold its consent to a request by Sublicensee to reduce the royalty payable
to Sublicensor by up to *** because of payments (the total of which are greater
than or equal to the amount of royalty reduction requested) it would have to
make to obtain rights to use Other Technology in combination with the Patent
Rights and (ii) negotiate in good faith with Sublicensee if Sublicensee requests
a reduction in the royalty payable to Sublicensor by more than *** because of
payments (the total of which are greater than or equal to the amount of royalty
reduction requested) it would have to make to obtain rights to use Other
Technology in combination with the Patent Rights.

      2.3 Excluded Field of Use. Notwithstanding anything herein to the
contrary, Sublicensee acknowledges and agrees that Sublicensee has no right or
sublicense under the Patents Rights in any Excluded Field of Use. Sublicensor
grants to Sublicensee a right of first refusal to an exclusive sublicense of the
Patent Rights in any Excluded Field of Use that the Sublicensor desires to
sublicense to a third party, such right of first refusal to be exercised within
60 days of Sublicensee receiving written notice from Sublicensor of the terms
and conditions of a proposed sublicense which it is willing to accept, by
Sublicensee providing written notice within such period that it agrees to enter
into a sublicense with Sublicensor on such terms and conditions.

      2.4 Best Efforts. Sublicensee shall use its commercially reasonable best
efforts to exploit the commercial potential of the Patent Rights. No less than
every three month anniversary following the Effective Date, Sublicensee shall
report in writing to Sublicensor on the progress made toward commercializing the
Patent Rights. If no reasonable effort is being made by Sublicensee to
commercialize the Patent Rights for a continuous period of six (6) months, then
the Sublicensor may provide written notice of default for the cure of which
Sublicensee shall have an additional sixty (60) days. If such default is not
cured by Sublicensee, Sublicensor may thereafter terminate this Agreement upon
written notice to Sublicensee.

                                   ARTICLE III

                             PAYMENTS AND ROYALTIES

      3.1 Initial Payment. Sublicensee shall make an initial payment to
Sublicensor of $25,000 (U.S.) ("Initial Payment") on the Effective Date.

      3.2 Additional Payments. ***

      3.3 Royalties.

            (a) Computation. In consideration of the sublicense granted by
Sublicensor to Sublicensee hereunder, Sublicensee shall pay to Sublicensor a
yearly royalty on an annual basis in an amount equal to *** of Sublicensee's Net
Sales to the extent such Net Sales in the aggregate are equal to or less than
***; to the extent such Net Sales in the aggregate are greater

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than ***, such royalty shall thereafter be *** of Sublicensee's Net Sales. For
purposes of this Section 3.3, (i) the first year shall be measured by the period
commencing on the First Commercial Sale and ending on the day immediately
preceding the first anniversary of the First Commercial Sale and (ii) each
subsequent year shall be measured by the period commencing on the applicable
anniversary of the First Commercial Sale and ending on the day immediately
preceding the next anniversary of the First Commercial Sale (each such year, a
"Royalty Year").

            (b) Accounting; Audit, Records.

                  (i) Within sixty (60) days after the end of each Royalty Year,
Sublicensee shall submit to Sublicensor an itemized statement setting forth the
amount of Net Sales during such Royalty Year and the royalties accrued thereon.
Acceptance by Sublicensor of such statement and the payment described in Section
3.3(c) hereof for any Royalty Year shall not, however, preclude Sublicensor from
thereafter questioning the accuracy thereof. During the term hereof and for a
period of three (3) years thereafter, Sublicensee will keep and maintain books
of account and records of transactions which relate to this Agreement, which
books and records, together with supporting documentation, shall, during such
period, be open for inspection by Sublicensor or its representatives during
regular business hours and upon reasonable notice, but not more frequently than
once every six (6) months.

                  (ii) In the event that any audit undertaken by Sublicensor in
accordance with its rights hereunder discloses that, with respect to any period
of one (1) or more Royalty Years, Sublicensee paid to Sublicensor, pursuant to
this Article III, royalties equal to only *** or less of the royalties which
were actually due to Sublicensor in respect of any such period, Sublicensee
shall reimburse Sublicensor for all reasonable out-of-pocket costs incurred by
Sublicensor in connection with such audit and shall pay Sublicensor the amount
of any such underpayment.

