Sample Business Contracts

Royalty Agreement - EpiCept Corp. and R. Douglas Cassel

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                               REVISED & RESTATED
                                ROYALTY AGREEMENT

This Royalty Agreement (this "Agreement"), dated as of July 16, 2003 (the
"Effective Date"), is entered into by and between EpiCept Corporation,
successor-in-interest of 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, NJ 07632 ("EpiCept") and R. Douglas Cassel,
M.D., an individual with his principal place of business at 4401 Fargreen Road,
Harrisburg, PA 17110 ("Cassel").


EpiCept owns the entire right, title and interest in, to and under the
inventions described in U.S. patent application. Serial No. 09/425,925 (the
"'925 application"), entitled, "Local Prevention or Amelioration of Pain from
Surgically Closed Wounds," which issued as U.S. Patent No. 6,383,511 (the "'511
Patent") to Cassel, as the inventor.

For consideration as described herein, Cassel has assigned his entire right,
title and interest in, to and under the inventions described in the '925
application to EpiCept (Exhibit A).

EpiCept and Cassel originally entered into that certain Royalty Agreement, dated
October 6, 1999. EpiCept and Cassel intend and desire that this Agreement amends
and restates the Original Agreement in its entirety and in particular the
parties expressly acknowledge and agree that this Agreement contains a
consulting arrangement with Cassel and, among others, modified and amended
financial provisions and due diligence provisions.


1.0   Definitions

            1.1 Affiliate: The term "Affiliate" means, with respect to any
      person, entity, or any other person or entity that it 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 Cassel Technology: The term "Cassel Technology" means all
      copyrightable material, notes, records, inventions, improvements,
      developments, discoveries and trade secrets conceived, made by or
      discovered by Cassel outside of the performances of his services.

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


            1.4 First Commercial Sale: The term "First Commercial Sale" means,
      after all necessary marketing approvals have been obtained in a relevant
      country, the initial transfer of a Product in such country to a third
      party customer not controlled by EpiCept in exchange for cash or some cash
      equivalent to which a value can be assigned for the purpose of determining
      "Net Sales."

            1.5 Patent: The term "Patent" means the '511 Patent and any other
      patent issued by the U.S. Patent and Trademark Office or any comparable
      foreign authority that results from the '925 application, including,
      without limitation U.S. Patent application Serial No. 10/137,685, filed
      May 3, 2002..

            1.6 Product: The term "Product" means any composition of matter,
      material, device, apparatus, or system developed by EpiCept for the
      treatment of pain from surgically closed wounds, which the making, using,
      offering for sale, sale or importation by an unlicensed third party, would
      infringe one or more issued claims of a Patent.

            1.7 Net Sales: The term "Net Sales" means gross sales of the
      Products invoiced by EpiCept or any of its Affiliates to a third party,
      but not to an Affiliate, and accepted by the third party, less shipping
      costs, returns, allowances, and taxes.

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

            1.9 Royalty Year: The "Royalty Year" shall be a twelve-month
      calendar year ending on December 31, except that the first Royalty Year,
      if the First Commercial Sale of Product should occur during the year, may
      be less than twelve months.

2.0   Royalty

            2.1 Monthly Payment: Within *** business days after the end of each
      calendar month, EpiCept shall pay to Cassel a payment of four thousand
      United States Dollars ($4,000) for a period of three (3) years from the
      Effective Date. Such monthly payments shall be fully creditable against
      future royalty payments to Cassel, provided that no more than *** of the
      total annual payments shall be credited to the royalties payable to Cassel
      in any one Royalty Year.

            2.2 Amount of Royalty: EpiCept shall pay to Cassel, on a
      country-by-country, Product-by-Product basis, a royalty of *** of Net
      Sales of Product per Royalty Year.

            2.3 No Multiple Royalties: No multiple royalties shall be payable in
      the event that any Product or the manufacture, use or sale thereof is
      covered by more than one patent included in the Patent.

            2.4 Payment: EpiCept shall submit a payment to Cassel annually that
      is equal to the royalties due for that Royalty Year, less applicable
      withholding taxes and credits, except that EpiCept shall reserve and hold
      back *** of the royalty payment each Royalty Year to account for returns,
      allowances, and write-offs of customer accounts. The reserved royalty
      payment, adjusted for returns, allowances, and write-offs of customer
      accounts, will be paid


      with the following Royalty Year's royalty payments. The royalty payments
      to Cassel shall be made within *** days of the end of each Royalty Year in
      which Net Sales occurred. With each royalty payment, EpiCept shall submit
      to Cassel an itemized statement setting forth the amount of Net Sales
      during the Royalty Year and the royalties accrued.

