Separation Agreement Between Kerry P. Gray And The Registrant, Dated As of May 10,2005

EXHIBIT 10.35


SEPARATION AGREEMENT


THIS SEPARATION AGREEMENT between Access Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and Kerry Gray (hereinafter referred to as "Gray"), dated as of May 10, 2005 (the "Effective Date");


WHEREAS, Gray is a member of the Board of Directors of the Company (the "Board"), and President and Chief Executive Officer of the Company;


WHEREAS, Gray intends to resign and terminate his employment and all other positions with the Company and its subsidiaries, including the offices of President and Chief Executive Officer and Gray's membership on the Board;


WHEREAS, the Company intends to accept Gray's resignation and wishes to provide to Gray certain payments and to provide Gray with certain other benefits upon such termination and Gray agrees to give certain releases and provide certain services to the Company;


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


1. Resignation and Termination.


1.1. Gray hereby resigns from all positions he currently holds with the
Company and any subsidiary of the Company, including without
limitation the positions of President, Chief Executive Officer and
Director, and member of the Board and any committee thereof,
effective as of the Effective Date. Gray agrees to transfer any
shares of any subsidiary or interest of any trust of the Company
held by him as nominee or in any other capacity to the Company or
its designee.


1.2. The Employment Agreement, dated as of April 1, 1998, by and between
the Company and Gray is hereby terminated in its entirety as of the
Effective Date and neither party thereto shall have any further
rights or owe any further payment, duty or obligation to the other
thereunder; notwithstanding the foregoing, (a) the non-competition
obligation of Gray set forth in Section 7 of the Employment
Agreement as it relates to (i) mucoadhesive film technology and (ii)
products incorporating


platinum for use as a chemotherapeutic agent and (b) the
non-solicitation obligation of Gray set forth in Section 8 of the
Employment Agreement shall each survive for a period of one year
from the date of this Agreement.


2. Company Covenants.


2.1. Cash Payments. Commencing as of the Effective Date, Gray shall be
entitled to the following cash payments:


(a) On the Effective Date, the Company shall pay to Gray a cash
payment of $225,000; and


(b) For a period of eighteen (18) months following the Effective
Date, the Company shall pay to Gray a payment of $33,333.33 on
the penultimate business day of each calendar month, with the
first such payment due and payable on May 30, 2005 making an
aggregate payment of $600,000 under this Section 2.1(b).


2.2. Common Stock Issuances. For a period of eighteen (18) months
following the Effective Date, the Company shall issue to Gray 3,500
shares of the Company's common stock on the penultimate business day
of each calendar month, with the first such issuance due on May 30,
2005 making an aggregate issuance of 63,000 shares under this
Section 2.2. The Company agrees to register the resale of such
shares on the next registration statement that it files for which
registration of such resale is allowed by the rules of the
Securities and Exchange Commission.


2.3. Vesting and Exercise of Existing Options and Restricted Stock. On
the Effective Date, all outstanding Company stock options and shares
of restricted stock of the Company held by Gray shall immediately
and fully vest. All outstanding Company stock options held by Gray
shall remain exercisable by Gray until June 30, 2007,
notwithstanding anything to the contrary in documents related to
such option grants, and shall expire on such date.


2.4. Consulting. At the Company's sole discretion, Gray and the Company
hereby agree that, beginning on July 1, 2005 and thereafter, the
Company may request that Gray serve the Company in the capacity of a
consultant. The Company shall


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pay to Gray the sum of $2,000 for each day worked by Gray as a
consultant at the request of the Company pursuant to this Agreement.
From the Effective Date until July 1, 2005 Gray agrees to cooperate
with the Company, at no cost to the Company, in connection with the
transition of operations of the Company to a new Chief Executive
Officer of the Company.


2.5. Benefits. For a period of Twenty (20) months following the Effective
Date, the Company shall, at its sole expense, continue to maintain
and provide coverage under Gray's existing health coverage plan. For
a period of Twelve (12) months following the Effective Date, the
Company shall, at its sole expense, provide outplacement services
appropriate to Gray's position.


2.6. Withholding. All payments required to be made by the Company
hereunder to Gray shall be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as the
Company may reasonably determine it must withhold pursuant to any
applicable law or regulation.


2.7. No Duty to Mitigate Damages. Gray's payments and benefits under
Sections 2.1, 2.2, 2.3 and 2.5 of this Agreement shall be considered
severance pay in consideration of his past service, and as an
inducement to him to enter into and become bound by this Agreement,
and his entitlement thereto shall not be dependent upon whether or
not Gray provides further services of any type to or for the Company
or any third party.


3. Gray Covenants. Gray hereby covenants with the Company as follows:


3.1. Non-disclosure. Gray recognizes and acknowledges that he has had and
will have access to certain highly sensitive, special, unique
information of the Company that is confidential or proprietary. Gray
hereby covenants and agrees not to use or disclose any Confidential
Information (as hereinafter defined) except for disclosures made
solely (i) to authorized representatives of the Company; or (ii) as
required by any governmental, statutory or judi ...