**Exhibit10.38**

**Note:  Certain information in this agreement hasbeen omitted pursuant to a request for confidential treatment that has beenfiled separately with the Securities and Exchange Commission.**

**SETTLEMENTAGREEMENT**

This Settlement Agreement, together with the exhibitsthereto (collectively, the “Agreement”), dated as of July 19, 2006 (the “EffectiveDate of Settlement”) is entered into by and between ImClone SystemsIncorporated, a Delaware corporation, having an address at 180 Varick Street,New York, NY 10014 USA (“ImClone”) and Merck KGaA, a German corporation withgeneral partners, having an address at Frankfurter Straße, D-64293 Darmstadt,Germany (“Merck”).  ImClone and Merck arereferred to collectively as the “Parties,” and individually as a “Party”.  (All capitalized terms used in thisAgreement, unless expressly defined herein, shall have the meaning assigned inthe DLA (as referenced below) or the Amendment to the DLA executed concurrentlyherewith and attached as Exhibit A.)

**WITNESSETH:**

WHEREAS, ImClone and Merck entered into theDevelopment and License Agreement, dated December 14, 1998, that was amended bythe Amendment of Development and License Agreement, dated September 21, 1999,the first letter agreement of March 1, 1999, the second letteragreement of March 23, 2001, and the third letter agreement of August 16, 2001,and as clarified by the fourth letter agreement of November 14, 2005(collectively, the “DLA”); and

WHEREAS, certain disputes have arisen between theParties concerning their rights and obligations under the DLA regarding:

(a) the development, manufacture and commercialization of the ImCloneproduct known as “IMC-11F8”, as set forth in the claims and defenses assertedby the Parties in the American Arbitration Association proceeding entitled *In the Matter of the Arbitration between Merck*

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*KGaA and ImClone SystemsIncorporated*, and theDecision and Award after Hearing of the Honorable George C. Pratt, Arbitrator,dated March 31, 2006, (collectively, the “11F8 Dispute”), and the appeal andcross-appeal arising from the 11F8 Dispute entitled *Merck KGaAv. ImClone Systems Incorporated*, Civil Action No. 05-7024-CV(L)currently pending in the United States Court of Appeal for the Second Circuit(the “Second Circuit Appeal”); and

(b) the development,manufacture and commercialization of EMD-72000 (a “Merck Product” as defined inthe DLA), as set forth in ImClone’s Notices of Default under the DLA addressedto Merck dated October 8, 2005, October 28, 2005 and March 21, 2006, and Merck’srespective responses thereto dated October 12, 2005, March 30, 2006 and April5, 2006 (the “EMD 72000 Dispute”); and

(c) the effect, if any, onthe DLA of the Development and Commercialization Agreement between Merck andTakeda Pharmaceuticals Company Ltd. (“Takeda”) (the “Takeda Agreement”); and

WHEREAS,****the 11F8 Dispute, the SecondCircuit Appeal, the EMD 72000 Dispute and the Takeda Agreement are referred tocollectively herein as the “Disputes”; and

WHEREAS,except as otherwise provided herein, the Parties desire to resolve fully andforever all claims and defenses asserted in the Disputes and continue theirsuccessful relationship and promote the further development andcommercialization of Erbitux®; and

NOW,THEREFORE, for good and valuable consideration, including, but notlimited to, the mutual covenants exchanged between the Parties hereto, theadequacy of which is hereby acknowledged, and subject to the terms andconditions set forth herein, the Parties hereby agree as follows:

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**TERMS**

1.             ThisAgreement represents a negotiated settlement of the Disputes, and the Partiesexpressly deny any liability to each other for any claims or defenses arisingfrom or related to the Disputes.  Theexecution of this Agreement shall not be construed as an admission on the partof any of the Parties hereto in any respect and shall not be used against anyof the Parties.  The Parties hereto agreeto be responsible for and to pay their own attorneys’ fees and costs related tothe Disputes.

