EXHIBIT 10.18


THE SYMBOL '*' IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE
EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

                        LICENSE AND COOPERATION AGREEMENT

This  License  and  Cooperation  Agreement  (the  "Agreement")  is  made  and is
effective as of this date of April 16, 1998 ("Effective Date"), between

         Merz + Co. GmbH & Co., a company  organized  under the laws of Germany,
         with its principal place of business at Eckenheimer Landstrase 100-104,
         60318 Frankfurt a. M., Germany ("Merz"),

and

         Neurobiological  Technologies  Inc., a company organized under the laws
         of the State of Delaware,  U.S.A., with its principal place of business
         at 1387 Marina Way South, Richmond, CA 94804, U.S.A., ("NTI"),

and

         Children's  Medical  Center  Corporation,   a  non-profit  organization
         organized  under  the  laws of the  State  of  Massachusetts  with  its
         principal   place  of  business  at  300   Longwood   Avenue,   Boston,
         Massachusetts, U.S.A., ("CMCC"),

in reference to the following facts:

A.       Merz holds  certain  patent  rights for the use of  Memantine  to treat
         cerebral  ischemia and  dementia  relating to  Alzheimer's  disease (as
         further  defined  in  Exhibit  B of  this  Agreement),  and is  further
         developing Memantine for the treatment of dementia and other diseases.

B.       NTI is the  licensee  of certain  patent  rights in  Memantine  for the
         treatment of  neuropathic  pain and AIDS related  dementia and of other
         patent rights pertaining to Memantine  licensed by CMCC on an exclusive
         basis in the field of use as defined in the Exclusive License Agreement
         entered  into on September  11, 1995 between CMCC and NTI  (hereinafter
         referred to as the "Exclusive License Agreement").

C.       CMCC is the owner of certain  patent rights to be further  specified in
         Exhibit A,  including  patent  rights in Memantine for the treatment of
         neuropathic pain and AIDS related dementia.


<PAGE>

D.       In view of the  cooperation  between the parties under this  Agreement,
         which will succeed the Exclusive License  Agreement,  CMCC and NTI will
         terminate  their Exclusive  License  Agreement on the Effective Date of
         the  Agreement,  without any further  obligations  under that Exclusive
         License Agreement. CMCC and NTI will grant mutual releases with respect
         to  any  obligations  under  the  Exclusive  License   Agreement.   The
         termination  of the Exclusive  License  Agreement  shall be a condition
         precedent to Merz' obligation to execute and perform this Agreement.

E.       CMCC desires to have the CMCC Patents, as hereinafter defined, utilized
         in the public interest and is willing to grant a license  thereunder on
         the terms and conditions herein.

F.       NTI and Merz desire to combine their efforts to most efficiently market
         and license the Products in the Territory (as  hereinafter  defined) in
         accordance with the terms and conditions of this Agreement.

G.       The parties believe that the cooperation  among the parties as provided
         under  this  Agreement  is in  their  best  interest  and is  the  most
         efficient and effective way to  commercialize  the CMCC Indications and
         the Merz Indication as hereinafter defined.

         Now,  therefore,  in  consideration  of the  promises  and  the  mutual
covenants contained herein, the parties agree as follows:

Article 1 - Definitions

1.1 "CMCC Indications" shall mean the use of the Product within the scope of the
CMCC Patents.

1.2 "CMCC Patents" shall mean all of the following intellectual property rights:

     (i) The United States and foreign patents and/or patent applications listed
in Exhibit A hereto,  including any patents or patent applications,  divisionals
and continuations thereof;

     (ii) The United  States and foreign  patents  issued from the  applications
listed in  Exhibit A hereto  and from  divisionals  and  continuations  of those
applications;

     (iii)   Claims   of  United   States   and   foreign   continuation-in-part
applications, and resulting patents, which relate to subject matter specifically
described  in the United  States and foreign  patent  applications  described in
Exhibit A hereto;

     (iv)  Claims of all after filed  foreign  patent  applications,  and of the
resulting patents,  which relate to subject matter specifically described in the
United States patent

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<PAGE>

and/or patent applications described in subparagraphs (i), (ii) or (iii) of this
Article 1.2; and

     (v) Any  reissues,  divisionals,  amendments  or  extensions  of the United
States or foreign patents described in subparagraphs (i), (ii), (iii) or (iv) of
this Article 1.2.

It is further understood that certain patents listed in Exhibit A hereto related
to nitrosylating compositions,  including nitrosomemantine,  are not included in
the CMCC Patents.

1.3  "Confidential  Information"  shall  mean and  include  any and all data and
information  not in the public  domain,  including  know-how  and trade  secrets
relating  to, or contained or embodied in the  products,  technology,  services,
business,  finances,  or affairs of any party.  Confidential  Information may be
communicated orally,  visually,  in writing or in any other recorded or tangible
form.  Subject to the provisions set forth in Article 12.1 with respect to CMCC,
all  data  and  information  hereunder  will be  considered  to be  Confidential
Information  (i) if the  disclosing  party has marked them as such,  (ii) if the
disclosing party has, orally or in writing, advised the receiving party of their
confidential nature, or (iii) if, due to their character or nature, a reasonable
person in a like  position  and under  like  circumstances  would  treat them as
confidential.

1.4 "Compound"  shall mean any raw material  necessary for the  manufacturing of
the Products.

1.5 "First  Commercial  Sale" shall mean the date on which Merz first sells bulk
Memantine, Products, or finished Products to a Marketing Partner or to any other
Person for any of the  Indications  governed by this  Agreement  in a particular
jurisdiction or receives Royalty Income from any Marketing  Partner with respect
to the sale of the Products in a particular jurisdiction.

1.6 "Indication"  shall mean the use of the Product for potential  diagnosis and
treatment of diseases and conditions in human beings,  except for ophthalmologic
diseases.

1.7  "Intellectual   Property  Rights"  shall  mean  and  include  all  patents,
copyrights,  trademarks,  trade names, or any other proprietary rights which the
parties may own, adopt, use or register and which relate to, are embodied in, or
are associated with any of the Products and/or any applications or registrations
therefor.

1.8  "Marketing  Partner(s)"  shall mean any other  Person with whom Merz enters
into  an  agreement  for  the   development,   manufacture,   marketing   and/or
distribution  of the  Products for any of the CMCC  Indications  and/or the Merz
Indication.

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<PAGE>

1.9 "Merz Indication" shall mean the use of the Product for potential  treatment
of dementia relating to Alzheimer's disease.

1.10 "Merz Patents" shall mean the patent rights listed in Exhibit B hereto.

1.11 "Person" shall mean and include any individual, corporation, trust, estate,
partnership, joint venture, company, association, governmental bureau or agency,
or other entity regardless of its type or nature.

1.12 "Product(s)" shall mean (i) Memantine for the Indications neuropathic pain,
AIDS related  dementia and any other  Indications  developed or patented by CMCC
and/or NTI, or licensed to CMCC and/or NTI, (ii) any other adamantan  derivative
developed  and/or patented by CMCC and/or NTI and/or licensed to CMCC and/or NTI
for  the  Indication  neuropathic  pain,  AIDS  related  dementia  and/or  other
neurological/neuropsychiatric  Indications,  (iii) any combination product which
includes  Memantine  developed or patented by CMCC and/or NTI and/or licensed to
CMCC and/or NTI, and (iv) Memantine for the  Indication of dementia  relating to
Alzheimer's disease, as developed by the parties heretofore and in the future.

1.13 "Representative" shall mean all partners, shareholders, officers, directors
and employees of a party to this Agreement.

1.14 "Royalty  Income" shall mean any royalty  income  derived from any license,
development  and/or  marketing  agreement  for  Products  between  Merz  and any
Marketing  Partner as contemplated in this Agreement;  provided,  however,  that
"Royalty  Income"  shall not  include any  revenues  from the supply and sale of
Compound  to any such  Marketing  Partner as set forth in Article 9 hereof,  and
shall not include any down-payments, lump-sum payments and/or milestone payments
as specified in Article 8.5 hereof.

1.15 "Territory" shall mean the worldwide territory,  unless otherwise expressly
specified in this Agreement.

1.16 "Trademark" shall mean the designs,  logos,  marks, names and service marks
used for the Product.

Article 2 - Representation and Warranties

Each party represents and warrants:

2.1 That it possesses  full power and authority to enter into this Agreement and
to perform the obligations hereunder;

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<PAGE>

2.2 That its  Representative  whose  signature is affixed  hereto has been fully
authorized to sign this Agreement;

2.3 That  upon its  Effective  Date,  the  provisions  of this  Agreement  shall
constitute its legal,  valid and binding  obligations  enforceable in accordance
with these terms;

2.4 That it has no agreement  with any other Person nor any other  conflict that
would preclude it from fully complying with its obligations under this Agreement
and/or any applicable law or regulations,  and that all required consents of any
and all third  parties,  if any,  to enter into this  Agreement  and perform the
obligations  hereunder,  have  been  obtained  prior  to  the  execution  of the
Agreement;  provided, however, that the parties hereby acknowledge that no party
has  obtained  any  approval  by  or  from  the  United  States  Food  and  Drug
Administration  for the sale,  distribution  and/or use of the  Products  in the
Territory  prior to the execution of this  Agreement.  Each party shall,  at its
sole  expense,  defend  and  hold  one or  both  of the  other  parties  and its
Representatives  harmless from any liabilities or actions brought against one or
both of the other parties,  if and to the extent such liabilities or actions are
based on a claim that (i) the first party  breached an agreement  with any other
Person for the marketing  and licensing of the Product,  or (ii) the first party
misappropriated  any  trade  secret or  improperly  disclosed  any  Confidential
Information of any other Person; and

2.5 Without limiting the generality of the foregoing,  CMCC hereby  specifically
represents and warrants that as of the Effective  Date, to the best knowledge of
the CMCC Technology  Transfer Office,  it alone owns the CMCC Patents,  and that
the CMCC Patents (i) have been duly registered as described in Exhibit A hereof,
and (ii) have not been abandoned.  CMCC further warrants and represents that the
CMCC  Technology  Transfer  Office has no knowledge of any pending or threatened
claims  of  infringement  and  has not  received  any  notice  of any  claim  of
infringement  from  any  third  party  regarding  the  use of  Memantine  or any
adamantan derivatives.

Article 3 - Purpose and Scope of Cooperation

3.1 The  purpose of the  cooperation  among the parties is [the  performance  of
clinical  trials,  securing of regulatory  approval,  and] the  development  and
commercialization of Products within the Territory, including but not limited to
the  marketing and licensing of the parties'  respective  Intellectual  Property
Rights  for  the  manufacture,  distribution,  sale  and  use  of  the  Products
throughout  the  Territory in accordance  with the terms and  conditions of this
Agreement.  In  furtherance  of this  purpose,  Merz  shall be  responsible  for
identifying  one or more  suitable  Marketing  Partners  for the Products in the
Territory in accordance with Article 3.2.

