<PAGE>
 
               This Agreement is made the 21st day of July 1997



BY AND BETWEEN



ELAN CORPORATION, plc

          An Irish company, having its registered office at Lincoln House,
          Lincoln Place, Dublin 2, Ireland.
 
 
AND


TARGON CORPORATION

          A Delaware corporation, having an office at 307 College Road, East
          Princeton, New Jersey 08540, United States of America.


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                                  Page 1 of 54
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WHEREAS
-------

-    ELAN is beneficially entitled to the use of various patents, including the
     ELAN PATENT RIGHTS, which have been granted or are pending under the
     International Convention in relation to the development and production of
     drug specific dosage forms for pharmaceutical products and process, and

-    ELAN is knowledgeable in the development of drug specific dosage forms and
     has developed a unique range of delivery systems designed to provide newer
     and better formulations of medicaments, and

-    TARGON is desirous of entering into a licensing agreement with ELAN by
     virtue of which it will be free to have manufactured in accordance with the
     terms of this Agreement and to market the PRODUCT in the TERRITORY without
     infringing any of the ELAN INTELLECTUAL PROPERTY rights held by ELAN, and

-    ELAN is prepared to license the ELAN PATENT RIGHTS in the TERRITORY to
     TARGON and ELAN is prepared to supply the PRODUCT to TARGON.



NOW IT IS HEREBY AGREED AS FOLLOWS:


ARTICLE I :    DEFINITIONS
---------      -----------


     In the present Agreement and any further agreements based thereon between
     the Parties hereto, the following definitions shall prevail:
 
     1.   AFFILIATE shall mean any corporation or entity controlling, controlled
          by or under the common control of ELAN or TARGON as the case may be.
          For the purpose of this paragraph, "control" shall mean the direct or
          indirect ownership of at least twenty five per cent (25%) of the
          outstanding shares or other voting rights of the subject entity to
          elect directors, or if not meeting the preceding criteria, any entity
          owned or controlled by or owning or controlling at the maximum control
          or ownership right permitted in the country where such entity exists.

     2.   Agreement shall mean this agreement.

     3.   cGCP, cGLP and cGMP shall mean current Good Clinical Practises,
          current Good Laboratory Practises and current Good Manufacturing
          Practises respectively.


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     4.   CMC SECTION shall mean the chemistry, manufacturing, and controls
          section of an NDA as defined in 21 CFR Section 314.50 (1) and its
          equivalent in the IRF.

     5.   CONFIDENTIAL INFORMATION shall mean information, material or data
          relating to the PRODUCT not generally known to the public.
          CONFIDENTIAL INFORMATION in tangible form disclosed hereunder shall be
          marked as "Confidential" at the time it is delivered to the receiving
          Party.  CONFIDENTIAL INFORMATION disclosed orally shall be identified
          as confidential or proprietary when disclosed and such disclosure of
          CONFIDENTIAL INFORMATION shall be confirmed in writing within thirty
          (30) days by the disclosing Party.

     6.   CYTOGEN shall mean Cytogen Corporation and any of its AFFILIATES
          (excluding Targon Corporation).

     7.   DMF shall have the meaning set forth in Article VI Paragraph 5.

     8.   EFFECTIVE DATE shall mean the 30th day of June 1997.

     9.   ELAN shall mean Elan Corporation plc and any of its AFFILIATES
          (excluding Targon Corporation).

     10.  ELAN INTELLECTUAL PROPERTY shall mean the ELAN PATENT RIGHTS and/or
          the ELAN KNOW-HOW and shall include the [Information omitted and filed
          separately with the Commission under Rule 24b-2].

     11.  ELAN KNOW-HOW shall mean all scientific or technical knowledge,
          information or expertise developed, produced, created or acquired by
          or on behalf of ELAN which is not generally known to the public, or to
          be developed by ELAN during the TERM, relating to the PRODUCT, whether
          or not covered by any patent, copyright, design, trademark or other
          industrial or intellectual property rights.

     12.  ELAN PATENT RIGHTS shall mean all granted patents and pending patent
          applications owned by, or licensed by ELAN which would be infringed by
          the manufacture, use or sale of the PRODUCT, the current status of
          which shall be attached as Appendix A prior to 30th September 1997.
          ELAN PATENT RIGHTS shall also include all continuations, 
          continuations-in-part, divisionals re-issues and re-examinations of
          such patents and patent applications and any patents issuing thereon
          and extensions of any patents licensed hereunder and all foreign
          counterparts within the TERRITORY.

          ELAN PATENT RIGHTS shall further include any patents or patent
          applications covering any improved methods of making or using the
          PRODUCT invented or


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<PAGE>
 
          acquired by ELAN during the TERM and under which ELAN has a right to
          grant a licence hereunder.

     13.  ELAN TRADEMARK shall mean SODAS(R).

     14.  EX WORKS shall have the meaning as such term is defined in the ICC
          Incoterms, 1990, International Rules for the Interpretation of Trade
          Terms, ICC Publication No. 460.

     15.  FDA shall mean the United States Food and Drug Administration or any
          other successor agency, whose approval is necessary to market the
          PRODUCTS in the United States of America.
 
     16.  IND shall mean the investigational new drug application to be filed by
          TARGON with the FDA.

     17.  IN MARKET shall mean the sale of the PRODUCT, by TARGON (or where
          applicable by TARGON's sublicensee) to an unaffiliated third party
          such as a wholesaler, distributor, managed care organisation, hospital
          or pharmacy and shall exclude the transfer pricing of the PRODUCT by
          TARGON to an AFFILIATE.

     18.  IRF shall mean the application(s) to be filed by TARGON, including any
          supplements or amendments thereto, which TARGON may file, for the
          PRODUCT with the one or more REGULATORY AUTHORITIES.

     19.  LAUNCH STOCKS shall have the meaning set forth in Article IV Paragraph
          4.1.

     20.  MANUFACTURING COST shall mean the costs described in Appendix B.

     21.  NDA shall mean the New Drug Application to be filed by TARGON,
          including any supplements or amendments thereto, which TARGON may
          file, for the PRODUCT with the FDA.

     22.  NDA APPROVAL shall mean the final approval to market the PRODUCT in
          the United States of America as defined under the NDA.

     23.  NET REVENUES shall mean the  [Information omitted and filed separately
          with the Commission under Rule 24b-2


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                    ].


     24.  NSP shall that  [Information omitted and filed separately with the
          Commission under Rule 24b-2



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<PAGE>
 
                    ].

     25.  PRODUCT shall mean the encapsulated SODAS(R) drug specific dosage
          forms in not more than  [Information omitted and filed separately with
          the Commission under Rule 24b-2] to be selected by TARGON not later
          than 30th September 1997, which ELAN shall further develop
          containing morphine, or its salts, as its sole pharmaceutical active
          ingredient for prescription use to be described in the NDA and such
          additional dosage strengths that TARGON calls upon ELAN to develop on
          ELAN's normal commercial terms.

     26.  PROJECT shall mean all activity as agreed by TARGON and ELAN in order
          to develop and obtain NDA APPROVAL and REGULATORY APPROVAL for the
          PRODUCT.

     27.  PROJECT TEAM shall mean the group to be established pursuant to
          Article IX.

     28.  REGULATORY AUTHORITY(IES) shall mean one or more regulatory
          authorities whose approval is necessary to market the PRODUCT in
          countries of the TERRITORY outside the United States of America where
          TARGON intends to obtain regulatory approval.

     29.  REGULATORY APPROVAL(S) shall mean the approval for sale and marketing
          of the PRODUCT by the REGULATORY AUTHORITY(IES) in countries of the
          TERRITORY outside the United States of America.

     30.  RESEARCH AND DEVELOPMENT  [Information omitted and filed separately
          with the Commission under Rule 24b-2].  The Parties shall agree upon a
          more detailed definition on or before 30th September 1997 which
          shall be added to this Agreement as Appendix C.


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     31.    SPECIFICATIONS shall mean the specifications as approved by the FDA
            and the REGULATORY AUTHORITIES and which shall be attached to
            Appendix D, as well as such other specifications which may be agreed
            upon by the Parties in writing and which are based upon the
            specifications approved by the FDA and the REGULATORY AUTHORITIES.

     32.    SUBSIDIARY shall mean any corporation or entity of which at least a
            majority of the voting interest is at the time held, directly or
            indirectly, by TARGON.

     33.    TARGON shall mean Targon Corporation and its SUBSIDIARIES.

     34.    TARGON KNOW-HOW shall mean [Information omitted and filed separately
            with the Commission under Rule 24b-2



                                         ].

     35.    TARGON PATENT RIGHTS shall mean all patents and patent applications
            owned or to be owned by, or licensed or to be licensed by TARGON
            which would be infringed by the manufacture, use or sale of the
            PRODUCT. TARGON PATENT RIGHTS shall also include all continuations,
            continuations-in-part, divisionals and re-issues of such patents and
            patent applications and any patents issuing thereon and extensions
            of any patents licensed hereunder.

     36.    TERM shall have the meaning set forth in Article XI Paragraph 1.

     37.    TERRITORY shall mean all of the countries of the world.

     38.    TRADEMARK shall mean the trademark(s) as may be selected by TARGON
            or its sub-licensee which has been or may be registered by TARGON in
            one or more countries of the TERRITORY.

     39.    $ shall mean United States Dollars.


1.2  In this Agreement

     1.2.1  the singular includes the plural and vice versa, the masculine
            includes the feminine and vice versa and references to natural
            persons include corporate bodies, partnerships and vice versa.



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<PAGE>
 
     1.2.2  any reference to a Article or Schedule shall, unless otherwise
            specifically provided, be to a Article or Schedule of this
            Agreement.

     1.2.3  the headings of this Agreement are for ease of reference only and
            shall not affect its construction or interpretation.


ARTICLE II: THE LICENCE
----------  -----------

     1.1.   ELAN shall remain proprietor of all the ELAN INTELLECTUAL PROPERTY
            relating to the PRODUCT and the ELAN TRADEMARK, but shall grant to
            TARGON for the term of the Agreement an exclusive licence, with the
            right to grant sublicenses, for the TERRITORY to clinically test,
            register, have manufactured in accordance with the terms of this
            Agreement, to package, use, promote, distribute and sell the PRODUCT
            as a prescription medicine under the terms and conditions set out
            herein.

     1.2.   Subject to the provisions of the following sentence, TARGON hereby
            accepts such licence and confirms that TARGON and its AFFILIATES
            will not market in the TERRITORY any [Information omitted and filed
            separately with the Commission under Rule 24b-2] during the TERM and
            for [Information omitted and filed separately with the Commission
            under Rule 24b-2] thereafter.

            In the countries of the European Union and in the European Economic
            Area, ELAN reserves the right to [Information omitted and filed
            separately with the Commission under Rule 24b-2



                                    ].

     1.3.   TARGON shall grant a right of first negotiation to ELAN and its
            joint venture partners in such countries of the TERRITORY where ELAN
            is a shareholder in a marketing joint venture, or has a direct
            marketing presence through an AFFILIATE (being as of the EFFECTIVE
            DATE, the United Kingdom of Great Britain and Northern Ireland,
            Ireland, Spain, Sweden, Taiwan and the Philippines); provided that
            the provisions of this Paragraph shall not apply to (I) the United
            States of America, (II) in countries where TARGON is a shareholder
            in a marketing joint venture, and (III) in countries which are the
            subject of a multinational sublicence agreement. ELAN shall advise
            TARGON of any additional countries of the



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            TERRITORY where ELAN becomes a shareholder in a marketing joint
            venture, or acquires or develops a direct marketing presence through
            an AFFILIATE. TARGON undertakes that it will not enter into a
            binding option or sub-license agreement with any third party for the
            PRODUCT for one or more of the foregoing countries of the TERRITORY
            without first approaching ELAN to establish whether ELAN wishes to
            acquire marketing rights for the PRODUCT in one or more of the
            foregoing countries of the TERRITORY. ELAN shall revert to TARGON
            within fifteen days (15) to indicate whether or not it wishes to
            proceed with negotiations to acquire marketing rights for the
            PRODUCT in the country or countries concerned. In the alternative,
            ELAN may approach TARGON to signify ELAN's wish to acquire marketing
            rights for the PRODUCT in one or more of the foregoing countries of
            the TERRITORY. In either event the Parties shall negotiate the terms
            of an agreement in good faith for a period not exceeding forty five
            (45) days. In the event that TARGON and ELAN or the marketing joint
            venture do not enter into a binding commercial agreement with ELAN
            within the said forty five (45)day period, then TARGON shall be free
            to enter unencumbered into binding agreements with one or more third
            parties and the rights of first negotiation granted to ELAN and the
            marketing joint venture hereunder shall cease for the applicable
            country or countries of the TERRITORY.