2.             TheParties agree to comply fully with the terms and conditions of thisAgreement.  In addition to other good andvaluable consideration, the consideration for this Agreement shall consist ofthe following:

a.             **ImClone Consent to Sublicense**. Pursuant to the provisions of Section 2.2 of the DLA, ImClone shallconsent in writing to a grant by Merck to Takeda of a sublicense under the “RadiotherapyPatent”, the “Chemotherapy Patent” (each as defined in the DLA and the “ImCloneConfidential Manufacturing Information” (as defined in the July 2006 amendmentto the DLA executed concurrently herewith) to make, use and sell EMD-72000,within the “Territory” , provided the following: (i) such sublicenseagreement contain terms obligating Takeda (A) to keep and make books andrecords available for inspection by an independent certified public accountantpursuant to Article V of the DLA, (B) to comply with the obligations forreceipt of “Confidential Information” pursuant to Article VI of the DLA, (C) tocomply with the obligations for “arms-length” sales of Merck Products pursuantto Section 9.7 of the DLA, and (D) to comply with any and all other terms ofthe DLA that are applicable to sublicensees ; (ii) such sublicense agreementshall not contain any terms that could be reasonably interpreted to beinconsistent with the terms contained in the DLA and with the terms herein; and(iii) Merck 

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providesto ImClone for its review and approval a written copy of said sublicenseagreement, with ImClone’s approval not to be unreasonably withheld.

b.             **Merck Covenants**

(i)            **Freedom of ImClone to Conduct Development ofIMC-11F8**.  Merck agreesthat it shall not sue or otherwise challenge ImClone, its Affiliates,sublicensees, successors, assigns, and each of their respective officers,directors, agents and employees for drug development activities that areprotected under 35 U.S.C. § 271(e)(1)) in the United States of America orequivalent activities in Canada or the Territory relating to IMC-11F8.

(ii)           **Covenant Not to Sue for Use of Merck ConfidentialTechnical Information.** Merck agrees that it shall not sue ImClone, its Affiliates,sublicensees, successors, assigns, and each of their respective officers,directors, agents and employees for any use by ImClone of Merck ConfidentialTechnical Information (as defined inthe July 2006 amendment to the DLA executed concurrently herewith) todevelop, manufacture or sell IMC-11F8.

c.             **ImCloneCovenants.**

(i)            **Freedomof Merck to Conduct Development of Merck Products.**  ImClone agrees that it shall not sue orotherwise challenge Merck, its Affiliates, sublicensees, successors, assigns,and each of their respective officers, directors, agents and employees for drugdevelopment activities that are protected under 35 U.S.C. § 271(e)(1)) in theUnited States of America or equivalent activities in Canada or the Territoryrelating to Merck Products.

(ii)           **CovenantNot to Sue for Use of ImClone Confidential Technical Information.**  ImClone agrees that it shall not sue Merck,its Affiliates, sublicensees, successors, assigns, and each of their respectiveofficers, directors, agents and employees for any 

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use by Merck of ImClone Confidential TechnicalInformation (as definedin the July 2006 amendment to the DLA executed concurrently herewith) todevelop, manufacture or sell Merck Products.

d.             **ExplicitReservation of Claims and Defenses Concerning the Merck Products.**  Notwithstanding the foregoing, ImClone herebyreserves all rights to claim that Merck cannot conduct activities (other thanthose set forth in sub-paragraph c above) relating to the Merck Products in theUnited States or Canada to the extent such activities would infringe thecorresponding US and Canadian counterparts of the “Radiotherapy Patent”, the “ChemotherapyPatent”, the “Other ImClone Patents”(as defined in the July 2006 amendment to the DLA executed concurrentlyherewith), or any other patent owned by, licensed to, or otherwisecontrolled by ImClone to make, use, sell, offer to sell or import MerckProducts therein.  In turn, Merckreserves all rights to defend against any such claim or action of infringementasserted by ImClone or its Affiliates. The Parties’ explicit reservation of claims and defenses in this regardshall be specifically excluded from the scope of the releases set forth insub-paragraph i below.

e.             **ExplicitReservation of Claims and Defenses Concerning IMC-11F8.**  Notwithstanding the foregoing, Merck herebyreserves all rights to claim that ImClone cannot conduct activities (other thanthose set forth in sub-paragraph b above) relating to IMC-11F8 outside theUnited States or Canada to the extent such activities would infringe the MerckPatents (as such term is defined in the July 2006 Amendment to the DLA executedconcurrently herewith), or any other patent owned by, licensed to, or otherwisecontrolled by Merck to make, use, sell, offer to sell or import IMC-11F8therein.  In turn, ImClone reserves allrights to defend against any such claim or action of infringement asserted byMerck or its Affiliates.  The Parties’ 

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explicit reservation of claims and defenses in thisregard shall be specifically excluded from the scope of the releases set forthin sub-paragraph i below.

