Agreement for Supply of Material - Connaught Laboratories Ltd., ImClone Systems Inc., and Merck KGaA


                        AGREEMENT FOR SUPPLY OF MATERIAL

This AGREEMENT FOR SUPPLY OF MATERIAL (the 'Agreement'), among

         Connaught  Laboratories  Limited,  a Pasteur Merieux Connaught company,
         incorporated  under the laws of Ontario,  Canada  with  offices at 1755
         Steeles Avenue West, Toronto, Ontario, Canada M2R 3T4, ('PMC')

and

         ImClone Systems  Incorporated,  a company  existing and organized under
         the laws of Delaware,  USA with offices at 180 Varick Street, New York,
         NY, USA 10014, ('ImClone')

and

         Merck  KGaA,  a company  incorporated  under the laws of  Germany  with
         offices at Frankfurter Strasse 250, 64271 Darmstadt, Germany, ('Merck')

is  effective  as of this 1st day of  January,  1997  ('Effective  Date'),  with
respect to the following facts and circumstances:

         WHEREAS PMC has a proprietary  interest in and manufactures and sells a
product known as BCG vaccine,  consisting of BCG in vaccine formulation with its
accompanying  diluent  in a  10-dose  vial  presentation  (hereinafter  the 'BCG
Material'); and

         WHEREAS  ImClone and Merck  severally have a proprietary  interest in a
monoclonal  anti-idiotypic  antibody  known  as BEC2  (hereinafter  'BEC2')  and
jointly  are  performing  clinical  and  pre-clinical  research  relating to the
treatment and/or  prophylaxis of certain human cancers by  administration of the
BEC2; and

         WHEREAS ImClone and Merck intend to administer a combination therapy of
BEC2 and BCG  Material  to  certain  patients  with  small  cell lung  carcinoma
('SCLC') in a multi-national Phase III clinical trial being conducted in Europe,
Australia and the United States  (hereinafter the 'SILVA Trial') pursuant to the
protocol(s)  and  investigators'  brochure(s)  (hereinafter  the 'Clinical Trial
Protocol') attached hereto as Exhibit 'A'; and

         WHEREAS, ImClone and Merck may administer a combination therapy of BEC2
and BCG Material to other patients in such  additional  clinical trials that are
necessary or advisable in the sole discretion of ImClone and Merck in connection
with or in furtherance of the SILVA Trial (the  'Additional  Clinical  Trials');
and

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         WHEREAS  ImClone and Merck are  interested  in securing a supply of the
BCG  Material  to be  administered  with  BEC2 in the  SILVA  Trial and any such
Additional  Clinical  Trials,  and PMC is willing to supply the BCG  Material to
ImClone and Merck on the terms set forth herein.

         NOW THEREFORE, in consideration of the foregoing and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereby agree as follows:

1.       Trials to be Conducted; Status of Recipient

         ImClone and Merck are  conducting  the SILVA  Trial and any  Additional
Clinical Trials together, and will receive supplies of the BCG Material together
or  independently  for the sole  purpose of  conducting  the SILVA Trial and the
Additional  Clinical Trials (the SILVA Trial and the Additional  Clinical Trials
are collectively referred to herein as the 'Clinical Trials'). ImClone and Merck
shall be referred to for the purposes  herein as the 'Recipient' and the term so
used shall mean ImClone and Merck together or either of them.  ImClone and Merck
shall be jointly and severally liable in respect of the obligations set forth in
this Agreement, except as specifically noted hereinbelow.

2.       Supply and Acceptance of Delivery

         2(a).    Quantities of the BCG Material

         Subject to the terms of this Agreement and during the [ *** ] following
the Effective Date  (hereinafter the 'Supply  Period'),  PMC shall supply to the
Recipient, and the Recipient shall accept delivery from PMC of, the BCG Material
for use in and  during  the  Clinical  Trials  on the  following  dates,  in the
following quantities and with the following expiry dating:

                           (i)      [ *** ]

                           (ii)     [ *** ]

                           (iii)    [ *** ]

                           (iv)     [ *** ]

                           (A)      [ *** ]

                           (B)      [ *** ]

                           (C)      [ *** ]

                           (D)      [ *** ]

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           [ *** ]

         2(b).    Cost of Supply

                  [ ***]

         2(c).    Delivery;  Risk of Loss

                  At  Recipient's  cost,  PMC shall  deliver or arrange  for the
delivery  of the  BCG  Material  to  Recipient,  FOB at a  point  or  points  of
destination  selected  by  Recipient,  to a  reputable  carrier.  Prior  to  any
delivery, Recipient shall forward import permits or other documents, as required
for shipment, to PMC to the attention of Ms. Joy Rennick, Logistics Coordinator,
(facsimile:  416-667-2275).  Upon delivery of the BCG Material,  Recipient shall
assume  all  risk of loss or  damage  for the BCG  Material  so  delivered.  All
temperature  monitoring  devices  shall be returned by  Recipient  to PMC to the
attention of Ms. Rennick.