            Sublicences
            -----------

     2.1.   TARGON may sub-license one or more third parties (each a sub-
            licensee) to clinically test, register, package, use, promote,
            distribute and sell the PRODUCT in one or more other countries of
            the TERRITORY.

            [Information omitted and filed separately with the Commission under
            Rule 24b-2]. TARGON shall use its reasonable endeavours to ELAN that
            ELAN shall be furnished with a copy of the executed sub-licence, or
            failing the foregoing to furnish the applicable terms of such
            agreement.

     2.2.   Any sub-licence permitted by this Paragraph shall be to the extent
            appropriate in the same terms mutatis mutandis as the terms of this
            Agreement, provided that no sublicence granted by TARGON pursuant to
            this Article II Paragraph 2 shall authorise or permit the
            sublicensee to grant further sublicences, or contain a production
            licence. TARGON shall use its reasonable endeavours to ensure that
            ELAN shall have the same rights of audit and inspection vis a vis
            the sublicensee as ELAN has pursuant to this Agreement concerning
            TARGON.

     2.3.   Insofar as the obligations owed by TARGON to ELAN are concerned,
            TARGON shall use reasonable endeavours to ensure compliance by the
            sub-licensee, including where applicable terminating the sub-
            licence. Any sub-licence permitted by Paragraph 2.1. above shall
            automatically and immediately terminate if the country


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                                  Page 9 of 54
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            or countries for which the sublicensee has rights are affected by
            the termination of this Agreement (so that a sub-licence shall only
            terminate if the Agreement has been terminated for the country or
            countries concerned).

            3.   Notwithstanding the provisions of Article XII Paragraph 1, ELAN
            may use the ELAN INTELLECTUAL PROPERTY and all technical and
            clinical data or improvements generated by ELAN pursuant to this
            Agreement in connection with ELAN's other commercial arrangements
            outside the TERRITORY, within the TERRITORY in the event of the
            termination of this Agreement or, within the TERRITORY in connection
            with products other than the PRODUCT. In consideration for the
            licences granted by ELAN pursuant to this Agreement, [Information
            omitted and filed separately with the Commission under Rule 24b-2



                         ].

     4.     ELAN shall, if requested, advise TARGON in any technical matters as
            may become necessary for the proper utilisation of TARGON's licence.

     5.     For the duration of the Agreement, ELAN shall not itself or through
            a third party develop or sell in the TERRITORY, nor shall ELAN
            license another party in the TERRITORY to develop or sell,
            [Information omitted and filed separately with the Commission under
            Rule 24b-2



                    ].  ELAN shall possess all rights including, without
            limitation, the right to research, develop, experiment with,
            manufacture, sell, license or otherwise market the PRODUCT in such
            country or countries which cease to be part of the TERRITORY.

     6.     When packaged, and to the extent permitted by law, a product label
            shall include an acknowledgement that the PRODUCT is made under
            licence from ELAN. Such acknowledgement shall take into
            consideration regulatory requirements and TARGON's commercial
            requirements. TARGON shall wherever possible give due
            acknowledgement and recognition to ELAN in all printed scientific
            publications, promotional and other material regarding the PRODUCT
            such as stating that the PRODUCT is developed by, under license
            from, and


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            manufactured by, ELAN and that the SODAS(R) technology has been
            applied to the PRODUCT.

     Trademarks
     ----------

     7.     TARGON shall market the PRODUCT in the TERRITORY under a TRADEMARK,
            whether during the INITIAL PERIOD or thereafter, which TRADEMARK
            will be owned by TARGON.

     8.1.   ELAN hereby grants to TARGON a non-exclusive royalty free licence,
            with the right to grant sublicenses, in the TERRITORY for the TERM
            to use the ELAN TRADEMARK upon or in relation to the PRODUCT on the
            terms set forth in Paragraph 8. TARGON shall not be obliged to use
            the ELAN TRADEMARK to identify the PRODUCT but at ELAN's request and
            to the extent permitted by law shall be obliged to use the ELAN
            TRADEMARK to identify the applicable ELAN technology embodied in the
            PRODUCT.

     8.2.   Except as set forth in this Paragraph 8, nothing contained in this
            Agreement shall grant to TARGON any right, title, or interest in or
            to the ELAN TRADEMARK, whether or not specifically recognised or
            perfected under applicable laws. At no time during or after the TERM
            of this Agreement shall TARGON challenge or assist others to
            challenge the ELAN TRADEMARK, or the registration thereof or attempt
            to register any trademarks, marks, or trade names confusingly
            similar to the ELAN TRADEMARK. All representations of the ELAN
            TRADEMARK that TARGON intends to use shall first be submitted to
            ELAN for approval (which shall not be unreasonably withheld) of
            design, colour, and other details, or shall be exact copies of those
            used by ELAN. In addition, TARGON shall fully comply with all
            reasonable guidelines, if any, communicated by ELAN concerning the
            use of the ELAN TRADEMARK.

     8.3.   TARGON shall as soon as it becomes aware of any infringement give to
            ELAN in writing full particulars of any use or proposed use by any
            other person, firm or company of a trade name or trademark or mode
            or promotion or advertising which amounts to or might amount either
            to infringement of ELAN's rights in relation to the ELAN TRADEMARK,
            trade dress violations or passing off.
 
     8.4.   If TARGON becomes aware that any other person, firm or company
            alleges that the ELAN TRADEMARK is invalid or that the use of the
            ELAN TRADEMARK infringes any rights of another Party or that the
            trademark is otherwise attacked or attackable, TARGON shall
            immediately give to ELAN full particulars in writing thereof and
            shall make no comment or admission to any third party in respect
            thereof.



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     8.5.   ELAN shall have the right to conduct all proceedings relating to the
            ELAN TRADEMARK and shall in its sole discretion decide what action,
            if any, to take in respect of any infringement or alleged
            infringement of the ELAN TRADEMARK or passing-off or any other claim
            or counter-claim brought or threatened in respect of the use or
            registration of the ELAN TRADEMARK. TARGON shall reasonably co-
            operate with ELAN in its efforts to terminate any trademark
            infringement, trade dress violation or passing off violations,
            including but not limited to providing documentary and testimonial
            evidence. Any such proceedings shall be conducted at ELAN's expense
            and for its own benefit. ELAN shall not settle or otherwise
            compromise such proceedings without due consultation for TARGON's
            interests.

     9.     Performance by TARGON
            ---------------------
 
     9.1.1. TARGON will use commercially reasonable efforts to file and
            prosecute to approval all registrations applications, obtain NDA
            APPROVAL in the United States of America, and REGULATORY APPROVAL in
            the [Information omitted and filed separately with the Commission
            under Rule 24b-2] as soon as practicable. Specifically, TARGON shall
            file the NDA no later than [Information omitted and filed separately
            with the Commission under Rule 24b-2]. TARGON or its sub-licensees
            shall file the IRF in the [Information omitted and filed separately
            with the Commission under Rule 24b-2] within [Information omitted
            and filed separately with the Commission under Rule 24b-2]. In the
            event of any failure by ELAN to diligently pursue any submission in
            any application for regulatory approval in any country which results
            in TARGON's failure to file the NDA or IRF, or to obtain NDA
            APPROVAL or REGULATORY APPROVAL, the Parties through the PROJECT
            TEAM shall make reasonable and appropriate adjustments to the period
            within which TARGON shall have to obtain NDA APPROVAL or the
            applicable REGULATORY APPROVALS.

     9.1.2. TARGON will use its commercially reasonable efforts to obtain
            regulatory approval to commercialise the PRODUCT in the other
            countries of the TERRITORY that it selects, having regard to the
            effort and expenditure required to obtain regulatory approval for
            the PRODUCT and the commercial opportunities for the PRODUCT in such
            other countries of the TERRITORY.

     9.2.   TARGON shall effect

     9.2.1. a national commercial launch of the PRODUCT in the United States of
            America [Information omitted and filed separately with the
            Commission under Rule 24b-2] of NDA APPROVAL,




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     9.2.2. a national commercial launch of the PRODUCT in the [Information
            omitted and filed separately with the Commission under Rule 24b-2]
            TARGON will effect within [Information omitted and filed separately
            with the Commission under Rule 24b-2] and

     9.2.3. a national commercial launch of the PRODUCT in the other countries
            of the TERRITORY as selected by TARGON pursuant to Paragraph 9.1.2.
            above

     provided that TARGON shall have the freedom to market the PRODUCT (in that
     it shall have received the agreed quantities of LAUNCH STOCKS ordered
     pursuant to firm purchase orders pursuant to Article IV at least sixty (60)
     days in advance of the launch date, where applicable shall have obtained
     reimbursement or pricing approval, and there are no other constraints
     outside the control of TARGON preventing launch, such as material patent
     litigation). TARGON shall be entitled to defer the commercial launch of the
     PRODUCT in one or more countries of the TERRITORY should TARGON in its good
     faith determine, after due discussion with ELAN, that it is not in the best
     commercial interest of TARGON to commence marketing the PRODUCT in the
     particular country or countries of the TERRITORY within the timetable
     imposed this by Paragraph and that such launch should be deferred for the
     appropriate period.
 
     9.3.   If (x) TARGON fails to obtain REGULATORY APPROVAL as required by
            Paragraph 9.1. above or (y) TARGON indicates to ELAN that it does
            not intend to obtain registration approval and commercialise the
            PRODUCT in a particular country or countries of the TERRITORY, or
            (z) TARGON fails to commence commercialisation in any country as
            required by Paragraph 9.2. above then, in such event, the licences
            granted to TARGON hereunder shall [Information omitted and filed
            separately with the Commission under Rule 24b-2] from ELAN terminate
            in the applicable country or countries of the TERRITORY. In such
            event, TARGON shall, at the option of ELAN, grant an exclusive
            licence to the TARGON PATENT RIGHTS and the TARGON KNOW-HOW to
            commercialise the PRODUCT on the terms set out in this Paragraph,
            and to the TRADEMARK on the terms set out in Article II Paragraph 8
            applied mutatis mutandis, and make available and transfer to ELAN
            all of TARGON's data, information, applications, approvals and
            filings to permit ELAN to commercialise the PRODUCT in the
            applicable country or countries of the TERRITORY. In such event
            TARGON shall be entitled to a royalty of [Information omitted and
            filed separately with the Commission under Rule 24b-2] of the
            PRODUCT by ELAN (for which purpose the definition of [Information
            omitted and filed separately with the Commission under Rule 24b-2]
            as set out in Article I shall apply mutatis mutandis to sales by
            ELAN to an unaffiliated third party such as a sublicensee appointed
            by ELAN), provided that where ELAN is selling IN MARKET (for which
            purpose the definition of IN MARKET as set out in Article I shall
            apply mutatis mutandis), ELAN shall pay a royalty of [Information
            omitted and filed separately with the Commission under Rule 24b-2



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                                 Page 13 of 54
<PAGE>
 
                    ] as set out in Article I shall apply mutatis mutandis).

            In such event, the Parties shall enter into a further written
            licence agreement which shall include customary and reasonable terms
            relating to, inter alia, the timing of royalty payments to TARGON,
            reporting obligations regarding net sales, audit rights of TARGON
            with respect to books and records relating to net sales, and
            indemnity provisions, which obligations shall, unless otherwise
            agreed by the Parties, be substantially similar to those in this
                                                    -------
            Agreement with respect to commercialisation of the PRODUCTS by
            TARGON.

     9.4.   Notwithstanding the above, in the event that the Parties disagree
            whether or not TARGON has satisfied its obligations under this
            Paragraph 9 with regard to one or more of such other countries of
            the TERRITORY, the matter may be submitted to arbitration by either
            Party pursuant to Article XII Paragraph 12, and TARGON's rights and
            licenses shall remain in effect until and unless the arbitrator
            makes a decision that TARGON's right and license in such country
            should terminate.

     10.    Each Party shall both prior to and subsequent to the launch of the
            PRODUCT communicate and consult with the other regarding its
            objectives for and performance of the PRODUCT in the United States
            of America and in the other countries of the TERRITORY, and the
            promotional activities and materials associated therewith, including
            marketing approaches, promotional and advertising materials and
            campaigns (including direct to customer advertising), sales plans
            and results, performance against competitors etc.

