Research Collaboration & License Agreement

Exhibit 10.18


RESEARCH COLLABORATION AND LICENSE AGREEMENT


This Research Collaboration and License Agreement (this "Agreement") is entered into as of May 1, 1998 (the "Effective Date") by and between Phytera, Inc. ("Phytera"), a Delaware corporation, and NeuroSearch A/S ("NeuroSearch"), a Danish corporation (together, the "Parties").


R E C I T A L S
---------------


WHEREAS, Phytera owns an inventory of distinct natural product extracts ("Extracts") derived from plant or marine microbes, including a library of [ ]* such Extracts (the "Library") that is the subject matter of this Agreement (Extracts from the Library are sometimes referred to herein as "Library Extracts");


WHEREAS, NeuroSearch has certain expertise and know-how related to the identification of compounds and mixtures of compounds capable of interacting with K+ channels (the "Assays"); and


WHEREAS, Phytera wishes to provide its Library to NeuroSearch for screening and NeuroSearch wishes to screen the Library in order to identify and develop pharmaceutical agents for the treatment and prevention of diseases which interact with K+ channels in humans (the "Field").


NOW, THEREFORE, Phytera and NeuroSearch hereby each agree as follows:


1. Certain Definitions.
--------------------


1.1. "Affiliate" means any legal entity (such as a corporation,
--------- partnership, or limited liability company) that is controlled by a party. For the purposes of this definition, the term "control" means (i) beneficial ownership of at least fifty percent (50%) of the voting securities of a corporation or other business organization with voting securities or (ii) a fifty percent (50%) or greater interest in the net assets or profits of a partnership or other business organization without voting securities.


1.2. "Assay" means tests, methods and know-how employed by NeuroSearch
----- to identify compounds or mixtures of compounds capable of interacting with K+ channels as defined in Appendix A.


1.3. "Collaboration Compounds" means an individual compound as to which
------------------------ Phytera has completed NPCII, has identified the compound's chemical structure and NeuroSearch has


___________________ * This portion of the Exhibit has been omitted pursuant to a Request for Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended. The complete Exhibit, including the portions for which confidential treatment has been requested, has been filed separately with the Securities and Exchange Commission.


verified its biological activity in primary and secondary screens. By definition, all Collaboration Compounds constitute Joint Technology.


1.4 "Collaborative Research Program" or the "Program" means the
------------------------------ collaborative research program described in Article 3 of this Agreement.


1.5 "Committee" means the Steering Committee charged with oversight of
--------- the Collaborative Research Program, as described in Section 2.1. of this Agreement


1.6 "Confidential Information" means certain proprietary information
------------------------ which may be disclosed by either party to the other pursuant to this Agreement, as described in Section 9.1 hereof.


1.7 "Development Compound" means a Collaboration Compound from the
-------------------- screening or lead optimization programs that has been selected by the Committee for entry into a pre-clinical or clinical development program.


1.8. "Development" or "Development Strategy" means the processes,
------------------------------------- steps and activities required to advance the pre-clinical or clinical assessment of a Development Compound as a potential product in the Field.


1.9 "Evaluation Period" means, for each distinct batch of Library
----------------- Extracts delivered to NeuroSearch, the period of time beginning when the batch is delivered and ending when the Committee determines which Extracts from the batch are to be designated as "Validated Hit Extracts" in accordance with Section 3.6(c) hereof.


1.10 "Field" means pharmaceutical agents for the treatment of diseases
----- which interact with K+ channels in humans.


1.11 "Natural Products Chemistry Isolation and Identification" or
------------------------------------------------------- "NPCII" means the process whereby Extracts agreed upon pursuant to Section 3.6 are analyzed by Phytera for the identification of Collaboration Compounds.