            (c) Payment. Sublicensee shall submit, along with the statement
described in Section 3.3(b) hereof, a payment to Sublicensor equal to the
royalties due for such Royalty Year in accordance with such Section less ***
("Holdback Amount"). Within *** days after the end of such Royalty Year,
Sublicensee shall submit to Sublicensor an itemized statement setting forth any
recalculation of Net Sales (the "Net Sales Recalculation") for such Royalty Year
and the amount of the Holdback Amount, if any, due Sublicensor as a result of
such Net Sales Recalculation. In no event shall Sublicensor be liable for any
Net Sales Recalculation for any given Royalty Year in excess of the Holdback
Payment.

            (d) Interest on Overdue or Unpaid Royalties. In the event that (i)
Sublicensee fails to make any royalty payment within the applicable time period
set forth in this Article III or (ii) Sublicensor's audit pursuant to Section
3.3(b)(ii) discloses an underpayment of royalties of more than *** in respect of
any such time period, each such overdue or unpaid royalty payment shall earn
interest at a rate of *** per annum, calculated from the date that such overdue
or unpaid royalty payment should have been made by Sublicensee in accordance
with this Article III.

            (e) Minimum Royalties. With respect to the first Royalty Year,
Sublicensee shall pay to Sublicensor as a guaranteed minimum royalty payment
("Guaranteed Royalty") the amount of ***. Each Royalty Year thereafter, the
Guaranteed Royalty shall increase by *** to a maximum Guaranteed Royalty of ***.
Each such payment shall be paid to Sublicensor in accordance with Section 3.3(c)
hereof.

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            (f) Advance Royalty. Within thirty (30) days of the First Commercial
Sale, as an advance on future royalties, Sublicensee shall pay Sublicensor ***
("Advance Royalty Payment"). All royalties owed by Sublicensee to Sublicensor in
accordance with this Section 3.3 shall be credited against the Advance Royalty
Payment until the total amount of all royalties owed exceeds such Advance
Royalty Payment. In the event of the termination of this Agreement in accordance
with Sections 12.1 or 12.2 hereof, Sublicensor shall remit to Sublicensee within
thirty (30) days of the effective date of such termination any uncredited amount
of the Advance Royalty Payment.

      3.4 Termination of Agreement. Except for the Initial Payment,
Sublicensee's payment obligations pursuant to this Article III are subject to
termination of this Agreement in accordance with Sections 12.1 or 12.2 hereof.

      3.5 Maintenance Payments. In the event that there has been no First
Commercial Sale by the end of the fourth year following the Effective Date,
Sublicensor may at its option terminate this Agreement unless Sublicensee agrees
to pay a maintenance fee of $50,000; if there has been no First Commercial Sale
by the end of the fifth year following the Effective Date, Sublicensor may at
its option terminate this Agreement unless Licensee agrees to pay a maintenance
fee of $100,000. At the end of each subsequent year where there has been no
First Commercial Sale, Sublicensor's option to terminate shall arise and
Sublicensee's ability to forestall termination on payment of a fee shall be
twice that paid in the previous year (e.g., $100,000 in the fifth year, $200,000
in the sixth year, and so on).

                                   ARTICLE IV

        MILESTONES; PATENT COSTS; RESEARCH GRANT; ADDITIONAL FORMULATIONS

      4.1 Milestones. Within *** days of each of the milestone events set forth
on Exhibit B hereto, Sublicensee shall pay Sublicensor the milestone payment
amount set forth on Exhibit B.

      4.2 Patent Prosecution and Maintenance. Sublicensor acknowledges and
agrees that Dalhousie shall prepare, file, prosecute and maintain all patent
applications and patents relating to the Patent Rights in the United States,
Canada, European Union ("EU"), Japan, Finland, Norway, Sweden, Denmark, China
and Australia, and in any other foreign country designated by Sublicensee.
Sublicensee shall reimburse Dalhousie for reasonable costs and expenses it shall
have incurred after the Effective Date in so preparing, filing, prosecuting and
maintaining such patents and patent applications, including attorneys' fees, the
costs of any interference proceedings, reexaminations, or any other ex parte or
inter partes administrative proceeding before patent offices, taxes, annuities,
issue fees, working fees, maintenance fees and renewal charges; provided,
however, that (i) Sublicensee shall not be responsible for any costs or expenses
incurred by any person or entity (including Dalhousie) with respect to any
Patent Rights sublicensed by Sublicensor in the Excluded Field of Use to a third
party ("Third Party Excluded Use Sublicensee") and (ii) all payments received by
Sublicensor from any Third Party Excluded Use Sublicensee for prosecution or
maintenance of the Patent Rights shall be deducted against the costs and
expenses to be reimbursed by Sublicensee pursuant to this Section 4.2.