     11.    In addition to meetings of the PROJECT TEAM, the Parties shall meet
            on a quarterly basis for the first year following the initial launch
            of the PRODUCT in the United States of America, on a semi-annual
            basis for the second and third year and on an annual basis
            thereafter. At such meetings, TARGON shall report on the ongoing
            sales performance of the PRODUCT in the TERRITORY, including
            marketing approaches, promotional and advertising materials and
            campaigns (including direct-to-consumer advertising), sales plans
            and results, performance against competitors etc.
 
     12.    TARGON shall provide ELAN with detailed [Information omitted and
            filed separately with the Commission under Rule 24b-2] sales reports
            outlining the status of the PRODUCT in the TERRITORY, including a
            report on the competitive position of the PRODUCT in its relevant
            market segment(s). Such reports shall be furnished to ELAN within
            [Information omitted and filed separately with the Commission under
            Rule 24b-2] days following the availability of the relevant data to
            TARGON.

     13.1.  In the event that either Party is interested in [Information omitted
            and filed separately with the Commission under Rule 24b-2



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                                 Page 14 of 54
<PAGE>
 
                      ] such Party will inform the other Party thereof and both
            Parties will [Information omitted and filed separately with the
            Commission under Rule 24b-2]. Prior to commencing any such
            programme, the Parties will [Information omitted and filed
            separately with the Commission under Rule 24b-2].

     13.2.  In the event that [Information omitted and filed separately with the
            Commission under Rule 24b-2] TARGON with a view to [Information
            omitted and filed separately with the Commission under Rule 24b-2]
            TARGON undertakes that it [Information omitted and filed separately
            with the Commission under Rule 24b-2]. ELAN shall be [Information
            omitted and filed separately with the Commission under Rule 24b-2].
            Should ELAN [Information omitted and filed separately with the
            Commission under Rule 24b-2] then ELAN and TARGON shall [Information
            omitted and filed separately with the Commission under Rule 24b-2].
            In the event that ELAN [Information omitted and filed separately
            with the Commission under Rule 24b-2] then TARGON shall [Information
            omitted and filed separately with the Commission under Rule 24b-2].
            ELAN shall [Information omitted and filed separately with the
            Commission under Rule 24b-2]. The provisions of this Paragraph 13.2.
            shall not apply where the relevant formulation is to contain that
            [Information omitted and filed separately with the Commission under
            Rule 24b-2] patented compound.

     13.3.  In the event that [Information omitted and filed separately with the
            Commission under Rule 24b-2] ELAN with a view to [Information
            omitted and filed separately with the Commission under Rule 24b-2]
            ELAN undertakes that it [Information omitted and filed separately
            with the Commission under Rule 24b-2]. TARGON shall [Information
            omitted and filed separately with the Commission under Rule 24b-2].

            Should TARGON [Information omitted and filed separately with the
            Commission under Rule 24b-2] then TARGON and ELAN shall [Information
            omitted and filed separately with the Commission under Rule 24b-2].
            In the event that TARGON [Information omitted and filed separately
            with the Commission under Rule 24b-2] then ELAN shall [Information
            omitted and filed separately with the Commission under Rule 24b-2




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

                                 Page 15 of 54
<PAGE>
 
                      ]. TARGON shall [Information omitted and filed separately
            with the Commission under Rule 24b-2]. The provisions of this
            Paragraph 13.3. shall not apply where the relevant formulation is to
            contain that [Information omitted and filed separately with the
            Commission under Rule 24b-2] patented compound, or the combination
            is the subject of a patent application or patent.

ARTICLE III:   PRODUCT AND CLINICAL DEVELOPMENT
------------   --------------------------------

     1.     Subject to the provisions of this Article III, TARGON shall use its
            reasonable efforts, as would be deemed commensurate with the
            achievement of its own business aims for a similar product of its
            own to conduct such part of the PROJECT as shall be conducted by
            TARGON. Subject to the provisions of this Article III, ELAN shall
            use its reasonable efforts, as would be deemed commensurate with the
            achievement of its own business aims for a similar product of its
            own, to conduct such part of the PROJECT as shall be conducted by
            ELAN. ELAN shall be primarily responsible for the further
            development of the formulations of the PRODUCT as well as the
            manufacturing scale up and validation. In addition ELAN shall be
            responsible for conducting such other activities as TARGON requests
            and ELAN agrees to conduct. TARGON shall, inter alia, be responsible
            for the Phase II and Phase III clinical development of the PRODUCT,
            including if necessary the generation of data to support the
            clinical pharmacology/pre-clinical section of the labelling for the
            PRODUCT.

     2.     For the avoidance of doubt, the Parties hereby confirm that a
            primary objective of the product and clinical development is to
            generate the NDA and secure NDA APPROVAL for the PRODUCT. The
            Parties also anticipate that the CMC SECTION to be generated by ELAN
            shall be applicable to the equivalent sections of the IRF for the
            countries of the TERRITORY outside the United States of America. If
            additional data or work such as [Information omitted and filed
            separately with the Commission under Rule 24b-2] is required
            [Information omitted and filed separately with the Commission under
            Rule 24b-2]. Additional work required of ELAN such as [Information
            omitted and filed separately with the Commission under Rule 24b-2

                                                                          ] on
            the basis set out in Article V Paragraph 6.

            As of the date of this Agreement, it is the Parties' expectation
            that the body of data so generated will also support such
            applications for regulatory approval that TARGON shall make in the
            other countries of the TERRITORY. In the event however that such
            expectation proves unfounded or incorrect and further data is
            required to obtain such other approvals as are pursued by TARGON in
            the other



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

                                 Page 16 of 54
<PAGE>
 
            countries of the TERRITORY, TARGON shall determine the viability of
            proceeding further with the regulatory application and generation of
            the further data requirements. In the event that TARGON elects to
            continue, the Parties shall agree on the programme of work to be
            undertaken to generate such additional data and the apportioning of
            tasks and costs therefor (other than work which ELAN is already
            obliged to conduct for no additional consideration as set out
            above). [Information omitted and filed separately with the
            Commission under Rule 24b-2] on the basis set out in Article V
            Paragraph 6. In the event that in the reasonable business judgement
            of TARGON the estimate furnished by ELAN as to the likely costs are
            excessive, TARGON shall be entitled to have the work conducted by a
            third party at lesser cost provided that this does not require the
            disclosure of the ELAN INTELLECTUAL PROPERTY to a third party. If
            such work requires the disclosure of the ELAN INTELLECTUAL PROPERTY
            to a third party and further if ELAN refuses to consent to the third
            party conducting such work, ELAN shall not be entitled to terminate
            the Agreement with respect to the applicable country or countries of
            the TERRITORY.

     3.     [Information omitted and filed separately with the Commission under
            Rule 24b-2



                                                   ].

     4.     The Parties hereby confirm that each shall undertake the PROJECT as
            a collaborative effort and that the provisions of this Agreement
            requires that each party diligently carries out those tasks assigned
            to it and as otherwise agreed. Each party shall co-operate with the
            other in good faith particularly with respect to unknown problems or
            contingencies and shall perform its obligations in good faith and in
            a commercially reasonable, diligent and workmanlike manner. The
            Parties shall report to each other on their respective development
            efforts at meetings of the PROJECT TEAM and otherwise as may be
            agreed.


            PRODUCT Development
            -------------------

     5.     ELAN shall perform its tasks in the development of the PRODUCT in
            accordance with the guidelines laid down where applicable under
            cGLP, cGCP and cGMP and with specific reference to standards
            acceptable to the FDA. ELAN shall use reasonable efforts to carry
            out and complete the development of the PRODUCT to the objectives
            and within the timeframes which are agreed with TARGON.



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

                                 Page 17 of 54
<PAGE>
 
     6.     In the event that TARGON requests changes in the design or
            specifications for the PRODUCTS which would add significant cost in
            terms of product development undertaken by ELAN, then the Parties
            shall agree on appropriate development royalties to be paid to ELAN
            for such.

     7.     In the event that TARGON decides not to proceed further with the
            development programme, the PRODUCT shall cease to be a PRODUCT for
            the purpose of this Agreement. ELAN shall thereafter be entitled to
            research, develop and commercialise the PRODUCT in the TERRITORY
            provided that ELAN shall only be entitled to use the TARGON KNOW-HOW
            and the TARGON PATENT RIGHTS and the TRADEMARK in accordance with
            the provisions of Article II Paragraph 9.3. In the event that the
            Agreement is terminated by TARGON due to a breach by ELAN, ELAN
            shall not be entitled to a licence to the TARGON PATENT RIGHTS, the
            TARGON KNOW-HOW or the TRADEMARK pursuant to the provisions of
            Article II Paragraph 9.3. [Information omitted and filed separately
            with the Commission under Rule 24b-2].

            Clinical Development
            --------------------

     8.1.   ELAN shall be responsible for all Phase I pharmacokinetic testing
            and modelling and associated analysis in animal and human
            volunteers. During the development of the PRODUCT and preparation of
            the NDA and other registration dossiers, TARGON will establish the
            Phase I testing which is required and will agree with ELAN on the
            design, cost and timeframe for such testing (testing conducted by
            ELAN in animals shall be at ELAN's cost). ELAN will provide full 
            bio-analytical, statistical and reporting services for such Phase I
            testing. ELAN will provide TARGON with full reports on all such
            testing it conducts for the PRODUCT. ELAN undertakes to conduct all
            such testing on the PRODUCT in accordance with prevailing cGCP and
            cCLP and with specific reference to standards acceptable to the FDA.

            The Parties agree that ELAN's charges to TARGON for such work will
            be on the basis of [Information omitted and filed separately with
            the Commission under Rule 24b-2] basis.

     8.2.   Prior to the commencement of the pivotal Phase I programme required
            for registration of the PRODUCT, TARGON shall use its reasonable
            endeavours to meet and discuss the proposed Phase I programme with
            the FDA and, subject to the views of the FDA, ELAN shall be
            represented as appropriate at such meetings. TARGON and ELAN agree
            that the Phase I programme will be conducted substantially in
            compliance with any requirements or guidelines communicated by FDA
            or otherwise deemed generally acceptable to the FDA.




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

                                 Page 18 of 54
<PAGE>
 
            Any proposed deviation from such FDA requirements or guidelines
            shall be first discussed between the Parties.

     8.3.   All payments to ELAN by TARGON for such testing shall be made on
            completion of the work and submission of the relevant report to
            TARGON.

     9.1.   TARGON shall be responsible for all Phase I pharmacokinetic studies
            and associated analytical testing for the PRODUCT in human patients.
            ELAN shall be informed in advance of the design and timeframe for
            such studies. TARGON shall bear the costs of all such studies. For
            the avoidance of doubt, ELAN shall be obligated to provide all
            bioanalytical and other testing procedures it utilises and develops
            pursuant to Paragraph 8.1. above and shall provide such to TARGON
            for no additional consideration.
 
     9.2.   TARGON will provide or have provided full bioanalytical, statistical
            and reporting services for such Phase I patient studies. TARGON will
            provide ELAN with full reports on all such studies it conducts for
            the PRODUCT. TARGON undertakes to conduct or have conducted all such
            studies on the PRODUCT in accordance with prevailing cGCP and cCLP
            and with specific reference to standards acceptable to the FDA. For
            the avoidance of doubt all reports and data provided by TARGON to
            ELAN pursuant to this paragraph shall constitute TARGON KNOW HOW.

     9.3.   TARGON shall be responsible for all Phase II and Phase III clinical
            trials for the PRODUCT in human patients. ELAN shall be informed in
            advance of the design and timeframe for such trials. TARGON shall
            bear the costs of all such trials.

     10.    Prior to the commencement of the pivotal regulatory clinical trials
            for the PRODUCT, TARGON shall use its reasonable endeavours to meet
            and discuss its proposed programme with the FDA and other REGULATORY
            AUTHORITIES and, subject to the views of the FDA, ELAN shall be
            represented as appropriate at such meetings. TARGON agrees that it
            will conduct its pivotal programme substantially in compliance with
            any requirements or guidelines communicated by FDA and other
            REGULATORY AUTHORITIES.

            Any proposed deviation from such FDA and other REGULATORY
            AUTHORITIES requirements or guidelines shall be first discussed with
            ELAN.
 
     11.    In the event that TARGON is not in a position to itself or through
            CYTOGEN conduct the Phase I, Phase II or Phase III pharmacokinetic
            or clinical studies envisaged in this Article III and instead
            intends to contract out such studies to a clinical research
            organisation or equivalent third party ("CRO"), TARGON shall
            contract with ELAN if ELAN can match the terms proposed by the CRO
            and provided that ELAN is technically proficient to conduct such
            studies. The


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

                                 Page 19 of 54
<PAGE>
 
            obligations set forth in this Paragraph shall not bind any
            sublicensee appointed by TARGON.

