Joint Venture Agreement

Exhibit 10.14


JOINT VENTURE AGREEMENT BETWEEN
CRAUN RESEARCH SDN. BHD., SARAWAK
AND
MEDICHEM RESEARCH INC., USA


DECEMBER, 1996


AGREEMENT


THIS AGREEMENT is made the 21st day of December, 1996


BETWEEN:


(1) CRAUN RESEARCH SENDIRIAN BERHAD a company incorporated in Sarawak,
Malaysia under the Companies Act, 1965, whose registered office is at
Levels 5, 8 and 12, Wisma Satok, Jalan Satok, 93400 Kuching, Sarawak
and a place of business at Lot 3147 Block 14, Jalan Santubong, 93055
Kuching, Sarawak (hereinafter referred to as "CRAUN") of the one part
and


(2) MEDICHEM RESEARCH INC. a company organised and incorporated under the
laws of the United States of America and State of Illinois, with a
place of business at 12305 So. New Avenue, Lemont, ILLINOIS 60439,
United States of America (hereinafter referred to as "MEDICHEM") of
the other part.


WHEREAS


(1) CRAUN is the duly authorised agent for and on behalf of the Government
of the State of Sarawak, Malaysia ("the State Government") where the
species of Callophylum plants from which the COMPOUND known
scientifically as (+) - Calanolide A (hereinafter referred to as "the
said COMPOUND") is isolated; and CRAUN, therefore, enters into this
Agreement for and on behalf of the State Government;


(2) MEDICHEM is primarily engaged in research and early stage development
of therapeutic agents. MEDICHEM has title or has the exclusive
licenses to the following patents and patent applications relating to
the COMPOUND which are potent inhibitors of Human Immunodeficiency
Virus (HIV) reverse transcriptase and intermediates, namely:


(a) MediChem U.S. Patent No. 5,489,697; 1996 - METHOD FOR THE
PREPARATION OF (+)-CALANOLIDE A AND INTERMEDIATES THEREOF
(Boulanger, Flavin, et al.).


(b) MediChem U.S. Patent Application No. 08/510,213; 1995, and
International Application No. PCT/US95/09804; 1995 - METHOD
FOR THE PREPARATION OF (+)-CALANOLIDE A AND INTERMEDIATES
THEREOF (Flavin, Xu, et al.).


(c) MediChem U.S. Patent Application No.08/609,537; 1996 - METHOD
FOR THE PREPARATION OF (+)-CALANOLIDE A ANDANALOGUES THEREOF
(Flavin, Xu, et al).


(d) NCI U.S. Patent Application No.08/065,618; 1993 - CALANOLIDE
AND RELATED ANTIVIRAL COMPOUNDS, COMPOSITIONS, AND USES
THEREOF (Boyd, Cardellina, et al.).


(e) NCI International Patent Application No. PCT/US94/05658; 1995
- CALANOLIDE AND RELATED ANTIVIRAL COMPOUNDS, COMPOSITIONS,
AND USES THEREOF (BOYD, Cardellina, et al.).


(3) MEDICHEM has by virtue of a Patent License Agreement (Patent License
No. L-135-94) with National Cancer Institute ("NCI") of the National
Institute of Health which is an agency of the United States Public
Health Service within the Department of Health and Human Services,
U.S.A. (a copy whereof is hereto attached as APPENDIX A) the use of
the Patent rights


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licensed thereunder to undertake research into the said COMPOUND with
a view to developing a drug for the treatment of acquired
immunodeficiency syndrome (AIDS) diseases, and to use and sell the
licensed PRODUCTS i.e. the drug derived from the said COMPOUND;


(4) MEDICHEM entered into an Agreement with the State Government whereby
in consideration of the State Government agreeing to NIH granting to
MEDICHEM a license to use the COMPOUND and to sell and distribute
drugs developed therefrom, MEDICHEM agrees to pay royalties, at the
rate stated therein, to the State Government. A copy of the Agreement
is attached as APPENDIX B;


(5) MEDICHEM has a duly executed license with vita of Spain under the
License Agreement attached as APPENDIX C.