3.2 The Parties  hereby  agree that one (1) suitable  Marketing  Partner for the
Merz  Indication  and the CMCC  Indications  should be  identified.  The parties
hereby expressly

                                       5
<PAGE>


acknowledge  that in view of the anticipated  market share and the amount of the
currently  available  pre-clinical  and clinical data, the search for a suitable
Marketing   Partner  will  initially  focus  on  a  Marketing  Partner  for  the
development  and  marketing  of  Memantine  for the Merz  Indication;  provided,
however,  that all  reasonable  efforts  shall be made to find one (1) Marketing
Partner  for all  Indications  covered by this  Agreement,  in  accordance  with
Article 10 hereof. If, despite Merz' reasonable  commercial  efforts,  it is not
possible  to find one (1)  Marketing  Partner  for the  development  of all such
Indications, commercially reasonable efforts shall be employed to cooperate with
such Marketing Partner to identify one or more additional Marketing Partners for
the  development  of Memantine for the other  Indications,  in  accordance  with
Article 10 hereof.

3.3 The parties  acknowledge  that it is in their best interest to expeditiously
pursue  the  marketing  and  licensing  opportunities  for the  Products  in the
Territory as set forth in this  Agreement.  Merz and NTI will  therefore  commit
sufficient  personnel,  efforts and  resources  to this  cooperation  project to
achieve the objectives of this Agreement, as reasonably determined by Merz.

3.4 Subject to  Articles  7.3 and 10.1 and  notwithstanding  Article 3.1 hereof,
nothing in this Agreement shall be construed to impose on any one of the parties
the  obligation  to (i)  perform  joint  development  work with  respect  to the
Products  or any  derivatives  of the  Products;  (ii)  assist  any of the other
parties in obtaining  financing  and funding for its  research  and  development
work; or (iii) engage in any sales  activities for the Products in the Territory
other than the activities expressly set forth in this Agreement.

3.5 The  relationship  of the parties  established  by this  Agreement is one of
independent  contractors,  and nothing in this  Agreement  shall be construed as
giving  any one of the  parties  the  power  to  direct  or  control  the  daily
activities of any other party, to constitute the parties as principal and agent,
employer and  employee,  or partners.  Neither one of the parties shall have any
right,  power or  authority  to act on  behalf  of,  or bind,  any of the  other
parties,  and neither one of the parties shall represent to any third party that
it has such right, power or authority, except as contemplated herein.

Article 4 - License Grant

4.1  Subject to the  provisions  of this  Article 4.1 and  Articles  4.4 and 4.5
hereof,  CMCC hereby  grants to and Merz hereby  accepts from CMCC the exclusive
and fully transferable and/or sublicenseable  license to CMCC Patents, as listed
in Exhibit A hereto, to develop, make, have made, use and market the Products in
the  Territory in  accordance  with the terms and  conditions  described in this
Agreement.  Subject to Article 10 hereof, Merz shall have the right, at its sole
option, to further research and develop, or to conduct or have conducted further
clinical studies,  regarding Memantine for the CMCC Indications.  Merz shall use
its  commercially  reasonable  efforts  to require  any  Marketing


                                       6
<PAGE>

Partner who  manufactures  Products as they pertain to the CMCC  Indications for
the sale in the  United  States of  America to  substantially  manufacture  such
Products in the United States of America.  Notwithstanding the exclusive license
granted to Merz under this Article 4.1, Merz hereby  acknowledges  that CMCC has
granted a license to Allergan to utilize  certain of the CMCC Patents  solely in
connection with  Indications for  ophthalmologic  diseases.  The license granted
hereunder shall not be construed to confer upon Merz by  implication,  estoppel,
or otherwise any rights as to any technology not governed by CMCC Patents.

4.2 NTI hereby  grants an exclusive  and fully  transferable  or  sublicenseable
license to Merz,  and Merz  hereby  accepts  such  license,  to use all of NTI's
Confidential   Information   related  to  and/or  required  for  the  commercial
exploitation  of the Products in the  Territory;  provided,  however,  that such
license shall not include any Confidential  Information  relating to the general
business information and financial information of NTI.

4.3 Subject to the obligations set forth in Article 10.1 hereof, Merz shall have
the right to engage  NTI's  services  to further  research  and  develop  and to
conduct further  clinical studies on Memantine for the CMCC Indications on terms
to be mutually agreed upon.

4.4  Notwithstanding  anything  herein  to the  contrary,  CMCC  shall  retain a
royalty-free,  non-exclusive, irrevocable license to practice, and to sublicense
other  non-profit  organizations  to  practice,  the  CMCC  Patents  it owns for
non-commercial  research  purposes  only.  Merz  shall not  assert  any claim of
infringement   of  the  Merz  Patents   against  CMCC  or  any  such  non-profit
organization,  sublicensed  by CMCC pursuant to this Article 4.4,  provided that
the CMCC Patents are utilized for non-commercial research purposes only.

4.5  Notwithstanding  the provisions of Article 4.1 hereof,  the license granted
hereunder  to  Merz  shall  be  subject  to  the  rights  of the  United  States
government, if any, under Public Laws 96-517, 97-226, and 98-620, codified at 35
U.S.C. sec. 200-212 and regulations promulgated thereunder.

Article 5 - Merz' Responsibilities and Obligations

5.1 Merz shall have the exclusive  right and the obligation to use  commercially
reasonable efforts to promote and market the Products for the Merz Indication as
well as the  CMCC  Indications  in the  Territory  and to  identify  one or more
Marketing  Partners for the development of these  Indications in accordance with
Articles 3.2 and 10.3 hereof.

5.2 The  parties  hereby  expressly  acknowledge  that  Merz  has  entered  into
marketing  arrangements,  license  agreements  and/or has business plans for the
marketing,  licensing and commercial  exploitation  of the Products for the Merz
Indication in [*] and that the rights conferred upon Merz' licensees under those
marketing and/or license  agreements


                                       7
<PAGE>

shall remain unaffected by this Agreement.  Notwithstanding the inclusion of the
foregoing  countries in the  Territory and subject to Exhibit C, Merz shall have
no obligation  whatsoever hereunder to NTI and/or CMCC, including the sharing of
Royalty Income, down-payments, lump-sum payments and/or milestone payments, with
respect to any such  marketing,  licensing  or the  commercial  exploitation  of
Products for the Merz Indication, in any of the foregoing countries.

5.3 Merz shall have the right to refer to this  cooperation  in connection  with
its  negotiation  of  development,   licensing  and  marketing  agreements  with
Marketing  Partners  for  Products  for the  Merz  Indication  and/or  the  CMCC
Indications as provided for in this Agreement.

5.4 Merz hereby  acknowledges that CMCC has licensed certain of the CMCC Patents
to Allergan for use solely in the ophthalmologic  field of use. It is the intent
of CMCC that each of Merz and Allergan focus its commercial  development efforts
within its  respective  field of use. Merz has requested  that CMCC provide Merz
with the name, address,  and description of the field of use of Allergan and the
name and  telephone  number of the principal  contact of Allergan  within thirty
(30) days of the  Effective  Date.  Merz and CMCC agree that the  provisions  of
Exhibit E hereto shall govern the interaction and communication between Merz and
Allergan.  To ensure that both Merz and Allergan  are aware of these  reciprocal
provisions,  CMCC shall make a copy of this  Article 5.4 and Exhibit E available
to Allergan,  and CMCC shall provide copies of the  corresponding  provisions of
its agreement with Allergan available to Merz, within twenty (20) days after the
Effective Date.

Article 6 - CMCC's Responsibilities and Obligations

6.1 CMCC  hereby  authorizes  NTI to  provide  Merz  with any CMCC  Confidential
Information  pertaining to and relevant for the commercial  exploitation  of the
patent rights in Memantine for the CMCC  Indications  as previously  provided by
CMCC to NTI.

6.2 CMCC shall not,  through its  Technology  Transfer  Office or Public Affairs
Office,  or in any other  official  communication,  without  the  prior  written
consent of Merz, (i) provide any  information to any other Person  regarding the
capabilities,   performance  or  use  of  the  Products  for  any  of  the  CMCC
Indications;  or (ii) make any  representations  to any other  Person  that Merz
and/or the Marketing Partner has endorsed,  warranted or guaranteed the Products
for any of the CMCC Indications.

Article 7 - NTI's Responsibilities and Obligations

7.1 Subject to the  provisions  of this  Agreement,  NTI shall use  commercially
reasonable efforts,  consistent with its financial and technical  resources,  to
actively  support  Merz in the  marketing  of the  Products in the  Territory to
Marketing  Partners and


                                       8
<PAGE>

licensees,  including but not limited to (i) evaluating  marketing and licensing
opportunities;  (ii) initiating contacts with potential Marketing Partners,  and
(iii)  upon  Merz'  request,  assisting  in the  negotiation  of  marketing  and
licensing agreements.

7.2 NTI shall provide to Merz within  thirty (30) days of the  Effective  Date a
data package with all  Confidential  Information  pertaining to and relevant for
the commercial  exploitation  of the CMCC Patents in Memantine  and/or any other
adamantan  derivatives for the CMCC Indications  developed by NTI, including any
Confidential  Information  heretofore  or  hereafter  provided  by  CMCC  to NTI
pertaining to the CMCC Indications. NTI shall further provide Merz with periodic
updates  relating to any further  research and  development  and/or  improvement
regarding  the Products  pursuant to Article 10 hereof.  NTI hereby  agrees that
Merz  shall  have  the  right  of  access  to,  review  and  use of any  and all
Confidential  Information  of NTI  relevant  in  the  context  of  any  required
regulatory product approval (e.g., NDAs) provided,  however,  that NTI shall not
be required to disclose any of its financial data to Merz.

7.3 NTI shall,  upon Merz' request,  provide Merz with reasonable  assistance in
connection with any applications for any required  regulatory  approvals for the
Products in any country within the Territory.

Article 8 - License Fees and Profit Sharing

8.1 In  consideration  for the rights licensed by CMCC to Merz under Article 4.1
of this  Agreement Merz shall pay to CMCC US $[*] (US Dollars [*]) as a one-time
lump-sum  license fee. The payment shall be due within five (5) business days of
the  signing  of this  Agreement  by the last  party  and shall be made via wire
transfer  to the bank  account of CMCC with  [*](ABA # [*]),  Account  No.  [*],
Account Name: [*]; Contact: [*] (Tel. No. [*]).