     12.    Validation and stability

     12.1   ELAN undertakes to scale-up and validate the manufacturing and
            assembly processes for the PRODUCT in accordance with cGMP
            requirements and with specific reference to FDA standards therefor.
            ELAN shall generate supporting stability performance data for the
            PRODUCT as indicated below:

            12.1.1.  At least two (2) years' shelf-life for bulk hard gelatin
                     capsules.

            12.1.2.  At least two (2) years' shelf-life for each of the four (4)
                     capsule strengths above in one market pack configuration.

     12.2   With regard to finished market pack supporting stability performance
            data for the PRODUCT other than as allowed for above, TARGON and its
            sub-licensees will inform ELAN of such requirements for each of its
            market territories and ELAN shall undertake such work at a cost to
            be agreed with TARGON and/or its sub-licensees.

ARTICLE IV :   SUPPLY OF THE PRODUCT
------------   ---------------------

     1.     Except as otherwise herein provided, ELAN shall produce and supply
            to TARGON its entire requirements of the PRODUCT. ELAN will be the
            sole and exclusive supplier of the PRODUCT to TARGON in the
            TERRITORY and TARGON will purchase exclusively from ELAN the PRODUCT
            in the TERRITORY.

     2.     The PRODUCT to be supplied to TARGON by ELAN shall be in the form of
            bulk two-piece hard gelatin capsules containing microparticulate
            SODAS(R) particles, or subject to further agreement between ELAN and
            TARGON in final market pack form, and in each case complying with
            the SPECIFICATIONS. ELAN shall deliver the PRODUCT to TARGON and/or
            any party designated by TARGON, in proper packaging so as to permit
            safe storage and transport. Where ELAN supplies the PRODUCT in bulk
            form, TARGON shall be responsible for the packaging of the PRODUCT
            into final market packaging.

     3.     As a consequence of the restrictions currently imposed upon the
            importation, use and distribution of controlled and scheduled
            substances into the countries of the TERRITORY, the Parties
            currently envisage that the PRODUCT shall be manufactured by ELAN or
            a third party manufacturer appointed by ELAN (I) in the United
            States of America for supply in the United States of America and
            Canada, and (II) in Europe for supply in the rest of the TERRITORY.
            In the event that the relevant authorities in one or more countries
            of the TERRITORY



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

                                 Page 20 of 54
<PAGE>
 
            prohibit the importation of the PRODUCT from the foregoing sites of
            manufacture, the Parties shall review what alternative acceptable
            arrangements can be put in place having regard to such expenditure
            as is justified having regard to the commercial opportunities
            available in the country or countries concerned. In the event that
            ELAN appoints a third party manufacturer, then ELAN shall be solely
            responsible and liable to TARGON for the performance of the said
            manufacturer and ELAN shall ensure that the said manufacturer's
            facility is an FDA approved facility and that such facility complies
            with all relevant FDA and other relevant governmental and regulatory
            requirements and that all accepted practises of GMP are adhered to.

     4.1.   The Parties acknowledge that it is in their mutual interest that
            launch of the PRODUCT shall be effected as soon as possible
            following NDA APPROVAL (and where applicable REGULATORY APPROVAL)
            for which purpose the parties shall in advance of the NDA APPROVAL
            (and where applicable REGULATORY APPROVAL) discuss the timing,
            scheduling and volume for the manufacture and purchase of specific
            quantities of launch stocks of the PRODUCT to be ordered by TARGON
            ("LAUNCH STOCKS") including the lead time required for manufacturing
            and supplying same. For the avoidance of doubt, the Parties hereby
            confirm that ELAN's manufacturing obligations shall only arise on
            receipt of firm purchase orders for the LAUNCH STOCKS.

     4.2.   Prior to filing the NDA, TARGON will provide ELAN with a forecast of
            TARGON's requirements for the PRODUCT [Information omitted and filed
            separately with the Commission under Rule 24b-2]. The said forecast
            will be updated [Information omitted and filed separately with the
            Commission under Rule 24b-2] until NDA APPROVAL of the PRODUCT.
            Except as otherwise provided herein, all forecasts made hereunder
            shall be made to assist ELAN in planning its production and TARGON
            in planning marketing and sales. Such forecasts shall not be binding
            purchase orders, and shall be without prejudice to TARGON's
            subsequent firm orders for the PRODUCT in accordance with the terms
            of this Agreement.
 
     5.     [Information omitted and filed separately with the Commission under
            Rule 24b-2] TARGON will provide a [Information omitted and filed
            separately with the Commission under Rule 24b-2



                                                   ].
 



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

                                 Page 21 of 54
<PAGE>
 
     6.   Subject to the agreement of ELAN, [Information omitted and filed
          separately with the Commission under Rule 24b-2] in terms of volume of
          PRODUCT ordered. ELAN will use its reasonable efforts to fulfil
          TARGON's requirements in excess of forecasted amounts, but shall not
          be obliged to meet such requirements if it is not reasonably
          practicable to do so and particularly where ELAN cannot obtain
          sufficient quantities of the active ingredient.
 
     7.   Within ninety (90) days of filing the NDA with the FDA, ELAN shall
          impart to TARGON all test and assay procedures for the PRODUCT
          necessary for TARGON to verify the quality of and conformity with
          SPECIFICATIONS of the PRODUCT it purchases pursuant to this Agreement,
          and shall notify TARGON promptly thereafter of any and all changes to
          the said procedures. Prior to the filing of the NDA, the Parties shall
          negotiate in good faith to conclude a technical agreement regulating
          the Parties' respective obligations from a technical and quality
          perspective for the supply of the PRODUCT by ELAN to TARGON. Such an
          agreement shall be attached to this Agreement as Appendix E.

     8.   ELAN shall not be obliged to accept orders for the PRODUCT unless and
          until the NDA has been accepted for filing by the FDA in the United
          States of America.

     9.   The Parties shall agree prior to the filing of the NDA and IRF upon a
          minimum economic order quantity for the manufacture and supply of the
          PRODUCT for the United States of America, the countries of the
          European Union and such other countries of the TERRITORY as may be
          agreed.

     10.  All quantities of the PRODUCT delivered by ELAN hereunder shall
          conform to the SPECIFICATIONS and all prevailing legislative and
          regulatory requirements of the TERRITORY in the country where the
          PRODUCT is manufactured and to be marketed and sold.

     11.  All claims for failure of any shipment of the PRODUCT to conform to
          SPECIFICATIONS must be made by TARGON to ELAN in writing within forty-
          five (45) days following delivery.  Failure to make timely claims in
          the manner prescribed shall constitute acceptance of the shipment.
          PRODUCT which has been delivered and which has been shown within the
          designated period not to conform to SPECIFICATIONS shall be replaced
          at ELAN's cost within ninety (90) days of the receipt by ELAN of the
          failed PRODUCT.

     12.  In the event that the PRODUCT supplied by ELAN is not in compliance
          with the SPECIFICATIONS, or is otherwise adulterated, misbranded or
          defective, TARGON shall immediately notify ELAN and shall follow all
          reasonable




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

                                 Page 22 of 54
<PAGE>
 
          instructions of ELAN regarding, and be responsible, at the sole cost
          and expense of ELAN, for re-analysis, sampling, processing, return,
          disposal or destruction, including certification of destruction, of
          such non-conforming PRODUCT.

     13.  In the event of an unresolved dispute as to conformity with
          SPECIFICATIONS of the PRODUCT, the Parties shall nominate an
          independent first class laboratory to undertake the relevant testing.
          Its findings shall be conclusive and binding upon the Parties.  All
          costs relating to this process shall be borne exclusively by the
          unsuccessful party.
 
     14.  Save as otherwise agreed between the Parties, delivery of consignments
          of PRODUCT shall be effected by ELAN EX WORKS the manufacturing
          facility designated by ELAN pursuant to Article IV Paragraph 3. All
          risks in such PRODUCT shall pass to TARGON when each such consignment
          of the PRODUCT is loaded onto the vehicle of TARGON's agent on which
          it is to be despatched from ELAN's designated facility. TARGON shall
          fully insure or procure the insurance of all consignments of the
          PRODUCT when risk passes as aforesaid and shall produce such insurance
          documentation supporting same as and when requested by ELAN.
 
     15.  In the event that ELAN fails to supply PRODUCT which has been ordered
          by TARGON for a period exceeding [Information omitted and filed
          separately with the Commission under Rule 24b-2] or there are repeated
          and serious failures, inability or delay in filling orders, (unless
          such failure, inability or delay in filling orders is caused by the
          supplier of the active ingredient or other raw material, or due to the
          applicable governmental imposed quota system for the active
          ingredient) ELAN shall for so long as the conditions set out in this
          paragraph exist:

          15.1.  grant to TARGON a production licence in the applicable country
                 or countries of the TERRITORY so that TARGON may manufacture
                 the relevant PRODUCT without infringing any of ELAN's patent
                 and/or any other industrial property rights. Any such licence
                 shall apply only in regard to the relevant PRODUCT as well as
                 to the applications of technology derived from the ELAN PATENT
                 RIGHTS related to its use with such PRODUCT. For the avoidance
                 of doubt, the Parties confirm that the provisions of Article V
                 Paragraph 2.1.2. shall apply to the sale of PRODUCT
                 manufactured by TARGON;

          15.2.  provide TARGON with any technical data necessary for the
                 carrying of this into effect. To this end, ELAN shall impart to
                 TARGON the documentation constituting the required material
                 support, more particularly practical performance advice, shop
                 practice, specifications as to materials to be used and control
                 methods; and



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

                                 Page 23 of 54
<PAGE>
 
          15.3.  assist TARGON for the working up and use of the technology
                 necessary to manufacture the relevant PRODUCT as well as for
                 the training of TARGON's personnel. For this purpose, ELAN
                 shall receive TARGON's scientific staff in its premises for
                 periods the term of which shall be decided by common consent.

          When ELAN has remedied the situation that prevented ELAN from
          satisfying TARGON's requirements and is once again able to fulfil its
          obligations to supply the PRODUCT as provided for in this Agreement,
          TARGON shall cease manufacturing the PRODUCT and shall resume
          purchasing the PRODUCT from ELAN pursuant to the terms of this
          Agreement; provided that TARGON shall be entitled to manufacture the
          PRODUCT for the period necessary so as to enable TARGON to recoup its
          [Information omitted and filed separately with the Commission under
          Rule 24b-2] (for which purpose the definition of [Information omitted
          and filed separately with the Commission under Rule 24b-2] set out in
          Article I shall be defined mutatis mutandis) plus [Information omitted
          and filed separately with the Commission under Rule 24b-2] involved in
          the transfer of production.

     16.  ELAN, its AFFILIATES or subcontractors shall be responsible for all
          process and equipment validation required by the U.S. Federal Food,
          Drug and Cosmetic Act and the regulations thereunder and shall take
          all steps reasonably necessary to pass government inspection by the
          FDA or other REGULATORY AUTHORITY.

     17.  ELAN shall make (and where relevant shall procure that ELAN's
          subcontractor shall make) that portion of its manufacturing facility
          where PRODUCT is manufactured, including all record and reference
          samples relating to the PRODUCT available for inspection by TARGON's
          duly qualified person or by the FDA or other relevant REGULATORY
          AUTHORITY.  The investigation shall be limited to determining whether
          there is compliance with cGMP and other requirements of applicable
          law.


ARTICLE V: FINANCIAL PROVISIONS
---------  --------------------
 

     1.   Licence Royalties
          -----------------

          1. In consideration of the rights and licence granted to TARGON to the
             ELAN PATENT RIGHTS by virtue of this Agreement, TARGON shall pay to
             ELAN amounts as follows:

             1.1.  US$7.5 million upon the date of execution of this Agreement;

                   1.2.  [Information omitted and filed separately with the
                   Commission under Rule 24b-2] on provision by [Information
                   omitted and filed separately with the Commission under Rule
                   24b-2



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

                                 Page 24 of 54
<PAGE>
 
                         ];
 
           1.3.  [Information omitted and filed separately with the Commission
                 under Rule 24b-2] on receipt of the [Information omitted and
                 filed separately with the Commission under Rule 24b-2];

           1.4.  [Information omitted and filed separately with the Commission
                 under Rule 24b-2] upon [Information omitted and filed
                 separately with the Commission under Rule 24b-2];

           1.5.  [Information omitted and filed separately with the Commission
                 under Rule 24b-2] on the [Information omitted and filed
                 separately with the Commission under Rule 24b-2];

           1.6.  [Information omitted and filed separately with the Commission
                 under Rule 24b-2] on [Information omitted and filed separately
                 with the Commission under Rule 24b-2];

           1.7.  [Information omitted and filed separately with the Commission
                 under Rule 24b-2] on the [Information omitted and filed
                 separately with the Commission under Rule 24b-2];

           All such payments are due upon achievement of the milestone event and
           are payable by TARGON within thirty (30) days following the
           occurrence of the milestone, of which event TARGON will promptly
           notify ELAN and ELAN will send an invoice to TARGON for the
           corresponding milestone payment. The foregoing licence royalties
           shall be non-recoverable by TARGON.