(6) MEDICHEM has invited the State Government, through CRAUN, to form a
COMPANY for the clinical trials for the said COMPOUND and subscribe to
purchase shares in the COMPANY with a view to enhancing benefits to
the State Government in the event of the successful development and
commercialization of the PRODUCT;


(7) Both the Sarawak Government (through CRAUN) and MEDICHEM wish to
jointly cooperate to form a COMPANY for conducting research into the
COMPOUND and more particularly in the conduct of the clinical trials
for the said COMPOUND, with a view to the production and medical
application of the PRODUCT. CRAUN and MEDICHEM wish to be equal
shareholders in the COMPANY.


In pursuance thereof, the parties hereto have agreed to enter into mutual commitments and to regulate their rights in relation to such COMPANY in the manner and upon the terms and conditions hereinafter appearing.


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IT IS MUTUALLY AGREED as follows:


1 INTERPRETATIONS


1.1 In this Agreement unless the context otherwise requires:


1.1.1 "the COMPOUND" means the anti-viral molecule or agent isolated from
the plants of the genus callophylum found in the State of Sarawak in
Malaysia and including Calanolide or any synthesized form thereof or
that derived from preparation made by MEDICHEM under the said patents.


1.1.2 "the COMPANY" means the COMPANY incorporated under Clause 4 below.


1.1.3 "FDA" means the Food and Drug Administration of the United States of
America.


1.1.4 MEDICHEM "INTELLECTUAL PROPERTY RIGHTS" means technical information,
all trade secrets, patent applications and patents and licenses
related to COMPOUND or PRODUCT in which MEDICHEM has right, title and
interest at the date of signing this Agreement.


1.1.5 "STATE GOVERNMENT" means the Government of the State of Sarawak,
Malaysia.


1.1.6 COMPANY Intellectual Property Rights shall mean technical information,
trade secrets, and patent rights developed or obtained by the COMPANY.


1.1.7 "THE PRODUCT" means any drug or pharmaceutical goods or PRODUCT
derived from the COMPOUND for the treatment of Human Immunodeficiency
(HIV) or HIV related diseases, developed through or under this
Project.


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1.1.8 "THIS PROJECT" means


(a) the development of Calanolide as a Therapeutic for
treatment of HIV infection;


(b) development of Calanolide A as a Therapeutic for
treatment of non HIV viral infections;


(c) development of Calanolide - related compounds including
Costatolide as Therapeutic agent for treatment of viral
infections;


(d) the research and study into medicinal properties of
other plant materials from the State of Sarawak, and


(e) undertake any current or future endeavours or
collaboration entered into between MEDICHEM and the
U.S. National Institute of Health in connection with
the research and study into Calanolide Compounds.


1.2 References to statutory provisions shall be construed as references to
those provisions as respectively amended or re-enacted or as their
application is modified by other provisions (whether before or after
the making of this agreement) from time to time and shall include any
provisions of which they are re-enactments (whether with or without
modifications).


1.3 The headings are inserted for convenience only and shall not affect
the construction of this Agreement.


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1.4. The Appendices shall be considered as an integral part of this
Agreement.


1.5 Words importing one gender include all other genders and words
importing the singular include the plural and vice versa.


1.6 Any covenant by a party not to do an act or thing shall be deemed to
include an obligation not to permit or suffer such act or thing to be
done by another person.


2. TERM


This Agreement shall commence on the date shown hereinabove and shall
continue until and unless terminated in accordance with hereinunder.


3. NATURE OF COLLABORATION


3.1 CRAUN and MEDICHEM hereby mutually agree to cooperate with each other
to form a COMPANY for the purpose of taking the COMPOUND through its
clinical trials which shall start as soon as such trials are approved
by the FDA and to comply with and achieve the Benchmarks for the
development thereof as set out in APPENDIX D to the Patent License
Agreement between MEDICHEM and the National Institutes of Health
(further set out in Appendix C hereof).


3.2 The COMPANY shall seek the requisite approvals of the FDA and any
other governing bodies (hereinafter referred to as "the regulatory
authorities") for the conduct of clinical trials for the COMPOUND and
comply with all the conditions and requirements set out in the
approvals by the regulatory authorities.