1.12 "Patent Rights" means any United States patent application and any
------------- divisional, continuation, or continuation-in-part of such patent application (to the extent the claims are directed to subject matter specifically described therein), as well as any patent issued thereon and any reissue or reexamination of such patent, and any foreign counterparts to such patents and patent applications. "Phytera Patent Rights" means Patent Rights that are (i) owned
--------------------- solely by Phytera, (ii) owned jointly by Phytera and a party other than NeuroSearch, (iii) licensed solely to Phytera or (iv) licensed jointly to Phytera and a party other than NeuroSearch, in each case to the extent that Phytera has the ability to license or sublicense the rights required under this Agreement. "NeuroSearch Patent Rights" means Patent Rights that are (i) owned
------------------------- solely by NeuroSearch, (ii) owned jointly by NeuroSearch and a party other than Phytera, (iii) licensed


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solely to NeuroSearch or (iv) licensed jointly to NeuroSearch and a party other than Phytera, in each case to the extent that NeuroSearch has the ability to license or sublicense the rights required under this Agreement. "Joint Patent
------------ Rights" means Patent Rights owned by both Phytera and NeuroSearch as joint - ------ owners. Joint Patent Rights will include (i) Patent Rights claiming Joint Technology and (ii) Patent Rights claiming both Phytera Technology and NeuroSearch Technology in a single filing.


1.13. "Progression" or "Progression Strategy" means the processes,
------------------------------------- steps and activities required to advance the assessment of a Collaboration Compound as a potential Development Compound.


1.14 "Requisite Activity" means desired biological activity observed
------------------ in Library Extracts during Assays, as determined by the Committee pursuant to Section 2.4(c) of this Agreement.


1.15 "Technology" means any proprietary development, idea, design,
---------- concept, technique, process, invention, research material, discovery, or improvement, whether or not patentable or copyrightable. "Phytera Technology"
------------------ means Technology that is (i) owned solely by Phytera, (ii) owned jointly by Phytera and a party other than NeuroSearch, (iii) licensed solely to Phytera or (iv) licensed jointly to Phytera and a party other than NeuroSearch, in each case to the extent that Phytera has the ability to license or sublicense the rights required under this Agreement. "NeuroSearch Technology" means Technology
---------------------- that is (i) owned solely by NeuroSearch, (ii) owned jointly by NeuroSearch and a party other than Phytera, (iii) licensed solely to NeuroSearch or (iv) licensed jointly to NeuroSearch and a party other than Phytera, in each case to the extent that NeuroSearch has the ability to license or sublicense the rights required under this Agreement. "Joint Technology" means Technology that is
---------------- developed or discovered jointly by one or more employees or consultants of NeuroSearch and one or more employees or consultants of Phytera in connection with the Collaborative Research Program, including specifically but without limitation all Validated Hit Extracts and Lead Molecules.


1.16 "Validated Hit Extract" means a Library Extract that the Committee
--------------------- has, based on its review of the Assays performed by NeuroSearch, determined to possess Requisite Activity. By definition all Validated Hit Extracts constitute Joint Technology.


2. Management of Collaborative Research Program.
--------------------------------------------


2.1. Steering Committee. The Parties hereby create a Steering Committee
------------------ (the "Committee") which shall consist of [ ]* members, [ ]* of whom shall be


___________________ * This portion of the Exhibit has been omitted pursuant to a Request for Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended. The complete Exhibit, including the portions for which confidential treatment has been requested, has been filed separately with the Securities and Exchange Commission.


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designated by Phytera and [ ]* of which shall be designated by NeuroSearch. The members initially designated by Phytera are [
]*, and the members initially designated by NeuroSearch are [ ].* A Committee member may resign, provided that if any member of the Committee dies, resigns, or becomes incapacitated the party which designated such member shall designate his or her successor (whose term shall commence immediately), and any party may withdraw the designation of any of its members of the Committee and designate a replacement (whose term shall commence immediately) at any time by giving notice of the withdrawal and replacement to the other party. The Committee shall designate one or more of its members to act as secretary for the Committee.


2.2. Meetings of the Committee. Regular meetings of the Committee shall
------------------------- be held within forty-five (45) days of the end of each calendar quarter, or at such other times as the Parties may deem appropriate, at such times and places as the members of the Committee shall from time to time agree. Special meetings of the Committee may be called by either party on fourteen (14) days written notice to the other party unless notice is waived by the parties. All meetings shall alternate between the offices of the parties unless the parties otherwise agree. Although informal and more frequent interactions between Committee members will occur as necessary for the efficient conduct of the Collaboration, discussions among Committee members shall not constitute an official Committee meeting unless either (i) written notice has been furnished to each Committee member at least fourteen (14) business days prior to such meeting or (ii) each Committee member executes a written waiver of such notice.


