<PAGE>   1
                                                                   EXHIBIT 10.01





                           EXCLUSIVE LICENSE AGREEMENT


                                 BY AND BETWEEN


                               ATHEROGENICS, INC.

                                       AND

                              SCHERING-PLOUGH LTD.







[*]  Certain confidential information contained in this document, marked by an
     asterisk within brackets, has been omitted and filed separately with the
     Securities and Exchange Commission pursuant to a request for confidential
     treatment under Rule 406 of the Securities Act of 1933, as amended.




<PAGE>   2

                                TABLE OF CONTENTS
                           EXCLUSIVE LICENSE AGREEMENT

<TABLE>
<CAPTION>
                                                                                                       PAGE
                                                                                                       ----

<S>        <C>                                                                                         <C>
ARTICLE I - DEFINITIONS..................................................................................1

1.1        AFFILIATE.....................................................................................1
1.2        CALENDAR QUARTER..............................................................................1
1.3        CALENDAR YEAR.................................................................................2
1.4        COMBINATION PRODUCT...........................................................................2
1.5        COMPOUND LIBRARY..............................................................................2
1.6        COST OF GOODS.................................................................................2
1.7        EFFECTIVE DATE................................................................................2
1.9        FIRST COMMERCIAL SALE.........................................................................2
1.9        HRD...........................................................................................2
1.10       HSR ACT.......................................................................................2
1.11       "IMPROVEMENT".................................................................................2
1.13       LICENSED COMPOUND.............................................................................3
1.14       LICENSED PRODUCT(S)...........................................................................3
1.15       LICENSOR KNOW-HOW.............................................................................3
1.16       NDA...........................................................................................4
1.17       NET SALES.....................................................................................4
1.18       PATENT RIGHTS.................................................................................5
1.19       PRIMARY INDICATION............................................................................5
1.20       PROPRIETARY INFORMATION.......................................................................5
1.21       REGULATORY APPROVAL...........................................................................5
1.22       "SECONDARY INDICATION"........................................................................5
1.23       "SUBLICENSEE".................................................................................5
1.24       "TERRITORY"...................................................................................6
1.25       "TERM"........................................................................................6
1.26       US AGREEMENT..................................................................................6
1.27       VALID CLAIM...................................................................................6

ARTICLE II - LICENSE; DISCLOSURE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION.......................6

2.1        EXCLUSIVE LICENSE GRANT.......................................................................6
      (a)  License.......................................................................................6
      (a)  Co-Exclusive License to Other Indications.....................................................6
      (c)  Right to Sublicense...........................................................................7
      (d)  Retained Rights...............................................................................7
      (e)  Third Party Agreements........................................................................7
2.2        NON-EXCLUSIVE LICENSE GRANT...................................................................7
2.3        DISCLOSURE OF INFORMATION.....................................................................8
</TABLE>


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<TABLE>
<S>        <C>                                                                                         <C>
2.4        HSR FILING AND APPROVALS......................................................................8
      (a)  HSR Filing....................................................................................8
      (b)  Licensor's Obligations........................................................................8
      (c)  Additional Approvals..........................................................................9
2.5        JOINT MANAGEMENT COMMITTEE....................................................................9
      (a)  Composition of the JMC........................................................................9
      (b)  JMC Meetings..................................................................................9
      (c)  JMC Responsibilities.........................................................................10
      (d)  Deadlock.....................................................................................10
2.6        SPL'S DEVELOPMENT OBLIGATIONS................................................................10
      (a)  SPL Diligence................................................................................10
      (b)  Opportunity to Cure..........................................................................10
      (c)  Research and Development Activities..........................................................11
      (d)  Licensed Product Registrations; Pricing Reimbursement Approvals..............................11
      (e)  Data.........................................................................................11
      (f)  Assistance by Licensor.......................................................................11
      (g)  Reimbursement of Costs by SPL................................................................12
      (h)  Licensor's Additional Development Obligations................................................12
      (i)  Adverse Event Reporting......................................................................13
2.7        INDEPENDENT DISCOVERIES BY SPL...............................................................13
2.8        EXCUSED PERFORMANCE..........................................................................13
2.9        SUPPLY OF LICENSED COMPOUND/LICENSED PRODUCT.................................................14
2.10       REPORTS......................................................................................14
2.11       NON-COMPETE PROVISION........................................................................14

ARTICLE III - PAYMENTS; ROYALTIES AND REPORTS...........................................................15

3.0        COORDINATION OF PAYMENTS UNDER THE US AGREEMENT..............................................15
3.1        LICENSE FEE..................................................................................15
      (a)  Development Milestones.......................................................................15
      (b)  Sales Milestones.............................................................................16
      (c)  Limitations..................................................................................16
3.3        ROYALTIES....................................................................................17
      (a)  Cap on Royalties Plus Cost of Goods..........................................................17
      (b)  Licensor's Option to Manufacture.............................................................18
      (c)  Royalty Reduction............................................................................18
3.4        THIRD PARTY LICENSES.........................................................................18
3.5        COMPULSORY LICENSES..........................................................................19
3.6        REPORTS AND PAYMENT OF ROYALTY; PAYMENT
           EXCHANGE RATE AND CURRENCY CONVERSIONS.......................................................19
      (a)  Royalties Paid Quarterly.....................................................................19
      (b)  Method of Payment............................................................................19
3.7        MAINTENANCE OF RECORDS; AUDITS...............................................................20
      (a)  Record Keeping by SPL........................................................................20
</TABLE>