         2(d).    Technical Services Assistance

                  Upon the reasonable request by Recipient, and in consideration
of payment by ImClone of PMC's costs and services  fees at a rate of [ *** ] for
regulatory/logistics  personnel,  PMC shall make,  and has made,  available  its
clinical/medical  and  regulatory/logistics  personnel  (at their usual place of
employment or by telephone) to provide reasonable levels of technical assistance
to the Recipient in connection with PMC's Regulatory Manufacturing Documentation
for the BCG Material or in connection  with the Recipient's  Regulatory  Filings
required for the Clinical  Trials.  ImClone shall pay PMC, by no later than July
15, 1998, the amount of [ *** ], representing the sum of:

                  (i)      [   ***  ]

                  (ii)     [   ***  ]

                  (iii)    [   ***  ]

                  (iv)     [   ***  ]

                  ImClone  agrees  to pay for  any  further  technical  services
provided by PMC and tests  conducted by or on behalf of PMC, in connection  with
this Agreement or the Clinical Trials,  at the hourly rates agreed to herein and
the costs to PMC of any such tests.  The  parties  agree that the  currency  for
payment shall be Canadian dollars.

         2(e).    Negotiations for Future Commercial Supply

                  In the event that the  Recipient  wishes to seek  registration
for the combination therapy of BEC2 and BCG Material, Recipient shall notify PMC
in writing.  PMC and the  Recipient  agree that  within  sixty (60) days of said
written notice from the Recipient, the parties

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shall  initiate  good faith  negotiations  toward the  securing of a  commercial
supply  agreement  for the  purchase by  Recipient  of BCG  Material  with terms
satisfactory  to both parties,  including  without  limitation,  purchase price.
Failure to reach such  agreement  during the Term within  twelve  months (12) of
initiation of negotiations, or as of such earlier time when it is clear that the
parties cannot reach such  agreement,  shall be grounds for  termination of this
Agreement by either PMC or  Recipient,  upon thirty (30) days written  notice to
the other.

3.       Preparation and Conduct of the SILVA Trial

         3(a).    Regulatory Filings;  Manufacturing Regulatory Documentation

                  At  Recipient's  sole  cost,  Recipient  shall file and be the
owner of record for all Regulatory  Filings developed by the Recipient  relating
to  the  Clinical  Trials.  'Regulatory  Filing'  shall  mean  a  filing  with a
regulatory agency,  for example,  the US Food and Drug  Administration  ('FDA'),
that concerns the Clinical  Trials.  Recipient  owns and shall retain all right,
title and interest in and to BEC2 (and any improvements, progeny, derivatives or
related  materials  thereof) and the  Regulatory  Filings.  PMC shall permit the
Recipient to cross-reference  PMC's Product License  Application  Supplement and
Drug  Master  File for BCG  Material  and/or  otherwise  excerpt  portions of or
describe PMC's Product  License  Application  Supplement and Drug Master File in
the Regulatory  Filings,  to enable the Recipient to complete Regulatory Filings
required for the Clinical  Trials.  Notwithstanding  the foregoing,  the parties
agree  that  despite   Recipient's   cross-referencing   PMC's  Product  License
Application  Supplement and Drug Master File for BCG Material  and/or  otherwise
excerpting   portions  of  or  describing  PMC's  Product  License   Application
Supplement and Drug Master File in the Regulatory  Filings,  PMC owns, and shall
retain  all  right,  title  and  interest  in and to the BCG  Material  (and any
improvements,  progeny,  derivatives  or  related  materials  thereof)  and  the
Manufacturing Regulatory Documentation. 'Manufacturing Regulatory Documentation'
shall  mean a  Product  License  Application,  Drug  Master  File  or any  other
regulatory filing or documentation owned, developed, submitted or prepared by or
on behalf of PMC and filed with appropriate regulatory authorities that contains
information   concerning  the  BCG  Material,   including  but  not  limited  to
information  concerning  the BCG Material  contained in the  Regulatory  Filings
which is excerpted from or describes PMC's Product  License  Application or Drug
Master File or other regulatory filing by or on behalf of PMC which concerns the
BCG Material,  which  information,  Recipient  agrees and  undertakes,  shall be
deemed and  treated as  Confidential  Information.  All  non-public  information
provided  by one  party to the other in  preparing  Regulatory  Filings  and the
Manufacturing  Regulatory  Documentation  shall  be  deemed  to be  Confidential
Information of the disclosing party for the purposes of this Agreement.

         3(b).    Protocols for Clinical Trials; Results

                  At Recipient's  sole cost,  Recipient shall be responsible for
the design, implementation, and evaluation of any human clinical studies used to
obtain  clinical  data for use in preparing  Regulatory  Filings  related to the
Clinical Trials.  Recipient shall conduct the Clinical Trials in compliance with
current Good Clinical Practices ('cGCP') pursuant to FDA regulations. Recipient,
at its sole cost, shall provide PMC with a complete copy of the protocols

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and  investigators'  brochures for the Clinical Trials, as well as copies of all
reports,  abstracts and publications (subject to Section 5(c) herein) concerning
the data and results of the Clinical  Trials.  All right,  title and interest in
and to the data and  results of the  Clinical  Trials  shall vest in  Recipient;
provided that any information relating to the BCG Material shall remain the sole
property of PMC.