8.2 Merz shall also pay US  $2,100,000  (US  Dollars  Two  Million  One  Hundred
Thousand) to NTI for the license granted to Merz relating to NTI's  Confidential
Information  pursuant to Article 4.2 and the waiver of its licensee rights under
the Exclusive License Agreement,  provided, however, that any such payment shall
be  conditioned  upon NTI delivering to Merz a board  resolution  approving this
Agreement.  The  payment  shall  be due  within  five (5)  business  days of the
execution  of this  Agreement  by the  last  party  and  shall  be made via wire
transfer to the bank account of NTI with [*] (ABA # [*]), Account No. [*].

8.3 Merz acknowledges and agrees that the payments payable to CMCC and NTI under
Article 8.1 and 8.2  respectively are in addition to any share of Royalty Income
payable to CMCC and NTI by Merz hereunder.

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<PAGE>

8.4 In  consideration  for the rights  conveyed and the  obligations  undertaken
hereunder  by each  one of the  parties,  each  party  shall  be  entitled  to a
percentage  share in the Royalty Income derived from the marketing and licensing
of  Products  for the  Indications  governed by this  Agreement  as set forth in
Exhibit C attached hereto. Payment of the percentage share of Royalty Income, if
any,  due to CMCC and NTI  shall  be paid by Merz to CMCC  and NTI  respectively
within thirty (30) days of the end of each calendar  quarter by wire transfer to
the bank accounts of CMCC and NTI respectively.

8.5 Merz shall pay to CMCC an amount equal to [*]% and to NTI an amount equal to
[*]%, the aggregate of which shall not exceed [*] ([*])%, of all  down-payments,
lump-sum payments and milestone payments, other than Royalty Income, received by
Merz pursuant to any licensing, development and marketing agreement entered into
with any Marketing Partner for Products pursuant to this Agreement.  The amounts
payable  by Merz to CMCC and NTI under  this  Article  8.5 shall be paid  within
thirty (30) days after the end of the  calendar  quarter in which such  payments
were received by Merz.

8.6 All amounts  payable to CMCC and NTI shall be paid in United States  Dollars
(US$)  and  shall  be paid to the  accounts  specified  in  Article  8.1 and 8.2
respectively.  For purposes of determining  the amounts  payable with respect to
any  Royalty  Income or any other  amount  payable by Merz to NTI and CMCC under
Article 8.5, which Merz has not received in United States Dollars,  the currency
conversion  shall be made by using the average of the exchange  rate between the
United States  Dollars and the currency in which Royalty  Income or other income
under  Article 8.5 was received by Merz  prevailing  at Deutsche Bank during the
last calendar quarter prior to the due date of the payment.

8.7 In the event that any amount  payable to CMCC  and/or NTI  hereunder  is not
paid on the due date as provided herein, such overdue amount shall bear interest
at the rate of [*]  ([*])%  per year or the  maximum  amount  permitted  by law,
whichever is less, until such time such overdue amount has been paid.

8.8  Merz  shall  furnish  CMCC  and NTI with a  report  on a  quarterly  basis,
including  the  information  listed in Exhibit D hereof.  Each  report  shall be
submitted  to CMCC and NTI along with the amounts  payable,  if any, to CMCC and
NTI  respectively  under  Article 8.4.  Merz shall keep full,  true and accurate
books of account in accordance with generally accepted accounting  principles to
enable CMCC and NTI to ascertain the payments made by Merz to NTI and CMCC under
this Agreement.  Said books of account shall be kept at Merz' principal place of
business  for a period  of at  least  five (5)  years  following  the end of the
calendar year to which they pertain. CMCC and NTI shall have the right, at their
own  expense,  to audit such books of  account  to the  extent  they  pertain to
payments made pursuant to this  Agreement and to the extent  necessary to verify
the reports provided by Merz to CMCC and NTI hereunder.

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<PAGE>

Article 9 - Supply of Compound, Bulk Memantine and Finished Products

9.1 In the  event  that  Merz  supplies  and sells  the  Compound,  directly  or
indirectly,  to one or more Marketing  Partners for use in the  manufacturing of
any of the Products for any or all Indications  governed by this Agreement,  the
parties hereby expressly acknowledge and agree that any and all revenues derived
by Merz from the sale of such Compound  shall be solely for the benefit of Merz,
and Merz shall not be obligated to share any such revenues with any of the other
parties to this Agreement; provided, however, that, subject to the provisions of
Article 5.2 hereof,  if the price for the  Compound  specified  in Merz'  supply
agreement  with such Marketing  Partner  exceeds [*] existing at the time of the
execution  of this  Agreement,  Merz shall pay to CMCC and NTI their  respective
share  of the  excess  revenue  as  defined  hereafter  in  accordance  with the
allocation  of Royalty  Income as set forth in Article 8.4 and Exhibit C of this
Agreement.  For  purposes  of this  Article  "excess  revenues"  shall  mean the
difference  between [*].  Merz shall (i) furnish CMCC and NTI with a certificate
executed by an independent  certified  public  accountant as to the [*] and (ii)
provide NTI and CMCC with  reports of such sales of the  Compound in  accordance
with the provisions of Exhibit D hereof.

9.2 Subject to Article 5.2 hereof, in the event that Merz directly or indirectly
supplies and sells bulk Memantine  products or finished  Products to one or more
Marketing Partners or any other third party for any or all Indications  governed
by this Agreement, the parties shall in good faith negotiate an allocation among
Merz,  NTI and CMCC of a  percentage  share of the  sales  price  for such  bulk
Memantine products or finished Memantine products;  provided,  however, that the
allocation  of revenue  set forth in Article  9.1 above  regarding  the sale and
supply of Compound to Marketing Partners shall be taken into consideration. Merz
shall  provide  NTI and CMCC with  reports of all such  sales of bulk  Memantine
products and/or finished Products in accordance with the provisions of Exhibit D
hereof. If the parties fail to reach an agreement on the appropriate  allocation
of such revenues within a period of sixty (60) days after the date on which such
negotiations  commenced,  any party shall be entitled to  institute  arbitration
proceedings  in  accordance  with  Article 18 hereof  solely for the  purpose of
determining  the respective  percentage  share of the sales price of each of the
parties.

Article 10 - Further Development and Research

10.1 NTI shall, at its own risk and expense, initiate Phase IIb clinical studies
for neuropathic  pain. The Phase IIb clinical studies for neuropathic pain shall
be initiated by [*]. NTI shall use commercially  reasonable  efforts to complete
such  studies  for  neuropathic   pain  within   approximately   [*]  after  the
commencement  of the studies;  provided,  however,  that any  improvement of any
Product developed as a result of such Phase IIb clinical studies for neuropathic
pain  pursuant  to this  Article  10.1 shall also be  governed by the rights and
obligations set forth in this Agreement.  In addition,  NTI shall


                                       11
<PAGE>

at is own risk and expense,  initiate and conduct the clinical  studies for AIDS
related  dementia in accordance with the requirements of the AIDS Clinical Trial
Group ("ACTG"); provided, however, that any improvement of any Product developed
as a result of such clinical studies for AIDS related dementia  pursuant to this
Article 10.1 shall also be governed by the rights and  obligations  set forth in
this Agreement. NTI shall inform Merz and CMCC on a regular basis about all such
research and development work, including, but not limited to, Phase IIb clinical
studies and ACTG  studies,  and Merz  reserves the right to  supervise  any such
further  research  and  development  as Merz  reasonably  deems  necessary.  Any
submission  that NTI proposes to make to the Food and Drug  Administration  with
respect to all such research and development  work,  including,  but not limited
to, Phase IIb clinical  studies  and/or the ACTG studies shall be subject to the
prior review, comment and approval by Merz. Merz hereby grants to NTI a limited,
non-exclusive  license to use the Merz  Patents,  and a  limited,  non-exclusive
sublicense to use the CMCC Patents and any related CMCC Confidential Information
licensed  to Merz  hereunder,  if any for the  sole  and  exclusive  purpose  of
conducting such Phase IIb clinical studies and ACTG studies.

10.2 If NTI fails to initiate and conduct either the Phase IIb clinical  studies
for  neuropathic  pain and/or AIDS related  dementia in accordance with the ACTG
studies  therefor,  CMCC and Merz  shall each have the right to  terminate  this
Agreement with respect to NTI with immediate  effect in accordance with Articles
17.2 and 17.6 hereof. Upon termination in accordance with this Article 10.2, NTI
shall have no further rights under this Agreement;  provided, however that Merz'
obligation to negotiate in good faith an allocation to NTI of a percentage share
of any revenue derived by Merz from the  commercialization  and marketing of any
Products or any derivatives thereof for any new Indication under, and limited to
the  circumstances  set  forth  in  Article  10.11  hereof,  shall  survive  the
termination  of the  Agreement.  The  relationship  between  Merz and CMCC shall
remain unaffected by such termination,  and the terms of this Agreement,  to the
extent they apply to CMCC and Merz,  shall  continue to govern the  relationship
between Merz and CMCC. Merz shall be entitled to retain NTI's  percentage  share
of the Royalty Income and any share of income under Article 8.5.

10.3 In the event that (i) NTI does not  initiate or conduct  Phase IIb clinical
studies for neuropathic  pain and AIDS related  dementia as set forth in Article
10.1 above; or (ii) NTI completes the Phase IIb clinical studies for neuropathic
pain and AIDS related dementia in accordance with the ACTG studies therefor, and
the results of such  studies  warrant  further  research and  development  work,
including  but not  limited to Phase III  clinical  studies  for the  Indication
neuropathic  pain,  as  determined  by Merz,  Merz  shall  use its


                                       12
<PAGE>

commercially  reasonable efforts to cause a Marketing Partner to conduct further
research and  development  of Memantine for the CMCC  Indications.  If the first
Marketing Partner, who is willing to develop the Merz Indication, is not willing
to conduct  such  further  research and  development  of Memantine  for the CMCC
Indications,  Merz shall use its commercially  reasonable  efforts to identify a
second  Marketing  Partner for the further  research and development of the CMCC
Indications  within [*] after  concluding an agreement with the first  Marketing
Partner,  and  reach  an  agreement  with  such  Marketing  Partner  as  soon as
practicable thereafter.

10.4 If Merz is unable to reach an agreement  with any Marketing  Partner within
[*] ([*]) months for the CMCC  Indications  as set forth in Article 10.3 hereof,
CMCC shall have the right to seek a Marketing  Partner for the CMCC  Indications
within [*] ([*]) months.  Merz will then use commercially  reasonable efforts to
enter into a sublicense with the Marketing Partner identified by CMCC.