2.3. Actions By the Committee. A quorum of the Committee shall be
------------------------ present at any meeting of the Committee if at least three members are present at such meeting in person or by telephone. If a quorum exists at any meeting, the unanimous consent of all members of the Committee present at such meeting is required to take any action on behalf of the Committee. In no event shall any action be taken by the Committee if there is other than unanimous consent. Unless otherwise specifically stated to the contrary herein, no individual party shall purport to act on behalf of the other party unless and then only to the extent authorized to do so by the Committee.


2.4. Responsibilities of The Committee. The Committee shall be
--------------------------------- responsible for the day-to-day conduct, progress and evaluation of the Collaborative Research Program (the "Program") and its activities, including, without limitation:


(a) planning and efficient prosecution of the Program


___________________ * This portion of the Exhibit has been omitted pursuant to a Request for Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended. The complete Exhibit, including the portions for which confidential treatment has been requested, has been filed separately with the Securities and Exchange Commission.


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(b) preparation of Quarterly Reports of Program activities


(c) selection and prioritization of Validated Hit Extracts for
NPCII and agreeing to the work plan and budget for these
activities, including the determination of the criteria of
significant biological activity ("Requisite Activity")
necessary for a Library Extract following the completion of
Assays to qualify as a Validated Hit Extract;


(d) selection and prioritization of Collaboration Compounds for
entry into early preclinical studies and agreeing to the
work plan and budget for these activities


(e) selection and prioritization of Collaboration Compounds for
entry into lead optimization and agreeing to the work plan
and budget for these activities


(f) nomination and prioritization of Development Compounds for
entry into development and agreeing to the work plan and
budget for these activities


(g) deciding on the long-term development plan for any
Development Compound and/or on the appropriate stage and
program to seek an outlicense partner


(h) agreeing on any publication strategy for any results, data,
discoveries or compounds from the Program


2.5. Committee Reports. Within ten (10) days following each meeting of
----------------- the Committee held pursuant to Section 2.2, the secretary of the Committee shall prepare and send to each party a written report of actions taken at the meeting in such form and containing such detail as shall be determined by the Committee.


2.6. Deadlock. In the event that the Committee cannot reach agreement
-------- within sixty (60) days as to any matter that is subject to its decision-making authority, either party may request that the matter be referred to the Chief Executive Officers ("CEO's") of the parties for resolution. If, in the sole discretion of either CEO, a meeting between the CEO's is advisable or required to resolve the matter, such a meeting shall be requested in writing and the CEO's will endeavor in good faith to meet at the earliest possible time and in a place of mutual convenience. In the event that the CEO's cannot reach agreement on the matter in question, the parties agree to submit the dispute to binding arbitration in accordance with the procedures set forth in Article 13.


3. Conduct of Collaborative Research Program.
-----------------------------------------


3.1. Objective of Collaboration. The overall objective of this
-------------------------- Agreement is to discover


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and develop compounds that demonstrate potential as human pharmaceutical agents for treatment and prevention of diseases which interact with K+ channels.


3.2. Responsibilities of Each Party. Each of the parties shall have the
------------------------------ general responsibilities for research and development tasks as are described in detail in Appendix A. However, the Committee shall have discretion to allocate
---------- specific research and development tasks in a particular situation to the party that has the best current capability, capacity, and desire to complete the task and advance the objectives of the Program, irrespective of whether that task comes within the general responsibilities assigned to that party. If the members of the Committee disagree on whether a party should participate in a particular task, the task will be assigned to the party who has general responsibility for such activities as set forth on Appendix A. NeuroSearch agrees to conduct all
---------- Assays of the delivered Extracts and all other actions required of it in connection with the Program expeditiously and in a scientifically sound manner. Phytera also agrees to deliver all Extracts on a timely basis and to conduct NPCII on Validated Hit Extracts and all other actions required of it in connection with the Program expeditiously and in a scientifically sound manner.


3.3. Reports and Records. Each party agrees to promptly and regularly
------------------- communicate to the other party all research results from the Program, including quarterly reports to the Committee detailing all tests conducted and results obtained by such party in connection with the Program. Each party shall prepare and maintain adequate records, including bound laboratory notebooks maintained in accordance with standard scientific procedures, containing all appropriate data reflecting all research results from the Program. In addition, each party shall retain under appropriate conditions any necessary or desirable samples of research materials that are developed or used in the Program.