      4.3 Research Grant. Sublicensee agrees to provide Sublicensor with the
amount of *** with the understanding that Sublicensor will fund research to be
conducted by Dr. J. Sawynok on improvements (the "Sawynok Improvements") to the
Patents Rights. Such amount shall be payable to Sublicensor in semi-annual
installments of ***, with the first installment due

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six months following the Effective Date. Notwithstanding Section 2.2 hereof, the
term "Patents Rights" shall include the Sawynok Improvements.

      4.4 Additional Formulations. ***

      4.5 Termination of Agreement. Sublicensee's payment obligations pursuant
to this Article IV are subject to termination of this Agreement in accordance
with Sections 12.1 or 12.2 hereof.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

      5.1 Sublicensor's Representations. Sublicensor represents and warrants to
the Sublicensee that (a) the Sublicensor is a valid licensee of all Patent
Rights, (b) the Sublicensor has the legal right to grant to the Sublicensee each
and every right and sublicense of the Patent Rights granted hereunder, (c) no
approvals or consents of any third party (except Dalhousie, which consent has
been obtained by Dalhousie and delivered to Sublicensee) or governmental entity
are necessary with respect to the execution and performance by the Sublicensor
of all transactions and actions contemplated by this Agreement, and (d) to the
best of the Sublicensor's knowledge, the manufacture, marketing, use and sale of
the Licensed Products commercially by the Sublicensor after the Effective Date
and the use of the Patent Rights in the manufacture of Licensed Products will
not infringe the patents or patent applications of third parties and no claim of
any such infringement has been made by any third party.

      5.2 Third Party License Agreements. Sublicensor represents and warrants to
the Sublicensee that Sublicensee has received true, correct and complete copies
of all license and sublicense agreements to which Sublicensor is a party
relating in any way to the Patent Rights (collectively, the "Third Party License
Agreements"). On and after the Effective Date, Sublicensor agrees to provide
Sublicensee with any modifications, cancellations, terminations, amendments or
other changes to any Third Party License Agreements within ten (10) days of such
modification, cancellation, termination, amendment or other change.

      5.3 Mutual Representations. The Sublicensor and the Sublicensee each
represents and warrants to the other that it has the full power and authority to
enter into this Agreement and carry out the transactions and activities
contemplated hereby.

      5.4 Sublicensee's Representations. The Sublicensee represents and warrants
to the Sublicensor that no approvals or consents of any third party or
governmental entity are necessary with respect to the execution and performance
by the Sublicensee of this Agreement.

      5.5 Maintenance of Representations. Each party hereby covenants and agrees
to maintain at all times throughout the term of this Agreement the truth and
accuracy, in every material respect, of each representation and warranty made by
such party in this Article V. In the event that at any time during the term of
this Agreement, any representation or warranty set forth in this Article V shall
be inaccurate in any material respect (as if such representation or warranty
were made at such time), the party making such inaccurate representation or
warranty (the "Representing Party") shall (i) give notice to the other party of
such inaccuracy within ten (10) days thereof and (ii) remedy such inaccuracy
within sixty (60) days from such notice, so that such inaccurate representation
or warranty is again accurate in all material respects. In the event that

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such inaccuracy is not cured within such sixty (60) day period, the Representing
Party shall be deemed to be a breaching party that has failed to cure its breach
for purposes of Section 12.2(g) hereof.

                                   ARTICLE VI

                            CONFIDENTIAL INFORMATION

      6.1 Non-Disclosure of Confidential Information. Neither the Sublicensor
nor the Sublicensee shall disclose to any third party or use except in
furtherance of this Agreement any confidential information disclosed by the
other party or its Affiliates in connection with the Agreement, except that
either party may disclose such confidential information to the extent necessary
to comply with an order of a court or a government agency provided that the
disclosing party shall use its reasonable best efforts to notify the other party
of the disclosing party's intention to make the disclosure, and shall provide
the other party with a copy of the court or government agency's order, identify
precisely the confidential information the disclosing party intends to disclose,
and cooperate with the other party in devising reasonable measures to protect
the confidentiality of such information including, but not limited to, obtaining
a protective order from the court or government agency that issued the order to
disclose.

