Employment Agreement - Bio-Technology General Corp. and Ernest L. Kelly


                              EMPLOYMENT AGREEMENT


     AGREEMENT made as of January 29, 1996, between BIO-TECHNOLOGY GENERAL
CORP., a Delaware corporation with an office at 70 Wood Avenue South, Iselin,
New Jersey 08830 (the 'Company'), and Ernest L. Kelly, 159 Pine Lane, Yardley,
PA 19067 (the 'Executive').


                              W I T N E S S E T H :


     WHEREAS, the Company desires that Executive be employed to serve in a
senior executive capacity with the Company, and Executive desires to be so
employed by the Company, upon the terms and conditions herein set forth.

     NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:

1. EMPLOYMENT.

     The Company hereby employs Executive and Executive hereby accepts such
employment, subject to the terms and conditions herein set forth. Executive
shall hold the office of Senior Vice President-Quality Assurance, reporting to
the President and Chief Executive Officer of the Company.

2. TERM.

     The initial term of employment under this Agreement shall begin on the date
hereof (the 'Employment Date') and shall continue for a period of two (2) years
from that date, subject to prior termination in accordance with the terms
hereof. Thereafter, this Agreement shall automatically be renewed for successive
two year terms unless either party shall give the other ninety (90) days prior
written notice of its intent not to renew this Agreement.

3. COMPENSATION.

     (a) As compensation for the employment services to be rendered by Executive
hereunder, including all services as an officer or director of the Company and
any of its subsidiaries, the Company agrees to pay, or cause to be paid, to
Executive, and Executive agrees to accept, payable in equal installments in
accordance with Company practice, an initial annual salary of $165,000.
Executive's annual salary hereunder for the remaining years of employment shall
be determined by the Board of Directors in its sole discretion.



     (b) Executive shall be entitled to bonuses from time to time in such
amounts as may be determined by the Board of Directors in its sole discretion.

4. EXPENSES.

     The Company shall pay or reimburse Executive, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Executive in connection with his employment hereunder. Executive
shall comply with such restrictions and shall keep such records as the Company
may deem necessary to meet the requirements of the Internal Revenue Code of
1986, as amended from time to time, and regulations promulgated thereunder.

5. OTHER BENEFITS.

     Executive shall be entitled to a vacation allowance of not less than four
(4) weeks per annum and to participate in and receive any other benefits
customarily provided by the Company to its senior management personnel
(including any profit sharing, pension, short and long-term disability
insurance, hospital, major medical insurance and group life insurance plans in
accordance with the terms of such plans) and including stock option and/or stock
purchase plans, all as determined from time to time by the Board of Directors of
the Company. Unused annual vacations may not be carried over to other years
without the consent of the Board of Directors excepting those instances in which
Executive has been unable to utilize fully his annual vacation entitlement due
to exigencies of Company business matters and needs.

6. STOCK OPTIONS.

     (a) The Company will recommend to the Compensation and Stock Option
Committee of the Board of Directors (the 'Committee') that Executive be granted
an incentive stock option, pursuant to an incentive stock option agreement
substantially in the form of Exhibit 6(a) hereto, to purchase 50,000 shares of
the Company's Common Stock (the 'Options'), at an exercise price per share equal
to the fair market value of the Company's Common Stock on the date of grant,
such Options to become exercisable as to 12,500 shares on the first anniversary
date of the date of grant and as to an additional 12,500 shares on each
successive anniversary date of the date of grant.

     (b) The Company will also recommend to the Committee that the Options
become exercisable upon the termination of Executive's employment (i) pursuant
to Sections 8(a)(i) or 8(b) herein or (ii) by reason of the Company's failure to
renew this Agreement.

     (c) In addition, Executive shall be entitled to the grant of additional
options from time to time in such amounts as may be determined by the Committee
in its sole discretion. Any future grant of stock options shall be subject to
such terms as the Committee in its sole discretion shall specify at the time of
grant.

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7. DUTIES.

     (a) Executive shall perform such duties and functions as the President and
Chief Executive Officer of the Company shall from time to time determine and
Executive shall comply in the performance of his duties with the policies of the
Board of Directors.

     (b) Executive agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and of any of its
subsidiaries by which he may be employed; and Executive shall not, directly or
indirectly, alone or as a member of any partnership or other organization, or as
an officer, director or employee of any other corporation, partnership or other
organization, be actively engaged in or concerned with any other duties or
pursuits which interfere with the performance of his duties hereunder, or which,
even if non-interfering, may be, in the reasonable determination of the Board of
Directors of the Company in its sole discretion, inimical, or contrary, to the
best interests of the Company.