              2.5 Records: The books and records of EpiCept which relate to the
     royalties under this Agreement shall be open for inspection by an
     independent accounting firm appointed by Cassel (subject to the consent of
     EpiCept, such consent not to be unreasonably withheld or delayed) for the
     sole purpose of verifying royalty payments during regular business hours at
     such place or places where such books and records are customarily kept and
     upon suitable written notice, but not more frequently than once each year.
     The relevant records shall be maintained by EpiCept for a period of three
     (3) years after the expiration or termination of this Agreement. The cost
     of any such inspection shall be paid by Cassel. Any books and/or records
     received from EpiCept during the course of any such inspection shall be
     kept confidential.

3.0   Term and Termination

            3.1 Term: The Term of this Agreement shall begin on the Effective
      Date, and unless sooner terminated by the parties as herein provided,
      shall continue in full force and effect, on a country-by-country and
      Product-by-Product basis, until the date of expiration of expiration of
      the last to expire patent within the Patent.

            3.2 Termination:

                  (a)   At Will: *** years after the Effective Date, EpiCept may
                        terminate this Agreement and all of its obligations
                        hereunder at any time upon *** days advance written
                        notice to Cassel, if a patent within the Patent is
                        determined to be invalid and/or unenforceable.

                  (b)   By Mutual Agreement: EpiCept and Cassel may terminate
                        this Agreement at any time by mutual written agreement.

                  (c)   For Breach: Except as set forth in Section 5.6, if
                        either party breaches this Agreement, the non-breaching
                        party, at its option, may terminate this Agreement,
                        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 this
                        Agreement, and the breaching party has failed to cure
                        its breach within ninety (90) days following the date
                        such notice was received by the breaching party.

4.0   Due Diligence

            4.1 Due Diligence: EpiCept by itself, or through its Affiliates or
      licensees, throughout the Term, shall use commercially reasonable efforts
      to proceed with the development and commercialization of Product through a
      program for exploiting the Patent, consistent with reasonable business
      practices and judgments.


5.0   Consulting Arrangements

            5.1 Services and Compensation:

                  (a)   Cassel agrees to provide general scientific consulting
                        services for EpiCept and in particular, EpiCept expects
                        such services to involve the development and
                        commercialization of Product ("Services") for a period
                        of three (3) years from the Effective Date ("Consulting
                        Term as defined herein below), with each twelvemonth
                        (12) month period designated a Consulting Year. EpiCept
                        agrees to give Cassel three (3) days advance notice of
                        EpiCept's need for Cassel to perform the Services, and
                        Cassel agrees to perform such Services upon EpiCept's
                        request, unless Cassel has a valid excuse in which case
                        the parties shall agree to a mutually acceptable date
                        for Cassel to perform such Services.

                  (b)   During the Consulting Term, EpiCept agrees to pay to
                        Cassel *** per day (each day being eight (8) hours) for
                        the performance of the Services. Such payment shall be
                        made within *** business days after receipt of a
                        detailed invoice by EpiCept. Such invoice shall include
                        a description of the Services performed by Cassel and
                        the number of hours of Service. In any Consulting Year
                        that EpiCept does not use Cassel's Services for ***
                        days, EpiCept shall, within *** days after the end of
                        such year, pay to Cassel the difference between the
                        amount paid to Cassel up to that date and the ***. For
                        purposes of clarity, EpiCept. shall pay to Cassel a
                        minimum of *** per Consulting Year for Services during
                        the Consulting Term, regardless of whether or not
                        EpiCept has utilized Cassel's Services during any
                        Consulting Year.

            5.2 Confidentiality:

                  (a)   "Confidential Information" means any and all proprietary
                        information, technical data, trade secrets or know-how
                        provided by EpiCept to Cassel, as well as any
                        information, data, trade secrets or know-how developed
                        by Cassel in the course of providing the Services to
                        EpiCept whether provided in written, oral, graphic,
                        visual, video, computer or other form, including, but
                        not limited to, research and product plans, products,
                        services, customer lists and customers (including, but
                        not limited to, customers of EpiCept on whom Cassel
                        called or with whom Cassel became acquainted during the
                        Consulting Term), markets, developments, inventions,
                        processes, formulas, technology, marketing, finances or
                        other business information.