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<TABLE>
<S>        <C>                                                                                         <C>
      (b)  Underpayments/Overpayments...................................................................20
      (c)  Record Keeping by Sublicensee................................................................20
      (d)  Confidentiality..............................................................................20
      (e)  Binding Records..............................................................................21
3.8        INCOME TAX WITHHOLDING.......................................................................21
3.9        DIRECT AFFILIATE LICENSES....................................................................21

ARTICLE IV - PATENTS....................................................................................21

4.1        FILING, PROSECUTION AND MAINTENANCE OF PATENTS...............................................21
4.2        OPTION OF SPL TO PROSECUTE AND MAINTAIN PATENTS..............................................22
4.3        ENFORCEMENT..................................................................................22
      (a)  Notice and Discontinuance of Infringement....................................................22
      (b)  Continuance of Infringement..................................................................23
4.4        THIRD PARTY INFRINGEMENT SUIT................................................................23
      (a)  Defense......................................................................................23
      (b)  Licensing....................................................................................23
4.5        CERTIFICATION UNDER DRUG PRICE COMPETITION
           AND PATENT RESTORATION ACT...................................................................24
4.6        ABANDONMENT..................................................................................24
4.7        PATENT TERM RESTORATION......................................................................24
4.8        NOTICES REGARDING PATENTS....................................................................24

ARTICLE V - CONFIDENTIALITY AND PUBLICATION.............................................................25

5.1        CONFIDENTIALITY..............................................................................25
      (a)  Nondisclosure Obligation.....................................................................25
      (b)  Disclosure to Agents.........................................................................26
      (c)  Disclosure to a Third Party..................................................................26
5.2        PUBLICITY....................................................................................26
5.3        PUBLICATION..................................................................................27

ARTICLE VI - REPRESENTATIONS AND WARRANTIES.............................................................27

6.1        REPRESENTATIONS AND WARRANTIES OF EACH PARTY.................................................27
6.2        LICENSOR'S REPRESENTATIONS...................................................................28
6.3        CONTINUING REPRESENTATIONS...................................................................30
6.4        NO INCONSISTENT AGREEMENTS...................................................................30
6.5        REPRESENTATION BY LEGAL COUNSEL..............................................................30
6.6        ADDITIONAL OBLIGATIONS OF LICENSOR...........................................................30


ARTICLE VII - INDEMNIFICATION AND LIMITATION ON LIABILITY...............................................31

7.1        INDEMNIFICATION BY SPL.......................................................................32
7.2        INDEMNIFICATION BY LICENSOR..................................................................32
7.3        CONDITIONS TO INDEMNIFICATION................................................................32
7.4        SETTLEMENTS..................................................................................33
7.5        LIMITATION OF LIABILITY......................................................................33
</TABLE>


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<TABLE>
<S>        <C>                                                                                         <C>
7.6        INSURANCE....................................................................................33

ARTICLE VIII - TERM AND TERMINATION.....................................................................33

8.1        TERM AND EXPIRATION..........................................................................33
8.2        TERMINATION BY SPL WITHOUT CAUSE.............................................................33
8.3        TERMINATION UPON CESSATION OF DEVELOPMENT....................................................33
      (a)  Termination by Either Party..................................................................34
      (b)  Termination by Licensor......................................................................34
8.4        TERMINATION..................................................................................34
      (a)  Termination for Cause........................................................................34
      (b)  Effect of Termination for Cause on License...................................................35
           (i) Termination by SPL.......................................................................35
           (ii)Termination by Licensor..................................................................35
           (iii)Effect of Bankruptcy....................................................................35
8.5        EFFECT OF TERMINATION........................................................................35
8.6        REMEDIES FOR BREACH..........................................................................36
8.7        LICENSOR'S RIGHTS ON TERMINATION.............................................................36
8.8        CONCURRENT TERMINATION WITH THE US AGREEMENT.................................................37

ARTICLE IX - MISCELLANEOUS..............................................................................37

9.1        ASSIGNMENT/CHANGE OF CONTROL.................................................................37
      (a)  Assignment...................................................................................37
      (a)  Change of Control............................................................................37
9.2        GOVERNING LAW................................................................................38
9.3        WAIVER.......................................................................................38
9.4        INDEPENDENT RELATIONSHIP.....................................................................38
9.5        EXPORT CONTROL...............................................................................38
9.6        COMPLETE AGREEMENT...........................................................................38
      (a)  Entire Agreement; Amendment..................................................................39
      (b)  Relationship to US Agreement; Controlling Provisions.........................................39
9.7        NOTICES......................................................................................39
9.8        PROVISIONS FOR INSOLVENCY....................................................................40
      (a)  Effect on Licenses...........................................................................40
      (b)  Rights to Intellectual Property..............................................................41
      (c)  SPL's Rights.................................................................................41
      (d)  Deemed Grant of Rights.......................................................................41
      (e)  Security Interests...........................................................................42
9.9        FORCE MAJEURE................................................................................42
9.10       SEVERABILITY.................................................................................42
9.11       COUNTERPARTS.................................................................................42
9.12       CAPTIONS.....................................................................................43
9.13       RECORDING....................................................................................43
9.14       FURTHER ACTIONS..............................................................................43
</TABLE>