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3.3 The COMPANY shall seek the approvals of the regulatory authorities in
the United States of America and those of other countries for the
manufacture, use, marketing and sale of the PRODUCT.


3.4. Upon approvals from the regulatory authorities for the manufacturing
of the PRODUCT and its medical application, the parties hereto shall
proceed, either through the COMPANY itself or by arrangements with
other parties (to be mutually agreed upon by CRAUN and MEDICHEM), to
have the PRODUCT manufactured, distributed and sold both in the United
States of America and abroad.


3.5 MEDICHEM shall make available to the COMPANY, at MEDICHEM'S standard
cost, the scientists to undertake the research and clinical trials of
the COMPOUND and manufacture of the PRODUCT and shall (subject to Visa
and U.S. immigration clearance) train scientists nominated by CRAUN at
MEDICHEM's facilities in the United States and permit such scientists
from Sarawak, to participate in the clinical trials, development,
manufacture, marketings and distribution of the PRODUCT.


4. SCHEME OF COLLABORATION


4.1 CRAUN and MEDICHEM agree to have incorporated, under United States
laws, a COMPANY, with limited liability, whose shares shall be owned
by the parties hereto in the following proportions:-


CRAUN


(as agent and nominee of the State Government) : 50 %


CRAUN'S shares are to be obtained by making subscription payments in
accordance with Subscription Agreement. (APPENDIX D).


MEDICHEM : 50 %.


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MEDICHEM's shares are to be obtained by contribution of MEDICHEM
Intellectual Property Rights and shall vest automatically according to
APPENDIX E.


4.2 The COMPANY shall be known as SARAWAK MEDICHEM PHARMACEUTICALS, INC..
or such other name as may be approved by the Secretary of State of
Delaware, United States of America.


4.3(a) The COMPANY'S principal business and activity is to undertake the
research work and carry out clinical trials for the COMPOUND and
thereafter, to carry out research and study into other plant materials
for their medicinal properties.


(b) In the event of a successful development of the PRODUCT, the parties,
as shareholders of the COMPANY, shall mutually agree upon the mode and
manner for undertaking the commercialization of the PRODUCT, in
particular, manufacturing, sale and distribution thereof either
through the COMPANY or such third parties as may be mutually agreed by
CRAUN and MEDICHEM. In making this determination both parties will
take into consideration the following:


(i) capital expenditure that may be required for the
commercialization of the PRODUCT,


(ii) the most efficient and cost effective manner for the
manufacturing, promoting and distributing thereof.


4.4 The objects, constitution and articles of association of the COMPANY
shall be in the document set out in APPENDIX F, the provision of this
appendix both parties hereto may both mutually agree in writing to
modify, alter, or amend the provisions of APPENDIX F.


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4.5 All Patents, License Agreements and Approvals relating to the
development of the PRODUCT shall be assigned or exclusively licensed
to the COMPANY upon payment by CRAUN of the sum of US $1,200,000 to
the COMPANY as the first payment for subscription of shares. These
funds are to be used for the attainment of the first benchmark
stipulated in APPENDIX D.


5. WARRENTIES AND UNDERTAKINGS


5.1 MEDICHEM undertakes that its scientists whose names appear in APPENDIX
G will carry out for the COMPANY all research and trials envisaged
under the Project and throughout the duration of this Agreement.
MEDICHEM will be reimbursed for services of MEDICHEM scientists at a
rate approved by the COMPANY's Board of Directors.


5.2 MEDICHEM warrants that all the scientists named in APPENDIX G possess
the requisite knowledge, skill and experience to undertake the
research and trials described hereinabove, and will undertake such
responsibilites to the best of their professional competence and
according to the highest standard of professional conduct and ethics.


5.3 MEDICHEM undertakes to recruit, engage, appoint, or involve other
scientists for the COMPANY whose skills and professional abilities are
required for the successful implementation of the Project or for the
development and commercialization of the PRODUCT in addition to or in
substitution of those scientists named in APPENDIX G.