         3(c).    Adverse Reaction Reporting

                  Recipient  shall  promptly  notify PMC of any serious  adverse
reactions which result from the conduct of the Clinical Trials on the same basis
that such  reporting is made to the  appropriate  regulatory  authorities.  Such
notices  shall  be sent  by  Recipient  to PMC to the  attention  of Mrs.  Doris
Rudert-Dolby, Supervisor, Regulatory Affairs (facsimile: 416-667-2912). For this
purpose,  it is  understood  that an adverse  reaction  is subject to  expedited
reporting  to  appropriate  regulatory  authorities  if  such  adverse  reaction
constitutes an  'unexpected  adverse  reaction' and if the minimum  criteria for
expedited  reporting  are met (as such  criteria  are set forth in the ICH Topic
E2A:  Clinical  Safety Data Management - Definitions and Standards for Expedited
Reporting,  June 1, 1995). An 'unexpected adverse reaction' is one the nature or
severity of which is not consistent  with the information in the relevant source
document (i.e., the most recent version of the investigators'  brochure).  It is
further  understood that  'SCLC-related  Deaths' are the end-points of the SILVA
Trial and are, therefore, not subject to expedited reporting.

         3(d). PMC's Notice in Connection With Actions by Regulatory Authorities

                  PMC shall  promptly  notify  Recipient  of any  threatened  or
pending  actions by regulatory  authorities  which may reasonably be believed to
affect the safety or efficacy claims of the BCG Material or to affect the supply
commitment  contained in this Agreement.  Any form of such notice that is not in
writing shall be promptly followed by notice in writing.

         3(e). Recipient's Notice in Connection With Actions by Regulatory
                 Authorities

                  Recipient  shall  promptly  notify  PMC of any  threatened  or
pending  actions by regulatory  authorities  which may reasonably be believed to
affect the safety or efficacy  claims of BEC2 or of the  combination  therapy of
BEC2 and BCG Material or to affect the Clinical Trials.  Any form of such notice
that is not in writing shall be promptly followed by notice in writing.

         3(f).    Recipient's Provision of Updated Investigators' Brochure

                  For the purpose of keeping  PMC  apprised of the status of the
Clinical  Trials,  Recipient  shall  provide  to  PMC  a  copy  of  all  updated
investigators'  brochures  which  Recipient  is required to file with the FDA or
other regulatory agency anywhere.

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4.       Availability and Manufacture of BCG Material and of BEC2

         4(a).    BCG Material for Clinical Trials

                  During the Supply Period, PMC shall supply the BCG Material in
the quantities and according to the terms set forth in Sections  2(a)(i),  (ii),
(iii) and (iv); provided, however, that with respect to the quantities and terms
set forth in  Section  2(a)(iii)  and (iv),  PMC shall only be  required  to use
reasonable  commercial  efforts to make available to Recipient such BCG Material
as may be requested for the Additional  Clinical Trials. With respect to the BCG
Material requested pursuant to Sections 2(a)(iii) and 2(a)(iv),  in the event of
Force Majeure or of supply shortage or production constraint, PMC shall allocate
the available  quantities of BCG Material among PMC, its  affiliates,  customers
and distributors, including Recipient, in a commercially reasonable manner. Each
lot of BCG Material  released to the Recipient for the Clinical  Trials shall be
manufactured in compliance with current Good  Manufacturing  Practices  ('cGMP')
pursuant to FDA  regulations and according to  manufacturing  information in the
Manufacturing Regulatory Documentation.  PMC shall, or shall cause a third party
to,  perform  quality  control  testing  of the  BCG  Material  released  to the
Recipient to establish  compliance with any release  specifications  required by
the Manufacturing Regulatory Documentation.

         4(b).    BEC2 for Clinical Trials

                  During the Term,  Recipient  shall use  reasonable  commercial
efforts to have sufficient quantities of BEC2 for use in the Clinical Trials. In
the event of Force  Majeure  or of supply  shortage  or  production  constraint,
Recipient  shall  notify PMC as soon as possible so as to permit PMC to allocate
the above-noted quantities of BCG Material among PMC, its affiliates,  customers
and  distributors  at  PMC's  sole  discretion.  Each  lot of BEC2  released  by
Recipient for the Clinical  Trials shall be manufactured in compliance with cGMP
pursuant to FDA  regulations and according to  manufacturing  information in the
Regulatory  Filings.  Recipient  shall, or shall cause a third party to, perform
quality  control  testing  of BEC2 to  establish  compliance  with  any  release
specifications required by the Regulatory Filings.

         4(c).    BCG Material Specifications

                  PMC  shall  provide  BCG  Material  to  the  Recipient  in the
available  vialed  formulations  and vial sizes  specified  in the then  current
Manufacturing Regulatory Documentation.  PMC shall have no obligation under this
Agreement  to develop any other vial sizes or  formulations  of BCG Material for
the  Recipient.  PMC shall use  reasonable  commercial  efforts to maintain  the
integrity and consistency of all specifications  applicable to BCG. In the event
that PMC  deems  it  necessary  to  revise  any  specifications,  procedures  or
Manufacturing  Regulatory  Documentation  applicable to BCG Material,  PMC shall
provide  reasonable advance notice of any such revision to the Recipient for the
sole purpose of permitting  Recipient to revise the Clinical  Trial  Protocol or
Regulatory  Filings,  as  required.  All  specification  changes  that result in
procedures  or  limits  that  exceed  or  differ  from  those  set  forth in the
Manufacturing  Regulatory  Documentation  shall be  submitted  to the FDA before
being implemented to the extent the FDA so requires such submission.

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         4(d).    Documentation

                  Upon  acceptance by Recipient of delivery of the BCG Material,
PMC shall provide the Recipient  with a  Certificate  of Analysis  applicable to
each lot of BCG Material delivered to the Recipient.  Complete batch records and
sufficient  retention  samples for the BCG Material  delivered to the  Recipient
shall be maintained at PMC for  inspection at any time by the Recipient at PMC's
place of business upon reasonable  prior written notice to PMC. Any confidential
or proprietary information of PMC or of its affiliates contained in such records
or samples shall be deemed to be Confidential Information of PMC.