f.              **SettlementPayments to ImClone.** Merck shall pay to ImClone by wire transfer of immediately availablefunds to an account set forth on Exhibit B hereto two million five hundredthousand Euro and zero cents (€2,500,000.00), which wire transfer shall beinitiated within thirty (30) days of the Effective Date of Settlement.  In addition, Merck shall pay to ImClone bywire transfer of immediately available funds to such account an additional fivemillion Euro and zero cents (€5,000,000.00), which wire transfer shall beinitiated within thirty (30) days of the date ImClone executes its writtenconsent to the sublicense agreement between Merck and Takeda described insub-paragraph a above.

g.             **Voluntary Dismissal of the Second Circuit Appealwith Prejudice**:  TheParties agree to dismiss with prejudice all claims or defenses asserted, orwhich could have been asserted, in the Second Circuit Appeal.  The Parties shall execute simultaneouslyherewith the Stipulation of Voluntary Dismissal with Prejudice in the formattached hereto as Exhibit C.  Within two (2) business days of the Effective Dateof Settlement, Merck shall file the fully-executed Voluntary Dismissal withPrejudice with the Court.  It is furtherunderstood and agreed that upon such filing with the Court, the Parties shalldeem the Decision and Award after Hearing of the Honorable George C. Pratt,Arbitrator, dated March 31, 2006, as “confirmed” under the Federal ArbitrationAct, and that no further judicial action shall be necessary to effectuate theterms of such award.

h.             **ImClone Withdrawal of Default Notice** ImClone withdraws the Default Notices describedin sub-clause (b) of the second “Whereas”-clause as of the Effective Date ofSettlement.

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i.              **Mutual Releases**.Each Party fully and forever releases and fully discharges the otherParty, as well as the other Party’s Affiliates (as defined in the DLA),divisions, subsidiaries, successors, assigns, and officers, directors, agents,and employees thereof from any and all liability for any and all causes ofaction, claims, counterclaims, defenses, damages and judgments, in law and inequity, arising out of or related to the Disputes as defined herein, up to andincluding the Effective Date of Settlement. This paragraph shall not be construed as a release of any kind regardingany other claims raised or that could be raised between the Parties which areunrelated to the Disputes.  In addition, the Parties’ explicit reservation of claimsand defenses concerning the Merck Products and IMC-11F8 as more fully describedin sub-paragraphs d and e above shall be specifically excluded from the scopeof this mutual release.  Thesereleases shall be deemed effective upon receipt by ImClone of the settlementpayments described in subparagraph f above.

j.              **July 2006 Amendment of the DLA**: In order to effectuate this Agreement, theParties agree to further amend the DLA as set forth in Exhibit C hereto.  Except as specifically set forth therein, theParties acknowledge and agree that there are no other amendments, waivers ormodifications being made, or intended to be made, to the DLA by virtue of thisAgreement.

k.             **Publicity.**  Within two (2) business days of the EffectiveDate of Settlement, ImClone and Merck shall issue a press release(s) to beagreed by the Parties. In addition, either Party may make such announcementsof, and/or provide publicity concerning, the existence and terms of thisAgreement and the transactions contemplated hereby as is reasonably necessaryor advisable, in the opinion of such Party’s counsel, to comply with theprovisions of any applicable law or regulation, including but not limited tofilings with the U.S.

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Securities and ExchangeCommission or any other governmental authority or with the National Associationof Securities Dealers; *provided, however*,that to the extent practical each Party shall give the other Party prior noticeof any such announcement or publicity.

3.             No Admission ofWrongdoing.  The Parties expresslyacknowledge that this Agreement represents a resolution of the Disputes asdefined herein.  Nothing in the terms ofthis Settlement Agreement or in its execution shall be construed as anadmission of liability or wrongdoing by any Party concerning the Disputes asdefined herein.