5.4 MEDICHEM undertakes to procure or obtain for the COMPANY from the
scientists named in APPENDIX G and any scientists recruited or
appointed under clause 5.3, written undertakings in the form
acceptable to the State Government, that they will not make any
unauthorised use or disclosure of


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any data, findings or knowledge acquired that may or come into their
possession during or in the course of their involvement or
participation in the Project.


5.5 MEDICHEM warrants that no other person has any claim, interest or
right whatsoever to any of the Patents, and that the same can be
validly be assigned to the COMPANY and that the COMPANY shall have
absolute right and ownership of the Patents and entitled to custody
and control of the certificates and the documentary evidence relating
thereto except as that provided in APPENDICES A, B and C.


5.6 CRAUN warrants that it has the authority to enter into this Agreement
on behalf of the State Government and has secured funds to meet the
payments due under this Agreement.


5.7 CRAUN undertakes to procure or obtain for the COMPANY from its
scientists involved in the Project, a written undertaking, in a form
acceptable to MEDICHEM, that they will not make any unauthorized use
or disclosure of any date, findings, or knowledge acquired or come
into their possesion during or in the course of their involvement or
participation in the Project.


5.8 Neither CRAUN nor MEDICHEM shall, during the subsistence of the
Agreement enter into or establish any relationship, arrangement or
collaboration with any other parties or institution for the purpose of
undertaking any research, study, trial, manufacture, production,
distribution, or sale of the PRODUCT, the COMPOUND or any analogs or
derivatives thereof without the prior written consent of the other
party.


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6. FUNDS FOR PROJECT AND PAID UP CAPITAL OF COMPANY


6.1 MEDICHEM has estimated that the costs of both Phases of the clinical
trials for the COMPOUND would have US $21,000,000 particulars of which
are as follows:


Phase Amount
----- ------

(a) Phase IA/IB US $ 6,000,000
(b) Phase II US $ 15,000,000
---------------
Total US $ 21,000,000


A detailed schedule for the disbursement of the above mentioned sum is
found in APPENDIX D hereto.


6.2 The clinical trials shall be undertaken by the Company from funds
provided as follows:


(i) CRAUN will provide to the COMPANY a total sum of US$9,000,000
through subscription in COMPANY stocks to cover the full costs
of the Phase IA/IB clinical trials and part of the costs of
Phase II of the trials. The sum of US $9,000,000 shall be made
available in the manner and at the times set out in
subscription APPENDIX D, subject always to the condition that
prior to each payment the results of the clinical trials are
shown to be satisfactory and the benchmarks stipulated in
APPENDIX D are attained. The COMPANY shall issue stocks in
accordance with the provisions of APPENDICES D and E within 30
days from the date of the subscription payment.


(ii) MEDICHEM shall be issued shares in the COMPANY equivalent to
the value of the MEDICHEM Intellectual Property Rights
assigned or licensed to the COMPANY. Both parties agree that
the ultimate value of the MEDICHEM Intellectual Property
Rights assigned or licensed to the COMPANY shall be US
$9,000,000, but


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the shares for MEDICHEM shall be vested and be issued at the
same time as the shares are issued to CRAUN, to the intent
that the amount of shares issued to CRAUN and MEDICHEM shall
be equal at all material times. Except if CRAUN fails to make
subscription payments, CRAUN shall not receive any further
shares, MEDICHEM shares shall continue to automatically be
vested according to the Schedule E.


(iii) The balance of the sum required to complete the clinical
trials of US $12,000,000 shall be raised by the COMPANY as
follows:


(a) through license fees or royalities received by the
COMPANY from the licensing of the rights to
manufacture, sale, and distribution of the PRODUCT to a
pharmaceutical company or companies;


(b) by loans or finance obtained from banks or financial
institutions;


(c) by a combination of (a) and (b);


(d) by loans provided by CRAUN to the COMPANY, or;


(e) by the COMPANY calling for additional working capital
from its shareholders and CRAUN and MEDICHEM will
purchase an equal number of shares to meet the working
capital needs of the COMPANY. In such an event, CRAUN
will make available a loan [on terms to be agreed upon
by the parties hereto] to MEDICHEM to subscribe to the
shares of the COMPANY to the intent that MEDICHEM shall
retain 50% equity interest in the COMPANY.