         4(e).    PMC Facility Audits

                  Upon reasonable prior written notice to PMC, the Recipient may
(but shall not be  required  to) have its  representatives,  acting  reasonably,
audit PMC's production of the BCG Material to be used in the Clinical Trials for
compliance  with cGMP;  provided  however that such  representatives  shall have
first  signed  a   confidentiality   agreement  with  PMC.   Recipient  and  its
representatives shall comply with all applicable health,  safety,  environmental
and security laws and with PMC's policies and procedures  while present at PMC's
facilities.

         4(f).    Recall or Withdrawals

                  In  the  event  that  a  party  is  notified  of a  recall  or
withdrawal  of BEC2 or of the BCG  Material in any  country,  or  believes  such
recall  or  withdrawal  is  necessary,  it shall  immediately  notify  the other
parties.  The parties will consult on the necessity of, and appropriate  actions
and mutually  acceptable  procedures to be taken in connection with, a recall or
withdrawal.  If such recall or  withdrawal  is  undertaken,  the  parties  shall
cooperate in taking all reasonable and appropriate  action necessary to complete
such recall or withdrawal in a timely fashion.

5.       Confidentiality and Disclosure

         5(a).    General Obligations of Confidentiality

                  For a period of ten (10) years  following  any  disclosure  of
Confidential  Information  hereunder,  the Recipient  and PMC shall  maintain in
confidence the respective Confidential Information received or obtained from the
other,  and  use  such   Confidential   Information   solely  for  the  purposes
contemplated  and  permitted  by  this  Agreement.  Each  party  shall  maintain
communications to the other parties in confidence.  Each party acknowledges that
all Confidential  Information exchanged or developed hereunder shall be owned by
the  transferor  and  shall  continue  to be owned by the  transferor  following
transfer.  'Confidential  Information'  shall mean any and all  confidential  or
proprietary  information owned by PMC (or its affiliates) or by the Recipient or
either of ImClone or Merck (or their  affiliates)  that is provided to the other
parties.  Confidential  Information  shall not be deemed to include  information
that:

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                  (i) is or  becomes  known  publicly  through  no  fault of the
receiving party;

                  (ii) is learned  by the  receiving  party  from a third  party
entitled to disclose it;

                  (iii) is developed by the  receiving  party  independently  of
information obtained from the disclosing party as shown by the receiving party's
written records;

                  (iv) is already  known to the receiving  party before  receipt
from the disclosing party, as shown by prior written records; or

                  (v)  is  released  with  the  prior  written  consent  of  the
disclosing party.

         5(b).    Permitted Disclosures

                  Notwithstanding  Section  5(a) hereof,  PMC and the  Recipient
shall,  upon prior  written  notice to the other  parties and only to the extent
necessary,   have  the  right  to  disclose  the  other  parties'   Confidential
Information  to regulatory or government  agencies for the purposes of preparing
or   supplementing   any   Regulatory   Filing   or   Manufacturing   Regulatory
Documentation,   as   applicable,   or  of   otherwise   assisting  in  securing
institutional  or government  approval to clinical test the BCG Material,  or as
required  by law  within  each  country  where  the  Clinical  Trials  are being
conducted.

         5(c).    Publications

                  The parties acknowledge that the data and results arising from
the Clinical Trials should be published and presented except to the extent where
such  publication  or  presentation  would be reasonably  expected to materially
diminish  the  commercial   value  of  the  BCG  Material,   or  to  affect  the
patentability  of the BCG  Material  or any  improvements  thereof.  The parties
further acknowledge that the Clinical Trials are multi-centre studies. Recipient
undertakes and shall ensure that the data and results  arising from the Clinical
Trials shall not be published or  presented by  Recipient,  by the  coordinating
investigators or by other participating individuals or entities, until such time
as the  Clinical  Trials are  completed  and the data and results  are  analyzed
thereafter.  Upon  completion of the SILVA Trial,  Recipient shall ensure that a
cooperative   clinical   administrative   body,   comprising  the   coordinating
investigators,  shall prepare a report which will include a statistical analysis
and an appraisal of the final data and results from a medical viewpoint. Interim
publication  or   presentation   of  the  Clinical  Trials  would  include  only
demographic  data,  for  publicity  purposes.   Any  publication,   abstract  or
presentation,  whether verbal or written,  of such data,  results or report,  or
excerpts or interpretations  thereof, shall be submitted by Recipient to PMC for
review, pursuant to the following conditions:

                  (i)   Recipient   shall  ensure  that  any   article,   paper,
manuscript,  report,  data,  results,  abstract,  poster  or notes  shall not be
published  or  presented  until  the  completion  of the  SILVA  Trial and after
analysis of the final results of the SILVA Trial;

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                  (ii)  Recipient  shall  ensure  that any such  publication  or
presentation  acknowledges  the contribution of the parties and their employees,
representatives or consultants as co-authors or as otherwise appropriate; and

                  (iii) Recipient shall ensure that the publishing party deliver
to PMC,  at  least  sixty  (60)  days in  advance  of any  such  publication  or
presentation,  any article, paper, manuscript,  report, data, results, abstract,
poster or notes  proposed to be published or presented,  in order to permit PMC,
acting reasonably:

                        (A)   to apply for patents or make such other filings or
                  registrations as deemed advisable,

                        (B)   to object to any part of such proposed publication
                  or  presentation  on the  basis  that it  would be  reasonably
                  expected  to  materially  diminish   the  value  of  the   BCG
                  Material and information  related thereto,

                        (C)   to require that any  Confidential  Information  be
                  deleted from any  such proposed  publication  or presentation,
                  or

                        (D)   to   revise   such   proposed    publication    or
                  presentation accordingly.