4.             Representationsand Warranties of the Parties.  TheParties hereby represent, warrant and agree as of the Effective Date ofSettlement as follows:

a.             Each Party representsand warrants that it neither knows of, nor believes there are, any claims orbases for claims by it or its Affiliates against the other Party or the otherParty’s Affiliates, other than ordinary course business debts; and

b.             Each Party representsand warrants that it has relied upon its own judgment and that of its own legalcounsel regarding the proper, complete, and agreed-upon consideration for, andthe terms and provisions of, this Settlement Agreement.  The Parties to this Agreement represent andwarrant that their respective attorneys have fully explained the meaning andeffect of this Agreement.  The Parties tothis Agreement further represent and warrant that they have read and understandthis Agreement, and have not relied upon any other statements orrepresentations regarding this matter other than those expressly statedherein.  The Parties to this Agreementfurther represent and warrant that they have signed this Agreement withoutduress, coercion, or undue influence by anyone or anything.

c.             ImClone and Merckrepresent and warrant that they are the sole owner of any claims or defenses****asserted in the Disputes, (and which are released herewith)and that no 

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portion of such claims or defenses is owned by anythird party, or has been sold, assigned, pledged, or hypothecated to any thirdparty.

d.             To induce Merck toenter into this Agreement, ImClone hereby represents and warrants that it hasfull and absolute right, power, authority and ability to enter into thisAgreement and perform all of its obligations hereunder.  To induce ImClone to enter into thisAgreement, Merck hereby represents and warrants that it has full and absoluteright, power, authority and ability to enter into this Agreement and performits obligations hereunder.

5.             Successors andThird Parties.  This SettlementAgreement is binding upon, and shall inure to the benefit of, the Parties andtheir respective Affiliates, subsidiaries and each of their employees,officers, directors, agents, successors and assigns.

6.             Merger,Integration and Modification.  ThisAgreement constitutes the entire, complete and integrated agreement madebetween the Parties regarding the subject matter hereof, is not subject to anyconditions not expressly provided for herein, and cancels and supersedes allearlier agreements, written or oral, between the Parties regarding the subjectmatter hereof.  No variation ormodification of this Agreement, or waiver of any of the terms or provisionsthereof, shall be deemed valid unless in writing as an amendment hereto, signedby both Parties.

7.             NoWaiver.  The failure, or partialfailure, of any of the Parties to enforce at any time any provision of thisAgreement shall not be construed to be a waiver of such provision, nor in anyway affect the validity of this Agreement or any part thereof or the right ofany Party thereafter to enforce each and every provision.  No waiver of any breach of this Agreementshall be held to constitute a waiver of any other breach.

8.             NoThird-Party Beneficiaries.  ThisAgreement is solely for the benefit of the named Parties hereto and there areno third-party beneficiaries of this Agreement.

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9.             Survival.  The provisions of this Agreement, whereapplicable, shall survive any termination or expiration of this Agreement andshall remain in full force and effect.

10.           Construction.  Neither this Agreement nor any provision thereofshall be construed for or against any Party because the Agreement as a whole,or any provision of this Agreement, was requested or drafted by suchParty.  Neither this Agreement nor anyprovision in this Agreement nor evidence of any negotiations in connection withit or them shall be offered or received in evidence or used in any way in anyaction or proceeding between the Parties except to enforce the terms andprovisions hereof.  The captions hereinare included for convenience of reference only and shall be ignored in theconstruction or interpretation of this Agreement.

11.           Default.  If either party materially defaults in theperformance of any material agreement, condition or covenant of this Agreementand such default or non-compliance shall not have been remedied, or stepsinitiated to remedy the same to the other party’s satisfaction, within thirty(30) calendar days after receipt by the defaulting party of a notice thereoffrom the other party, the other party may pursue all available remedies in lawand in equity.

12.           Notices.  Any notice expressly provided for under thisAgreement shall be in writing, shall be given either by hand, express courier,or by facsimile and shall be deemed sufficiently given if and when received bythe party to be notified as follows:

ToMerck:

FrankfurterStraße

D-64293Darmstadt

Germany

Attention:  Jens Eckhardt, Legal Counsel

Facsimile: +49-6151-72-2373

ToImClone:

180Varick Street

NewYork, NY 10014 USA

Attention:  Erik Ramanathan, General Counsel

Facsimile: +1-(212)-645-2770

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13.           Applicable Law.  This Settlement Agreement shall be governedby and construed in accordance with the laws of the State of New York withoutregard to its conflicts-of-law principles.