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SCHEDULES

SCHEDULE 1.6               COST OF GOODS
SCHEDULE 1.18              PATENT RIGHTS
SCHEDULE 2.1(E)            THIRD PARTY AGREEMENTS
SCHEDULE 2.6(H)            DEVELOPMENT WORK TO BE PERFORMED BY LICENSOR
SCHEDULE 2.6(I)            ADVERSE EVENT REPORTING PROCEDURES
SCHEDULE 3.2               DEFINITION OF SUCCESSFUL COMPLETION
SCHEDULE 6.2(D)            GOVERNMENT RIGHTS
SCHEDULE 6.2(K)            OTHER VCAM-1 INHIBITORS
SCHEDULE 9.2               ARBITRATION PROVISIONS





                                       v

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                           EXCLUSIVE LICENSE AGREEMENT

         THIS EXCLUSIVE LICENSE AGREEMENT (the "Agreement") is made as of
October 22, 1999 by and between ATHEROGENICS, INC., a Georgia corporation having
its principal place of business at 8995 Westside Parkway, Alpharetta, Georgia
30004 (hereinafter referred to as "Licensor") and SCHERING-PLOUGH LTD., a
corporation organized and existing under the laws of Switzerland and having its
principal place of business at Toepferstrasse 5, CH 6004 Lucerne Switzerland
(hereinafter referred to as "SPL"). Licensor and SPL are sometimes referred to
herein individually as a Party and collectively as the Parties. References to
"SPL" and "Licensor" shall include their respective Affiliates (as hereinafter
defined).

         WHEREAS, Licensor has developed certain Licensor Know-How and has
rights to Patent Rights relating to soluble analogs of probucol, including
without limitation the Licensed Compound (each as hereinafter defined); and

         WHEREAS, SPL, together with its Affiliates (as hereinafter defined)
possesses extensive capabilities in the development and commercialization of
pharmaceutical products on a worldwide basis; and

         WHEREAS, SPL desires to obtain and Licensor is willing to grant to SPL,
an exclusive license under the Patent Rights and to use the Licensor Know-How,
upon the terms and conditions set forth herein.

                  NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, SPL and Licensor hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         As used in this Agreement, the following initially capitalized terms,
whether used in the singular or plural, shall have the respective meanings set
forth below:

         1.1      "Affiliate" shall mean any individual or entity directly or
indirectly controlling, controlled by or under common control with, a Party to
this Agreement. For purposes of this Agreement, the direct or indirect ownership
of [*] or more of the outstanding voting securities of an entity, or the right
to receive [*] or more of the profits or earnings of an entity shall be deemed
to constitute control. Such other relationship as in fact results in actual
control over the management, business and affairs of an entity shall also be
deemed to constitute control.

         1.2      "Calendar Quarter" shall mean the respective periods of three
(3) consecutive calendar months ending on March 31, June 30, September 30 or
December 31, for so long as this Agreement is in effect.


<PAGE>   8



         1.3      "Calendar Year" shall mean each successive period of twelve
(12) months commencing on January 1 and ending on December 31, for so long as
this Agreement is in effect.

         1.4      "Combination Product" shall mean any form or dosage of
pharmaceutical composition or preparation in final form for sale by
prescription, over-the-counter or any other method and which comprises two (2)
or more active ingredients within the same pharmaceutical formulation, at least
one (1) of which is Licensed Compound and/or any other compound from the
Compound Library.

         1.5      "Compound Library" shall mean the collection of compounds
(including, without limitation, the Licensed Compound) which as of the Execution
Date is specifically and/or generically covered by one or more claims in U.S.
Patent No. 5,262,439, entitled "Soluble Monoesters of Probucol", or any
corresponding foreign patents or patent applications. The Compound Library shall
include such compounds in any form, including any salt, hydrate or crystalline
structure thereof.

         1.6      "Cost of Goods" shall mean SPL's fully allocated manufacturing
cost of goods as determined in accordance with Schedule 1.6.

         1.7      "Effective Date" shall mean the next business day following
the last to occur of (i) expiration or earlier termination of any notice and
waiting period under the HSR Act; or (ii) the date of delivery of fully executed
counterparts of this Agreement (the "Execution Date").

         1.8      "First Commercial Sale" shall mean, with respect to any
Licensed Product, the first sale by SPL to any third party, not an Affiliate or
Sublicensee, of such Licensed Product for an indication for which SPL has
obtained Regulatory Approval.