                  (b)   Cassel shall not, during or subsequent to the Consulting
                        Term, use Confidential Information for any purpose
                        whatsoever other than the performance of the Services on
                        behalf of EpiCept, or disclose Confidential Information
                        to any third party. It is understood and agreed that


                        Confidential Information also includes such information
                        received during Cassel's initial consulting agreement
                        with EpiCept. Cassel agrees that Confidential
                        Information shall remain the sole property of EpiCept.
                        Cassel further agrees to take all reasonable precautions
                        to prevent any unauthorized disclosure of Confidential
                        Information. Notwithstanding the above, Cassel's
                        obligation under this Section 5.2 (b) relating to
                        Confidential Information shall not apply to information:

                              (i) which is already known to Cassel (other than
                        under an obligation of confidentiality), at the time of
                        disclosure by EpiCept to the extent that Cassel has
                        documentary evidence to that effect;

                              (ii) which is generally available to the public or
                        otherwise part of the public domain at the time of its
                        disclosure to Cassel;

                              (iii) which becomes generally available to the
                        public or otherwise part of the public domain after its
                        disclosure or development, as the case may be, and other
                        than through any act or omission of Cassel in breach of
                        Cassel's confidentiality obligations under this

                              (iv) which is subsequently lawfully disclosed to
                        Cassel by a third party who had no obligation to EpiCept
                        not to disclose such information to others;

                              (v) which is approved for release by EpiCept in

                  (c)   Cassel shall not, during the Consulting Term, improperly
                        use or disclose any proprietary information or trade
                        secrets of any former or current employer or other
                        person or entity with which Cassel has an agreement or
                        duty to keep in confidence information acquired by
                        Cassel in confidence and that Cassel shall not bring
                        onto the premises of EpiCept any unpublished document or
                        proprietary information belonging to such employer,
                        person or entity unless consented to in writing by such
                        employer, person or entity.

                  (d)   Cassel recognizes that EpiCept has received and in the
                        future will receive from third parties their
                        confidential or proprietary information subject to a
                        duty on EpiCept's part to maintain the confidentiality
                        of such information and to use it only for certain
                        limited purposes. Cassel agrees that Cassel owes EpiCept
                        and such third parties, during the Consulting Term and
                        thereafter, a duty to hold all such confidential or
                        proprietary information in the strictest confidence and
                        not to disclose it to any person, firm or corporation or
                        to use it except as necessary in carrying out the
                        Services for EpiCept consistent with EpiCept's agreement
                        with such third party.

                  (e)   Upon the termination of the Consulting Term, or upon
                        EpiCept's earlier request, Cassel shall deliver to
                        EpiCept all of EpiCept's property relating


                        to, and all tangible embodiments of, Confidential
                        Information in Cassel's possession or control.

                  (f)   The obligations of Cassel under this Section 5.2 shall
                        continue in full force and effect for three (3) years
                        after termination of Cassel's performance of the

            5.3 Ownership:

                  (a)   Cassel agrees that all copyrightable material, notes,
                        records, inventions, improvements, developments,
                        discoveries and trade secrets (collectively,
                        "Inventions") conceived, made or discovered by Cassel in
                        performing the Services, solely or in collaboration with
                        others, during the Consulting Term relating to the
                        business of EpiCept shall be the sole property of
                        EpiCept. In addition, to the extent allowed by law, any
                        Inventions which constitute copyrightable subject matter
                        shall be considered "works made for hire", as that term
                        is defined in the United States Copyright Act. Cassel
                        further agrees to assign (or cause to be assigned) and
                        does hereby assign fully to EpiCept all such Inventions
                        and any copyrights, patents or other intellectual
                        property rights relating thereto.

                  (b)   Upon termination of the Consulting Term, or upon
                        EpiCept's earlier request, Cassel shall deliver to
                        EpiCept all of EpiCept's property relating to, and all
                        tangible embodiments of, Inventions in Cassel's
                        possession or control.

                  (c)   Cassel agrees to assist EpiCept, or its designee, at
                        EpiCept's expense, to obtain and from time to time
                        enforce and defend EpiCept's rights in the Inventions
                        and any copyrights, patents or other intellectual
                        property rights relating thereto in any and all
                        countries, and to execute all documents reasonably
                        necessary for EpiCept to do so.