IN WITNESS WHEREOF, theParties have caused this Agreement to be executed by their duly authorizedrepresentatives in a manner legally binding upon their respective corporationsas of the Effective Date of Settlement.
| IMCLONE SYSTEMS INCORPORATED |                            | MERCK KGaA |
|------------------------------|---------------------------------|------------|
|                         |                            |       |
|                         |                            |       |
| By:                          | /s/ Joseph L. Fischer           |       |   | By: | /s/ Dr. Tilman Schmidt-Lorenz |   |
| Name:                        | Joseph L. Fischer               |       | Name: | Dr. Tilman Schmidt-Lorenz |
| Title:                       | Interim Chief Executive Officer |       | Title: | General Counsel |
|                         |                            |       |   | Senior Vice  President Corporate |
|                         |                            |       |   | Legal &  Intellectual Property |
|                         |                            |       |   |   |
|                         |                            |       |   | i.V. |
|                         |                            |       |   |   |
|                         |                            |       |   | By: | /s/ Jens Eckhardt |   |
|                         |                            |       |   | Name: | Jens Eckhardt |
|                         |                            |       |   | Title: | Legal Counsel |
|                              |                                 |            |  |  |  |  |  |  |

 

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| CORPORATE ACKNOWLEDGEMENT  For ImClone Systems Incorporated                                                                                                                                                                               |   | CORPORATE ACKNOWLEDGEMENT  For Merck KGaA                                                                                                                                                                                                         |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                              |
| STATE OF NEW YORK        )                                                                                                                                                                        |   | REPUBLIC OF GERMANY)                                                                                                                                                                                                                              |
| ) ss:                                                                                                                                                                                                                                     |   | ) ss:                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                              |
| COUNTY OF NEW  YORK  )                                                                                                                                                                                                          |   | CITY OF  DARMSTADT   )                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                              |
| On this 19th day of July 2006, before me personally  came Joseph L. Fischer, to me known to be the individual described in, and  who executed the foregoing Settlement Agreement, and duly acknowledged to me  that he executed the same. |   | On this 24th day of July 2006, before me personally  came Dr. Tilman Schmidt-Lorenz, to me known to be the individual described  in, and who executed the foregoing Settlement Agreement, and duly  acknowledged to me that he executed the same. |
|                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                              |
| /s/ Angela Sacca                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                              | /s/ Alexander Pfeiffer |   |
| Notary Public                                                                                                                                                                                                                             |   | Notary Public                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                           |        |                                                                                                                                                                                                                                                   |  |  |

 

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**EXHIBIT A**

**JULY2006 AMENDMENT TO DEVELOPMENT AND LICENSE AGREEMENT**

WHEREAS, ImClone and Merck entered into theDevelopment and License Agreement, dated December 14, 1998, that has beensubsequently amended by (a) the Amendment of Development and License Agreement,dated September 21, 1999; (b) the first letter agreement dated March 1, 1999;(c) the second letter agreement dated March 23, 2001; (d) the third letteragreement dated August 16, 2001; and (e) the fourth letter agreement datedNovember 14, 2005 (collectively, the “DLA”);

WHEREAS, Merck desires tosublicense to Takeda certain rights licensed to Merck under the DLA pertainingto EMD-72000 (a “Merck Product” as defined in the DLA) in the Territory; and

WHEREAS, the Parties desireto continue to promote the development and commercialization of LicensedProducts in the Territory and to settle the Disputes between them; and

WHEREAS, the Parties have agreed to terms ofsettlement embodied in a Settlement Agreement to be executed concurrentlyherewith (the “Agreement”) and wish to further amend the DLA in order toeffectuate the Agreement; and

NOW, THEREFORE, inconsideration of the foregoing and the mutual promises made herein, and forother good and valuable consideration, the receipt and sufficiency of which ishereby acknowledged, the Parties hereby agree to amend the DLA as follows:

1.             Definitions.  All capitalized terms used herein but notspecifically defined herein shall have the meanings ascribed to them in the DLA:

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a.             “ImClone ConfidentialManufacturing Information” shall mean any and all ImClone information that isreasonably useful for the production, manufacture, processing, filling,finishing, packaging, labeling, shipping, and storage of Merck Product thatlawfully comes into Merck’s possession after the Effective Date of Settlement,including, but not limited to, process development, process qualification andprocess validation, manufacturing scale-up, pre-clinical, clinical andcommercial manufacture and analytical development, product characterization,quality assurance and quality control.

b.             “ImClone ConfidentialTechnical Information” shall mean any and all ImClone confidential technicalinformation that is in Merck’s possession as of the Effective Date ofSettlement and is useful in the manufacture or sale of Merck Product.