      6.2 Return of Confidential Information. Upon the termination of this
Agreement for any reason prior to the expiration of its term, each party shall
return to the other party all confidential information received pursuant to or
in connection with this Agreement.

      6.3 Non-Confidential Information. Neither party shall be under any
obligation with respect to information of the other party, which the party
receiving the information can demonstrate, preferably by reference to documents:

            (a) through no act or failure on the part of the party receiving the
information or the inspector, becomes known or available to the public;

            (b) is known by the party receiving the information or by the
inspector prior to its receiving such information from the other party; or

            (c) is furnished to the party receiving the information or to the
inspector by any person not legally precluded from making disclosure of the
information without restriction.

                                   ARTICLE VII

                               PATENT INFRINGEMENT

      7.1 Patent Infringement. In the event of infringement of any of the Patent
Rights which occurs in the field of the sublicense granted to the Sublicensee
under this Agreement, the Sublicensee shall provide notice to the Sublicensor
within thirty (30) days after the Sublicensee becomes aware of such infringement
or of facts suggesting that infringement is occurring. The Sublicensor shall
have the right, which it may or may not exercise in its discretion, to institute
litigation or take any other action in connection with a suspected infringement
of the Patent Rights or otherwise with respect to the Licensed Products. The
Sublicensee shall cooperate with all reasonable requests for assistance with
such litigation or other action. Nothing in this Article VII shall be construed
as preventing or restricting the Sublicensor from taking any action that it

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deems, in its sole discretion, to be necessary or appropriate to defend, assert,
or protect the Patent Rights against the actions of any infringer.

      7.2 Action By Sublicensee. If Sublicensor fails to bring or defend any
action, claim or proceeding concerning the Patent Rights within twenty (20) days
after receiving notice of such action, claim or proceeding, which would, in
Sublicensee's reasonable opinion, prejudice Sublicensee's rights hereunder,
Sublicensee may notify Sublicensor of its intention to commence or defend any
such action, claim or proceeding. If Sublicensor, within ten (10) days after
receiving such notice, delivers to Sublicensee a notice of its intention to
bring or defend any such action, claim or proceeding, Sublicensee shall not
bring or defend such action, claim or proceeding. If, however, Sublicensee does
not receive such notice from Sublicensor within such ten (10) day period,
Sublicensee shall thereafter have the ability, at its own cost and expense, to
commence or defend such action, claim or proceeding in its name and/or in the
name of Sublicensor. In such event, Sublicensee shall keep Sublicensor
reasonably notified of the progress of such action, claim or proceeding and
Sublicensor, at the request of Sublicensee, shall cooperate at its own cost and
expense in all reasonable respects with Sublicensee in connection therewith.

      7.3 Judgment; Settlement. The party that is bringing or defending any
action, claim or proceeding in accordance with Sections 7.1 or 7.2 hereof shall
have the right, with the consent of the other party (which consent shall not be
unreasonably withheld), to (a) consent to entry of any judgment or (b) settle
with any third party to such action, claim or proceeding.

      7.4 Recovery. Any settlement or other recovery received in accordance with
Sections 7.1 or 7.2 hereof (including, without limitation, pursuant to a
judgment or court order) shall be applied as follows: (i) first, to the costs
and expenses of the party prosecuting or defending such action; (ii) second, to
the costs and expenses of the cooperating (non-litigating) party; and (iii)
lastly, to the extent of any excess proceeds, such proceeds shall constitute Net
Sales for purposes of Article III hereof. Notwithstanding the foregoing, any
non-compensatory damages recovered, such as punitive or treble damages, shall be
divided evenly between Sublicensor and Sublicensee when either Sublicensor or
Dalhousie defends against the infringement; in the event that Sublicensee
defends against the infringement pursuant to Section 7.2 hereof, any
non-compensatory damages shall be allocated as follows: *** to Sublicensee and
*** to Sublicensor; provided, however, that non-compensatory damages shall not
constitute Net Sales, regardless of the party defending against the
infringement. Sublicensor agrees to pay to Dalhousie any amounts due to
Dalhousie for any such settlement or other recovery in accordance with the terms
of the license agreement between Dalhousie and Sublicensor.