         1.9      "HRD" shall mean a health registration dossier or its
equivalent, submitted to a national government or a supranational governmental
authority, consisting of the chemical, pharmaceutical and biological
documentation; the toxicological and pharmacological documentation; and the
clinical documentation respectively, and covering a Licensed Product which is
filed in any country outside the United States and which is analogous to a new
drug application, product license application or its equivalent filed with the
United States Food and Drug Administration seeking approval to market and sell a
Licensed Product in the Territory and including, where applicable, applications
for pricing, pricing reimbursement approval, labeling and Regulatory Approval.

         1.10     "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.

         1.11     "Improvement" shall mean any enhancement in the formulation,
preparation, presentation, means of delivery, dosage, packaging of, manufacture,
or any new or expanded


<PAGE>   9

therapeutic indications(s) for, Licensed Product or Licensed Compound, in each
case which is developed prior to or during the Term of this Agreement by or on
behalf of Licensor.

         1.12     [Section Reserved]

         1.13     "Licensed Compound" shall mean the soluble analog of probucol
AGI-1067, having the chemical name butanedioic acid, mono[4-[[1-[3,5-bis(1,1-
dimethyethyl)-4-hydroxyphenyl]thio]-1-[methylethylthio]-2,6-bis(1,1-
dimethylethyl)-phenyl]ester, and any stereoisomers, salts, hydrates and/or
crystalline forms thereof.

         1.14     "Licensed Product(s)" shall mean any form or dosage of
pharmaceutical composition or preparation in final form for sale by
prescription, over-the-counter or any other method, which contains as an active
ingredient the Licensed Compound and/or any other compound from the Compound
Library, including, without limitation, Combination Products; provided, however,
that Licensed Product shall not include topical dermatological products as
described in Section 2.11(c).

         1.15     "Licensor Know-How" shall mean any of Licensor's information
and materials specifically relating to the research, development, registration,
manufacture, marketing, use or sale of Licensed Compound and/or Licensed Product
and/or the Compound Library, and which prior to or during the Term of this
Agreement are developed by or at the request of Licensor, or those of its
Affiliates involved in the performance of development of Licensed Product under
Article 2, or are in Licensor's or such Affiliates' possession or control
through license or otherwise (provided that Licensor is permitted to make
disclosure thereof to SPL without violating the terms of any third party
agreement), and which are not generally known. Licensor Know-How shall include,
without limitation, discoveries, practices, methods, knowledge, Improvements,
processes, formulas, data, ideas, skill, experience, inventions, know-how,
technology, trade secrets, manufacturing procedures, purification and isolation
techniques, instructions, test data and other intellectual property, patentable
or otherwise, relating to Licensed Compound, Licensed Product or any
Improvements. Licensor Know-How shall also include, without limitation:

         (i)      all biological, chemical, pharmacological, toxicological,
                  pharmaceutical, physical and analytical, clinical, safety,
                  manufacturing and quality control data and information related
                  thereto;

         (ii)     compositions of matter, assays and biological materials
                  specifically relating to development, manufacture, use or sale
                  of any Licensed Compound, Licensed Product or Improvement; and

         (iii)    all applications, registrations, licenses, authorizations,
                  approvals and correspondence submitted to or received from any
                  regulatory authorities with jurisdiction in the Territory over
                  an investigational drug containing Licensed


                                       3
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                  Compound and/or Licensed Product (including, without
                  limitation, minutes and meeting notes relating to any
                  communications with any regulatory authority with jurisdiction
                  in the Territory over an investigational drug containing
                  Licensed Compound and/or Licensed Product).

         1.16     "NDA" shall mean a New Drug Application or its equivalent
filed with the United States Food and Drug Administration seeking approval to
market and sell a Licensed Product in the United States.

         1.17     "Net Sales" shall mean the amounts actually received on all
sales of Licensed Product by SPL, its Affiliates or Sublicensees to an
unaffiliated third party, and exclusive of intercompany transfers or
inter-company sales, less the following reasonable and customary deductions from
such gross amounts (to the extent actually taken):

         (i)      normal and customary trade, cash and quantity discounts,
                  allowances and credits;

         (ii)     credits or allowances actually granted for damaged goods,
                  returns or rejections of Licensed Product and retroactive
                  price reductions;

         (iii)    sales taxes, duties or other taxes with respect to such sales
                  (including duties or other governmental charges levied on,
                  absorbed or otherwise imposed on the sale of Licensed Product
                  including, without limitation, value added taxes or other
                  governmental charges otherwise measured by the billing amount,
                  when included in billing);

         (iv)     insurance, postage, customs duties and transportation costs,
                  when included in billing;

         (v)      charge back payments and rebates granted to managed health
                  care organizations or to federal, state and local governments,
                  their agencies, and purchasers and reimbursers or to trade
                  customers, including but not limited to, wholesalers and chain
                  and pharmacy buying groups; and

         (vi)     rebates (or equivalents thereof) granted to or charged by
                  national, state or local governmental authorities in countries
                  other than the United States.

In determining Net Sales of a Licensed Product any of the above discounts shall
be accounted for and apportioned based on the list price of each such Licensed
Product.