c.             “Merck ConfidentialManufacturing Information” shall mean any and all Merck information that isreasonably useful for the production, manufacture, processing, filling,finishing, packaging, labeling, shipping, and storage of IMC-11F8 that lawfullycomes into ImClone’s possession after the Effective Date of Settlement,including, but not limited to, process development, process qualification andprocess validation, manufacturing scale-up, pre-clinical, clinical andcommercial manufacture and analytical development, product characterization,quality assurance and quality control.

d.             “Merck ConfidentialTechnical Information” shall mean any and all Merck confidential technicalinformation that is in ImClone’s possession as of the Effective Date ofSettlement and is useful in the manufacture or sale of IMC-11F8.

e.             “Merck Patents” shallmean all issued patents or patents issuing from an application pending as ofthe date of this amendment which are owned or exclusively licensed by Merckthat are required or that Merck alleges are required to make, use, sell, offerto sell, or 

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import IMC-11F8 inthe United States of America and its territories or Canada, and all issuedpatents or patents issuing from an application pending as of the date of thisamendment which are owned or exclusively licensed by Merck that are required orthat Merck alleges are required to make, use, sell, offer to sell, or importLicensed Products in the United States of America and its territories, Canadaor Japan, including, but not limited to those patents listed in Annex A hereto

f.              “Other ImClonePatents” shall mean all issued patents or patents issuing from an applicationpending as of the date of this amendment which are owned or exclusivelylicensed by ImClone that are required or that ImClone alleges are required tomake, use, sell, offer to sell or import Merck Products in the Territory,including, but not limited to those patents listed in Annex B hereto.

2.             Grant of Rights.  Article II****ofthe DLA shall be amended to also include the following:

a.             In consideration ofthe licenses and approvals granted herein, and subject to the other provisionsof this amendment and the DLA, Merck grants ImClone an irrevocable, fullypaid-up, royalty-free non-exclusive worldwide license to use the MerckConfidential Manufacturing Information to manufacture IMC-11F8.  This license shall survive termination of theDLA.

b.             In consideration ofthe licenses, royalties and payments herein, and subject to the otherprovisions of this amendment and the DLA, ImClone grants Merck an irrevocable,fully paid-up, royalty-free non-exclusive worldwide license to use the ImCloneConfidential Manufacturing Information to manufacture Merck Products.  This license shall survive termination of theDLA. 

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3.             Limited CovenantNot to Sue for Infringement. ** **Article VIII of the DLA shall beamended to also include the following:

a.             During the term ofthe DLA, Merck will not bring any claim of infringement under any of the MerckPatents against ImClone, ImClone’s Affiliates, ImClone’s approved sublicensees,and their respective successors and assigns due to any sales or otheractivities related to Licensed Products or IMC-11F8 in the United States orCanada.

b.             During the term ofthe DLA, ImClone will not to bring any claim of infringement in the Territoryunder any of the Other ImClone Patents against Merck, Merck’s Affiliates orMerck’s approved sublicensees, and their respective successors and assigns dueto any sales or other activities related to Merck Products.  ImClone acknowledges that, upon ImClone’sconsent to sublicense as set forth in Section 2.a. of the Settlement Agreement,Takeda Pharmaceuticals Company Ltd. and its Affiliates shall be “approvedsublicensees” as used in the foregoing sentence.

4.             Development andCommercialization of Erbitux® in Japan. The DLA as it pertains to Japan shall be amended to also include thefollowing:

a.             Merck shall use itsbest reasonable efforts to negotiate and enter into as soon as practicable anagreement with Bristol-Myers Squibb Company (“BMS”) for the co-development andco-commercialization of Erbitux® in Japan, which, (i) but for the removal ofImClone (except as a Net Sales royalty collector), are consistent with theterms set forth in [*], a copy of

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**Pursuantto a request for confidential treatment submitted to the Securities andExchange Commission, redacted information has been replaced with “[*]”.**

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which is attached heretoas Annex C; and (ii) is acceptable to Merck and ImClone and executed by BMS,Merck and ImClone.

b.             Unless and until suchan agreement is executed by BMS, Merck and ImClone, Merck and ImCloneacknowledge that all applicable provisions of the DLA pertaining to developmentand commercialization of Erbitux® in Japan shall continue to define the rightsand obligations of ImClone and Merck with respect to such development andcommercialization.