     2.    Royalty on NET REVENUES
           -----------------------

     2.1.  In consideration of the license of the ELAN PATENT RIGHTS to TARGON,
           the royalty payable by TARGON to ELAN shall be as follows:

           2.1.1.  Where the PRODUCT is not being sold IN MARKET by TARGON (such
                   as to a sub-licensee), TARGON shall pay to ELAN [Information
                   omitted and filed separately with the Commission under Rule
                   24b-2];

           2.1.2.  Where the PRODUCT is being sold IN MARKET by TARGON, TARGON
                   shall pay to ELAN [Information omitted and filed separately
                   with the Commission under Rule 24b-2] in the United States of
                   America, and in [Information omitted and filed separately
                   with the Commission under Rule 24b-2].



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

                                 Page 25 of 54
<PAGE>
 
     2.2.  Within forty five (45) days of the end of each quarter, TARGON shall
           notify ELAN of the [Information omitted and filed separately with the
           Commission under Rule 24b-2] of PRODUCT for that preceding quarter.
           Payments shown by each calendar quarter report to have accrued but
           have not yet been paid are payable shall be due on the date such
           report is due.

     2.3.  Payment of royalties shall be made quarterly within forty five (45)
           days after the expiry of the quarter.

     2.4.  All payments due hereunder shall be made in United States Dollars.

     2.5.  For the avoidance of doubt the Parties confirm that ELAN has no
           entitlement to a royalty pursuant to the terms of this Agreement in
           relation to licence fees received by TARGON from one or more
           sublicensees.

     3.    Price of PRODUCT where TARGON is not selling IN MARKET
           ------------------------------------------------------

     3.1.  The provisions of this Paragraph 3 shall apply in determining the
           price of the PRODUCT to be supplied by ELAN to TARGON where TARGON is
           not selling the PRODUCT IN MARKET. The price of the PRODUCT to be
           charged to TARGON, which price shall apply to bulk tablets of PRODUCT
           supplied EX WORKS ELAN's manufacturing facility to TARGON, shall be
           equivalent to the [Information omitted and filed separately with the
           Commission under Rule 24b-2] as determined by the provisions of this
           Article V Paragraph 3, and [Information omitted and filed separately
           with the Commission under Rule 24b-2]. In the event that ELAN
           supplies the PRODUCT in final market packaging, the price of the
           PRODUCT to be charged to TARGON, which price shall apply to PRODUCT
           supplied EX WORKS ELAN's manufacturing facility to TARGON shall be
           equivalent to the [Information omitted and filed separately with the
           Commission under Rule 24b-2] as determined by the provisions of this
           Article V Paragraph 3, and [Information omitted and filed separately
           with the Commission under Rule 24b-2].

     3.2.  [Information omitted and filed separately with the Commission under
           Rule 24b-2



                                         ].

     3.3.  [Information omitted and filed separately with the Commission under
           Rule 24b-2



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

                                 Page 26 of 54
<PAGE>
 
                         ].

     3.4.  Upon receipt by ELAN of firm purchase orders for the LAUNCH STOCKS of
           the PRODUCT, TARGON shall confirm the intended NSP of the sublicensee
           for the purpose of calculating the supply price to be charged for
           said LAUNCH STOCKS. ELAN shall invoice TARGON at a price equivalent
           to [Information omitted and filed separately with the Commission
           under Rule 24b-2]. At the commencement of sales of the PRODUCT,
           TARGON shall re-confirm the NSP to ELAN, which NSP shall thereafter
           govern the calculation of the supply price to be paid to ELAN. In the
           event that the intended NSP used for the supply of the LAUNCH STOCKS
           should differ from the NSP prevailing as at the date of sale of the
           LAUNCH STOCKS, the Parties shall adjust their account in accordance
           with the mechanism set forth at Paragraph 3.6. below.
 
     3.5.  ELAN shall render an invoice in respect of the quantities of PRODUCT
           delivered to TARGON during that quarter for a sum calculated by
           reference to [Information omitted and filed separately with the
           Commission under Rule 24b-2]. For the avoidance of doubt the Parties
           agree that if for whatever reason the PRODUCT supplied by ELAN to
           TARGON is not sold by TARGON or its sublicensee, payment to ELAN for
           such PRODUCT shall nonetheless be effected and the price of the
           PRODUCT shall be determined by reference to the NSP calculated
           pursuant to the provisions of Article V Paragraph 3.6.

     3.6.  Within forty five (45) days of the end of each calendar quarter,
           TARGON shall notify ELAN of the prevailing NSP for the PRODUCT sold
           in the previous quarter, whereupon the Parties shall [Information
           omitted and filed separately with the Commission under Rule 24b-2]:

           3.6.1.  [Information omitted and filed separately with the Commission
                   under Rule 24b-2


                                    ], or

           3.6.2.  [Information omitted and filed separately with the Commission
                   under Rule 24b-2



                                                   ].

     3.7.  Following launch of the PRODUCT, TARGON shall inform ELAN quarterly
           of the prevailing NSP and promptly inform ELAN of any change in the
           NSP. In addition 



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

                                 Page 27 of 54
<PAGE>
 
           TARGON shall notify ELAN on a quarterly basis of the prevailing NSP
           in the other countries of the TERRITORY.

 
     3.8.  Payment for all PRODUCT supplied to TARGON shall be effected in $
           within thirty (30) days of the date of the relevant invoice.


     4.    Price of PRODUCT where TARGON is selling IN MARKET
           --------------------------------------------------

     4.1.  The provisions of this Paragraph 4 shall apply in determining the
           price of the PRODUCT to be supplied by ELAN to TARGON where TARGON is
           selling the PRODUCT IN MARKET.

           The price of the PRODUCT shall be equivalent to [Information omitted
           and filed separately with the Commission under Rule 24b-2] which
           price shall apply to bulk tablets of PRODUCT supplied EX WORKS ELAN's
           facility to TARGON. In the event that ELAN supplies the PRODUCT in
           final market packaging, the price of the PRODUCT shall be equivalent
           to [Information omitted and filed separately with the Commission
           under Rule 24b-2] which price shall apply to the PRODUCT supplied in
           final market packaging EX WORKS ELAN's manufacturing facility to
           TARGON.

     4.2.  Upon receipt by ELAN of firm purchase orders for the LAUNCH STOCKS of
           the PRODUCT, TARGON shall confirm its intended NSP for the purpose of
           calculating the supply price to be charged for said LAUNCH STOCKS.
           ELAN shall invoice TARGON at a price equivalent to [Information
           omitted and filed separately with the Commission under Rule 24b-2].
           At the commencement of sales of the PRODUCT, TARGON shall re-confirm
           the NSP to ELAN, which NSP shall thereafter govern the calculation of
           the supply price to be paid to ELAN. [Information omitted and filed
           separately with the Commission under Rule 24b-2].
 
     4.3.  ELAN shall render an invoice in respect of the quantities of PRODUCT
           delivered to TARGON during that quarter for a sum calculated by
           reference to [Information omitted and filed separately with the
           Commission under Rule 24b-2]. For the avoidance of doubt the Parties
           agree that if for whatever reason the PRODUCT supplied by ELAN to
           TARGON is not sold by TARGON, payment to ELAN for such PRODUCT shall
           nonetheless be effected and the price of the PRODUCT shall be
           determined by reference to the NSP calculated pursuant to the
           provisions of Article V Paragraph 4.4.

     4.4.  Within forty five (45) days of the end of each calendar quarter,
           TARGON shall notify ELAN of the prevailing NSP for the PRODUCT sold
           in the previous quarter whereupon the Parties shall [Information
           omitted and filed separately with the Commission under Rule 24b-2]


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

                                 Page 28 of 54
<PAGE>
 
           4.4.1.  [Information omitted and filed separately with the Commission
                   under Rule 24b-2], or

           4.4.2.  [Information omitted and filed separately with the Commission
                   under Rule 24b-2].

     4.5.  In the event that ELAN is likely to be in a position of supplying
           PRODUCT to TARGON pursuant to this Paragraph 4 at [Information
           omitted and filed separately with the Commission under Rule 24b-2],
           the Parties shall review the position in good faith, including the
           granting by ELAN of a production licence to TARGON for the applicable
           country or countries of the TERRITORY and shall agree upon the
           applicable modifications to the provisions of Article V.

     4.6.  Following launch of the PRODUCT, TARGON shall inform ELAN quarterly
           of the prevailing NSP and promptly inform ELAN of any change in the
           NSP. In addition TARGON shall notify ELAN on a quarterly basis of the
           prevailing NSP in the other countries of the TERRITORY.
 
     4.7.  Payment for all PRODUCT supplied to TARGON shall be effected in $
           within thirty (30) days of the date of the relevant invoice.

     5.    Minimum Royalties and Purchases
           -------------------------------

     5.    ELAN and TARGON shall agree on minimum performance criteria for the
           PRODUCT, including the market and sales performance in the United
           States of America, [Information omitted and filed separately with the
           Commission under Rule 24b-2] following launch. Specifically in the
           case of the United States of America market, minimum sales targets
           shall be agreed for the initial five (5) years following launch of
           the PRODUCT and TARGON undertakes to make such targets the subject of
           its sub-licensing arrangements, if any, for the United States of
           America. The Parties will also agree on a staggered pan-European
           sales target plan and an independent sales target plan for Japan,
           which targets shall be the subject of its sub-licensing arrangements,
           if any for the countries concerned.

     6.    Additional Expenses
           -------------------



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

                                 Page 29 of 54
<PAGE>
 
     6.   TARGON shall reimburse ELAN for the following expenses within thirty
          (30) days of the date of invoicing of the expense.

          6.1.   Cost of any additional development or registration work on the
                 PRODUCT carried out by ELAN at the specific request of TARGON
                 other than work for which ELAN is responsible to conduct for no
                 additional consideration pursuant to Article III, including but
                 not limited to, pharmacokinetic studies and related assays,
                 stability data generation, clinical studies and compilation and
                 submission of dossiers required for registration purposes, and
                 all market pack stability studies. ELAN's charges for such work
                 shall be [Information omitted and filed separately with the
                 Commission under Rule 24b-2].
 
          6.2.   Cost of any technical assistance requested by TARGON at ELAN's
                 normal commercial terms, provided that ELAN is not obliged to
                 provide such assistance pursuant to the terms of the Agreement.
                 ELAN's charges for such work shall be [Information omitted and
                 filed separately with the Commission under Rule 24b-2].

     7.   Payments, Reports and Records
          -----------------------------

     7.1. TARGON shall keep, and shall use its reasonable endeavours to cause
          its sublicensees to keep, true and accurate records of [Information
          omitted and filed separately with the Commission under Rule 24b-2] and
          the royalties payable to ELAN under Article V hereof. TARGON shall
          deliver to ELAN a written statement thereof within forty five (45)
          days following the end of each calendar quarter (or any part thereof
          in the first or last calendar quarter of this Agreement) for such
          calendar quarter.

          The said written statements shall set forth on a country-by-country
          basis, the calculation of the NET REVENUES and NSP from gross revenues
          during that calendar quarter, the applicable percentage rate, and a
          computation of the sums due to ELAN ("the Statement").  The Parties'
          financial officers shall agree upon the precise format of the
          Statement.

     7.2. Payments due on [Information omitted and filed separately with the
          Commission under Rule 24b-2] based on sales amounts in a currency
          other than United States Dollars shall first be calculated in the
          foreign currency and then converted to United States Dollars on the
          basis of the exchange rate in effect for the purchase of United States
          Dollars with such foreign currency quoted in the Wall Street Journal
          (or comparable publication if not quoted in the Wall Street Journal)
          with respect to the sale of currency of the country of origin of such
          payment for the date on which the payment giving rise to [Information
          omitted and filed separately with the Commission under Rule 24b-2] has
          been received by TARGON, or on such other basis as is agreed in good
          faith between the Parties (such as where the provisions of Article V
          Paragraph 3.5. or Article V Paragraph 4.3. are applicable.