10.5 If neither  Merz nor CMCC is able to identify a  Marketing  Partner for the
CMCC  Indications  as set forth in Articles 10.3 and 10.4 hereof,  the Agreement
may be terminated in  accordance  with Article 17 hereof by mutual  agreement of
CMCC and Merz. If this  Agreement is terminated by mutual  agreement of Merz and
CMCC,  Merz shall have no further  rights in the CMCC Patents,  and neither Merz
nor NTI shall have any  further  obligations  with  respect to the CMCC  Patents
and/or the CMCC Indications.  CMCC shall be free to conduct further research and
development  with  respect to the CMCC  Patents and the CMCC  Indications.  Upon
termination  of the Agreement in accordance  with this Article 10.5,  Merz shall
have no  further  payment  obligations  of any  Royalty  Income,  down-payments,
milestone  payments  or lump sum  payments  to CMCC  and/or  NTI as set forth in
Article 8 hereof, provided, however, that (i) nothing in this Article or in this
Agreement  shall be construed as to release any of the parties to this Agreement
from any obligation,  including payment  obligations,  that matured prior to the
effective date of such  termination,  and (ii) Merz'  obligation to negotiate in
good faith an allocation to NTI of a percentage  share of any revenue derived by
Merz from the commercialization and marketing of any Products or any derivatives
thereof for any new Indication under, and limited to the circumstances set forth
in Article 10.11 hereof, shall survive the termination of the Agreement. If Merz
and CMCC jointly decide not to terminate the Agreement,  the revenue  sharing of
all Royalty Income shall be in accordance with Exhibit C, Number 2.

10.6 If further  research and  development,  including  clinical  studies,  with
respect to the CMCC Indications present negative results, such as an intolerance
of the Products or an  inefficiency  of the  Products for the CMCC  Indications,
which Merz reasonably  determines  makes it unlikely that any regulatory  agency
will grant the approvals required for the marketing, distribution and use of the
Products  for the  CMCC  Indications,  CMCC or Merz  shall  have  the  right  to
terminate this Agreement upon six (6) months'  written notice in accordance with
Article 17.6 hereof;  provided,  however,  that Merz' obligation to negotiate in
good faith an allocation to NTI of a percentage  share of any revenue derived by
Merz from the commercialization and marketing of any Products or any


                                       13
<PAGE>

derivatives   thereof  for  any  new  Indication   under,  and  limited  to  the
circumstances  set forth in Article 10.11 hereof,  shall survive the termination
of the Agreement.

10.7 Subject to Article  10.1 hereof,  NTI shall,  upon Merz'  request,  conduct
further  research  and  development  with  respect to the  Products for the CMCC
Indications if such further research and development is requested by a Marketing
Partner for the development  and marketing of such  Indications at the sole cost
and expense of such Marketing Partner.

10.8 Merz shall  provide to NTI any data  currently in possession of Merz and/or
hereinafter developed by Merz on any side effects or other risks to human health
and/or safety  pertaining to Memantine for use by NTI solely in connection  with
the  research  and  development  activities  pursuant  to  this  Agreement.   In
connection  with the  research  and  development  work  hereunder,  NTI shall be
authorized to make  reference to Merz' IND data.  Merz shall provide  reasonable
technical  assistance to NTI, as Merz, in its sole discretion,  determines to be
necessary for further research and development of the CMCC Indications conducted
by NTI in accordance with this Article 10.

10.9 CMCC may, but is not obligated to, conduct further research and development
with respect to the Products as they pertain to the CMCC Indications,  improving
the effectiveness of such Products;  provided,  however, that any improvement of
such  Products,  to the extent  they are  within the scope of the CMCC  Patents,
shall  also  be  governed  by the  rights  and  obligations  set  forth  in this
Agreement.  CMCC  shall  disclose  to Merz  and/or  its  Marketing  Partner  any
information that is known to CMCC Technology Transfer Office on any side effects
or other risks to human health and/or safety  pertaining to Memantine,  which is
revealed or developed as a result of such further  research and  development  by
CMCC,  for use by Merz and/or its Marketing  Partner in connection  with any and
all  applications  for Food  and Drug  Administration  or any  other  regulatory
approval for the Products.  CMCC shall  provide Merz with written  notice of any
such research and development  conducted by CMCC with respect to Memantine which
is known to the CMCC  Technology  Transfer  Office.  CMCC  shall also be free to
research and develop any other  Indications  or  derivatives of the Products for
new Indications which shall not be governed by this Agreement. The parties agree
that CMCC shall own all  rights,  title and  interest in and to, or shall be the
authorized licensee of the work product resulting from such further research and
development with respect to such new Indications and/or any other derivatives of
the Products for new Indications and shall be entitled to claim, register, file,
prosecute and maintain any applicable  Intellectual  Property Rights without any
restrictions  and,  subject  to Merz'  right of first  negotiation  set forth in
Article  10.10  below,  neither  Merz nor NTI shall have any  rights  therein or
thereto.  Nothing in this Article shall be construed to impose any obligation on
CMCC to conduct such further research.

                                       14
<PAGE>

10.10 In the event that CMCC  wishes to license its patent  rights in  Memantine
for any such new Indication  and/or any other derivative of the Products for new
Indications,  if any,  except  as  provided  in  Article  1.2 as it  relates  to
nitrosylating compositions, including nitrosomemantine,  Merz shall have a right
of first negotiation with respect to such patent rights.  CMCC shall notify Merz
promptly in writing of its intent to license its patent rights.  Merz shall have
an exclusive right to negotiate a license for such patent rights for a period of
[*] ([*]) calendar days from the receipt of CMCC's notice hereunder. If (i) Merz
fails to exercise its right of first negotiation hereunder within this [*] ([*])
days' period, or (ii) the parties cannot agree,  despite good faith efforts,  on
the terms and conditions of such license during the [*] ([*]) days' period, CMCC
shall  be free to  license  its  patent  rights  in  Memantine  for any such new
Indication  and/or any other derivative of the Products for new Indications to a
third party.

10.11 Merz may conduct further research and development with respect to the Merz
indications.  Merz  shall  also  be free  to  research  and  develop  any  other
Indications or derivatives of the Products for new  Indications  which shall not
be governed by this Agreement. The parties agree that Merz shall own all rights,
title and interests in and to, or shall be the  authorized  licensee of the work
product  resulting from such further  research and  development  with respect to
Merz  Indications   and/or  any  other  derivatives  of  the  Products  for  new
Indications  and shall be  entitled  to claim,  register,  file,  prosecute  and
maintain any applicable  Intellectual  Property Rights without any restrictions,
and neither  CMCC nor NTI shall have any rights  therein or  thereto;  provided,
however, that NTI and Merz shall negotiate in good faith an allocation to NTI of
a percentage share of any revenue derived by Merz from the commercialization and
marketing  of any  Products or any  derivatives  thereof for any new  Indication
developed  and  marketed by Merz if (i) Merz used NTI  Confidential  Information
provided to Merz by NTI pursuant to this  Agreement for the  development  of the
new  Indication,  and (ii)  such  NTI  Confidential  Information  was not in the
possession of or known to Merz prior to the disclosure by NTI to Merz, and (iii)
NTI  Confidential  Information was an essential and fundamental  element for the
development  of the new  Indication,  and (iv) it is established by NTI based on
NTI's  business  records that the conditions set forth under (i) and (iii) above
are satisfied.

10.12  In  furtherance  of  Merz'  rights  hereunder,  during  the  term of this
Agreement,  neither CMCC nor NTI shall enter into any other  agreement  with any
third party regarding the licensing,  development,  manufacturing,  distribution
and/or marketing of the Products in the Territory.

10.13  Nothing in this  Agreement  will limit the right of any of the parties to
further  research  and  develop  with  respect  to any  products  other than the
Products,  provided  that such  development  activity does not violate any other
provision of this  Agreement.  Nothing in this Agreement shall confer any rights
to such independently developed products upon any other party hereto.

                                       15
<PAGE>

Article 11 - Trademarks

11.1 Merz shall have the right to choose, at its sole discretion, the Trademarks
under which the Products shall be marketed in the Territory,  including  without
limitation,  any  Trademark  proposed  or  required  by  any  Marketing  Partner
hereunder,  and Merz shall be the sole owner of such Trademark,  unless Merz and
its Marketing  Partner agree to market the Products  under a Trademark  owned by
the Marketing Partner. CMCC and NTI hereby acknowledge and agree that they shall
have no rights whatsoever in or to such Trademarks.

11.2 This Agreement shall, however, not confer any right to any party to use any
trademarks  of any other party,  unless such use is  authorized by such party in
writing and/or by separate license agreement.

Article 12 - Confidentiality

12.1 Each  party  acknowledges  that in the  course of the  performance  of this
Agreement,  it may disclose to one or both of the other parties (the  "Receiving
Party')  certain of the first party's  Confidential  Information.  The Receiving
Party shall refrain from using or copying any and all of the disclosing  party's
Confidential  Information for any purposes or activities whatsoever,  other than
those specifically  authorized in this Agreement.  Except as provided in Article
12.3 below, the Receiving Party shall not disclose any Confidential  Information
of the  disclosing  party to any third party,  except to those of the  Receiving
Party's employees,  agents, or representatives with a need to know, each of whom
shall have executed a reasonable nondisclosure agreement effectively prohibiting
the unauthorized use or disclosure of any of the disclosing party's Confidential
Information,  the terms and  conditions  of which are no less  restrictive  than
those contained in this Agreement. The Receiving Party shall implement effective
security  procedures  in order to avoid  disclosure or  misappropriation  of the
disclosing  party's   Confidential   Information.   The  Receiving  Party  shall
immediately notify the disclosing party of any unauthorized disclosure or use of
any Confidential  Information that comes to the Receiving  Party's attention and
shall take all action that the disclosing party  reasonably  requests to prevent
any further unauthorized use or disclosure thereof. For purposes of this Article
12 the term  "Receiving  Party" as it pertains to CMCC shall mean the Technology
Transfer Office of CMCC. CMCC hereby  specifically  acknowledges and agrees that
(i) except as  specifically  provided in the  Agreement,  Merz has no obligation
whatsoever  to furnish or disclose any Merz  Confidential  Information  to CMCC;
(ii) any Merz  Confidential  Information to be disclosed to CMCC hereunder shall
be  disclosed  solely  to the  Technology  Transfer  Office  of CMCC,  (iii) all
information provided by Merz to CMCC under the Agreement,  including all reports
furnished  under Article 8.8 hereof and all copies of proposed  agreements  with
Marketing  Partners  furnished  under  Article  16.3  hereof,   constitute  Merz
Confidential  Information;  and (iv) CMCC's


                                       16
<PAGE>

Technology   Transfer  Office  will  not  furnish  or  disclose  any  such  Merz
Confidential Information to any other CMCC employee, agent or representative (or
any other  third  party)  without  the prior  written  consent of Merz.  If Merz
discloses any  information to any other  employee,  agent or  representative  of
CMCC, such information shall not be regarded as Confidential Information.