         In the event that Licensed Product is sold in the form of a Combination
Product containing Licensed Compound and one or more other active ingredients
then Net Sales for such Combination Product will be calculated by multiplying
actual Net Sales of such Combination Product by the fraction A/(A+B) where: A is
the invoice price of the Licensed Compound



                                       4
<PAGE>   11

contained in the Combination Product if sold separately by SPL, an Affiliate or
Sublicensee and B is the invoice price of any other active component or
components in the Combination Product if sold separately by SPL, an Affiliate or
Sublicensee. In the event that the Licensed Product is sold in the form of a
Combination Product containing one or more active ingredients other than
Licensed Compound and one or more such active ingredients of the Combination
Product are not sold separately, then the above formula shall be modified such
that A shall be the total cost to SPL, its Affiliate or Sublicensee(s) of the
Licensed Compound and B shall be the total cost to SPL, its Affiliate or
Sublicensee of any other active component or components in the combination.

         1.18     "Patent Rights" shall mean all patents and patent applications
in the Territory which during the Term of this Agreement are owned or controlled
(with the right to grant sublicenses) by Licensor and which contain one or more
claims covering Licensed Compound(s), Licensed Product(s), one or more compounds
contained in Compound Library, or any uses, formulations, processes or methods
of preparing any of the foregoing, or any Improvements, including, but not
limited to, those set forth in Schedule 1.18, any and all substitutions,
divisions, continuations, continuations-in-part, reissues, renewals,
registrations, confirmations, re-examinations, extensions, supplementary
protection certificates or any like filing thereof, and provisional applications
of any such patents and patent applications and any international equivalent of
any of the foregoing.

         1.19     "Primary Indication" shall mean the treatment and prevention
of [ * ].

         1.20     "Proprietary Information" shall mean all other scientific,
clinical, regulatory, marketing, financial and commercial information or data,
whether communicated in writing, verbally or electronically, which is provided
by one Party to the other Party in connection with this Agreement including,
without limitation, Licensor Know-How. When Propriety Information is disclosed
in a manner other than in writing, it shall be reduced to written form, marked
"Confidential" and transmitted to the receiving Party within twenty (20)
business days of disclosure to the receiving Party.

         1.21     "Regulatory Approval" shall mean any approvals, including any
NDA's, HRD's, supplements, amendments, pre- and post-approvals, marketing
authorizations based upon such approvals (including any prerequisite
manufacturing approvals or authorizations related thereto) and labeling
approval(s), technical, medical and scientific licenses, registrations or
authorizations of any national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity, necessary
for the development, manufacture, distribution, marketing, promotion, offer for
sale, use, import, export or sale of Licensed Product(s) and/or Licensed
Compound(s) in the Territory.

         1.22     "Secondary Indication" shall mean [ * ]

         1.23     "Sublicensee" shall mean any party not an Affiliate of SPL,
which party is



                                       5
<PAGE>   12

authorized by SPL or its Affiliates through express or implied license or
consent to import, export, use, distribute, market, promote, offer for sale and
sell Licensed Product(s) under Section 2.1(b).

         1.24     "Territory" shall mean the entire world, except for the United
States and its territories, possessions and commonwealths.

         1.25     "Term" shall mean the period described in Section 8.1 of the
Agreement.

         1.26     "US Agreement" shall mean that certain exclusive license
agreement by and between Licensor and Schering Corporation entered into
concurrently herewith.

         1.27     "Valid Claim" shall mean a composition of matter claim, or
method of use claim (or its equivalent) for the Primary Indication and/or the
Secondary Indication, of an issued and unexpired patent in a country in the
Territory which covers the Licensed Compound and/or any other compound from the
Compound Library, which is included within the Patent Rights, and which (i) has
not been revoked or held unenforceable or invalid by a decision of a court or
other governmental agency of competent jurisdiction, unappealable or unappealed
within the time allowed for appeal; or (ii) has not been abandoned, disclaimed,
or admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise.


                                   ARTICLE II
               LICENSE; DISCLOSURE OF INFORMATION; DEVELOPMENT AND
                                COMMERCIALIZATION

         2.1      Exclusive License Grant.

                  (a) License. Subject to the terms and conditions of this
         Agreement, Licensor hereby grants to SPL, as of the Effective Date, an
         exclusive license (exclusive even as to Licensor) under the Patent
         Rights and Licensor Know-How in the Territory to develop, make, have
         made, import, export, use, distribute, market, promote, offer for sale
         and sell: (i) Licensed Compound(s) and/or Licensed Product(s)
         containing Licensed Compound; and (ii) compound(s) in the Compound
         Library other than Licensed Compound, and/or Licensed Product(s)
         containing such compound(s) for the Primary Indication and the
         Secondary Indication.

                  (b) Co-Exclusive License to Other Indications Subject to the
         terms and conditions of this Agreement, Licensor hereby grants to SPL,
         as of the Effective Date, a co-exclusive license under the Patent
         Rights and Licensor Know-How in the Territory to develop, make, have
         made, import, export, use, distribute, market, promote, offer for sale
         and sell compound(s) in the Compound Library other than Licensed
         Compound, and/or Licensed Product(s) containing such compound(s), for
         any and all indications other than



                                       6
<PAGE>   13

         the Primary Indication and Secondary Indication. The term "co-exclusive
         license" shall mean that with respect to the rights granted to SPL
         under this Section 2.1(b), Licensor retains the same rights as are
         granted to SPL. With respect to a given compound, indication or
         territory, each of Licensor and SPL may either directly exercise and
         exploit its co-exclusive rights or grant a co-exclusive license under
         such rights, either in whole or in part, to one (1) third party or
         Affiliate.