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

                                 Page 30 of 54
<PAGE>
 
     7.3. Any income or other taxes which TARGON is required by law to pay or
          withhold on behalf of ELAN with respect to royalties and any other
          monies payable to ELAN under this Agreement shall be deducted from the
          amount of such NSP payments, royalties and other monies due. TARGON
          shall furnish ELAN with proof of such payments. Any such tax required
          to be paid or withheld shall be an expense of and borne solely by
          ELAN. TARGON shall promptly provide ELAN with a certificate or other
          documentary evidence to enable ELAN to support a claim for a refund or
          a foreign tax credit with respect to any such tax so withheld or
          deducted by TARGON. Both Parties will reasonably cooperate in
          completing and filing documents required under the provisions of any
          applicable tax treaty or under any other applicable law, in order to
          enable TARGON to make such payments to ELAN without any deduction or
          withholding.

     7.4. All payments due hereunder shall be made in $ to the designated bank
          account of ELAN in accordance with such timely written instructions as
          ELAN shall from time to time provide.

     7.5. ELAN and TARGON will provide each other's independent certified
          accountants (reasonably acceptable to the other Party) with access,
          during regular business hours and upon reasonable prior request and
          subject to the confidentiality provisions as contained in this
          Agreement, to such Party's books and records relating to the PRODUCT
          (and in the case of TARGON, TARGON shall use its reasonable endeavours
          to cause its sublicensees to provide such access) solely for the
          purpose of verifying the accuracy and reasonable composition of the
          calculations hereunder for the current financial year and the two
          preceding financial years, including in the case of ELAN the sums
          payable by TARGON to ELAN pursuant to Article V.

     7.6. Any adjustment required by such inspection shall be made within
          thirty (30) days of the agreement of the Parties or, if not agreed,
          upon the determination of an arbitrator to whom any dispute under this
          Paragraph shall be submitted to arbitration pursuant to Article XII
          Paragraph 12.  If the adjustment payable to ELAN is greater than five
          per cent (5%) of the amount paid for the relevant period, then the
          cost to ELAN for the inspection, and if applicable the arbitration
          shall be paid by TARGON.  In addition, TARGON shall pay interest to
          ELAN at the rate publicly announced by Morgan Guaranty Trust Company
          of New York at its principal office at its prime or best rate plus one
          per cent (applicable as of the date on which payment should have been
          made pursuant to the applicable provision of Article V), from the date
          on which payment should have been made pursuant to the applicable
          provision of Article V until the date of payment.

     7.7. TARGON shall pay interest to ELAN at the rate publicly announced
          by Morgan Guaranty Trust Company of New York at its principal office
          at its prime or best rate plus one per cent (applicable as of the date
          on which payment should have



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

                                 Page 31 of 54
<PAGE>
 
          been made pursuant to the applicable provisions of this Agreement)
          from the date on which payment should have been made pursuant to the
          applicable provision until the date of payment.

 
ARTICLE VI:    REGISTRATION OF THE PRODUCT
-----------    ---------------------------

     1.   TARGON shall be responsible for the compilation, preparation,
          submission and prosecution to approval of the NDA and of all
          international registration applications for marketing approval.
          TARGON shall itself file the NDA and may at its option have its sub-
          licensees file one or more of the IRF.  TARGON will use its reasonable
          efforts in prosecuting the NDA and the IRF to approval.  TARGON shall
          thereafter maintain at its own cost the NDA and the REGULATORY
          APPROVALS for the TERM. The NDA and the IRF shall remain the property
          of TARGON, provided that TARGON shall allow ELAN access thereto to
          enable ELAN to fulfil its obligations and exercise its rights
          hereunder.

          2.  TARGON shall consult with ELAN on the preparation of the NDA and
          the IRF and shall supply ELAN with a copy thereof prior to submission.
          TARGON will also supply ELAN with copies of the IRF should ELAN
          request a copy or extracts thereof.  Where a sub-licensee undertakes
          such registration activity on behalf of TARGON outside the United
          States of America, TARGON shall use reasonable efforts to ensure that
          its sub-licensee provides ELAN with a copy of the application dossier,
          should ELAN so request.

          TARGON shall copy ELAN on all correspondence with FDA concerning the
          NDA and undertakes to keep ELAN fully informed of progress with the
          IRF.  TARGON shall immediately notify ELAN of the NDA APPROVAL and of
          all REGULATORY APPROVALS in the international territory as soon as
          possible after such is known to it.

     3.   TARGON and/or its sub-licensees shall undertake to maintain in force
          all registration approvals for the PRODUCT at its/their cost,
          including the filing of all reports required or requested by the
          regulatory authorities, such as adverse event reporting.

     4.   All such regulatory activity shall be undertaken at the cost of TARGON
          and/or its sub-licensees.

     5.   ELAN shall at its option file Drug Master File(s) ("DMF") for the
          PRODUCT in its own name and shall be responsible for all interaction
          with FDA, and where applicable other REGULATORY AUTHORITIES,
          concerning the DMF.



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

                                 Page 32 of 54
<PAGE>
 
     6.   TARGON shall undertake to protect the confidentiality of ELAN's
          formulation, engineering and manufacturing processes for the PRODUCT
          in its dealings with sub-licensees and shall where possible refrain
          from transmitting such information within the relevant CMC SECTION of
          registration dossiers to sub-licensees. TARGON undertakes that the CMC
          SECTION of the NDA shall not be transmitted, or access thereto given
          to its sub-licensees without the prior written consent of ELAN.
          Unless required by law, TARGON undertakes that the CMC SECTION of the
          IRF shall not be transmitted, or access thereto given to its sub-
          licensees without the prior written consent of ELAN.

     7.   TARGON shall indemnify and hold harmless ELAN, its agents and
          employees from and against all claims, damages, losses, liabilities
          and expenses to which ELAN, its agents, and employees may become
          subject related to or arising out of TARGON's bad faith, gross
          negligence or intentional misconduct in connection with the filing or
          maintenance or failure to file or maintain or prosecute the NDA. ELAN
          shall indemnify and hold harmless TARGON, its agents and employees
          from and against all claims, damages, losses, liabilities and expenses
          to which TARGON, its agents, and employees may become subject related
          to or arising out of ELAN's bad faith, gross negligence or intentional
          misconduct in connection with the filing or maintenance or failure to
          file or maintain or prosecute the NDA.

     8.   It is hereby acknowledged that there are inherent uncertainties
          involved in the development and registration of pharmaceutical
          products with the FDA or any other REGULATORY AUTHORITIES insofar as
          obtaining approval is concerned and such uncertainties form part of
          the business risk involved in undertaking the form of commercial
          collaboration as set forth in this Agreement. Therefore, save for
          using its reasonable efforts, neither Party shall have any liability
          to the other solely as a result of any failure of the PRODUCT to
          achieve the approval of the FDA or the other REGULATORY AUTHORITIES.

     9.   Save as otherwise outlined in this Agreement, the costs and expenses
          of any filings and proceedings made by TARGON to the FDA, including
          post approval studies required by the FDA or any other Governmental
          Authority in respect of the PRODUCT, and to maintain the FDA approval
          hereunder shall be paid by TARGON.  TARGON may elect to conduct post
          approval studies whether or not mandated by the FDA provided that
          TARGON shall bear all costs associated with such studies.

     10.  TARGON shall not conduct any technical analysis, study or test on the
          formulations of the PRODUCT without the prior agreement of ELAN, save
          for the routine quality tests required to verify conformance with the
          SPECIFICATIONS.  In the event that TARGON does conduct such analysis,
          study or test, then such data and information shall be transmitted to
          ELAN, who shall own said data and information which shall thereafter
          form part of the KNOW-HOW.




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

                                 Page 33 of 54
<PAGE>
 
ARTICLE VII:   WARRANTY AND INDEMNITY.
------------   -----------------------

     1.   ELAN represents and warrants that it has the sole, exclusive and
          unencumbered right to grant the licences and rights herein granted to
          TARGON, and that it has not granted any option, licence, right or
          interest in or to the ELAN PATENT RIGHTS or PRODUCT to any third party
          which would conflict with the rights granted pursuant to this
          Agreement.  ELAN agrees to hold TARGON harmless from any and all
          costs, expenses and damages (including reasonable attorneys' fees)
          incurred or sustained by TARGON as the result of any third party's
          challenges to ELAN's right to grant the rights and licences herein
          granted to TARGON.

     2.   ELAN represents and warrants that to the best of its knowledge, the
          true inventors of the subject matter claimed are named in the ELAN
          PATENT RIGHTS and all such inventors have irrevocably assigned all
          their rights and interests therein to ELAN.
 
     3.   ELAN represents and warrants that the execution of this Agreement and
          the full performance and enjoyment of the rights of TARGON under this
          Agreement will not breach or in any way be inconsistent with the terms
          and conditions of any licence, contract, understanding or agreement,
          whether express, implied, written or oral between ELAN and any third
          party.
 
     4.   ELAN represents and warrants that the PRODUCT supplied to TARGON by
          ELAN under this Agreement shall conform to the SPECIFICATIONS and in
          accordance with all regulations and requirements of the FDA including
          the cGMP regulations which apply to the manufacture and supply of the
          PRODUCT.  ELAN represents and warrants that the PRODUCT supplied to
          TARGON shall not be adulterated or mis-branded as defined by the
          Federal Food, Drug and Cosmetic Act, and shall not be a product which
          would violate any section of such Act if introduced in interstate
          commerce.

     5.   Except as expressly stated in this Article VII, all other warranties,
          conditions and representations, express or implied, statutory or
          otherwise, including a warranty as to the quality or fitness for any
          particular purpose of the PRODUCT are hereby excluded, and ELAN shall
          not be liable in contract, tort or otherwise for any loss, damage,
          expense or injury of any kind whatsoever, consequential, incidental or
          otherwise, arising out of or in connection with the PRODUCT or any
          defect in the PRODUCT or from any other cause.
 
     6.   ELAN is fully cognisant of all applicable statutes, ordinances and
          regulations of the TERRITORY  with respect to the manufacture of the
          PRODUCT including, but not limited to, the U.S. Federal Food, Drug and
          Cosmetic Act and regulations

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

                                 Page 34 of 54
<PAGE>
 
          thereunder, cGLP and cGMP. ELAN shall manufacture or procure the
          manufacture the PRODUCT in conformity with the SPECIFICATIONS and the
          DMF and in a manner which fully complies with such statutes,
          ordinances, regulations and practices.

     7.   ELAN shall indemnify, defend and hold harmless TARGON from all
          actions, losses, claims, demands, damages, costs and liabilities
          (including reasonable attorneys' fees) to which TARGON is or may
          become subject insofar as they arise out of or are alleged or claimed
          to arise out of any breach by ELAN of any of its obligations under
          this Agreement or warranties of ELAN.

     8.   TARGON shall assume the sole and entire responsibility and shall
          indemnify and save harmless ELAN from any and all claims, liabilities,
          expenses, including reasonable attorney's fees, responsibilities and
          damages by reason of any claim, proceedings, action, liability or
          injury arising out of any faults of the PRODUCT resulting from the
          transport, packaging, storage, handling, distribution, marketing or
          sale of the PRODUCT by TARGON, to the extent that it was caused by the
          negligence or wrongful acts or omissions on the part of TARGON.
 
     9.   As a condition of obtaining an indemnity in the circumstances set out
          above, the Party seeking an indemnity shall:
 
          9.1. fully and promptly notify the other Party of any claim or
               proceeding, or threatened claim or proceeding;
 
          9.2. permit the indemnifying Party to take full care and control of
               such claim or proceeding;

          9.3. assist in the investigation and defence of such claim or
               proceeding;

          9.4. not compromise or otherwise settle any such claim or proceeding
               without the prior written consent of the other Party, which
               consent shall not be unreasonably withheld; and

          9.5. take all reasonable steps to mitigate any loss or liability in
               respect of any such claim or proceeding.
 
     10.  Notwithstanding anything to the contrary in this Agreement, ELAN and
          TARGON shall not be liable to the other by reason of any
          representation or warranty, condition or other term or any duty of
          common law, or under the express terms of this Agreement, for any
          consequential or incidental loss or damage (whether for loss of profit
          or otherwise) and whether occasioned by the negligence of the
          respective Parties, their employees or agents or otherwise  For the
          avoidance of doubt, the Parties agree that TARGON's liability for
          damages awarded to an

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

                                 Page 35 of 54
<PAGE>
 
          individual third party consumer in respect of a product liability type
          claim shall not of itself constitute consequential or incidental loss
          or damage.
 