Recipient  undertakes and shall ensure that similar publication and presentation
procedures will be established for any Additional Clinical Trials.

         5(d).    Use of Names or Trademarks

                  The parties shall not  originate any press release  concerning
the entering into of this  Agreement or the subject  matter  hereof  without the
prior  written  approval  of the  other  parties,  which  approval  shall not be
unreasonably  withheld.  The parties shall not have the right to use the name or
any trade name or trademark of the other parties without prior written approval.
Reference to the existence of this  Agreement may be made in the regular  course
of business of the parties in informational  disclosures describing the business
of the parties, upon prior written notice to the other parties.

6.       Warranties and Representations

         6(a). Warranties and Representations of PMC.

                  Subject to Section 7(a),  PMC  represents  and warrants to the
Recipient that:

                  (i) PMC is a corporation duly organized,  validly existing and
in good standing and has all necessary corporate power to enter into and perform
its obligations under this Agreement;

                  (ii) the execution, delivery and performance of this Agreement
by PMC have been duly authorized and approved by all necessary corporate action,
and the Agreement is binding

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upon and  enforceable  against  PMC in  accordance  with its terms  (subject  to
bankruptcy and similar laws affecting the rights of creditors generally);

                  (iii) each lot of the BCG Material  delivered to the Recipient
for the Clinical Trials shall be manufactured, tested and released in compliance
with cGMP and the applicable Manufacturing Regulatory Documentation; and

                  (iv)  any  documentation  provided  to  the  Recipient  by PMC
concerning the BCG Material or Manufacturing  Regulatory  Documentation shall be
accurate to the best of PMC's knowledge and ability.

         6(b).    Warranties and Representations of the Recipient

                  Recipient  and  each  of  ImClone  and  Merck  represents  and
warrants to PMC that:

                  (i) Recipient consist of corporations duly organized,  validly
existing and in good  standing and have all necessary  corporate  power to enter
into and perform their obligations under this Agreement;

                  (ii) the execution, delivery and performance of this Agreement
by the  Recipient  have been  duly  authorized  and  approved  by all  necessary
corporate action, and the Agreement is binding upon and enforceable  against the
Recipient in accordance  with its terms  (subject to bankruptcy and similar laws
affecting the rights of creditors generally);

                  (iii)  Recipient shall use BCG Material in compliance with all
applicable  laws and  regulations  and  shall  conduct  the  Clinical  Trials in
compliance with cGMP and cGCP;

                  (iv) Recipient is not aware of any special or unusual  hazards
that would arise as a result of the combination of BEC2 and BCG Material for the
Clinical Trials to be conducted by Recipient;

                  (v)  each  lot of  BEC2  for  the  Clinical  Trials  shall  be
manufactured,  tested and released in  compliance  with cGMP and the  applicable
Regulatory Filings; provided that, in connection with such release only, each of
ImClone and Merck provides such warranty and representation  with respect to the
territories in which they  respectively  are  responsible for the conduct of the
Clinical Trials;

                  (vi) any documentation concerning the Clinical Trials, BEC2 or
Regulatory  Filings shall be accurate to the best of  Recipient's  knowledge and
ability; and

                  (vii) Recipient does not guarantee any particular results from
the conduct of the Clinical Trials.

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7.       Limitation of Liability; Indemnification

         7(a).    Limitation of Liability

                  PMC has limited  knowledge or awareness of, and has no control
over,  the manner in which the Recipient  intends to use the BCG  Material.  PMC
shall not be liable for any  losses,  damages,  costs or  expenses of any nature
incurred or suffered by the  Recipient or by a third  party,  arising out of any
dispute or other claims or proceedings (including,  without limitation,  product
liability  claims  and  claims by a third  party  alleging  infringement  of its
intellectual  property  rights  by the  use or sale  of BCG  Material),  made or
brought as a result of the Clinical  Trials or against the Recipient,  nor shall
PMC be  responsible  in any way for dealing  with any such  disputes,  claims or
proceedings,  except to the extent that any such  dispute,  claim or  proceeding
arises  from (a) a breach  by PMC of any  warranty  set  forth in  Section  6(a)
hereof, or (b) any failure by PMC to manufacture,  test, document or release the
BCG Material in compliance with cGMP and the applicable Manufacturing Regulatory
Documentation.  PMC shall not be responsible for any interruption in supply that
is caused by Force  Majeure.  EXCEPT AS SET FORTH IN SECTION  6(a)  HEREOF,  PMC
MAKES NO  WARRANTIES,  EXPRESS OR IMPLIED,  WRITTEN OR ORAL,  INCLUDING  WITHOUT
LIMITATION  ANY  WARRANTIES  OF  MERCHANTABILITY,  OF FITNESS  FOR A  PARTICULAR
PURPOSE OR OF NON-INFRINGEMENT  OF THIRD PARTY PATENTS.  PMC SHALL NOT BE LIABLE
FOR ANY LOSS, CLAIM, DAMAGE, EXPENSE OR LIABILITY,  OF ANY KIND OR NATURE, WHICH
MAY ARISE FROM OR IN CONNECTION  WITH THIS AGREEMENT OR WITH THE CLINICAL TRIALS
OR FROM THE USE,  HANDLING OR STORAGE OF BCG MATERIAL,  BEC2 OR THEIR  ANCILLARY
MATERIALS BY RECIPIENT OR BY ANY  AFFILIATES,  EMPLOYEES,  AGENTS,  CONTRACTORS,
INVESTIGATORS OR REPRESENTATIVES OF RECIPIENT.  NO PARTY TO THIS AGREEMENT SHALL
BE  ENTITLED  TO  RECOVER  FROM  THE  OTHER  PARTIES  ANY  SPECIAL,  INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES.