                  (c)      Right to Sublicense. The licenses granted to SPL
         under Sections 2.1(a) and 2.1(b) shall include the right to grant
         sublicenses to Affiliates and/or any third party (to the extent
         provided therein), provided that SPL remains responsible to Licensor
         under this Agreement for the performance of its Sublicensees.

                  (d)      Retained Rights Subject to the restrictions set forth
         in Section 2.11, Licensor retains all rights under the Patent Rights
         not expressly granted to SPL by this Section 2.1, and the right to use
         Licensor Know-How pursuant to Sections 2.6(h) and 5.1(c) below.

                  (e)      Third Party Agreements. As of the Execution Date,
         Licensor is a party to certain agreements (as listed in Schedule
         2.1(e), redacted copies of which have been provided to SPL) with third
         parties pursuant to which Licensor has acquired rights to certain
         patent applications, patents and technology, which agreements are
         relevant to the Patent Rights and/or Licensor Know-How. The parties
         acknowledge that the licenses granted to SPL under this Agreement are,
         or may be, subject to the specific rights retained by or granted to the
         U.S. Government, and/or the rights for research use retained by such
         third parties, under those agreements. In the event that on or after
         the Execution Date and during the Term of this Agreement, Licensor
         acquires any additional Patent Rights or Licensor Know-How from any
         third parties, by assignment, license or otherwise, Licensor shall
         promptly notify SPL in writing to that effect, and provide SPL with a
         copy (which may be redacted) of the agreement(s) with such third party.
         To the extent that the copies of the agreements listed in Schedule
         2.1(e) which were provided to SPL, or any other agreements provided to
         SPL under this Section 2.1(e), have been redacted, Licensor represents
         and warrants that the redacted portions of such agreements have no
         material effect on the scope of the licenses or other rights granted to
         SPL under this Agreement. Nothing herein shall be construed as granting
         to SPL any greater rights under the Patent Rights and/or Licensor
         Know-How than those held by Licensor

         2.2      Non-Exclusive License Grant. In the event that the
development, making, having made, importing, exporting, use, distribution,
marketing, promotion, offering for sale or sale by SPL, its Affiliates and/or
Sublicensees of Licensed Product in the Territory would infringe during the Term
of this Agreement a claim of an issued letters patent, and/or any patent rights
which Licensor owns or has the rights to license and which patents are not
covered by the grant in Section 2.1, Licensor hereby grants to SPL and its
Affiliates, to the extent Licensor is legally able to do so, a non-exclusive,
royalty-free license in the Territory under such issued letters patent



                                       7
<PAGE>   14

solely for SPL, its Affiliates and/or Sublicensees to discover, develop, make,
have made, use, distribute, market, promote, offer for sale and sell Licensed
Compound and/or Licensed Product(s) in the Territory.

         2.3      Disclosure of Information. Promptly after the Effective Date,
Licensor shall, at its own cost, disclose to SPL in writing, or via mutually
acceptable electronic media, copies or reproductions of all existing Licensor
Know-How not previously disclosed to SPL in order to enable SPL to exploit its
rights granted under Section 2.1 and, if applicable, Section 2.2 of this
Agreement. In addition, during the Term of this Agreement, Licensor shall
promptly disclose to SPL in writing, or via mutually acceptable electronic
media, on an ongoing basis copies or reproductions of all new Licensor Know-How
that is reasonably necessary for research, development, registration,
manufacture, marketing, use or sale of Licensed Compound and/or Licensed
Product. Such Licensor Know-How and other information shall be automatically
deemed to be within the scope of the licenses granted herein without payment of
any additional compensation. Upon SPL's request but reasonably subject to
Licensor's other business requirements, Licensor shall provide reasonable
technical assistance to enable SPL to utilize such additional Licensor Know-How,
provided, that SPL shall promptly reimburse Licensor for reasonable
out-of-pocket costs and expenses incurred by Licensor in providing such
technical assistance. Licensor shall invoice SPL for such costs and expenses,
and shall provide documentation for the invoice. The invoice shall be payable to
Licensor or its designee(s) [ * ] after receipt by SPL of the invoice provided,
however, that such cost and out-of-pocket expenses must be identified prior to
being committed to by Licensor and provided to SPL to determine whether SPL
agrees to have the technical assistance provided at such cost and the final
amount sought to be reimbursed shall not exceed [ * ] of the estimated cost
without SPL's prior written consent. SPL shall be under no obligation to
reimburse Licensor for out-of-pocket costs and expenses incurred by Licensor
without SPL's agreement. SPL shall have the right to use for all purposes in
connection with obtaining any Regulatory Approval for the Licensed Product(s)
all Licensor Know-How and other information, disclosed pursuant to this Section
and under this Agreement.