     (c) All fees, compensation or commissions received by Executive during the
term of this Agreement for personal services (including, but not limited to,
commissions and compensation received as a fiduciary or a director, and fees for
lecturing and teaching) rendered at the request of the Company shall be paid to
the Company when received by Executive, except those fees that the Board of
Directors determines may be kept by Executive.

     (d) Nothing in this Section 7 or elsewhere in this Agreement shall be
construed to prevent Executive from investing or trading in nonconflicting
investments as he sees fit for his own account, including real estate, stocks,
bonds, securities, commodities or other forms of investments.

     (e) The principal location at which the Executive shall perform his duties
hereunder shall be at the Company's offices in Iselin, New Jersey or at such
other location as may be designated from time to time by the Board of Directors
of the Company, provided that if the principal location of Executive's duties is
transferred from Iselin, New Jersey, the new principal location of Executive's
duties shall not be transferred beyond a 50-mile radius of Iselin, New Jersey
without Executive's consent. Notwithstanding the foregoing, Executive shall
perform such services at such other locations as may be required for the proper
performance of his duties hereunder, and Executive recognizes that such duties
may involve significant travel.

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8. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.

     (a) Executive's employment hereunder may be terminated at any time upon
written notice from the Company to Executive:

          (i) upon the determination by the Board of Directors, after Executive
     has received notice that his performance is not satisfactory and has failed
     to remedy such performance to the satisfaction of the Company, that
     Executive's performance of his duties has not been fully satisfactory for
     any reason which would not constitute justifiable cause (as hereinafter
     defined) upon thirty (30) days' prior written notice to Executive; or

          (ii) upon the determination by the Board of Directors that there is
     justifiable cause (as hereinafter defined) for such termination upon ten
     (10) days' prior written notice to Executive.

     (b) Executive's employment shall terminate upon:

          (i) the death of Executive; or

          (ii) the 'disability' of Executive (as hereinafter defined pursuant to
     subsection (c) herein) pursuant to subsection (f) hereof.

     (c) For the purposes of this Agreement, the term 'disability' shall mean
the inability of Executive, due to illness, accident or any other physical or
mental incapacity, substantially to perform his duties for a period of three (3)
consecutive months or for a total of six (6) months (whether or not consecutive)
in any twelve (12) month period during the term of this Agreement, as reasonably
determined by the Board of Directors of the Company in its sole discretion after
examination of Executive by an independent physician reasonably acceptable to
Executive.

     (d) For the purposes hereof, the term 'justifiable cause' shall mean and be
limited to: Executive's conviction (which, through lapse of time or otherwise,
is not subject to appeal) of any crime or offense involving money or other
property of the Company or its subsidiaries or which constitutes a felony in the
jurisdiction involved; Executive's performance of any act or his failure to act,
for which it is determined by independent counsel retained by the Board of
Directors (which may be counsel for the Company), after due inquiry in which
Executive is given the opportunity to be heard, that if Executive were
prosecuted and convicted, a crime or offense involving money or property of the
Company or its subsidiaries, or which would constitute a felony in the
jurisdiction involved, would have occurred; any unauthorized disclosure by
Executive to any person, firm or corporation other than the Company, its
subsidiaries and its and their directors, officers and employees, of any
confidential information or trade secret of the Company or any of its
subsidiaries; any attempt by Executive to secure any improper personal profit in
connection with the business of the Company or any of its subsidiaries; the
failure by Executive to devote his full time to the affairs of the 

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Company and its subsidiaries; Executive's pursuit of activities which in the
reasonable determination of the Board of Directors of the Company are inimical,
or contrary, to the best interests of the Company; the engaging by Executive in
any business other than the business of the Company and its subsidiaries which
interferes with the performance of his duties hereunder; or Executive's repeated
and willful failure to follow the instructions of the Chief Executive Officer of
the Company or the policies established by the Board of Directors and
communicated to Executive (other than instructions or policies which are illegal
or improper) where such conduct shall not have ceased or offense cured within 30
days following written warning from the Company. Upon termination of Executive's
employment for justifiable cause, this Agreement shall terminate immediately and
Executive shall not be entitled to any amounts or benefits hereunder other than
such portion of Executive's annual salary as has been accrued through the date
of his termination of employment and reimbursement of expenses pursuant to
Section 4 hereof.