         7(b).    Recipient's Right to Indemnification

                  PMC  hereby  agrees to  indemnify,  defend  and hold  harmless
Recipient and its affiliates, officers, directors, employees and representatives
(collectively,  the 'Recipient's Indemnitees') from and against any liabilities,
claims,  damages,  costs,  expense (including  reasonable  attorneys' fees), and
actions  (collectively,  'Claims')  arising  out of or  resulting  from  (i) the
failure by PMC to  manufacture,  test,  document or release the BCG  Material in
compliance with cGMP and the applicable  Manufacturing  Regulatory Documentation
or (ii) the  breach by PMC or PMC's  Indemnitees  of any of its  obligations  or
warranties  hereunder,  except to the extent that any such Claims  arise out of,
are based upon or result  from the gross  negligence  or willful  misconduct  of
Recipient or  Recipient's  Indemnitees  or a breach by Recipient or  Recipient's
Indemnitees of any of Recipient's obligations or warranties under this Agreement
or under the Clinical  Trial  Protocol or Regulatory  Filings.  Recipient  shall
promptly notify PMC of any Claims,  upon becoming aware thereof,  and permit PMC
at PMC's cost to defend against such Claims and shall  cooperate with PMC in the
defense  thereof.  Recipient shall not enter into, or permit,  any settlement of
any such Claims without the express written consent of PMC.

*** Confidential Treatment Requested


                                      -12-


Recipient  may, at its option and expense,  have its own counsel  participate in
any proceeding that is under the direction of PMC and will cooperate with PMC or
its insurer in the disposition of any such matter.

         7(c).    PMC's Right to Indemnification

                  Recipient hereby agrees to indemnify, defend and hold harmless
PMC and its  affiliates,  officers,  directors,  employees  and  representatives
(collectively,  'PMC's  Indemnitees') from and against any liabilities,  claims,
damages,  costs,  expense  (including  reasonable  attorneys' fees), and actions
(collectively,  'Claims')  arising  out of or  resulting  from (i) the  Clinical
Trials, (ii) the failure by Recipient to manufacture,  test, document or release
BEC2 in compliance with cGMP and the applicable  Regulatory  Filings,  (iii) the
breach by Recipient or Recipient's Indemnitees of any of Recipient's obligations
or  warranties  under this  Agreement  or under the Clinical  Trial  Protocol or
Regulatory  Filings,  (iv)  the  possession,   processing,   shipment,  storage,
handling,  administration  or disposal of any BCG Material supplied to Recipient
hereunder,  or  (v)  the  possession,   manufacture,  sale,  use,  distribution,
processing,  shipment, storage, handling,  administration or disposal of BEC2 by
Recipient  whether or not any BCG  Material is combined  thereto,  except to the
extent  that any such  Claims  arise out of, are based  upon or result  from the
gross negligence or willful  misconduct of PMC or PMC's  Indemnitees or a breach
by PMC or PMC's Indemnitees of any of PMC's obligations or warranties under this
Agreement.  PMC shall  promptly  notify  Recipient of any Claims,  upon becoming
aware thereof,  and permit Recipient at Recipient 's cost to defend against such
Claims and shall cooperate with Recipient in the defense thereof.  PMC shall not
enter into, or permit,  any  settlement  of any such Claims  without the express
written consent of Recipient.  PMC may, at its option and expense,  have its own
counsel  participate in any proceeding  that is under the direction of Recipient
and will cooperate with Recipient or its insurer in the  disposition of any such
matter.

         7(d).    Recipient's Insurance

                  Each of ImClone and Merck shall obtain and  maintain  separate
product liability  insurance and clinical trial liability  insurance (naming PMC
either as an  additional  insured  or policy  beneficiary),  with an  acceptable
insurer,  in the minimum amount of US$10,000,000 per occurrence.  Such insurance
may not be cancelled or  terminated  except upon thirty (30) days' prior written
notice to PMC. Such insurance  shall be obtained and maintained at the sole cost
and  expense of ImClone  and Merck.  From time to time,  at the  request of PMC,
ImClone and Merck will cause  certificates  of such  insurance to be provided to
PMC evidencing compliance with their respective obligations set forth herein.

*** Confidential Treatment Requested


                                      -13-


8.       Term and Termination

         8(a).    Expiration

                  This Agreement  shall commence on the Effective Date and shall
terminate  six (6) months  after the  expiration  of the Supply  Period,  unless
earlier  terminated  as  provided  in  Sections  8(b),  (c) and (d) hereof  (the
'Term').