         2.4      HSR Filing and Approvals.

                  (a)      HSR Filing. To the extent necessary, each of Licensor
         and SPL shall file, within ten (10) days after the date of this
         Agreement, with the Federal Trade Commission (the "FTC") and the
         Antitrust Division of the United States Department of Justice (the
         "Antitrust Division") any notification and report form (the "Report")
         required of it in the reasonable opinion of either or both Parties
         under the HSR Act with respect to the transactions as contemplated
         hereby and shall cooperate with the other Party to the extent necessary
         to assist the other Party in the preparation of its Report and to
         proceed to obtain necessary approvals under the HSR Act, including but
         not limited to the expiration or earlier termination of any and all
         applicable waiting periods required by the HSR Act.

                  (b)      Licensor's Obligations. Licensor shall use good faith
         reasonable efforts to



                                       8
<PAGE>   15

         assist SPL in eliminating any concern on the part of any court or
         government authority regarding the legality of the proposed
         transaction, including, if required by federal or state antitrust
         authorities, SPL's promptly taking all reasonable steps to secure
         government antitrust clearance. Licensor shall cooperate in good faith
         at its own cost with any government investigation and promptly produce
         documents and information demanded by a second request for documents
         and of witnesses if requested.

                  (c)      Additional Approvals. Each of Licensor and SPL will
         cooperate and use all reasonable efforts to make all other
         registrations, filings and applications, to give all notices and to
         obtain as soon as practicable all governmental or other consents,
         transfers, approvals, orders, qualifications authorizations, permits
         and waivers, if any, and to do all other things reasonably necessary or
         desirable in SPL's opinion for the consummation of the transactions as
         contemplated hereby (including, without limitation, those acts required
         to obtain necessary approvals under any foreign equivalent antitrust
         statute to the HSR Act or regulation from any government or regulatory
         authority having the requisite jurisdiction; provided, however, that
         SPL shall promptly reimburse Licensor for reasonable out-of-pocket
         costs and expenses incurred by Licensor in providing such cooperation.
         Licensor shall invoice SPL for such costs and expenses, and shall
         provide supporting documentation for the invoice. The invoice shall be
         payable to Licensor or its designee(s) [ * ] days after receipt by SPL
         of the invoice.

         2.5      Joint Management Committee. The Parties shall establish a
Joint Management Committee (the "JMC") to oversee the development and
commercialization program for Licensed Product for the Primary Indication and
the Secondary Indication, and to facilitate the exchange of information between
the Parties. The JMC will generally serve in an advisory capacity with respect
to the development and commercialization activities to be performed by SPL under
this Agreement, with SPL retaining final decision making authority with respect
to all such matters.

                  (a)      Composition of the JMC. The JMC shall be composed of
         up to three (3) representatives from each of SPL and Licensor, and a
         quorum shall consist of at least one (1) JMC representative from each
         Party. In any matter before the JMC, each Party shall have one (1)
         vote, with decisions being made by unanimous decision. SPL shall
         seriously consider the recommendations and decisions of the JMC. A
         Party's representatives to the JMC shall serve at the discretion of
         such Party and may be substituted for or replaced at any time by such
         Party. The JMC shall be chaired by a representative of SPL. The
         Chairperson shall be responsible for calling meetings, preparing
         agendas and preparing and issuing minutes of each meeting within
         [ * ] thereafter.

                  (b)      JMC Meetings. The JMC shall meet at least once each
         Calendar Quarter during the Term of this Agreement, until such time as
         the Parties agree to a more or less frequent meeting schedule. The site
         of such meetings shall alternate between the offices of SPL and
         Licensor (or any other site mutually agreed upon by the Parties) and
         each



                                       9
<PAGE>   16

         Party shall bear its own costs of attending such meetings. All meetings
         of the JMC shall be summarized in writing and sent to both Parties and
         countersigned by both Parties.

                  (c)      JMC Responsibilities. The JMC will be generally
         responsible for monitoring the status of SPL's development and
         commercialization activities with respect to Licensed Product and for
         preparing recommendations for implementation by SPL with regard to: (i)
         selection of Licensed Compounds for development by SPL as Licensed
         Products for the Primary Indication; (ii) preclinical and clinical
         development plans; (iii) development timelines and scheduling; (iv)
         strategies for obtaining and maintaining Regulatory Approvals; (v)
         marketing and sales strategies for Licensed Product.

                  (d)      Deadlock. In the event that the JMC is unable to
         reach a decision by unanimous vote with respect to any matter, then SPL
         shall have final decision making authority with respect thereto.