5.             Royalty Paymentsto ImClone.  Section 4.2 of the DLAis restated and amended in its entirety as follows:

“4.2           Merck shall pay ImClone royalties quarterlyon (i) sales in the Territory by Merck and its Affiliates of (A) LicensedProducts and (B) Alternative Products developed and/or acquired by ImClone orany of its Affiliates and (ii) sales in the Territory, subject to Section 2.2of the DLA, by Merck and its Affiliates and sublicensees of Merck Products asfollows:

a.             Merck shall payImClone a royalty of nine and one-half percent (9.5%) of Net Sales of allLicensed Products sold in the Territory, which shall be paid from July 1, 2006(and thereafter);

b.             Merck shall payImClone [*], on sales in the Territory of Alternative Products developed and/oracquired by ImClone or any of its Affiliates; provided, however, that suchamount shall not exceed [*] of [*];

c.             Merck shall payImClone a royalty of [*] of [*] in the Territory.  This

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**Pursuantto a request for confidential treatment submitted to the Securities andExchange Commission, redacted information has been replaced with “[*]”.**

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d.             royalty is due on allMerck Products sold, whether sold as a mono-therapy, combination therapy, or insome other form.  Royalties on MerckProducts shall be reported and paid on a country by country basis for eachcountry in which patent protection exists, shall be reported and paid on aproduct-by-product basis.  Royaltiesshall be paid from the Effective Date of Settlement until any expiration orfinal, non-appealable judgment of invalidity of both ImClone’s ChemotherapyPatent and its Radiotherapy Patent in such country; and

e.             NotwithstandingSection 4.8 of the DLA, in the event of expiration or entry of a finalnon-appealable judgment of invalidity of both the Chemotherapy Patent and theRadiotherapy Patent in a certain country in the Territory (where once patent protectionexisted) occurring at any time during a period commencing on the date of firstcommercial sale in such country of Merck Product and ending [*] yearsthereafter, a reduced royalty of [*] of [*] shall be paid from the date of suchexpiration or final, non-appealable judgment of invalidity of both theChemotherapy Patent and the Radiotherapy Patent in said country (where oncepatent protection existed) until [*] years from the first commercial sale ofMerck Product in said country provided that such country belongs to theEuropean Union (as the European Union exists on the date of such firstcommercial sale) or is Japan.”

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**Pursuantto a request for confidential treatment submitted to the Securities andExchange Commission, redacted information has been replaced with “[*]”.**

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6.             MerckIndemnification.  Section 10.5 (Survival)of the DLA shall be renumbered as “Section 10.6” and a new Section 10.5 of theDLA shall read as follows:

“10.5       Merck shall indemnify, holdharmless and defend ImClone, ImClone’s Affiliates, and ImClone’s successors andassigns, and each of their respective agents employees, officers and directors(the “Indemnitees”) from any and all Losses resulting from any claims oractions by Takeda (or its Affiliates) arising out of or relating to: (i) theDevelopment and Commercialization Agreement between Merck and Takeda datedSeptember 29, 2005 (the “Merck/Takeda Agreement”); or (ii) the SettlementAgreement between Merck and ImClone executed herewith.  Upon assertion of any claim or suit forindemnification, the Indemnitees shall (i) promptly notify Merck thereof, (ii)permit Merck to assume direction and control of the defense of the claim(including the reasonable selection of counsel and the right to reasonablysettle it at the sole discretion of Merck), provided that such settlement doesnot impose any obligation on, otherwise adversely affect the interests of, orinvolve any admission of fault or guilt by Indemnitees, and (iii) reasonablycooperate as requested (at the expense of Merck) in the defense of suchclaim.  This section 10.5 shall not applyif ImClone or its Affiliates has commenced a claim or action without Merck’sapproval (including any counter-claim, cross-claim or third party claim)against Takeda arising out of or relating to the Merck/Takeda Agreement or theSettlement Agreement between Merck and ImClone executed herewith.”

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7.             ContinuingEffect of DLA.  To the extent the [*]year period specified in Section 4.2(d) of the DLA as hereby amended extendsbeyond the expiration of the term of the license set forth in Sections 2.5 and11.1 of the DLA, the term of the DLA shall be automatically extended to the endof such [*] year period.  Except asspecifically set forth in this amendment or in the Settlement Agreement, theDLA shall remain unchanged and in full force and effect.  The Parties hereby acknowledge and agree thatthere are no amendments, modifications or waivers of the DLA other than thosespecifically referenced or set forth in this Amendment.