12.2 Each party  acknowledges  the sensitivity of the business  negotiations and
the contemplated  cooperation and agrees not to use or disclose any Confidential
Information,   except  as  reasonably  required  for  the  performance  of  this
Agreement;  provided,  however,  that CMCC and NTI hereby  acknowledge  that the
disclosure by Merz of  Confidential  Information to one or more of the Marketing
Partners may be required for Merz'  performance  of its  obligations  hereunder.
Furthermore,  each  party  acknowledges  that the terms and  conditions  of this
Agreement shall be subject to this Article 12 and shall not be disclosed, except
if the  performance  of this  Agreement  so requires  and subject to Article 5.3
above.  Notwithstanding  this Article 12.2, NTI shall have the right to disclose
certain  information  relating to this  Agreement  to third  parties;  provided,
however, that (i) the prior written consent of Merz and CMCC is obtained,  which
shall not be unreasonably withheld, and (ii) NTI requires the party to whom such
Confidential  Information  is  disclosed by NTI with the consent of Merz and NTI
not to disclose or misappropriate such Confidential Information.

12.3 The  provisions of this Article 12 will not apply,  or will cease to apply,
to data and  information  supplied by the  disclosing  party that (i) was in the
Receiving Party's  possession prior to receipt from the other party as reflected
by files  existing  at the time of  disclosure;  (ii) has come  into the  public
domain other than through a breach of  confidentiality  by the Receiving  Party;
(iii) was  developed  independently  by employees of the  Receiving  Party or by
persons  who  have  not  had  access  to  the  disclosing  party's  Confidential
Information;  (iv) was or is lawfully obtained,  directly or indirectly,  by the
Receiving  Party from a third party under no obligation of  confidentiality;  or
(v) is  required  to be  disclosed  pursuant  to  any  statutory  or  regulatory
provision,  including  without any limitation any and all applicable  securities
laws, court order, or regulatory approval requirement;  provided, however, that,
with the exception of any regulatory product approval proceedings, the Receiving
Party shall be obliged to provide to the disclosing party as much advance notice
as reasonably  practicable of such statutory or regulatory  provision,  or court
order requiring such  disclosure,  so that the disclosing party has a reasonable
opportunity  to obtain a  protective  order,  or to take such  other  protective
measures as necessary,  with respect to such data or information.  The Receiving
Party  shall have the burden of  establishing  the  applicability  of any of the
exceptions set forth in this Article 12.3.

                                       17
<PAGE>

Article 13 - Patent Prosecution

13.1 Merz  shall  during  the term of this  Agreement  apply  for,  seek  prompt
issuance  of,  and  maintain  Merz  Patents as set forth in Exhibit B. The other
parties  shall,  upon  reasonable  request by Merz,  cooperate  with Merz in the
filing, registration, prosecution and maintenance of the patent rights.

13.2 CMCC shall take  reasonable  actions to  maintain  all of the CMCC  Patents
during the term of this  Agreement.  Merz shall  reimburse CMCC for all fees and
costs relating to the filing,  prosecution  and maintenance of the CMCC Patents,
as specified  in Exhibit A hereto,  incurred  after the date of this  Agreement,
unless any of those CMCC Patents have also been  licensed to another  Person for
an Indication not covered by this Agreement, in which case, Merz shall reimburse
CMCC  for  one-half  of the  costs  relating  to  the  filing,  prosecution  and
maintenance of such CMCC Patents. CMCC shall provide to Merz an itemized invoice
of all such fees and  costs,  and Merz shall pay to CMCC all  amounts  due under
such invoice within thirty (30) business days after receipt of such invoice.

13.3 If CMCC elects to apply for and seek  registration  of any CMCC  Patents in
any particular jurisdiction,  where that CMCC Patent is not registered as of the
Effective Date, CMCC shall notify Merz in writing of such intention immediately.
Merz  shall  then  have the  option  to  reimburse  CMCC for all fees and  costs
relating to the filing,  prosecution and maintenance of that CMCC Patent in that
jurisdiction,  unless any of those patent rights are also licensed to a licensee
which is not party to this  Agreement  for an  Indication  not  covered  by this
Agreement, in which case, Merz' obligation,  if it elects to exercise its option
under this Article  13.3,  shall be to reimburse  CMCC for one-half of the costs
relating to the filing,  prosecution and  maintenance of such CMCC Patent.  CMCC
shall be required  to provide to Merz an  itemized  invoice of all such fees and
Merz shall pay to CMCC all amounts  due under said  invoice  within  thirty (30)
business  days of the receipt of such  invoice.  If Merz elects not to reimburse
CMCC for the fees and costs for the filing,  prosecution  and maintenance of any
CMCC  Patent in a  particular  jurisdiction,  CMCC shall be free to license  the
patent right in question to another party with respect to such  jurisdiction and
Merz shall  have no  further  rights  with  respect to that CMCC  Patent in that
jurisdiction.  Upon request by Merz,  and at Merz' sole cost and  expense,  CMCC
shall  apply  for  and  seek  prompt  registration  of any  CMCC  Patent  in any
particular jurisdiction.

13.4 Merz will  cause its  Marketing  Partner to mark any  Products  sold in the
United States with all applicable United States patent numbers, and any Products
sold in any other country shall be marked by the respective Marketing Partner in
accordance with the patent laws and practices of that country.

                                       18
<PAGE>

Article 14 - Infringement

14.1  Subject  to Article  13.3  hereof,  NTI and Merz shall  render to CMCC all
reasonable   assistance  as  may  be  required  to  preserve  the  validity  and
enforceability of the CMCC Patents in the Territory. NTI and Merz shall promptly
notify CMCC in writing  (i) of any and all  infringements,  imitations,  illegal
use, misuse, or  misappropriation,  by any third party of the CMCC Patents which
come to their  attention,  and (ii) of any claims or objections that Merz and/or
NTI's use of the CMCC Patents  hereunder  may or will  infringe the  copyrights,
patents,  designs,  trademarks  or other  proprietary  rights of any other third
party.  CMCC as the owner or authorized  licensee of the CMCC Patents,  shall be
responsible for taking any action or initiating any  proceedings  which CMCC, in
its sole  discretion,  determines to be necessary or  appropriate to prevent any
infringement of the CMCC Patents,  and NTI and Merz shall provide CMCC with such
assistance as may be reasonably  requested in connection with any such action or
proceeding.

14.2 If  CMCC  fails  to or  decides  not to  take  any  action  or to  initiate
proceedings  necessary to prevent the  infringement  of the CMCC Patents  within
sixty (60) days after written notice of such  infringement,  Merz shall have the
right to take such  action or to initiate  such  proceedings  to enforce  and/or
defend the CMCC  Patents.  In the event  that Merz  undertakes  the  enforcement
and/or the defense of the CMCC  Patents by  litigation,  Merz may  withhold  the
one-half of the payments  otherwise due to CMCC under Article 8 hereof and apply
the same toward reimbursement of Merz' expenses, including reasonable attorney's
fees,  in  connection  therewith.  Subject  to these  set-off  rights of Merz to
recover costs and expenses of the infringement litigation, any damages recovered
by Merz in such  litigation  will be allocated  among the parties in  accordance
with the  percentage  share of the  Royalty  Income  as set  forth in  Exhibit C
hereto.

14.3 NTI and CMCC  shall  render  to Merz all  reasonable  assistance  as may be
required to preserve the validity and enforceability of Merz' rights,  title and
interests in and to the Merz Patents or other  Intellectual  Property  Rights in
its Products. NTI and CMCC agree that they shall promptly notify Merz in writing
(i)  of  any  and  all  infringements,   imitations,  illegal  use,  misuse,  or
misappropriation,  by any third party of the Merz Patents or other  Intellectual
Property  Rights  which  come  to its  attention,  and  (ii)  of any  claims  or
objections  that any use of the Merz  Patents  or  other  Intellectual  Property
Rights,  if  any,  may  or  will  infringe  the  copyrights,  patents,  designs,
trademarks  or other  proprietary  rights of any other third party.  Merz as the
owner or authorized licensee of the Merz Patents or other Intellectual  Property
Rights, shall be responsible for taking any action or initiating any proceedings
which Merz, in its sole discretion, determines to be necessary or appropriate to
prevent any  infringement  the Merz Patents and/or other  Intellectual  Property
Rights,  and NTI and CMCC  shall  provide  Merz with such  assistance  as may be
reasonably requested by Merz in connection with any such action or proceeding.

                                       19
<PAGE>

Article 15 - Indemnification

15.1 Merz hereby  warrants and  represents  that, to the best of its  knowledge,
Merz owns the Merz  Patents,  and that the patents are in full force and effect.
Merz further  warrants and represents  that, to the best of Merz'  knowledge the
Merz Patents as listed in Exhibit B do not  conflict  with or infringe any third
party's  intellectual  property rights, and Merz has no knowledge of any pending
or  threatened  claims of  infringement  and has not  received any notice of any
claim of infringement by any third party with respect to the Merz Patents.

15.2 If a third Person asserts a claim or institutes legal  proceedings  against
Merz in connection  with any claim arising under the laws of any country  within
the Territory that the use,  manufacturing,  sale or distribution by Merz or the
Marketing  Partner of the Products for the CMCC  Indications in accordance  with
this Agreement  constitutes an infringement of any intellectual  property rights
of any other Person that claim  Memantine or any  adamantan  derivative  for the
CMCC Indications,  Merz shall be entitled to set off against any payments due to
CMCC under this Agreement any damages, costs and expenses,  including reasonable
attorney fees,  incurred by Merz in connection with the investigation,  defense,
settlement  and/or  discharge of such claim or legal  proceedings,  or any other
payments  made by Merz to such  third  party as a result of such  claim or legal
proceeding or the resolution thereof.

15.3 Merz will defend,  indemnify  and hold  harmless  CMCC and/or NTI and their
respective   officers,   directors,   shareholders,    employees,   agents   and
representatives,  against any claims, damages, liabilities,  costs and expenses,
including  reasonable  attorney fees,  arising out of or in connection with: (i)
the performance or use of Products as they pertain to the Merz Indication by any
Person;  (ii)  information  supplied  by Merz to any third party  regarding  the
capabilities, performance, or use of the Products for the Merz Indication; (iii)
any representation made by Merz that CMCC and/or NTI has endorsed, warranted, or
guaranteed  the Products for the Merz  Indication  without the  specific,  prior
written consent of CMCC and/or NTI as the case may be; or (iv) any claim arising
under the laws of any  jurisdiction  within  the  Territory  that the use of the
Products for the Merz Indication constitutes an infringement of any intellectual
property  rights of any Person.  The  foregoing  indemnification  obligation  is
contingent  upon CMCC's and/or NTI's  compliance  with the  following:  (a) CMCC
and/or NTI promptly  notifies Merz in writing of such claim, suit or proceeding,
or threat thereof;  and (b) CMCC and/or NTI gives Merz information,  assistance,
and sole  authority to  investigate,  defend,  settle and/or  discharge any such
claim, suit or proceeding.