      7.5 Indemnity for Claims of Infringement.

            (a) Subject to and limited by the terms of Section 7.5(b) hereof,
Sublicensor shall indemnify, defend and hold harmless the Sublicensee, its
Affiliates, its successors and assigns, and their directors, officers,
employees, agents and representatives from and against any loss, damage, cost or
expense of any kind or nature (including reasonable attorneys' and other
professionals' fees and expenses) incurred as a result of or in responding to
any demand, claim, action, proceeding or suit that is brought or threatened to
be brought against any of them by any third party and that asserts a claim of
patent infringement arising from such third party's assertion of the ownership
or co-ownership of rights in or to or related to the Patent Rights or Licensed
Products.

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            (b) In the event that Sublicensee or its assignee becomes the
defendant in any court, arbitration or other proceeding or action alleging
infringement of a third party's patent rights as a result of the exercise of
Sublicensee's rights hereunder (except where such infringement is based solely
on Other Technology) (a "Third Party Action"), then from such event going
forward Sublicensee or its assignee may withhold in escrow *** of the royalty
payments due Sublicensor under this Agreement until such proceeding or action
has been finally adjudicated or resolved by an unappealable judgment or order
(the "Escrowed Indemnification Amount"). If such judgment or order:

                  (i) discontinues or dismisses the Third Party Action, or if
Sublicensee incurs no monetary liability as a result of such judgment or order,
then Sublicensee or its assignee shall be indemnified the legal costs and
expenses of its defense of such proceeding or action out of the Escrowed
Indemnification Amount and, if the Escrowed Indemnification Amount is
insufficient to indemnify it completely, Sublicensee or its assignee shall be
entitled to withhold and apply *** of all subsequent royalty payments due
Sublicensor hereunder until the indemnification is complete; or

                  (ii) awards monetary damages against Sublicensee, then
Sublicensee or its assignee shall be indemnified all of its (x) monetary damages
and (y) legal costs and expenses incurred in defense of such proceeding or
action ((x) and (y) collectively, the "Defense Costs") out of the Escrowed
Indemnification Amount and, if the Escrowed Indemnification Amount is
insufficient to indemnify it completely, Sublicensor within ninety (90) days of
such judgment or order shall reimburse Sublicensee *** of all royalties accrued
(but only to the extent, if applicable, not yet received by Sublicensee pursuant
to the Escrow Indemnification Amount) over the last three (3) Royalty Years
prior to the entry of such judgment or order (the "Reimbursed Royalty Payments")
to the extent necessary to indemnify Sublicensee or its assignee for all of the
Defense Costs. If the Reimbursed Royalty Payments do not completely indemnify
Sublicensee for all of the Defense Costs, Sublicensee or its assignee shall be
entitled to withhold and apply *** of all subsequent royalty payments due
Sublicensor hereunder until the indemnification is complete.

            (c) Notwithstanding anything in Section 7.5(b) hereof to the
contrary, (i) any amount of the Escrowed Indemnification Amount in excess of the
indemnification entitled by Sublicensee or its assignee herein shall be paid to
Sublicensor within one hundred and twenty (120) days of such judgment or order
and (ii) in no event shall Sublicensee or its assignee withhold and/or apply to
any indemnification herein any royalty payment due Sublicensor with respect to
any Royalty Year commencing on or after six (6) years from the date of such
judgment or order.

      7.6 Rights of Dalhousie. Sublicensor may transfer, by written notice to
Sublicensee and Dalhousie, all of its rights (but not its obligations, including
without limitation, under Section 7.5 hereof) under this Article VII to
Dalhousie.

                                  ARTICLE VIII

                    PROHIBITION AGAINST USE OF PARTIES' NAMES

      Neither party will use the name, logo, insignia, or symbols of the other
party, or any variation or combination thereof, or the name of any officer,
director or employee of the other party, for any purpose whatsoever without the
other party's prior written consent; provided,

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however, that either party shall be deemed to have granted its consent to any
request by the other party to use such name, logo, insignia or symbol if such
party fails to respond to such request within ten (10) business days of its
receipt of such a request.