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**Pursuantto a request for confidential treatment submitted to the Securities andExchange Commission, redacted information has been replaced with “[*]”.**

9

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INWITNESS WHEREOF, the Parties have caused this amendment to be executed by theirduly authorized representatives in a manner legally binding upon theirrespective corporations as of the Effective Date of Settlement.
| IMCLONE SYSTEMS INCORPORATED |                            | MERCK KGaA |
|------------------------------|---------------------------------|------------|
|                         |                            |       |
|                         |                            |       |
| By:                          | /s/ Joseph L. Fischer           |       |   | By: | /s/ Dr. Tilman Schmidt-Lorenz |   |
| Name:                        | Joseph L. Fischer               |       | Name: | Dr. Tilman Schmidt-Lorenz |
| Title:                       | Interim Chief Executive Officer |       | Title: | General Counsel |
|                         |                            |       |   | Senior Vice  President Corporate |
|                         |                            |       |   | Legal &  Intellectual Property |
|                         |                            |       |   |   |
|                         |                            |       |   | i.V. |
|                         |                            |       |   |   |
|                         |                            |       |   | By: | /s/ Jens Eckhardt |   |
|                         |                            |       |   | Name: | Jens Eckhardt |
|                         |                            |       |   | Title: | Legal Counsel |
|                              |                                 |            |  |  |  |  |  |  |

 

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**ANNEX A**

**MERCK PATENTS**

[*]

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**Pursuantto a request for confidential treatment submitted to the Securities andExchange Commission, redacted information has been replaced with “[*]”.**

1

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**ANNEX B**

**OTHER IMCLONE PATENTS**

[*]

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**Pursuantto a request for confidential treatment submitted to the Securities andExchange Commission, redacted information has been replaced with “[*]”.**

2

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**ANNEX C**

[*]

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**Pursuantto a request for confidential treatment submitted to the Securities andExchange Commission, redacted information has been replaced with “[*]”.**

3

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**EXHIBIT B**

 

**WireTransfer Instructions**

[*]

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**Pursuantto a request for confidential treatment submitted to the Securities andExchange Commission, redacted information has been replaced with “[*]”.**

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**EXHIBIT C**

INTHE UNITED STATES COURT OF APPEALSFOR THE SECOND CIRCUIT
|                                           |   | x      |   |                           |
|-------------------------------------------|--------|--------|--------|--------------------------------|
|   MERCK KGaA,                   |   | :      |   |                           |
|                                      |   | :      |   | ** **                     |
| Appellant,                                |   | :      |   | ** **                     |
|                                      |   | :      |   | Civil Action No. 05-7024-CV(L) |
| - against -                               |   | :      |   | ** **                     |
|                                      |   | :      |   | ** **                     |
|   IMCLONE SYSTEMS INCORPORATED, |   | :      |   | **STIPULATION OF**             |
|                                      |   | :      |   | **VOLUNTARY**                  |
| Appellee.                                 |   | :      |   | **DISMISSAL WITH**             |
|                                      |   | :      |   | **PREJUDICE PURSUANT**         |
|                                      |   | :      |   | **TO FRAP 42(b)**              |
|                                      |   |   |   | ** **                     |
|                                      |   | x      |   | ** **                     |

 

 IT IS HEREBY STIPULATED AND AGREED, pursuantto Federal Rule of Appellate Procedure 42(b), by and between the undersignedattorneys for the parties, that the above-captioned appeal is herebyvoluntarily dismissed with prejudice and without costs to any party as againstany other. 
|                                                                                                                                    |   |                                                                                                                      | * * |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|----------|
| KELLEY DRYE & WARREN  William R. Golden, Jr.  101 Park Avenue  New York, New York 10178  (212) 808-7800 (Tel)  (212) 808-7897 (Fax) |   | PROSKAUER ROSE LLP  Louis M. Solomon  1585 Broadway  New York, New York 10036  (212) 969-3000 (Tel)  (212) 969-2900 (Fax) |
| *Attorneys  for Appellant Merck  KGaA*                                                                                                  |   | *Attorneys for Appellee ImClone  Systems  Incorporated*                                                                   |

 
|   |   | IT IS SO ORDERED. |
|--------|--------|-------------------|
|   |   |              |
|   |   | Dated:            |   | , 2006 |
|   |   |              |
|   |   |              |   |
|   |   | U.S.J.            |   |
|        |        |                   |  |  |  |

 

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