         8(b).    Termination by Any Party

                  Any party shall have the right to  terminate  this  Agreement,
immediately upon written notice of termination to the other parties in the event
that:

                  (i) a party fails to perform or observe or otherwise  breaches
any of its material  obligations under this Agreement and such failure or breach
continues  unremedied  for a period of sixty  (60)  days  after  receipt  by the
breaching party of a written notice thereof from the non-breaching party; and

                  (ii) a  proceeding  or case  shall be  commenced  without  the
application  or consent  of the other  party and such  proceeding  or case shall
continue undismissed,  or an order, judgment or decree approving or ordering any
of the  following  shall be entered and continue  unstayed and in effect,  for a
period of  forty-five  (45) days from and after the date  service  of process is
effected  upon the  other  party,  seeking  (A) the other  party's  liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment of
its debts, (B) the appointment of a trustee, receiver, custodian, liquidation or
the  like of the  other  party  or of all or any  substantial  portion  of their
assets,  or (C)  similar  relief in  respect  of the other  party  under any law
relating  to   bankruptcy,   insolvency,   reorganization,   winding-up  or  the
composition or readjustment of debts.

         8(c).    Termination due to Cessation of Clinical Trials

                  In the  event  Recipient  in its sole  discretion  ceases  the
Clinical Trials,  and so advises PMC in writing in advance,  either Recipient or
PMC may terminate  this  Agreement upon thirty (30) days prior written notice to
the other parties.

         8(d).    Termination in Connection With Further Negotiation

                  This  Agreement  may be  terminated by the Recipient or PMC in
connection with the failure, during the Term, to enter into a separate agreement
for future  commercial  supply of BCG Material,  as further set forth in Section
2(e) hereof.

         8(e).    Effects of Termination

                  In the event of any termination of this Agreement, all amounts
previously  invoiced  and  unpaid  or owed to PMC  shall be due and  payable  by
Recipient on the date of  termination.  Following  termination of the Agreement,
the Recipient shall return to PMC or

*** Confidential Treatment Requested


                                      -14-


destroy,  at PMC's option,  any  quantities  of BCG Material.  The parties agree
that: (i) the provisions of Section 2(e),  Article 3 and Article 6 shall survive
the termination or expiration of this Agreement;  (ii) the provisions of Article
5 hereof shall survive the  termination  or expiration of this Agreement for the
term  specified in that  Article;  and (iii) the  provisions of Article 7 hereof
shall survive  termination  or expiration of this Agreement only with respect to
Claims that arose from acts or circumstances that occurred prior to termination.

9.       Miscellaneous

         9(a).    No Implied Waivers; Rights Cumulative

                  No failure on the part of PMC or the  Recipient  to  exercise,
and no delay in exercising,  any right,  power,  remedy or privilege  under this
Agreement,  or  provided  by  statute  or at  law  or in  equity  or  otherwise,
including,  without limitation,  the right or power to terminate this Agreement,
shall impair,  prejudice or constitute a waiver of any such right, power, remedy
or privilege  or be construed as a waiver of any breach of this  Agreement or as
an acquiescence  therein,  nor shall any single or partial  exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
or the exercise of any other right, power, remedy or privilege.

         9(b).    Notices

                  All notices,  requests and other  communications to PMC or the
Recipient   hereunder  shall  be  in  writing  (including  telecopy  or  similar
electronic  transmissions) and shall be personally delivered or sent by telecopy
(fax) or other  electronic  facsimile  transmission  or by  registered  mail, or
certified mail, return receipt requested,  postage prepaid,  or by other form of
courier requiring receipt in each case to the respective address specified below
(or to such address as may be  specified  in writing to the other party  hereto)
and shall be effective upon receipt thereof:

Connaught Laboratories Limited
1755 Steeles Avenue West
Toronto, Ontario, CANADA
M2R 3T4

Attn:    Vice President and General Counsel
         Facsimile:        (416) 667-2860
with a copy to:   Senior Vice President, and General Manager,
                    Oncology Business Unit
         Facsimile:        (416) 667-2990

*** Confidential Treatment Requested


                                      -15-


Merck KGaA
Frankfurter Strasse 250
64271 Darmstadt, GERMANY

Attn:    Dr. Dieter Orth, License Department
         Facsimile:        61 51 72 3378
with a copies to: Dr. Jurgen Uhl, Project Manager, Facsimile: 61 51 72 7580, and
                           Lothar Finke, TATONZ, Facsimile: 61 51 72 6905

ImClone Systems Incorporated
180 Varick Street
New York   NY 10014
U.S.A.

Attn:    General Counsel
         Facsimile:        (212) 645-2054

         9(c).    Successors and Assigns

                  The terms and provisions of this Agreement  shall inure to the
benefit  of, and be binding  upon,  PMC,  the  Recipient,  and their  respective
successors and permitted assigns as provided in this Section.  PMC and Recipient
shall  have the right to assign or  otherwise  transfer  any of its  rights  and
interests,  or delegate  any of its  obligations,  to an Affiliate of such party
provided  that  such  Affiliate  agrees  in  writing  to  carry  out in full any
obligations  that are assigned to it. PMC and Recipient  shall have the right to
assign all of its rights and interests and delegate all of its obligations under
this  Agreement to any entity that is the successor in interest to the assigning
party in any merger,  consolidation or sale involving  substantially  all of the
business and assets of the assigning  party.  Any other assignment or delegation
shall only be valid and  effective  if the other  parties  have  provided  their
respective prior express written consent.  Any attempt to assign or delegate any
portion of this  Agreement in violation of this Section  shall be null and void.
Subject to the foregoing,  any reference to PMC or the Recipient hereunder shall
be deemed to include the successors thereto and permitted assigns thereof.