                  (d)   Cassel agrees that if in the course of performing the
                        Services, Cassel incorporates into any Inventions
                        developed hereunder any invention, improvement,
                        development, concept, discovery or other proprietary
                        information owned by Cassel or in which Cassel has an
                        interest ("Item"), EpiCept is hereby granted and shall
                        have a non-exclusive, royalty-free, perpetual,
                        irrevocable, worldwide license to make, have made,
                        modify, reproduce, display. use and sell such Item as
                        part or in connection with such inventions.

            5.4 Option to Cassel Technology: Cassel hereby grants to EpiCept an
      exclusive option to obtain an exclusive, worldwide license to any Cassel
      Technology. Cassel shall provide to EpiCept a written notice of any such
      Cassel Technology and a summary detailing any such Cassel Technology.
      EpiCept shall have the right to exercise its option under this Section 5.4
      within *** months of receipt of the written notification and summary by
      written notice to Cassel indicating that EpiCept is exercising its option,
      whereupon the parties shall


      negotiate in good faith the terms and conditions for an agreement for a
      *** month negotiation period, extendible upon mutual agreement. If EpiCept
      does not exercise its option(s) within the *** month option period or
      enter into a definitive agreement with Cassel within the *** month
      negotiation period or any agreed upon extension period, Cassel shall have
      no further obligation to EpiCept regarding any such Cassel Technology,
      provided, however, that EpiCept's failure to exercise its option or enter
      a definitive agreement with respect a particular Cassel Technology shall
      not affect EpiCept' s exclusive option to obtain an exclusive license for
      any other Cassel Technology. Cassel shall not enter into any negotiations
      or agreement with a third party during the *** month option period or any
      particular negotiation period, whichever is longer.

            5.5 Reports: Cassel agrees that Cassel will from time to time during
      the Consulting Term or any extension thereof (as mutually agreed upon by
      the parties in writing) keep EpiCept advised as to Cassel's progress in
      performing the Services hereunder and that Cassel shall, as requested by
      EpiCept, prepare written reports with respect thereto. It is understood
      that the time required in the preparation of such written reports shall be
      considered time devoted to the performance of the Services by Cassel.
      Reports prepared by Cassel shall be the sole property of Cassel.

            5.6 Conflicting Obligations: Cassel certifies that Cassel has no
      outstanding agreement or obligation that is in conflict with any of the
      provisions of this Agreement, or that would preclude Cassel from complying
      with the provisions hereof, and further certifies that Cassel shall not
      enter into any such conflicting agreement during the Consulting Term or
      any extension thereof.

            5.7 Term and Termination for Consulting Arrangements:

                  (a)   Cassel's obligation to perform the Services and
                        EpiCept's obligation to compensate Cassel for the
                        Services shall commence on the Effective Date and end
                        three (3) years from the Effective Date ("Consulting
                        Term"). For purposes of clarity, the Consulting Term
                        shall commence on the Effective Date and end thirty-six
                        (36) months after the Effective Date.

                  (b)   Cassel may terminate the consulting arrangement between
                        Cassel and EpiCept set forth in this Section 5 by giving
                        *** days prior written notice thereof.

                  (c)   EpiCept and Cassel may terminate the consulting
                        arrangement between Cassel and EpiCept set forth in this
                        Section 5 at anytime by mutual written agreement.

                  (d)   EpiCept may terminate the consulting arrangement between
                        Cassel and EpiCept set forth in this Section 5
                        immediately and without prior written notice or
                        opportunity to cure if Cassel refuses or is unable to
                        perform the Services or is in breach of any material
                        provision of this Section 5.


                  (e)   Upon termination of the consulting arrangement between
                        Cassel and EpiCept set forth in this Section 5, all
                        rights and duties of the parties hereunder shall cease

                              (i) in the event that the consulting arrangement
                        between Cassel and EpiCept is terminated by EpiCept,
                        EpiCept shall be obliged to pay, within *** days after
                        receipt of Cassel's final statement, all undisputed
                        amounts owing to Cassel for unpaid Services and related
                        expenses, if any, in accordance with Section 5.1 hereof;

                              (ii) Sections 5.2, 5.3 and 6.7 shall survive
                        termination of this Section 5 of this Agreement.

6.0   Miscellaneous

            6.1 Sports Medicine and Rehabilitation: EpiCept acknowledges that
      Cassel is free to pursue with any interested third party sports medicine
      and/or rehabilitation.

            6.2 No Implied Licenses: No license rights to the Patent or any
      Inventions shall be created hereunder by implication, estoppel or
      otherwise and nothing herein shall be construed to grant to Cassel any
      rights or licenses under the Patent or Inventions.