                                   ARTICLE IX

                            ASSIGNMENTS AND TRANSFERS

      9.1 Transfers Generally. Except as provided in this Article IX, the
Sublicensee shall not be permitted to assign or transfer any of its rights,
obligations or duties under this Agreement without the express written consent
of the Sublicensor. The Sublicensor shall be permitted to assign or transfer any
or all of its rights, obligations or duties under this Agreement, without any
requirement of consent, provided that the net worth of such assignee or
transferee is at least as great and its financial condition is at least as sound
as the net worth and financial condition of Sublicensor as of the date hereof.

      9.2 Exceptions. Notwithstanding anything to the contrary contained herein,
the Sublicensee may assign its rights and obligations under this Agreement to
any one or more of its Affiliates, and its or their successors and assigns,
provided that the net worth of such assignee is at least as great, and its
financial condition is at least as sound, as the net worth and financial
condition of the assigning party. In addition, the Sublicensee (and any
permitted assignee) may assign its rights and obligations under this Agreement
to any successor by way of merger, consolidation or acquisition of substantially
all of such party's assets associated with its Patent Rights or License Products
business. Upon any permitted assignment, the Sublicensee's agreement to perform
all of its obligations hereunder through the effective date of the assignment
shall nevertheless continue until expressly released by the Sublicensor, which
release shall not be unreasonably withheld.

                                    ARTICLE X

                                     MARKING

      Prior to the issuance of patents, Sublicensee will mark Licensed Products
made, sold, or otherwise disposed of by it under the sublicense granted in this
Agreement with the words "Patent Pending," and following the issuance of one or
more patents, with the numbers of such patents.

                                   ARTICLE XI

                               EXPORT CONTROL LAWS

      This Agreement is made subject to any restrictions concerning the export
of products or technical information from the United States of America which may
be imposed from time to time by the government of the United States of America.
Furthermore, each party hereto agrees that it will not export, directly or
indirectly, any technical information acquired from the other under this
Agreement or any products using such technical information to any country for
which the United States government or any agency thereof at the time of export
requires an export license or other governmental approval, without first
obtaining the written consent to do so from the Department of Commerce or other
agency of the United States government when required by an applicable statute or
regulation.

                                       10
<PAGE>

                                   ARTICLE XII

                              TERM AND TERMINATION

      12.1 Term. The term of this Agreement shall commence on the Effective
Date, and unless sooner terminated as herein provided, shall end on the date on
which the last to expire of the Patent Rights covering the Licensed Products
expires.

      12.2 Termination. This Agreement may be terminated prior to the expiration
of its term:

            (a) if mutually agreed by the parties in writing;

            (b) by either party, within three (3) months of the Effective Date
if toxicology or other issues cause or threaten to cause excessive expenses in
the development of the Patent Rights;

            (c) by either party, prior to the revival of the Frome Patent
Application by the PTO;

            (d) by either party, prior to submission to the FDA of a NDA with
respect to any Patent Rights due to inefficacy or lack of commercial feasibility
of such technology;

            (e) by Sublicensee, in the event that the Frome Patent Application
or any revival thereof is not an U.S. approved final patent within five (5)
years of the Effective Date;

            (f) by Sublicensee, at any time after payment to Sublicensor of a
termination fee of ***; or

            (g) in the event of the breach of this Agreement by either party, at
the option of the non-breaching party, provided that the non-breaching party has
provided written notice to the breaching party of the breach and the
non-breaching party's intention to terminate the Agreement, and the breaching
party has failed to cure its breach within sixty (60) days following the date
such notice was sent to the breaching party. Notwithstanding anything in this
Agreement to the contrary, in the event that Sublicensor is the breaching party
that has failed to cure its breach, Sublicensee shall continue to hold and
exercise the rights granted to it under this Agreement upon payment to Dalhousie
of such monies as are owed to it by Sublicensor and upon performance to
Dalhousie of the obligations, monetary and otherwise, previously owed to
Sublicensor under this Agreement.

      12.3 Disposition of Patent Rights. Upon the expiration or termination of
this Agreement in accordance with Sections 12.1 or 12.2 (except 12.2(g) if
Sublicensor is the breaching party) hereof, all rights in and to the sublicense
granted hereunder shall immediately revert to and become the property of the
Sublicensor.