3.4. Grant of License. For the duration of the term of this Agreement,
---------------- Phytera hereby grants to NeuroSearch a license (without the right to sublicense) under the Phytera Patent Rights and other rights in Phytera Technology to (i) test Library Extracts for assay interference (as described in Section 3.5(b) below), (ii) test, screen and perform Assays on any and all Library Extracts in order to determine which, if any, of the Library Extracts (or combinations thereof) possesses Requisite Activity and (iii) if duly authorized by the Committee, to perform necessary research and development tasks associated with NPCII of Validated Hit Extracts, each as set forth in detail on Appendix A.
----------


3.5. Pilot Phase.
-----------


(a) Delivery of Extracts. The Pilot Phase of the Program
-------------------- shall commence


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Pilot Phase, Phytera shall promptly deliver a total of approximately [ ]* Extracts, approximately [ ]* each of plant and marine origin (the "Pilot Extracts"), to NeuroSearch.


(b) Conduct of Initial Screens. Promptly following receipt of
-------------------------- the Pilot Extracts, NeuroSearch shall (i) test such Pilot Extracts for activity to ensure that Assays are optimally configured for screening and (ii) evaluate the Pilot Extracts for assay interference. In the event that such interference is identified, NeuroSearch shall attempt to modify its Assays as necessary in order to enable successful completion. NeuroSearch shall promptly notify the Committee of any modification so implemented. NeuroSearch shall promptly provide to the Committee a detailed description of all evaluations performed and all Assays successfully conducted. All such information disclosed by Phytera and NeuroSearch shall be deemed Confidential Information and, as such, is subject to the restrictions set forth in Article 10 hereof.


(c) Termination of Research. In the event that NeuroSearch is
----------------------- unable to perform successful Assays of any of the Pilot Extracts during the Pilot Phase (as such Assays may be modified by NeuroSearch), either party may (but shall have no obligation to) terminate this Agreement upon [ ]* written notice to the other party; provided, however, that such termination must occur prior to the commencement of the Program, as described in Section 3.6 below.


3.6. Commencement of the Collaborative Research Program
--------------------------------------------------


(a) Delivery of Extracts. The Program shall commence
------------------- following the successful evaluation of Pilot Extracts in the Assays by NeuroSearch. It is anticipated that, assuming that one or more Pilot Extracts is successfully Assayed during the Pilot Phase, the Program shall commence on or about [ ]*, although the Program may commence on such other date as shall be designated by the Committee. Upon commencement of the Program Phytera shall promptly deliver an additional [ ]* plant cell and marine microbe culture extracts (the "Year One Extracts") to NeuroSearch.


(b) Conduct of Year One Assays. As soon as is reasonably
-------------------------- practical following the receipt of the Year One Extracts, NeuroSearch shall initiate screening of such Extracts in accordance with the procedures set forth on Appendix A hereto. NeuroSearch shall report to Phytera each Extract in which
---------- its Assays detect signs of Requisite Activity. Phytera shall, in a reasonable period of time thereafter, provide NeuroSearch with information as to species (plant) or isolate type (marine microbe) and extract type for each Extract with Requisite Activity.


(c) Identification and Labeling of Validated Hit Extracts.
----------------------------------------------------- Within 30 days of completion of the Assays on each of the Year One Extracts, NeuroSearch shall provide a


___________________ * This portion of the Exhibit has been omitted pursuant to a Request for Confidential Treatment under Rule 406 of the Securities Act of 1933, as amended. The complete Exhibit, including the portions for which confidential treatment has been requested, has been filed separately with the Securities and Exchange Commission.


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detailed report of all Assays conducted to the Committee. The Committee shall in its sole discretion label each Library Extract (or combination thereof) determined by the Committee to possess Requisite Activity as a "Validated Hit Extract."


(d) Evaluation Meetings. Within thirty (30) days following
------------------- NeuroSearch's completion of Assays on each of the Year One Extracts, the Committee shall meet to review the results of all of the Assays and evaluate the overall progress of the Program. The Committee shall determine, based upon the results of the Assays performed by NeuroSearch whether any of such Extracts possesses Requisite Activity. If so, the Committee shall then designate between [ ]* Extracts that have been determined to possess Requisite Activity as Validated Hit ...