15.4 OTHER THAN THE WARRANTIES SET FORTH IN THIS AGREEMENT,  THE PARTIES MAKE NO
WARRANTIES,  EXPRESS OR  IMPLIED  INCLUDING,  WITHOUT  LIMITATION,  ANY  IMPLIED
WARRANTY OF  MERCHANTABILITY


                                       20
<PAGE>

OR ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR  PURPOSE WITH RESPECT TO ANY
PATENT, TRADEMARK, TRADE SECRET, TANGIBLE RESEARCH PROPERTY, INFORMATION OR DATA
LICENSED OR  OTHERWISE  PROVIDED  TO THE OTHER  PARTIES  HEREUNDER  AND ALL SUCH
IMPLIED WARRANTIES ARE HEREBY DISCLAIMED AND EXCLUDED.

Article 16 - Liability

16.1  NTI will  defend,  indemnify  and  hold  harmless  CMCC,  Merz  and  their
respective   officers,   directors,   shareholders,    employees,   agents   and
representatives,  against any claims, damages, liabilities,  costs and expenses,
including  reasonable  attorney fees,  arising out of or in connection  with any
liability  under  applicable  product  liability  laws for any  injuries  and/or
damages caused by any use or testing of any Product by, for, on behalf of, or at
the direction of, NTI,  prior to the Effective  Date as well as during the Phase
IIb clinical  studies and any other research and  development  work conducted by
NTI pursuant to Articles 10.1 and/or 10.7 of this Agreement  after the Effective
Date,  for the CMCC  Indications;  provided,  however,  that NTI  shall  have no
obligation  to defend,  indemnify  or hold Merz and/or CMCC  harmless for claims
arising out of any negligent  activities,  reckless  misconduct  or  intentional
misconduct   of  Merz  or  CMCC   respectively,   their   officers,   directors,
shareholders,  employees,  agents or  representatives,  as the case may be.  NTI
shall maintain at all times product liability  insurance coverage of at least US
$[*].  Merz and  CMCC  shall be named  as  additional  insured  in such  product
liability insurance.  NTI's  indemnification and insurance  obligations provided
under this Article 16.1 shall  survive the term of the Agreement for a period of
at least ten (10) years.

16.2 Merz will defend,  indemnify and hold harmless  CMCC,  and/or NTI and their
officers,  directors,  shareholders,   employees,  agents  and  representatives,
against  all  claims,  damages,  liabilities,   costs  and  expenses,  including
reasonable  attorney fees,  arising out of, or in connection with, any liability
under applicable  product  liability laws for any injuries and/or damages caused
by the use or testing of any Product by, for, on behalf of, or at the  direction
of,  Merz,  prior to the  Effective  Date,  for the Merz  Indication;  provided,
however,  that Merz will not defend,  indemnify or hold CMCC and/or NTI harmless
for claims  arising out of any  negligent  activities,  reckless  misconduct  or
intentional  misconduct  on the  part  of  CMCC or NTI  respectively,  or  their
officers, directors,  shareholders,  employees, agents or representatives as the
case may be.

16.3 Merz shall  cause each  Marketing  Partner  to  indemnify,  defend and hold
harmless  Merz,  NTI,  CMCC and their  respective  corporate  affiliates,  their
respective current or future directors,  trustees, officers,  employees, medical
and professional  staff,  employees,  students and agents,  and their respective
successors (the  "Indemnitees")  against any liability,  damage, loss or expense
(including reasonable attorney's fees and expenses of litigation) incurred by or
imposed upon the  Indemnitees or any one of them in connection


                                       21
<PAGE>

with any claims, suits, actions,  demands or judgments arising out of any theory
of product  liability  (including,  but not limited  to,  actions in the form of
tort, warranty or strict liability),  concerning any Product used or distributed
by that Marketing  Partner pursuant to any marketing,  development and licensing
agreement  entered  into  with  such  Marketing  Partner  as  provided  in  this
Agreement.  Merz shall provide CMCC with a copy of the proposed  agreement  with
the  Marketing  Partner for the sole purpose of enabling CMCC to verify that the
proposed  agreement with the Marketing  Partner conforms to the  indemnification
and  insurance  requirements  set forth in Articles  16.3,  16.4,  16.5 and 16.6
hereof.

16.4 Merz shall cause each Marketing  Partner,  at the Marketing  Partner's sole
cost  and  expense,   to  procure  and  maintain  commercial  general  liability
insurance,  commencing at the time any Product is being commercially distributed
or sold by that Marketing Partner or any of its affiliates,  in amounts not less
than  $[*] per  incident  and $[*]  annual  aggregate.  Merz  shall  cause  that
Marketing  Partner  to  name  the  Indemnitees  as  additional  insureds.   Such
commercial  general  liability  insurance  shall  provide (i) product  liability
coverage and (ii) contractual  liability coverage for the indemnification of the
Indemnitees.  If the Marketing  Partner elects to self-insure all or part of the
limits described above (including  deductibles or retentions which are in excess
of $[*] annual  aggregate),  such self  insurance  program must be acceptable to
CMCC and the Risk  Management  Foundation of the Harvard  Medical  Institutions,
Inc. The minimum amount of insurance  coverage  required under this Article 16.4
shall not be construed to create a limit of the  Marketing  Partner's  liability
with respect to the Indemnitees' indemnification under this Article.

16.5 Merz shall cause each such  Marketing  Partner  hereunder to maintain  such
commercial  general  liability  insurance as provided  under Article 16.4 hereof
during the period that any Product is  commercially  distributed  or sold (other
than for the  purpose  of  obtaining  regulatory  approvals)  by that  Marketing
Partner and for a  reasonable  period  thereafter,  which shall not be less than
fifteen (15) years.

16.6 Merz shall cause each such  Marketing  Partner to provide CMCC and NTI with
written  evidence of such  insurance as required  under Article 16.4 hereof upon
request of CMCC and/or  NTI.  Merz shall  cause each such  Marketing  Partner to
provide  Merz  with  written  notice  at least  thirty  (30)  days  prior to the
cancellation,  non-renewal or material change in such insurance,  and Merz shall
so notify CMCC and NTI  immediately.  If the Marketing  Partner or Merz does not
obtain replacement  insurance  providing  comparable coverage within ninety (90)
days' period, CMCC shall have the right to terminate this Agreement effective at
the end of such  ninety  (90)  days'  period  without  notice of any  additional
waiting  periods and thereafter CMCC shall have no further rights or obligations
hereunder,  except  obligations  that have accrued prior to the date of such one
ninety (90) days' period.

                                       22
<PAGE>

16.7 If Merz  manufactures  and sells the  Compound,  the bulk  products  or the
finished  products as provided for in Article 9 of this Agreement to one or more
Marketing Partners for use in the manufacture of the CMCC Indications, Merz will

         (i) procure and maintain  commercial  general  liability in  accordance
with Article 16.4 hereof; and

         (ii)  indemnify,   defend  and  hold  harmless,  NTI,  CMCC  and  their
respective corporate  affiliates,  their respective current or future directors,
trustees,  officers,  employees,  medical  and  professional  staff,  employees,
students and agents, and their respective successors (the "Indemnitees") against
any liability, damage, loss or expense (including reasonable attorney's fees and
expenses of litigation)  incurred by or imposed upon the  Indemnitees or any one
of them in  connection  with any claims,  suits,  actions,  demands or judgments
arising out of any theory of product liability  (including,  but not limited to,
actions  in the form of tort,  warranty  or strict  liability),  concerning  the
Compound,  the bulk products or the finished products used or distributed by the
Marketing Partner pursuant to any marketing, development and licensing agreement
entered into with such Marketing Partner as provided in this Agreement.

16.8 The  provisions  set forth in this Article 16 shall survive  termination of
this Agreement.

16.9 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NO PARTY WILL BE
LIABLE  TO  EITHER  OF THE  OTHER  PARTIES  FOR ANY  CONSEQUENTIAL,  INCIDENTAL,
SPECIAL, OR INDIRECT DAMAGES,  WHETHER BASED ON CONTRACT OR TORT, AND WHETHER OR
NOT THE PARTY WAS AWARE THAT SUCH  DAMAGES  MAY BE CAUSED.  THIS  LIMITATION  OF
LIABILITY  SHALL  NOT  APPLY TO ANY  DAMAGES  INTENTIONALLY  CAUSED BY ANY PARTY
HERETO.

Article 17 - Term and Termination

17.1 The  Agreement  shall  commence on the  Effective  Date and shall remain in
effect in each  country  where the  Products  are  licensed to and marketed by a
Marketing  Partner under this  Agreement  until the later of ten (10) years from
the First  Commercial  Sale of a Product  in that  country or the last to expire
patent covering the Products in that country,  or until terminated in accordance
with this Article 17 as set forth below.

17.2 In the event that any party hereto  commits any  material  breach of any of
its obligations under this Agreement,  any of the other parties may provide such
breaching  party with a written notice  demanding the cure of such breach within
thirty (30) days, or if the breach cannot reasonably be cured within thirty (30)
days,  require the breaching party to initiate  reasonable  efforts to cure such
breach as soon as reasonably  practicable


                                       23
<PAGE>

thereafter.  Subject to Articles 17.4 and 17.5 hereof,  any of the non-breaching
parties may terminate this Agreement should the breaching party fail to cure the
material breach or initiate  reasonable  efforts to cure such breach within such
thirty (30) days period.  Termination  for a material  breach under this Article
17.2 shall be in addition and not in lieu of any other  remedies,  including but
not  limited to the right to recover  damages,  the  terminating  party may have
against the breaching party.

17.3  Subject to  Articles  17.4 and 17.5  hereof,  any one of the  parties  may
terminate this Agreement with immediate effect, upon the dissolution, insolvency
or bankruptcy of any other party and/or the appointment of a trustee or receiver
in bankruptcy for such other party.

17.4  Except  when this  Agreement  is  terminated  as to one party  only,  upon
termination of this Agreement for any reason,  all rights and obligations  under
this Agreement will immediately cease except as otherwise  specifically provided
or required under this Agreement;  provided,  however,  that termination of this
Agreement for whatever  reason shall not have the effect of releasing any of the
parties from any  obligation  that matured prior to the  effective  date of such
termination.  Each party will  promptly  cease all use of, and will,  at another
party's   discretion,   either  destroy  or  return  to  that  other  party  all
Confidential Information of such other party.

17.5 In the event that (i) NTI terminates the Agreement,  or (ii) either CMCC or
Merz  terminates  the  Agreement  due  to  NTI's   bankruptcy,   dissolution  or
insolvency,  or  due  to a  material  breach  of  this  Agreement  by  NTI,  the
relationship  between CMCC and Merz shall remain unaffected by such termination,
and the terms of this  Agreement,  to the extent they apply to the  relationship
between Merz and CMCC, shall continue to govern such  relationship,  unless CMCC
and/or Merz also elect to terminate their relationship  pursuant to this Article
17.