      12.4 Survival. Except as otherwise provided herein, any provision of this
Agreement with respect to the subject matter described in this Article XII shall
continue in effect after the expiration of the term of, or termination of, this
Agreement to the extent necessary to permit the complete fulfillment or
discharge of any obligation that so continues:

                                       11
<PAGE>

            (a) Any Sublicensee obligation to maintain records that relate to
any period ending on or before the expiration or termination of this Agreement;

            (b) Sublicensor's right to receive or recover, and the Sublicensee's
obligation to pay, any amounts due the Sublicensor under this Agreement that had
accrued and were earned at any time on or prior to its expiration or
termination;

            (c) Any agreement, including the provisions of Article VI hereof, in
effect at the time of such expiration or termination with respect to
confidential information of any party to this Agreement;

            (d) Any cause of action or claim or remedy of the Sublicensor or the
Sublicensee arising from any breach of or failure to perform any obligation
under this Agreement that occurred on or prior to the date of termination;

            (e) Sublicensor's indemnification obligations pursuant to Section
7.5 hereof;

            (f) The representations and warranties of any party that are
contained in Article V of this Agreement; and

            (g) Any right, duty or obligation of either party hereto which is
expressly stated elsewhere in this Agreement to survive the expiration or
termination hereof.

      12.5 Sales after Termination. Upon termination or expiration of this
Agreement for any reason, Sublicensee shall have the right for a period of ***
days to sell or otherwise dispose of any inventory of Licensed Products (i)
which it, its Affiliates or its permitted sublicensees has in its possession
(subject to the obligation to pay royalty on the Net Sales thereof pursuant to
Section 3.3 hereof) or (ii) for which it has acquired constituent materials that
cannot be returned without costs exceeding in the aggregate ***.

                                  ARTICLE XIII

                           JOINT DEVELOPMENT AGREEMENT

      The parties agree to negotiate, execute and deliver in good faith a joint
development agreement with respect to the Licensed Products within three (3)
months of the Effective Date. In the event that such joint development agreement
is not fully executed and delivered within three (3) months of the Effective
Date, either party may terminate this Agreement with no further obligations or
liabilities to the other party hereunder.

                                   ARTICLE XIV

                                  MISCELLANEOUS

            14.1 Notice. Any notice given pursuant to this Agreement shall be in
writing and, except as otherwise expressly provided herein, shall be deemed to
have been duly delivered when it actually is delivered in person or by facsimile
transmission; seven days after it is mailed by certified or registered mail,
postage and mailing expense prepaid; and one day after it is sent by overnight
express mail or by overnight courier service (such as FedEx or DHL), postage or
shipping expense prepaid and designated for next-day delivery; and, if given or
rendered to:

                                       12
<PAGE>

Licensor, addressed to:         Epitome Pharmaceuticals Limited
                                5162 Duke Street, Suite 501
                                Halifax, Nova Scotia
                                B3J lN7
                                Canada
                                Attention: President or Chief Operating Officer
                                Facsimile Number: (902) 492-0013

with a copy to:                 Slone & Munro
                                5162 Duke Street, Suite 501
                                Halifax, Nova Scotia
                                B3J lN7
                                Canada
                                Attention: Mr. Andrew J.M. Munro
                                Facsimile Number: (902) 492-0013

                                       13
<PAGE>

or if given or rendered to Licensee, addressed to:

                                American Pharmed Labs, Inc.
                                270 Sylvan Avenue
                                Englewood Cliff, New Jersey 07632
                                Attention: President
                                Facsimile: (201) 837-0200

with a copy to:                 Epstein Becker & Green, P.C.
                                250 Park Avenue
                                New York, New York 10177-0077
                                Attention: Lowell S. Lifschultz, Esq.
                                           or Mark A. Polemeni, Esq.
                                Facsimile: (212) 661-0989

Either party may specify a different address by notice in writing in accordance
with this Section 14.1.

      14.2 Bankruptcy. Sublicensor acknowledges that this Agreement constitutes
a license for "intellectual property" as that term is defined in Section 365(n)
of the U.S. Bankruptcy Code and all provisions of that Section shall apply in
the event of Sublicensor's bankruptcy.

      14.3 Entire Agreement, Amendment. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and has priority over any and all agreements, documents, verbal consents or
understandings previously made between the parties with respect to the subject
matter hereof. None of the terms of this Agreement shall be amended or modified
except as set forth in a writing signed by both the Sublicensor and the
Sublicensee.