         9(d).    Force Majeure

                  No party shall be liable to the others, or be in default under
the  terms  of this  Agreement,  for its  failure  to  fulfill  its  obligations
hereunder to the extent such  failure  arises for any reason or cause beyond its
control including,  without limitation,  strikes, lockouts, labor disputes, acts
of God, acts of nature,  acts of governments  or their  agencies,  fire,  flood,
storm, power shortages or power failure, war, sabotage,  inability to supply and
to obtain labor,  raw materials,  supplies,  fuel or utilities,  or inability to
obtain transportation,  or any other circumstance or event beyond the reasonable
control of the party (each, 'Force Majeure'), provided that the party relying on
the  provisions  of this Section 9(d) shall give notice to the other  parties of
its inability to observe or perform the  provisions of this  Agreement.  A party
shall notify the other  parties if, at any time,  it  encounters a production or
manufacturing problem

*** Confidential Treatment Requested


                                      -16-


which in its reasonable opinion could reasonably be expected to adversely affect
its ability to supply BEC2 or BCG  Material,  as  applicable,  for the  Clinical
Trials. Should such production or manufacturing be so reduced, the party relying
on these provisions shall have the right to allocate such supply for its own use
and among its affiliates, customers and distributors, in such manner and on such
basis as it may reasonably  determine,  without  compensation  or penalty to the
other parties.

         9(e).    Governing Law

         This  Agreement  shall  be  governed  by the  laws of the  Province  of
Ontario. The parties specifically agree that the International Sale of Goods Act
does not apply hereto.

         9(f).    Entire Agreement

                  This  Agreement,  together  with  its  Exhibits  A,  B and  C,
constitutes, on and as of the Effective Date hereof, the entire agreement of and
among PMC, ImClone and Merck with respect to the subject matter hereof,  and all
prior or contemporaneous  understandings or agreements, whether written or oral,
between or among PMC,  ImClone or Merck with respect to such subject  matter are
hereby superseded, as of the Effective Date.

         9(g)     Relationship

                  Each of the parties is an independent contractor. No party is,
and  nothing  in this  Agreement  shall  constitute  any party as the  employer,
employee,  principal,  agent or partner of, or joint  venturer  with,  any other
party. No party has authority to enter into any agreement on behalf of the other
parties or to bind the other parties in any other manner, and no party shall act
or omit to act so as to suggest that it has such authority. No party shall incur
any  obligations  or  liabilities,  express  or  implied,  by reason of, or with
respect to, the actions or omissions of the other parties or of persons for whom
they are responsible.

         9(h)     Counterparts

                  This  Agreement  may be executed in two or more  counterparts,
each of which  shall be  deemed  an  original  but all of which  together  shall
constitute one and the same instrument.

*** Confidential Treatment Requested


                                      -17-


         IN WITNESS  WHEREOF,  the  parties  have caused  this  Agreement  to be
executed by their duly authorized officers as of the Effective Date.

ImClone Systems Incorporated


By: /s/ John B. Landes
    --------------------------
Name:    John B. Landes
Title: VP Business Development
        and General Counsel


Merck KGaA


By: /s/  Professor Schurr  18/8/98                
    ------------------------------                
Name:    Professor Schurr                         
Title:   Vice President Clin. R&D                 


By:      /s/ Dr. Dieter Orth         
         ---------------------------   
Name:    Dr. Dieter Orth             
Title:   Head of Corporate Licensing 


Connaught Laboratories Limited

By:      /s/ Dr. Pierre Meulien                   
         ----------------------                   
Name:    Dr. Pierre Meulien                       
Title:   Vice President                           
Research & Development

  
By:      /s/ Wm. M.M. Thoms         
         -------------------         
Name:    Wm. M. Thoms                
Title:   VP & General Counsel        

*** Confidential Treatment Requested


                                      -18-


                Exhibit 'A' (Protocols, Investigators' Brochures)
   to Agreement among PMC, ImClone and Merck effective as of January 1, 1997

--------------------------------------------------------------------------------



[ *** ]

*** Confidential Treatment Requested


                                      -19-


          Exhibit 'B' (Section 2(a), ImClone's labelling requirements)
    to Agreement among PMC, ImClone and Merck effective as of January 1, 1997

--------------------------------------------------------------------------------


                            BCG (lyophilized) 1.5 mg
                          (An Active Immunizing Agent)
                        For Intracutaneous Injection Only
                          Dose as per Clinical Protocol
                                      Lot:

                                      Exp:

                          For Investigational Use Only

                    MUST NOT BE ADMINSTERED AS A SINGLE AGENT

                       Mfg: Connaught Laboratories Limited
                             North York, ONT Canada

*** Confidential Treatment Requested


                                      -20-


           Exhibit 'C' (Section 2(a), Merck's labelling requirements)
    to Agreement among PMC, ImClone and Merck effective as of January 1, 1997

--------------------------------------------------------------------------------


                            BCG (lyophilized) 1.5 mg
                          (An Active Immunizing Agent)
                        For Intracutaneous Injection Only
                Use according to study protocol EORTC 08971 only

                                                                     Lot:
                                                                     Exp:

                           For Clinical Trial Use Only

                    MUST NOT BE ADMINSTERED AS A SINGLE AGENT

                       Mfg: Connaught Laboratories Limited
                             North York, ONT Canada

*** Confidential Treatment Requested