17.6 Notwithstanding any provision to the contrary,  Articles 12, 13, 14, 15, 16
and this Article 17 will survive termination of this Agreement.

Article 18 - Choice of Law and Dispute Resolution

18.1 This Agreement,  and any disputes arising out of or in connection with this
Agreement  shall be governed by and construed in accordance with the laws of the
State of New York, excluding its rules governing conflicts of laws.

18.2  Subject to Article  18.7 below,  any  disputes,  claims and  controversies
arising out of or in  connection  with the  Agreement,  including  any questions
regarding its existence, validity,  performance,  interpretation,  construction,
breach or  termination,  shall be referred  to and  finally  resolved by binding
arbitration under the commercial  arbitration rules of the


                                       24
<PAGE>

American  Arbitration  Association ("AAA") in effect as of the Effective Date of
this  Agreement;  provided,  however,  that no  arbitration  with respect to any
claim,  dispute or controversy  arising out of or in connection with or relating
to this Agreement or the breach or alleged breach thereof shall take place until
the following procedure has been satisfied.

18.3 A senior  officer  from each  party  will meet at a  mutually  agreed  upon
location and time within  twenty (20) business days after receipt of notice from
either  party to review any dispute with  respect to the  interpretation  of any
provision of this  Agreement or with respect to the  performance by either party
under this  Agreement.  They will  discuss the problems  and/or  negotiate in an
effort to resolve the disagreement or negotiate an acceptable  interpretation or
revision of the applicable  portion of this Agreement mutually agreeable to both
parties, without the necessity of formal procedures relating thereto. During the
course of such  negotiation,  the parties will reasonably  cooperate and provide
information  so that each of the parties may be fully  informed  with respect to
the  issues  in  dispute.   The   institution  of  arbitration  to  resolve  the
disagreement  may occur only  after the  earlier  of:  (i) the  senior  officers
mutually agree that resolution of the disagreement through continued negotiation
is not likely to occur,  or (ii) thirty (30)  business  days after such  initial
meeting between such senior officers.

18.4  All  arbitration  proceedings,   shall  be  conducted  in  English  and  a
transcribed  record shall be prepared in English.  The  arbitration  proceedings
shall take place in the City of New York. The arbitration  shall be conducted by
three  arbitrators.  If the dispute lies  between  CMCC and Merz,  CMCC and Merz
shall choose one (1) arbitrator each within ten (10) business days of receipt of
notice of the intent to arbitrate. If the dispute lies between NTI and Merz, NTI
and Merz shall choose one (1)  arbitrator  each within ten (10) business days of
receipt  of notice of the intent to  arbitrate.  The third  arbitrator  shall be
appointed by mutual agreement of the first two arbitrators.  If no arbitrator is
appointed by CMCC or Merz within the times herein  provided or any  extension of
time which is mutually agreed upon, the AAA shall make such  appointment  within
five (5)  business  days of such  failure.  If the  issues  in  dispute  involve
scientific  matters,  any arbitrator  chosen  hereunder  shall have  educational
training  and/or  experience  sufficient to  demonstrate  a reasonable  level of
relevant scientific knowledge.

18.5 Such arbitration  shall be concluded,  including the receipt by the parties
of a final  decision,  no later than sixty (60)  calendar days after the date of
appointment,  and such  arbitration  shall be binding on all  parties  and shall
constitute  the final  resolution of such dispute.  No party shall  commence any
action  against  another to resolve  such dispute in any court except to confirm
and enforce such an arbitrator's award.

18.6 The  arbitrators  shall  (i)  interpret  and  construe  this  Agreement  in
accordance  with,  and  shall be bound  by,  the laws of the  State of New York,
excluding  its  conflict  of laws


                                       25
<PAGE>

provisions;  and (ii) establish and enforce appropriate rules to ensure that the
proceedings,   including  the  decision,  be  kept  confidential  and  that  all
Confidential  Information of the parties be kept confidential and be used for no
purpose  other than the  arbitration.  The  decision  and award  rendered by the
arbitrator  may include costs of  arbitration,  reasonable  attorneys'  fees and
reasonable costs for expert and other witnesses.  Any judgment on such award may
be entered in any court of competent  jurisdiction.  The arbitrators shall state
in  writing  the  basis  for  their   decision  and  award  and  describe   with
particularity  the provisions of the Agreement and the legal basis on which such
decision and award is founded.

18.7  Notwithstanding  anything herein to the contrary,  the parties reserve all
rights  with  respect  to seeking a  temporary  restraining  order,  preliminary
injunctive relief or other injunctive relief for the unauthorized  disclosure or
use of  Confidential  Information or the  misappropriation  or  infringement  of
Intellectual Property Rights, or other pre-judgment or equitable relief, and any
party may apply to any court of competent  jurisdiction  for such relief without
breach of this Agreement.  Each party  acknowledges  and agrees that, due to the
unique  nature of this  cooperation,  the  Intellectual  Property  Rights of the
parties and the Confidential  Information  exchanged  between the parties,  each
party  will  suffer   irreparable  injury  and  harm  from  any  breach  of  the
confidentiality  obligations under this Agreement and/or any misappropriation or
infringement of such party's Intellectual Property Rights.  Therefore,  upon any
such breach,  misappropriation  or  infringement,  and prior to the arbitrator's
final  decision  under  Article 18.6 hereof,  the  non-breaching  party shall be
entitled to appropriate  equitable relief in courts or arbitration,  in addition
to whatever remedies it might have at law or under this Agreement.

Article 19 - General Provisions

19.1  Except  as  otherwise  provided  for  in  this  Agreement,  including  the
sublicensing by Merz of rights and obligations to one or more Marketing Partners
hereunder,  no party  shall  have the  right or power to  assign,  delegate,  or
transfer  this  Agreement,  directly  or  indirectly,  by  operation  of  law or
otherwise,  without  the prior  written  consent  of the other  party.  Any such
attempted assignment shall be null and void. The parties hereby acknowledge that
the  obligations  under this Agreement are specific in nature to the parties and
shall not be delegated  to any third party other than wholly owned  subsidiaries
of the parties.  Notwithstanding  this Article 19.1, no prior written consent of
CMCC and/or NTI shall be required for Merz to assign, delegate, or transfer this
Agreement,  directly or  indirectly,  by operation of law or  otherwise,  to any
wholly  owned  subsidiaries,  other  affiliates  of  Merz or any  successors  in
interest to the whole or part of Merz'  business.  Notwithstanding  this Article
19.1, no prior written  consent of CMCC and/or Merz shall be required for NTI to
assign  and  transfer  its  rights  under this  Agreement  to any other  Person;
provided, however, that NTI shall inform CMCC and Merz promptly of its intent to
assign  and/or  transfer its rights under the  Agreement.  In the event that NTI

                                       26
<PAGE>

proposes to assign its rights under the Agreement,  by acquisition or otherwise,
to a direct  competitor  of Merz,  NTI's  right to assign its rights  under this
Agreement shall be conditioned upon (i) NTI's written  agreement not to disclose
any of the Merz Confidential  Information to that competitor;  (ii) NTI's return
to Merz of all copies of all Merz  Confidential  Information prior to closing of
the  acquisition  or any other  act  assigning  and  transferring  NTI's  rights
hereunder;  and (iii) NTI  confirming,  in a  written  certificate  signed by an
officer of NTI, that all such Merz Confidential Information has been returned to
Merz.  NTI shall  also be free to  delegate,  transfer  and/or  subcontract  its
obligations  with respect to any research and development  obligations set forth
in  Article 10 hereof to any other  Person;  provided,  however,  that (i) Merz'
prior written consent to such delegation,  transfer and/or  subcontracting shall
be required, and (ii) none of Merz' Confidential  Information shall be disclosed
to such other Person without Merz' prior written consent.

19.2 Any notices,  reports, or other communications between the parties pursuant
to  this  Agreement  will be in  writing  and  will  be  sent by hand  delivery,
facsimile,  international air courier,  or first-class mail,  postage prepaid to
the address for notice written below.

     Notice to Merz:                           Notice to NTI:

     Merz + Co. GmbH & Co.                     Neurobiological Technologies Inc.
     Attention: Friedhelm Klingenburg          Attention: Paul E. Freiman
     Eckenheimer Landstrase 100-104            1387 Marina Way South
     60318 Frankfurt a.M.                      Richmond, CA 94804
     Germany                                   USA

     Facsimile: (49) 69-1503-400               Facsimile: (1) 510-215-8100


     Notice to CMCC:

     Children's Medical Center Corporation
     Attention: Donald P. Lombardi
     300 Longwood Avenue
     Boston, Massachusetts
     U.S.A.

     Facsimile:  (1) 617-232-7485

19.3 In the  event  that any  provision  of this  Agreement  shall be held to be
unenforceable,  illegal  or  invalid,  such  provision  shall  in good  faith be
re-negotiated  to be  enforceable  and shall  reflect as closely as possible the
intent of the original provision of this Agreement.

                                       27
<PAGE>

Such   invalidity,   illegality  or   unenforceability   shall  not  affect  the
enforceability of the remainder of the Agreement.


19.4 Nonperformance by any party shall be excused to the extent that performance
is rendered impossible by war, rebellion,  civil unrest, strike,  lockout, labor
troubles, fire, flood, earthquake, adverse weather conditions, governmental acts
or orders or restrictions, failure of supplies, or any other reason when failure
to  perform  is beyond  the  control  and not  caused by the  negligence  of the
non-performing party.

19.5 The parties shall,  at all times and at their own expense,  strictly comply
with all applicable  laws,  rules,  regulations and  governmental  orders of all
countries within the Territory,  including Germany and the United States, now or
hereafter  in effect,  relating  to their  performance  of this  Agreement.  The
parties specifically  acknowledge that the Products and Confidential Information
supplied  under this  Agreement  may be subject  to U.S.  Export  Administration
Regulations,  and, as such,  may not be exported,  re-exported,  transferred  or
diverted  in  violation  of the  U.S.  Export  Administration  Regulations.  The
transfer of certain  technical data and  commodities  may require a license from
the cognizant agency of the United States Government  and/or written  assurances
by Merz that Merz shall not export such data or commodities  to certain  foreign
countries without prior approval of such agency.

19.6  Subject to Article  5.3 above,  Merz shall not use the name of CMCC or the
name of any of their  respective  corporate  affiliates  or  employees,  not any
adaptation thereof, in any advertising,  promotional or sales literature without
prior  written  consent  obtained  from CMCC in each case,  except that Merz may
state  that it is  licensed  by CMCC  under  one or more of the  patents  and/or
applications  comprising the CMCC Patents  governed by this Agreement,  and Merz
may comply with disclosure  requirements of all applicable laws, including,  but
not limited to, United States and state security laws.