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6.3 Both parties shall endeavor to ensure that the COMPANY has sufficient
funds at all material times, to complete the clinical trials for the
COMPOUND.


7. INTELLECTUAL PROPERTY RIGHTS


7.1 Any Product created jointly by the parties in pursuance of this
Agreement, shall belong to the Company at the date of its creation:


(a) Where in the course of developing the PRODUCT Intellectual
Property Rights are brought into existence, such Intellectual
Property Rights SHALL be COMPANY intellectual property Rights
and be held in the name of the COMPANY, and the COMPANY'S
expense, shall take all reasonable steps necessary to protect
the same by applying for US and Worldwide Patents and such
foreign rights corresponding to them or registrations of them
as may be reasonable.


(b) if at any time during the existence of the COMPANY any
Intellectual Property Rights belonging to the COMPANY or
assigned or licensed to the COMPANY by MEDICHEM are infringed
by a third party then the COMPANY shall take all reasonable
steps necessary to enforce the COMPANY and MEDICHEM
Intellectual Property Rights at COMPANY expense. Both parties
shall use all steps and provide all information and assistance
reasonably required for the purpose of such proceedings. Any
sums recovered as a result of proceedings taken to enforce the
COMPANY or MEDICHEM Intellectual Property Rights shall after
deduction of all legal fees and other expenses incurred in
connection with such proceedings by the parties be paid to the
COMPANY'S general account.


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8. TERMINATION AND BREACH OF AGREEMENT AND THEIR CONSEQUENCES.


8.1 This Agreement shall be deemed to have been terminated if:


(a) both CRAUN and MEDICHEM mutually agree in writing not to
proceed further with any stage of the clinical trials of the
COMPOUND;


(b) the State Government fails to provide share subscription funds
required for the clinical trials of the COMPOUND in accordance
with the provisions of Clause 6 above or in the manner
stipulated and at the times mentioned in APPENDIX D hereto or
fails, without reasonable cause, to provide the funds in
accordance with clause 6.2 (iii).


8.2.1 Where this Agreement is terminated pursuant to clause 8.1(a) both
parties will be released from their prospective obligations hereunder
and any liabilities of the COMPANY will be settled by the parties
hereto equally. Upon settlement of such liabilities, all patents
assigned or licensed to the COMPANY shall be reassigned back to
MEDICHEM, including rights to clinical trials, and the parties will
take steps to dissolve the COMPANY in accordance with the laws of the
State of Delaware of the United States of America.


8.2.2 Where this Agreement is terminated pursuant to Clause 8.1(b), the
MEDICHEM Intellectual Property Rights shall be reassigned by the
COMPANY back to MEDICHEM, who shall be entitled to continue with the
development of the COMPOUND.


8.3 In the event that the parties are unable to arrive at a joint decision
as required under Clause 8.1(a), and the provisions of Clause 8.1(b)
do not apply on whether or not to proceed further with any stage of
the clinical


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trials for the PRODUCT that the party that wishes to proceed with the
development of the PRODUCT is entitled to do so, subject to the
following:


(a) in the event that it is CRAUN that does not want to proceed,
MEDICHEM shall have the right but not the obligation to
purchase CRAUN'S shares at the price paid by CRAUN.


(b) in the event it is MEDICHEM that does not wish to proceed,
CRAUN shall have the right, but not the obligation to purchase
MEDICHEM'S shares at the price of $9,000,000 US being the
price paid by MEDICHEM.


(c) in the event that the conditions in subparagraphs (a) and (b)
above cannot be fulfilled within a period of six months from
the date when either party gives written notice to the other
of its desire not to proceed with the clinical trial of the
COMPOUND, this Agreement shall be deemed mutually terminated
and the provisions of clause 8.2 shall apply.


8.4. Subject to the provisions of 8.1(b), a breach of any of the provisions
of the Agreement shall not ...