     (e) If Executive shall die during the term of his employment hereunder,
this Agreement shall terminate immediately. In such event, the estate of
Executive shall thereupon be entitled to receive such portion of Executive's
annual salary as has been accrued through the date of his death and such bonus,
if any, as the Board of Directors in its sole discretion may determine to award
taking into account Executive's contributions to the Company prior to his death.
If Executive's death shall occur while he is on Company business, the estate of
Executive shall be entitled to receive, in addition to the other amounts set
forth in this subsection (e), an amount equal to one-half his then annual
salary.

     (f) Upon Executive's 'disability', the Company shall have the right to
terminate Executive's employment. Notwithstanding any inability to perform his
duties, Executive shall be entitled to receive his compensation (including
bonus, if any) as provided herein until he begins to receive long-term
disability insurance benefits under the policy provided by the Company pursuant
to Section 5 hereof. Any termination pursuant to this subsection (f) shall be
effective on the date 30 days after which Executive shall have received written
notice of the Company's election to terminate.

     (g) Notwithstanding any provision to the contrary contained herein, in the
event that Executive's employment is terminated by the Company at any time for
any reason other than justifiable cause, disability or death, or in the event
the Company shall fail to renew this Agreement, the Company shall (i) pay to
Executive, in full satisfaction and in lieu of any and all other payments due
and owing to Executive under the terms of this Agreement (other than any
payments constituting reimbursement of expenses pursuant to Section 4 hereof), a
severance payment in an amount equal to his then annual salary (less all
amounts, if any, required to be withheld), payable bi-weekly in equal
installments, and (ii) continue to allow Executive to participate, at the
Company's expense and to the same extent that Executive had participated prior
to termination of his employment, in the Company's health insurance and
disability insurance programs, to the extent permitted under such programs,
until the earlier of 

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(x) one year or (y) Executive becoming eligible to participate in another
employer's group health and disability insurance plans. Executive shall notify
the Company of his acceptance of a position with a new employer, together with
the specific date on which Executive shall become eligible for coverage in such
new employer's health and disability insurance programs, such notice to be given
within 15 days following commencement of such employment.

     (h) Executive may terminate his employment at any time upon 30 days' prior
written notice to the Company. Upon Executive's termination of his employment
hereunder, this Agreement (other than Sections 4, 8, 10, 11, 12 and 13, which
shall survive) shall terminate immediately. In such event, Executive shall be
entitled to receive such portion of Executive's annual salary as has been
accrued to date. Executive shall be entitled to reimbursement of expenses
pursuant to Section 4 hereof and to participate in the Company's benefit plans
to the extent participation by former employees is required by law or permitted
by such plans, with the expense of such participation to be as specified in such
plans for former employees.

9. REPRESENTATIONS AND AGREEMENTS OF EXECUTIVE.

     (a) Executive represents and warrants that he is free to enter into this
Agreement and to perform the duties required hereunder, and that there are no
employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder or requiring him to perform employment, consulting, business related
or similar duties for any other person.

     (b) Executive agrees to submit to a medical examination and to cooperate
and supply such other information and documents as may be required by any
insurance company in connection with the Company's obtaining life insurance on
the life of Executive, and any other type of insurance or fringe benefit as the
Company shall determine from time to time to obtain.

10. NON-INTERFERENCE.

     Executive agrees that for a period of one year following the termination of
Executive's employment hereunder, Executive shall not, directly or indirectly,
request or cause any collaborative partners, universities, governmental
agencies, contracting parties, suppliers or customers with whom the Company or
any of its subsidiaries has a business relationship to cancel or terminate any
such business relationship with the Company or any of its subsidiaries or
solicit, interfere with or entice from the Company any employee (or former
employee) of the Company.

11. INVENTIONS AND DISCOVERIES.

     (a) Insofar as is related to the principal business activities and products
of the Company and any of its subsidiaries or joint ventures, Executive shall
promptly 

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and fully disclose to the Company, and with all necessary detail for a complete
understanding of the same, all developments, know-how, discoveries, inventions,
improvements, concepts, ideas, writings, formulae, processes and methods of a
financial or other nature (whether copyrightable, patentable or otherwise) made,
received, conceived, acquired or written during working hours, or otherwise, by
Executive (whether or not at the request or upon the suggestion of the Company)
during the period of his employment with, or rendering of advisory or consulting
services to, the Company or any of its subsidiaries, solely or jointly with
others (collectively the 'Subject Matter').