      14.4 Waiver. A waiver by any party of any term or condition of this
Agreement in any one instance shall not be deemed or construed to be a waiver of
such term or condition for any similar instance in the future or of any
subsequent breach thereof. No failure by a party to take action against default
or breach of this Agreement shall constitute a waiver of such party's right to
enforce any provision of this Agreement or to take action against such default
or breach or against any subsequent default or breach. All rights, remedies,
undertaking, obligations, and agreements contained in this Agreement shall be
cumulative and none of them shall be a limitation of any other remedy, right,
undertaking, obligation or agreement of any party.

      14.5 Severability. If, and solely to the extent that, any provision of
this Agreement shall be invalid or unenforceable, or shall render this entire
Agreement invalid or unenforceable, such offending provision shall be of no
effect and shall not affect the validity of the remainder of this Agreement or
of any of its other provisions.

      14.6 No Agency, Partnership or Joint Venture. Nothing in this Agreement
shall be deemed to appoint or authorize the Sublicensee to act as an agent of
the Sublicensor or to assume or incur any liability or obligation in the name of
or on behalf of the Sublicensor. Additionally, nothing in this Agreement shall
be construed to constitute a partnership or joint venture between the parties.

                                       14
<PAGE>

      14.7 Headings. Headings in this Agreement are included for ease of
reference only and shall have no effect on the meaning or interpretation of this
Agreement.

      14.8 Singular/Plural. Whenever in the context it appears appropriate, each
term stated either in the singular or the plural shall include both the singular
and the plural.

      14.9 Applicable Law/Jurisdiction. All disputes arising out of the
validity, interpretation or application of this Agreement shall be submitted to
the courts of competent jurisdiction sitting in the County and State of New
York. This Agreement shall be interpreted and construed in accordance with the
laws of Delaware, without reference to its conflicts of laws provisions.

      14.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

      14.11 No Third-Party Beneficiaries. The provisions of this Agreement are
for the exclusive benefit of the parties hereto and, except as specifically set
forth herein, no other person, firm, institution or other entity shall have any
right or claim against any party to this Agreement by reason of such provisions
or shall be entitled to enforce any such provision against any party.

      14.12 Harmonization. Notwithstanding anything to the contrary in this
Agreement, Sublicensee acknowledges that Sublicensor agrees and is bound to
convey to Sublicensee only those rights available to it under its license
agreement with Dalhousie, a copy of which is attached hereto as Exhibit C.

                              * * * * * * * * * * *

                  [remainder of page left intentionally blank]

                                       15
<PAGE>

            IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.

                                         SUBLICENSOR:

                                         EPITOME PHARMACEUTICALS LIMITED

                                         By: /s/ ANDREW J.M. MUNRO
                                            -----------------------------------
                                         Print Name: Andrew J.M. Munro
                                         Title: Director

                                         SUBLICENSEE:

                                         AMERICAN PHARMED LABS, INC.

                                         By: /s/ PETER GOLIKOV
                                            -----------------------------------
                                         Print Name: Peter Goikov
                                         Title: President

                                       16
<PAGE>

                                    EXHIBIT A

                                 PATENTS RIGHTS

      U.S. Patent Appl. No. 08/531,760, Dr. Bruce M. Frome, titled "The
      Preparation of Topical Regional Compositions for the Relief of Pain,"
      filed on September 22, 1995.

      U.S. Patent Appl. No. 09/081,709, Drs. J. Sawynok, M.J. Esser and A.R.
      Reid, titled "Use of Antidepressants for Local Analgesia," filed on May
      19, 1998.

All pending and issued reissues, revivals, re-examinations, divisions,
continuations, continuations-in-part, renewals, extensions and additions
thereto, and all foreign counterparts and applications for foreign counterparts
of the foregoing; provided, however, that continuations-in-part are limited to
improvements to the subject matter of the claims in the patent applications
above that are developed or reduced to practice by Dr. Sawynok or her
collaborators during the term of and for three months following the Research
Grant described in Section 4.3 hereof and which Dalhousie has the right to grant
to Epitome.

                                       17
<PAGE>

                                    EXHIBIT B

                           MILESTONE PAYMENT SCHEDULE

                                       ***

                                       18
<PAGE>

                                    EXHIBIT C

                           DALHOUSIE LICENSE AGREEMENT

                                       ***

                                       19


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