     11.  ELAN represents and warrants that Elan Corporation plc will provide
          Elan Pharma Limited, Elan Pharma Inc. or any other subsidiaries with a
          licence and the rights to manufacture the PRODUCT in accordance with
          the terms of this Agreement.

ARTICLE VIII : CUSTOMER COMPLAINTS; PRODUCT RECALL
------------   -----------------------------------

     1.   TARGON shall notify ELAN promptly of any complaints reported to TARGON
          which relate to the manufacture or packaging of the PRODUCT.  In
          addition, TARGON shall notify ELAN promptly of any serious or
          unexpected adverse events resulting from the use of the PRODUCT.  ELAN
          agrees to notify TARGON promptly of any complaints reported by third
          parties in relation to the PRODUCT to ELAN and any serious or
          unexpected adverse events reported to ELAN in relation to the PRODUCT.
          TARGON and ELAN shall establish a procedure for complaint handling and
          formal adverse event handling and reporting.  As part of their
          regulatory obligations, it is envisaged that TARGON shall be
          responsible for furnishing post-marketing reports, IND safety reports,
          as well as periodic reports (where appropriate) to the FDA and any
          other REGULATORY AUTHORITY.  TARGON and ELAN shall keep each other
          informed regarding adverse event reporting in relation to the PRODUCT,
          with each Party copying the other with all such communications with
          regulatory authorities.

     2.   In the event of any recall of the PRODUCT, as requested by any
          governmental authority, TARGON shall perform the recall of the PRODUCT
          in the TERRITORY.  If the recall arises from ELAN's acts or omissions,
          such as in the design, manufacturing or delivery of the PRODUCT, the
          recall costs shall be borne by ELAN.  In all other events the recall
          costs shall be borne by TARGON.

     3.   TARGON and ELAN shall establish a procedure for formal complaint
          handling and reporting in accordance with the requirements of the FDA
          and the REGULATORY AUTHORITIES.  TARGON and ELAN shall keep each other
          informed and shall copy the other Party with all communications with
          the FDA and the REGULATORY AUTHORITY.


ARTICLE IX:    PROJECT TEAM, MEETINGS
-----------    -----------------------

     1.   It is recognised by the Parties hereto that a significant resource
          shall be required from each Party to accomplish a successful NDA
          APPROVAL and launch of the PRODUCT, particularly in the co-ordination
          of logistics, finalisation of various

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                                 Page 36 of 54
<PAGE>
 
          specifications, methodologies transfer, supply and packaging
          configurations, shipping and handling procedures etc.

          Accordingly following execution of this agreement, a PROJECT TEAM
          shall be appointed with representation from TARGON, ELAN and CYTOGEN.
          TARGON shall be responsible for the planning and day to day activities
          of the development programmes.  In the event TARGON wishes to effect
          any significant changes to the development programmes, it shall first
          inform ELAN and CYTOGEN thereof.

     2.   Unless both Parties agree otherwise, the PROJECT TEAM shall meet at
          least once each calendar quarter, whether in person or by video
          conference, such meetings to continue until the time of launch or some
          such later time thereafter as may be agreed.  The PROJECT TEAM shall
          be chaired by a TARGON designee.  The PROJECT TEAM shall review
          progress of the development programmes and shall report thereon to the
          management of TARGON, ELAN and CYTOGEN.  The PROJECT TEAM shall
          prepare for the launch of the PRODUCT and finalising all joint
          preparations therefor.  The PROJECT TEAM shall review the regulatory
          and commercialisation strategy for the PRODUCT on an ongoing basis.
          At and between meetings of the PROJECT TEAM, each Party shall keep the
          other fully and regularly informed as to its progress with its
          respective obligations.

     3.   The PROJECT TEAM shall not be empowered to alter the terms of this
          Agreement.
 

ARTICLE X        PATENTS
---------        -------

     1.   ELAN and TARGON will [Information omitted and filed separately with
          the Commission under Rule 24b-2].
 
     2.   [Information omitted and filed separately with the Commission under
          Rule 24b-2].

     3.   With respect to the ELAN INTELLECTUAL PROPERTY, ELAN shall have the
          right to apply for patent protection in its own name and at its own
          expense.  Should it however be doubtful whether a patent may be
          obtained, then ELAN may at its sole discretion decide not to apply for
          a patent in one or more countries of the TERRITORY.


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                                 Page 37 of 54
<PAGE>
 
          If such a patent is obtained, such a patent shall constitute ELAN
          PATENT RIGHTS and TARGON shall have for the duration of this Agreement
          a right thereunder to have manufactured pursuant to the terms of this
          Agreement, to prepare, use and sell the PRODUCT as specified in
          Article II Paragraph 1.

     4.   TARGON and ELAN shall promptly inform the other in writing of any
          alleged infringement of which it shall become aware by a third party
          of any patents within the ELAN PATENT RIGHTS and provide such other
          with any available evidence of infringement.

     5.   TARGON and ELAN shall promptly inform the other in writing of any
          alleged infringement of which it shall become aware by a third party
          of any patents within the ELAN PATENT RIGHTS and provide such other
          with any available evidence of infringement.  TARGON and ELAN shall
          promptly inform the other in writing of any alleged infringement of
          which it shall become aware by a third party of any patents within the
          TARGON PATENT RIGHTS and provide such other with any available
          evidence of infringement.
 
     6.   In the event that a [Information omitted and filed separately with the
          Commission under Rule 24b-2



                         ].


ARTICLE XI:    TERM AND TERMINATION
----------     --------------------

     1.   This Agreement is concluded for a period commencing as of the date of
          this Agreement and shall expire on a country by country basis fifteen
          (15) years starting from the EFFECTIVE DATE, or for the life of the
          last to expire patent included in the ELAN PATENT RIGHTS, whichever is
          longer ("the TERM").  At the end of the TERM, the Agreement shall
          continue automatically for an additional period or periods of two (2)
          years, unless the Agreement has been terminated by TARGON or ELAN on
          serving one (1) year's written notice on the other prior to the end of
          the TERM or any additional two (2) year period.

     2.1. In addition to the rights of early or premature termination provided
          for elsewhere in this Agreement, in the event that any of the terms or
          provisions hereof are incurably breached by either Party, the non-
          breaching Party may immediately terminate this Agreement by written
          notice.

          An incurable breach shall be committed when either Party is dissolved,
          liquidated, discontinued, becomes insolvent, or when any proceeding is
          filed or commenced by

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                                 Page 38 of 54
<PAGE>
 
          either Party under bankruptcy, insolvency or debtor relief laws (and
          not dismissed within ninety (90) days. For the purposes of this
          Agreement, an "incurable" breach shall be committed when a company
          with a directly competing product to the PRODUCT acquires twenty (20%)
          per cent or more of TARGON's voting stock, or where TARGON acquires a
          technological competitor of ELAN or a company with a directly
          competing product to the PRODUCT.

          Subject to the other provisions of this Agreement, in the event of any
          other material breach, the non-breaching Party may terminate this
          Agreement by the giving of written notice to the breaching Party that
          this Agreement will terminate on the [Information omitted and filed
          separately with the Commission under Rule 24b-2] from notice unless
          cure is sooner effected.  If the breaching Party has proposed a course
          of action to rectify the breach and is acting in good faith to rectify
          same but has not cured the breach by the [Information omitted and
          filed separately with the Commission under Rule 24b-2], the said
          period shall be extended by such period as is reasonably necessary to
          permit the breach to be rectified.

     2.2. Subject to the determination in an arbitration that TARGON has
          breached the applicable provisions, ELAN may terminate the Agreement
          for the applicable region(s) or country or countries of the TERRITORY
          if TARGON breaches the provisions of Article II Paragraph 9, or TARGON
          indicates to ELAN pursuant to Article II Paragraph 9.3, that it does
          not intend to obtain registration approval and commercialise the
          PRODUCT, and ELAN does not exercise its option to take a licence to
          the TARGON PATENT RIGHTS and the TARGON KNOW-HOW and the TRADEMARK in
          accordance with Article II Paragraph 9.3.

     3.   Upon termination of the Agreement:

          3.1. any sums that were due from TARGON to ELAN prior to the exercise
               of the right to terminate this Agreement, shall be paid in full
               within sixty (60) days of termination of this Agreement;
 
          3.2. all confidentiality provisions (other than the obligations set
               out in Article XII Paragraph 1.1. as they effect ELAN in the
               event of termination of this Agreement by ELAN pursuant to
               Article XI Paragraph 2 due to the breach by TARGON) set out in
               this Agreement shall remain in full force and effect for a period
               of five (5) years;

          3.3. all representations and warranties shall insofar are appropriate
               remain in full force and effect;
 
          3.4. the rights of inspection and audit shall continue in force for
               the period referred to in the relevant provisions of this
               Agreement;


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                                 Page 39 of 54
<PAGE>
 
          3.5.  termination of this Agreement for any reason shall not release
                any Party hereto from any liability which, at the time of such
                termination, has already accrued to the other Party or which is
                attributable to a period prior to such termination nor preclude
                either Party from pursuing all rights and remedies it may have
                hereunder or at law or in equity with respect to any breach of
                this Agreement;

          3.6.  save and except as is necessary to enable ELAN to exercise the
                licenses granted by TARGON to ELAN pursuant to Article II
                Paragraph 9.3. TARGON and ELAN shall promptly return to the
                other Party all CONFIDENTIAL INFORMATION received from the other
                Party (except one copy of which may be retained for archival
                purposes);

          3.7.  in the event this Agreement is terminated by ELAN or TARGON
                pursuant to Article XI Paragraph 2, TARGON and its sublicensees
                shall have the right for a period of six (6) months from
                termination to sell or otherwise dispose of the stock of any
                PRODUCTS then on hand, which such sale shall be subject to
                Article V and the other applicable terms of this Agreement;

          3.8.  the licences granted by ELAN to TARGON shall terminate and ELAN
                shall thenceforth be entitled to exploit the ELAN INTELLECTUAL
                PROPERTY together with any improvements made by TARGON to the
                ELAN INTELLECTUAL PROPERTY; and

          3.10. Articles I, Article II Paragraph 3, Article II Paragraph 9.3,
                Article V Paragraph 7, Article VII, Article VIII, Article XI and
                Article XII shall survive the termination or expiration of this
                Agreement for any reason.

 


ARTICLE XII:        SUNDRY CLAUSES
-----------         --------------

     1.   Secrecy
          -------

     1.1. Any CONFIDENTIAL INFORMATION pertaining to the PRODUCT that has been
          or will be communicated or delivered by ELAN to TARGON, and any
          information from time to time communicated or delivered by TARGON to
          ELAN, including, without limitation, trade secrets, business methods,
          and cost, supplier, manufacturing and customer information, shall be
          treated by TARGON and ELAN, respectively, as information, and shall
          not be disclosed or revealed to any third party whatsoever or used in
          any manner except as expressly provided for herein; provided, however,
          that such CONFIDENTIAL INFORMATION shall not be subject to the
          restrictions and prohibitions set forth in this section to



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                                 Page 40 of 54
<PAGE>
 
          the extent that such CONFIDENTIAL INFORMATION, and shall not be
          disclosed or revealed to any third party whatsoever or used in any
          manner except as expressly provided for herein; provided, however,
          that such CONFIDENTIAL INFORMATION shall not be subject to the
          restrictions and prohibitions set forth in this section to the extent
          that such CONFIDENTIAL INFORMATION:

          1.1.1.  is available to the public in public literature or otherwise,
                  or after disclosure by one Party to the other becomes public
                  knowledge through no default of the Party receiving such
                  information; or

          1.1.2.  was known to the Party receiving such information prior to the
                  receipt of such information by such Party, whether received
                  before or after the date of this Agreement; or

          1.1.3.  is obtained by the Party receiving such information from a
                  third party not subject to a requirement of confidentiality
                  with respect to such information; or

          1.1.4.  is required to be disclosed pursuant to: (A) any order of a
                  court having jurisdiction and power to order such information
                  to be released or made public; or (B) other requirement of
                  law; provided that if the receiving Party becomes legally
                  required to disclose any CONFIDENTIAL INFORMATION, the
                  receiving Party shall give the disclosing Party prompt notice
                  of such fact so that, to the extent permitted by law, the
                  disclosing Party may obtain a protective order or other
                  appropriate remedy concerning any such disclosure.