     (b) Executive hereby assigns and transfers, and agrees to assign and
transfer, to the Company, all his rights, title and interest in and to the
Subject Matter, and Executive further agrees to deliver to the Company any and
all drawings, notes, specifications and data relating to the Subject Matter, and
to execute, acknowledge and deliver all such further papers, including
applications for copyrights or patents, as may be necessary to obtain copyrights
and patents for any thereof in any and all countries and to vest title thereto
to the Company. Executive shall assist the Company in obtaining such copyrights
or patents during the term of this Agreement, and any time thereafter on
reasonable notice and at mutually convenient times, and Executive agrees to
testify in any prosecution or litigation involving any of the Subject Matter;
provided, however, that Executive shall be compensated in a timely manner at the
rate of $100.00 per hour (with a minimum of $500 per day), plus out-of-pocket
expenses incurred in rendering such assistance or giving or preparing to give
such testimony if it is required after termination of his employment hereunder.

12. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.

     (a) Executive shall not, during the term of this Agreement, or at any time
following termination of this Agreement, directly or indirectly, disclose or
make accessible (other than as is required in the regular course of his duties
(including without limitation disclosures to the Company's advisors and
consultants) or is required by law (in which case Executive shall give the
Company prior written notice of such required disclosure) or with the prior
written consent of the Board of Directors of the Company), to any person, firm
or corporation, any confidential information acquired by him during the course
of, or as an incident to, his employment or the rendering of his advisory or
consulting services hereunder, relating to the Company or any of its
subsidiaries, the directors of the Company or its subsidiaries, any client of
the Company or any of its subsidiaries, or any corporation, partnership or other
entity owned or controlled, directly or indirectly, by any of the foregoing, or
in which any of the foregoing has a beneficial interest, including, but not
limited to, the business affairs of each of the foregoing. Such confidential
information shall include, but shall not be limited to, proprietary technology,
trade secrets, patented processes, research and development data, know-how,
market studies and forecasts, competitive analyses, pricing policies, employee
lists, personnel policies, the substance of agreements with customers and
others, marketing or dealership arrangements, servicing and training programs
and arrangements, customer lists and any other documents embodying such

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confidential information. This confidentiality obligation shall not apply to any
confidential information which thereafter becomes publicly available other than
pursuant to a breach of this Section 12(a) by Executive.

     (b) All information and documents relating to the Company and its
affiliates as hereinabove described shall be the exclusive property of the
Company, and Executive shall use commercially reasonable best efforts to prevent
any publication or disclosure thereof. Upon termination of Executive's
employment with the Company, all documents, records, reports, writings and other
similar documents containing confidential information, including copies thereof,
then in Executive's possession or control shall be returned and left with the
Company.

13. SPECIFIC PERFORMANCE.

     Executive agrees that if he breaches, or threatens to commit a breach of,
any of the provisions of Sections 10, 11 or 12 (the 'Restrictive Covenants'),
the Company shall have, in addition to, and not in lieu of, any other rights and
remedies available to the Company under law and in equity, the right to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and that
money damages would not provide an adequate remedy to the Company.
Notwithstanding the foregoing, nothing herein shall constitute a waiver by
Executive of his right to contest whether a breach or threatened breach of any
Restrictive Covenant has occurred.

14. AMENDMENT OR ALTERATION.

     No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.

15. GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of New Jersey
applicable to agreements made and to be performed therein.

16. SEVERABILITY.

     The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.


17. NOTICES.

     Any notices required or permitted to be given hereunder shall be sufficient
if in writing, and if delivered by hand, or sent by certified mail, return
receipt 

                                        8



requested, to the addresses set forth above or such other address as either
party may from time to time designate in writing to the other, and shall be
deemed given as of the date of the delivery or mailing.

18. WAIVER OR BREACH.


     It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.

19. ENTIRE AGREEMENT AND BINDING EFFECT.

     This Agreement contains the entire agreement of the parties with respect to
the subject matter hereof and shall be binding upon and inure to the benefit of
the parties hereto and their respective legal representatives, heirs,
distributors, successors and assigns. Notwithstanding the foregoing, all prior
agreements between Executive and the Company relating to the confidentiality of
information, trade secrets, patents and stock options shall not be affected by
this Agreement.

20. SURVIVAL.

     The termination of Executive's employment hereunder or the expiration of
this Agreement shall not affect the enforceability of Sections 4, 8, 10, 11, 12
and 13 hereof.

21. FURTHER ASSURANCES.

     The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

22. HEADINGS.

     The Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.


                               BIO-TECHNOLOGY GENERAL CORP.

                               By:_________________________________

                               ____________________________________
                               Ernest L. Kelly

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