            6.3 Notice: Any notices required or permitted to be given under this
      Agreement shall be deemed given if communicated in the English language
      and delivered to the party to be notified at its address shown below or at
      such other address as may be furnished from time to time by the party to
      be notified to the notifying party in writing either (a) by registered air
      mail, postage prepaid, which notice shall be effective five (5) days after
      the date of mailing or (b) in person, by telefax (with proof of
      transmission and confirmation by first-class mail postage paid), or
      overnight courier, which notice shall be effective on the business day
      immediately following the date of such delivery.

            If to Cassel, addressed to:        R. Douglas Cassel, M.D.
                                               4401 Fargreen Road
                                               Harrisburg, P0A 17110

            With a copy to:                    Jered L. Hock
                                               Metzger, Wickersham
                                               3211 North Front Street
                                               P.O. Box 5300
                                               Harrisburg, PA 17110

            If to EpiCept:                     EpiCept Corporation
                                               270 Sylvan Avenue
                                               Englewood Cliffs, NJ 07632
                                               Attn.: Jack V. Talley, Chief
                                               Executive Officer


            6.4 Entire Agreement: This Agreement and exhibit hereto set forth
      the entire agreement and understanding between the parties regarding the
      Patent, and supercedes and replaces any and all prior arrangements and
      understandings relating to such matters, including the Original Agreement.
      None of the terms of this Agreement may be modified except as set forth in
      writing and signed by Cassel and EpiCept.

            6.5 Amendments: This Agreement may only be amended by a written
      agreement signed by both parties.

            6.6 Waiver: A waiver by either party of any term or condition of
      this Agreement in any one instance shall not be deemed to be a waiver of
      such term or condition for any similar instance in the future or any
      subsequent breach thereof. No delay or failure by either party to exercise
      any right, power, or remedy hereunder shall constitute a waiver thereof,
      nor shall any single or partial exercise of any right, power, or remedy
      preclude other or further exercise thereof or the exercise of any other
      right power, ore remedy.

            6.7 Severability: The invalidity of any provision or part of this
      Agreement shall not affect the validity of this Agreement in its entirety
      nor any provision or part thereof. In the event any provisions of this
      Agreement are judged legally invalid, they shall automatically be severed
      herefrom and the remaining provisions shall continue in full force and
      effect, provided that should such invalidity substantially alter the
      rights of either Party, the Parties shall promptly renegotiate in good
      faith the severed provisions of this Agreement.

            6.8 Assignment: This Agreement may not be assigned by Cassel. This
      Agreement may be assigned by EpiCept provided that such assignee agrees in
      writing to be bound by the terms and provisions of this Agreement or is so
      bound by operation of law. Any purported assignment in violation of the
      provisions of this paragraph shall be null and void.

            6.9 No Agency, Partnership, or Joint Venture: Nothing in this
      Agreement shall be deemed to make the parties partners, joint venturers,
      or agents of one another. No party to this agreement shall have the power
      to bind or obligate the other. Cassel shall perform the Services hereunder
      as an independent contractor. Cassel acknowledges and agrees that Cassel
      is obligated to report as income all compensation received by Cassel
      pursuant to this Agreement, and Cassel agrees to indemnify EpiCept and
      hold it harmless to the extent of any obligation imposed on EpiCept (i) to
      pay withholding taxes or similar items or (ii) resulting from Cassel's
      being determined not to be an independent contractor.

            6.10 Survival. Sections 5.2, 5.3 and 6.7 shall survive termination
      of this Agreement.

            6.11 Governing Law: This Agreement shall be deemed to have been made
      in the State of New Jersey, and shall be governed and construed in
      accordance with the laws of New Jersey.

            6.12 Counterparts. This Agreement may be executed in two (2)
      counterparts, whereby each party may execute a duplicate original thereof,
      and each counterpart shall have


      the same force and effect as an original and shall constitute an
      effective, binding agreement on the part of each of the undersigned.

                           [SIGNATURE PAGE TO FOLLOW]


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

EpiCept Corporation                           R. Douglas Cassel, M.D.

By: /s/ JACK V. TALLEY                        By: /s/ R. DOUGLAS CASSEL
    ---------------------------------             ------------------------------
    Jack V. Talley                                R. Douglas Cassel, M.D.
    Chief Executive Officer  7/18/03                                7/22/03