                  The receiving Party shall fully cooperate with the disclosing
                  Party in connection with the disclosing Party's efforts to
                  obtain any such order or other remedy. If any such order or
                  other remedy does not fully preclude disclosure, the receiving
                  Party shall make such disclosure only to the extent that such
                  disclosure is legally required; or

          1.1.5.  is independently developed by or for the Party by persons not
                  having access to the CONFIDENTIAL INFORMATION of the other
                  Party.

     1.3. Each Party shall take all such precautions as it normally takes with
          its own CONFIDENTIAL INFORMATION to prevent any improper disclosure of
          such CONFIDENTIAL INFORMATION to any third party; provided, however,
          that such CONFIDENTIAL INFORMATION may be disclosed within the limits
          required to obtain any authorisation from the REGULATORY AUTHORITY or,
          with the prior written consent of the other Party, which shall not be
          unreasonably withheld, or as may otherwise be required in connection
          with the purposes of this Agreement.

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                                 Page 41 of 54
<PAGE>
 
     1.4. TARGON agrees that it will not use, directly or indirectly, any ELAN
          INTELLECTUAL PROPERTY, or other CONFIDENTIAL INFORMATION disclosed to
          TARGON or obtained from ELAN pursuant to this Agreement, other than as
          expressly provided herein.

          ELAN agrees that it will not use, directly or indirectly, any TARGON
          KNOW-HOW, TARGON PATENT RIGHTS or other CONFIDENTIAL INFORMATION
          disclosed to ELAN or obtained from TARGON pursuant to this Agreement,
          other than as expressly provided herein.

     1.5. TARGON and ELAN will not publicise the existence of this Agreement in
          any way without the prior written consent of the other subject to the
          disclosure requirements of applicable laws and regulations.  In the
          event that either Party wishes to make an announcement concerning the
          Agreement, that Party will seek the consent of the other Party.  The
          terms of any such announcement shall be agreed in good faith.

     1.6. Each Party may make such disclosure to its directors, officers and
          agents and, in the case of TARGON, its potential and actual
          sublicensees and other Third Parties to whom such disclosure is
          appropriate to enable TARGON to conduct its regular business (each of
          whom shall be bound by TARGON's customary confidential disclosure
          agreements), who shall be informed of such confidentiality obligation
          and for whose breach the disclosing Party shall be responsible.

          1.7.  Except as required by law, each Party agrees that it shall not
          publish or present the results of studies carried out pursuant to the
          Agreement without the opportunity for prior review by the other Party
          where the intellectual property of the other Party is incorporated in
          such study.  Each Party shall provide to the other the opportunity for
          review any proposed extracts, manuscripts or presentations (including
          information to be presented verbally) which relate to the PRODUCT at
          least sixty (60) days prior to their intended submission for
          publication and such submitting Party agrees, upon written request
          from the other Party, not to submit such abstract or manuscript for
          publication or to make such presentation until the other Party is
          given a reasonable period of time to seek patent protection for any
          material in such publication or presentation which it believes to be
          patentable.  Each Party shall be entitled to require that a proposed
          publication or presentation be delayed or withheld until significantly
          more data has been developed if it reasonably believes that the
          disclosure will seriously limit the patent protection available.

     2.   Assignments/ Sub-contracting
          ----------------------------

          This Agreement may not be assigned by either Party without the prior
          written consent of the other Party not to be unreasonably withheld or
          delayed.  Consent



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                                 Page 42 of 54
<PAGE>
 
          shall be not be deemed to be unreasonably withheld if the Party whose
          consent is required would be subject to a higher net tax on payments
          made hereunder after taking into account any applicable tax treaty and
          available tax credits, than the said Party was subject to before the
          proposed assignment.
 
          Notwithstanding the foregoing provisions, ELAN and TARGON shall be
          entitled to assign its rights and obligations to an AFFILIATE provided
          that such assignment shall not have an adverse tax effect on the other
          party.  ELAN shall have the right to subcontract all or any portion of
          its duties, including the manufacture of the PRODUCT by a third party,
          provided that in the event that ELAN proposes to sub-contract all or
          part of the manufacture of the PRODUCT, TARGON has consented to the
          identity of the sub-contractor, which consent shall not be
          unreasonably withheld.  Subject to the applicable provisions of this
          Agreement including Article II Paragraph 11 and Article VI Paragraph
          1, TARGON shall have the right to subcontract all or any portion of
          its duties, provided that in the event that ELAN has consented to the
          identity of the sub-contractor, which consent shall not be
          unreasonably withheld.

     3.   Parties bound
          -------------

          This Agreement shall be binding upon and enure for the benefit of
          Parties hereto, their successors and permitted assigns.

     4.   Severability
          ------------
 
          If any provision in this Agreement is agreed by the Parties to be, or
          is deemed to be, or becomes invalid, illegal, void or unenforceable
          under any law that is applicable hereto, (i) such provision will be
          deemed amended to conform to applicable laws so as to be valid and
          enforceable or, if it cannot be so amended without materially altering
          the intention of the Parties, it will be deleted, with effect from the
          date of such agreement or such earlier date as the Parties may agree,
          and (ii) the validity, legality and enforceability of the remaining
          provisions of this Agreement shall not be impaired or affected in any
          way.

 
     5.   Force Majeure
          -------------

          Neither Party to this Agreement shall be liable for delay in the
          performance of any of its obligations hereunder if such delay results
          from causes beyond its reasonable control, including, without
          limitation, acts of God, fires, strikes, acts of war, or intervention
          of a relevant government authority, non availability of raw materials,
          but any such delay or failure shall be remedied by such Party as soon
          as practicable.
 
     6.   Relationship of the Parties
          ---------------------------
 

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                                 Page 43 of 54
<PAGE>
 
          Nothing contained in this Agreement is intended or is to be construed
          to constitute ELAN and TARGON as partners or joint venturers or either
          Party as an employee of the other.

          Neither Party hereto shall have any express or implied right or
          authority to assume or create any obligations on behalf of or in the
          name of the other Party or to bind the other Party to any contract,
          agreement or undertaking with any third party.
 
     7.   Amendments
          ----------

          No amendment, modification or addition hereto shall be effective or
          binding on either Party unless set forth in writing and executed by a
          duly authorised representative of both Parties.
 
     8.   Waiver
          ------
 
          No waiver of any right under this Agreement shall be deemed effective
          unless contained in a written document signed by the Party charged
          with such waiver, and no waiver of any breach or failure to perform
          shall be deemed to be a waiver of any future breach or failure to
          perform or of any other right arising under this Agreement.
 
     9.   Headings
          --------
 
          The section headings contained in this Agreement are included for
          convenience only and form no part of the agreement between the
          Parties. Save as otherwise provided herein, references to articles,
          paragraphs, clauses and appendices are to those contained in this
          Agreement.

     10.  No effect on other agreements
          -----------------------------
 
          No provision of this Agreement shall be construed so as to negate,
          modify or affect in any way the provisions of any other agreement
          between the Parties unless specifically referred to, and solely to the
          extent provided, in any such other agreement.

     11.  Applicable Law
          --------------

          This Agreement is construed under and ruled by the laws of the State
          of New York.  For the purpose of this Agreement the Parties submit to
          the exclusive jurisdiction of the United States District Court for the
          District of New York.

     12.  Arbitration
          -----------

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                                 Page 44 of 54
<PAGE>
 
          Any dispute under this Agreement which is not settled by mutual
          consent and which is the subject of an arbitration clause shall be
          finally settled by binding arbitration, conducted in accordance with
          the Commercial Arbitration Rules of the American Arbitration
          Association by an arbitrator appointed in accordance with said rules.
          The arbitration shall be held in New York, New York and the arbitrator
          shall be to the extent practicable experienced as to the subject
          matter of the dispute such as an independent expert in pharmaceutical
          product development and marketing (including clinical development and
          regulatory affairs) or an independent patent attorney as the case may
          be.

          The arbitrator shall determine what discovery will be permitted,
          consistent with the goal of limiting the cost and time which the
          Parties must expend for discovery; provided the arbitrator shall
          permit such discovery as he deems necessary to permit an equitable
          resolution of the dispute.  Any written evidence originally in a
          language other than English shall be submitted in English translation
          accompanied by the original or a true copy thereof.  The costs of the
          arbitration, including administrative and arbitrator's fees, shall be
          shared equally by the Parties and each Party shall bear its own costs
          and attorneys' and witness' fees incurred in connection with the
          arbitration; provided that the prevailing Party may be awarded the
          reasonable costs and fees incurred in connection with the arbitration
          at the discretion of the arbitrator.

          A disputed performance or suspended performances pending the
          resolution of the arbitration must be completed within thirty (30)
          days following the final decision of the arbitrators or such other
          reasonable period as the arbitrators determine in a written opinion.

          Any arbitration subject to this Paragraph 12 shall be completed within
          one (1) year from the filing of notice of a request for such
          arbitration.  The arbitration proceedings and the decision shall not
          be made public without the joint consent of the Parties and each Party
          shall maintain the confidentiality of such proceedings and decision
          unless (a) otherwise permitted by the other Party or (b) otherwise
          required by the applicable law in which case the provisions of Article
          XII Paragraph 1.1.4. shall be applicable.  The Parties agree that the
          decision shall be the sole, exclusive and binding remedy between them
          regarding any and all disputes, controversies, claims and
          counterclaims presented to the arbitrators.  Application may be made
          to any court having jurisdiction over the Party (or its assets)
          against whom the decision is rendered for a judicial recognition of
          the decision and an order of enforcement.


     13.  Notice
          ------

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                                 Page 45 of 54
<PAGE>
 
     13.1. Any notice to be given under this Agreement shall be sent in writing
           in English by registered airmail or telecopied to:

              -  ELAN at
                    Elan Corporation plc.
                    Lincoln House,
                    Lincoln Place
                    Dublin 2
                    Ireland.
             
                    Attention:  Vice President and General Counsel, Elan
                                Pharmaceutical Technologies, a division of Elan
                                Corporation, plc
                                 
                    Telephone:  353 1 709 4000
                    Telefax :   353 1 6624960
 
              -  TARGON at
                    600 College Road East
                    CN 5308
                    Princeton, New Jersey 08540-5308
                    United States of America
 
                    Attention:  President
                    Telephone:  1 609 419 4105
                    Telefax  1 609 419 1999



          with a copy to

              -  Cytogen Corporation at
                    600 College Road East
                    CN 5308
                    Princeton, New Jersey 08540-5308
                    United States of America

                    Attention:  General Counsel and Corporate Secretary
                    Telephone:   1 609 520 3063
                    Telefax  1 609 952 9298


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                                 Page 46 of 54
<PAGE>
 
                or to such other address(es) and telecopier numbers as may from
                time to time be notified by either Party to the other hereunder.

     13.2.  Any notice sent by mail shall be deemed to have been delivered
            within seven (7) working days after despatch and any notice sent by
            telex or telecopy shall be deemed to have been delivered within
            twenty four (24) hours of the time of the despatch. Notice of change
            of address shall be effective upon receipt.


IN WITNESS THEREOF the Parties hereto have executed this Agreement in duplicate.


Executed by TARGON on 21st July, 1997


By :  /s/ Michael Sember
       ----------------------------

Name:  Michael Sember
       ----------------------------

Title: Chairman and CEO
       ---------------------------- 

Executed by ELAN 21st July, 1997


By :  /s/ Kevin Insley
       ----------------------------

Name:  Kevin Insley
       ----------------------------

Title: President and CFO, Elan International Services, Ltd.,
       ----------------------------------------------------- 
       Subsidiary of Elan Corporation
       ------------------------------

                                 Page 47 of 54
<PAGE>
 
                                   APPENDIX A


                               ELAN PATENT RIGHTS








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

                                 Page 48 of 54
<PAGE>
 
                                   APPENDIX B


                               MANUFACTURING COST


     [Information omitted and filed separately with the Commission under Rule
24b-2






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

                                 Page 49 of 54
<PAGE>
 
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                                 Page 50 of 54
<PAGE>
 
               ].






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                                 Page 51 of 54
<PAGE>
 
                                   APPENDIX C

                         RESEARCH AND DEVELOPMENT COST






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

                                 Page 52 of 54
<PAGE>
 
                                   APPENDIX D

                                 SPECIFICATIONS

Once-daily oral morphine capsules, containing SODAS(R) beads in up to
[Information omitted and filed separately with the Commission under Rule 24b-2].
Formulation as per Lot No. PD 14625.

The SPECIFICATIONS are considered to be in draft format and any further changes
or amendments thereto shall be effected within ninety (90) days of the EFFECTIVE
DATE.





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                                 Page 53 of 54
<PAGE>
 
                                   APPENDIX E

                              TECHNICAL AGREEMENT







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                                 Page 54 of 54