19.7 This Agreement,  including any Exhibits,  which are incorporated  herein by
reference,  is the entire  agreement  of the  parties and  supersedes  any prior
agreements  between them,  including,  but not limited to, the Exclusive License
Agreement  between  CMCC  and  NTI.  No  modification  of or  amendment  to this
Agreement, nor any waiver of any rights under this Agreement, shall be effective
unless in writing and signed by an authorized representative of each party.

                                       28
<PAGE>


IN  WITNESS   WHEREOF,   the   parties   have  caused   their  duly   authorized
representatives to execute this Agreement:

Merz + Co GmbH & Co.


Date: April 17, 1998                        Date: April 16, 1998
      -----------------------------------         ------------------------------

By: Jochen Huckmann /s/                     By: Friedhelm Klingenburg /s/
    -------------------------------------       --------------------------------

Name: Dr. Jochen Huckmann                   Name: Friedhelm Klingenburg

Title: President                            Title: Executive Director Corporate
                                                   Development

Children's Medical Center Corporation

Date: April 16, 1998
      -----------------------------------------
By:   William New /s/
      -----------------------------------------

Name: William New
      -----------------------------------------

Title: VP, Research Administration
       ----------------------------------------


Neurobiological Technologies Inc.

Date:        April 16, 1998
      -----------------------------------------

By:          Paul E. Freiman /s/
      -----------------------------------------

Name:        Paul E. Feiman
      -----------------------------------------

Title:       President and CEO
      -----------------------------------------


                                       29
<PAGE>



                                    EXHIBIT A

                                  CMCC Patents


[*]



                                       30
<PAGE>

<TABLE>
                                                       EXHIBIT B

                                                      Merz Patents

------------------------------- ---------------------------- ---------------------------- ----------------------------
<CAPTION>
       Designated State             Date of Application              Patent No.                     Issued

------------------------------- ---------------------------- ---------------------------- ----------------------------
           <S>                             <C>                          <C>                          <C>
           [*]                             [*]                          [*]                          [*]

------------------------------- ---------------------------- ---------------------------- ----------------------------
           [*]                             [*]                          [*]                          [*]

------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>


                                                          31

<PAGE>


                                    EXHIBIT C

                            Royalty Income Splitting

1. If a  Marketing  Partner  develops  and  markets  Memantine  for the (i) Merz
Indication,  and (ii)  CMCC  Indications  in the  Territory  in  which  CMCC has
obtained  patent  protection,  the parties  will be  entitled  to the  following
percentage shares of the Royalty Income:


INDICATION                 MERZ               NTI                CCMC
Merz Indication*           [*]%               [*]%,**            [*]%,**
CMCC Indications*,         [*]%               [*]%,**            [*]%,**
***

*  Fee split is limited to the licensing of Products in the Territory.

** In territories where CMCC has not obtained any patent protection for the CMCC
Indications, NTI and CMCC will be entitled jointly to [*]% of the Royalty Income
derived from the licensing of Merz' rights to the  development  and marketing of
Memantine for the Merz  Indication in such  territory.  NTI shall be entitled to
[*]% of such  Royalty  Income and CMCC shall be entitled to [*]% of such Royalty
Income.

*** In  territories  where Merz (i) has  entered  into  marketing  arrangements,
license  agreements  and/or has business plans for the marketing,  licensing and
commercial  exploitation of the Products for the Merz Indication as set forth in
Article  5.2 above,  and (ii) also  enters  into an  agreement  with a Marketing
Partner for the marketing,  licensing and/or commercial exploitation of the CMCC
Indications,  Merz shall be entitled  to [*]% of the  resulting  Royalty  Income
pertaining to the CMCC Indications. In such event, NTI shall be entitled to [*]%
and  CMCC  shall  be  entitled  to  [*]% of the  Royalty  Income  for  the  CMCC
Indication.  As set forth in Article 5.2 of this  Agreement,  Merz shall have no
obligation  whatsoever  to NTI and/or  CMCC,  including  the  sharing of Royalty
Income, down-payments, lump-sum payments and/or milestone payments, with respect
to any such marketing,  licensing or commercial exploitation of Products for the
Merz Indication in any of the countries listed in Article 5.2.

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<PAGE>


2. If no  Marketing  Partner is willing to  develop  the CMCC  Indications,  the
parties  will be  entitled  to the  following  percentage  shares of the Royalty
Income:

INDICATION               MERZ                 NTI               CMCC
Merz Indication*         [*]%                 [*]%**            [*]%**
***


*  Fee split is limited to the licensing of Products in the Territory.

** In territories where CMCC has not obtained any patent protection for the CMCC
Indications, NTI and CMCC will be entitled jointly to [*]% of the Royalty Income
derived from the licensing of Merz' rights to the  development  and marketing of
Memantine for the Merz  Indication in such  territory.  NTI shall be entitled to
[*]% of such  Royalty  Income and CMCC shall be entitled to [*]% of such Royalty
Income.

*** In territories where Merz has entered into marketing  arrangements,  license
agreements and/or has business plans for the marketing, licensing and commercial
exploitation of the Products for the Merz Indication as set forth in Article 5.2
above,  Merz shall have no obligation  whatsoever to NTI and/or CMCC,  including
the sharing of Royalty Income, down-payments, lump-sum payments and/or milestone
payments which are  attributable or allocable to one or more countries listed in
Article 5.2 and Exhibit F hereto, with respect to any such marketing,  licensing
or  commercial  exploitation  of Products for the Merz  Indication in any of the
countries listed in Article 5.2 and Exhibit F hereto.


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<PAGE>


                                    EXHIBIT D
                                     Reports

The quarterly  reports to be provided by Merz to CMCC and NTI in accordance with
Article 8.8 shall contain the following information:

1.   Names and addresses of Marketing Partners;

2.   Copies of any new marketing,  development and licensing  agreements entered
     into by Merz with Marketing  Partner(s) during the calendar  quarter;  Merz
     shall,  however, be authorized to delete any Confidential  Information from
     such agreement;

3.   Royalty Income due under license,  development and marketing agreement with
     Marketing Partner;

4.   Down-payments,  lump-sum  payments,  milestone-payments  due under license,
     development and marketing agreement with Marketing Partner;

5.   Royalty  Income  received by Merz from  Marketing  Partners  under license,
     development and marketing agreement with Marketing Partner;

6.   Down-payments,  lump-sum payments, milestone-payments received by Merz from
     Marketing Partners under license,  development and marketing agreement with
     Marketing Partner; and

7.   Amount and price of  Compound,  bulk  Memantine  products  and/or  finished
     Products, if any, sold to Marketing Partner.


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<PAGE>

                                    EXHIBIT E

             Interaction and Communication between Merz and Allergan

1. Merz  agrees to  establish a  Scientific  Management  Committee  (hereinafter
referred to as "SMC") to allow Merz and Allergan to communicate with one another
and/or  receive   information   from  one  another   concerning  the  commercial
development  of the CMCC Patents.  The SMC shall  consist of four  members,  two
appointed  by Merz and two  appointed by Allergan.  The  Chairperson  of the SMC
shall be appointed  alternatively  from the  representatives of Merz or Allergan
respectively  and shall hold that position for one year.  Merz shall appoint the
first  Chairperson.  CMCC and the Massachusetts Eye and Ear Infirmary shall each
have  the  right to  select a  representative  to  participate  in the SMC as an
observer.  The  SMC  will  meet as soon as  reasonably  possible  following  the
execution of this Agreement.  The SMC shall meet,  thereafter,  at six (6) month
intervals,  or as otherwise  agreed  between  Merz and  Allergan to  communicate
progress on research  activities and to review and recommend  possible  research
projects for joint  sponsorship and funding.  Minutes of these meetings shall be
taken and  distributed  to Merz,  CMCC,  and Allergan as a formal  record of the
proceedings and actions, if any.

2.  All  data and  information  generated  by  Merz'  research  and  development
activities with respect to the CMCC Patents shall remain the exclusive  property
of Merz  and all data and  information  generated  by  Allergan's  research  and
development  activities  with  respect  to the CMCC  Patents  shall  remain  the
exclusive  property of Allergan.  Neither Merz nor Allergan shall have the right
to use the  other's  data and  information  for any  purpose  without  the prior
written permission from the other. To the extent that Merz and Allergan agree to
cosponsor and co-fund certain research  activities  during their  development of
the  CMCC  Patents,  both  parties  shall  jointly  own the  resulting  data and
information  and shall  both have the right to use the data and  information  as
they see fit.  Notwithstanding the above, Merz and Allergan shall communicate to
one another how they intend to use such joint data and  information  through the
SMC,  and the SMC shall  coordinate  the use, and the timing of the use, of such
joint data and information by both Merz and Allergan, to ensure that neither one
is unfairly disadvantaged by such use.

3. Merz and CMCC acknowledge that Merz and Allergan may develop, market and sell
the  same  dosage  form  and  strength  of  the  same   Products  for  different
Indications.  It is CMCC's intent that both,  Merz and Allergan,  focus on their
licensed Field of Use. However,  if significant sales of either Merz or Allergan
can be shown to have been made for Indications within the other party's Field of
Use,  a rebate to  compensate  the other  party  will be  provided  by the party
receiving  the profits from said sales in the other party's Field of Use. Such a
rebate,  if any,  shall  be  determined  based  upon the  sales  made by Merz or
Allergan respectively and the percent of prescriptions attributed to Indications
and/or  the  appropriate  prescribers  within  the  respective  Field  of Use as
measured by


                                       35
<PAGE>

NDTI, PDDA, or other agreed upon prescription  audit. Such rebate shall be equal
to the profit the other party would have received if it had made the sale in its
Field of Use but shall not  exceed  the profit  actually  realized  by the party
making the sale.  For  purposes of this Exhibit E, the term "Field of Use" shall
mean the treatment and diagnosis of diseases and  conditions in humans  governed
by the CMCC Patents licensed to Merz hereunder or licensed to Allergan under the
license agreement between CMCC and Allergan.

4. CMCC will grant or cause  Allergan to grant a right of first  refusal to Merz
to obtain an exclusive  royalty-bearing  license outside Allergan's Field of Use
to make, have made, use, and sell any pharmaceutical  composition  covered under
the  CMCC  Patents  that is  discovered  by  Allergan  during  the  term of this
Agreement.

5. Merz  agrees  that Merz will grant a right of first  refusal to  Allergan  to
obtain an exclusive  royalty-bearing  license within  Allergan's Field of Use to
make, have made, use, and sell any pharmaceutical  composition covered under the
CMCC Patents that is discovered by Merz during the term of this Agreement.

6. The  provisions of this Exhibit E may be changed only with the mutual consent
of Licensee,  Allergan,  and CMCC. CMCC shall not unreasonably withhold or delay
consent to any change agreed to by Merz and Allergan.


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<PAGE>

                                    EXHIBIT F

                 List of other countries relating to article 5.2

Country                            Contract
[*]                                [*]
16 April 1998



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