         2.6      SPL's Development Obligations.

                  (a)      SPL Diligence. SPL shall, at SPL's expense, and
         subject to Licensor's compliance with its obligations under Sections
         2.3 and 2.4, use good faith reasonable efforts to develop, obtain
         Regulatory Approval for, and commercialize the Licensed Product(s) in
         the Territory for the Primary Indication. SPL shall have the option, in
         its sole discretion, to seek Regulatory Approval for the Licensed
         Product for any additional indications it determines are desirable, but
         shall have no diligence obligations to Licensor with respect thereto
         with the exception of those expressly set forth in Section 2.11(d). The
         Parties acknowledge and agree that all business decisions including,
         without limitation, decisions relating to SPL's research, development,
         registration, manufacture, sale, commercialization, design, price,
         distribution, marketing and promotion of Licensed Products covered
         under this Agreement, shall be within the sole discretion of SPL.
         Licensor acknowledges that SPL is in the business of developing,
         manufacturing and selling pharmaceutical products and, subject to the
         provisions of this Section, nothing in this Agreement shall be
         construed as restricting such business or imposing on SPL the duty to
         market and/or sell and exploit Licensed Compound or Licensed Product
         for which royalties are payable hereunder to the exclusion of, or in
         preference to, any other product, or in any way other than in
         accordance with its normal commercial practices.

                  (b)      Opportunity to Cure. If, in Licensor's reasonable
         opinion, SPL fails to comply with any of its diligence obligations
         under Sections 2.6(a) and (c), then Licensor shall have the right to
         give SPL written notice thereof stating in reasonable detail the
         particular failure(s). SPL shall have a period [ * ] days from the
         receipt of such notice to correct the failure or, in the event that the
         failure cannot be reasonably cured within a [ * ] day period, then SPL
         shall initiate actions reasonably expected to cure the failure within
         [ * ] days of receiving notice and shall thereafter diligently pursue
         such actions to cure



                                       10
<PAGE>   17

         the failure (even if requiring longer than the [ * ] days specified in
         Section 8.4(a)(i)). In the event of a dispute as to whether or not SPL
         has failed to exercise due diligence under Sections 2.6(a) and 2.6(c),
         or whether SPL is diligently pursuing actions reasonably expected to
         cure such failure under this Section 2.6(b), such dispute shall be
         resolved through binding arbitration in accordance with Section 9.2.

                  (c)      Research and Development Activities. As of the
         Effective Date, SPL shall be responsible, at its cost and expense, and
         in its sole judgment, for all research and development activities which
         are necessary to obtain Regulatory Approval for a Licensed Product in
         the Territory for the Primary Indication and any post-approval studies
         required as a condition of obtaining any Regulatory Approval for a
         Licensed Product for the Primary Indication. The parties acknowledge
         and agree that SPL's obligations under this Section 2.6(c) shall
         include all of the costs of conducting the CART Study (whether incurred
         before or after the Effective Date) which are estimated at [ * ]. In
         addition, SPL shall be responsible for any other studies (or portions
         of studies) necessary or desirable, in its sole judgment, for
         maintaining any Regulatory Approval (for the Primary Indication or any
         other indication for which SPL, in its sole discretion, may decide to
         seek Regulatory Approval) in the Territory, as well as any
         pre-marketing studies prior to such Regulatory Approval and
         post-marketing studies conducted following a Regulatory Approval.

                  (d)      Licensed Product Registrations; Pricing Reimbursement
         Approvals. Subject to its diligence obligations set forth in Section
         2.6(a), SPL shall be responsible, at its cost and expense, and in its
         sole judgment, for determining the appropriate regulatory strategy, for
         obtaining and maintaining all Regulatory Approvals and for obtaining
         and maintaining any pricing and reimbursement approvals required for
         the sale of Licensed Product in the Territory. Each Regulatory Approval
         and each pricing and reimbursement approval shall be placed in SPL's
         name or the name of a SPL Affiliate unless applicable law requires, or
         Licensor and SPL otherwise agree, that an approval be solely or jointly
         in the name of Licensor or a designated Licensor Affiliate. Licensor
         agrees that notwithstanding such Regulatory Approval or pricing and
         reimbursement approval in its name, SPL retains the exclusive rights to
         make, have made, import, export, use, distribute, promote, offer for
         sale and sell Licensed Compound and/or Licensed Product(s) as granted
         SPL in Section 2.1.

                  (e)      Data. SPL shall own all data arising out of studies
         performed by or on behalf of SPL under this Article II.

                  (f)      Assistance by Licensor. In connection with any NDA,
         HRD or other application for Regulatory Approval relating to Licensed
         Product, Licensor shall, at SPL's request, provide to SPL in a prompt
         manner responses to questions which have been raised by any regulatory
         authority in connection with such application for Regulatory Approval
         and further provide to SPL estimates of Licensor's [ * ] costs for


                                       11
<PAGE>   18

         rendering such assistance. Licensor shall assist SPL from time to time,
         at SPL's request, in the design and implementation of clinical studies.
         Subject to Licensor's rights under Section 3.3(b), Licensor shall
         assist SPL to enable SPL to self-source bulk material for the
         manufacture of Licensed Compound and/or Licensed Product; provided,
         however, that SPL shall have no obligation whatsoever to purchase any
         bulk material or Licensed Compound from Licensor.

                  (g)      Reimbursement of Costs by SPL

                           (i) SPL shall reimburse Licensor for its reasonable
         [ * ] costs and expenses incurred in rendering assistance under Section
         2.6(f) (but no more than [ * ] of those costs which Licensor estimated,
         as provided above, that the work would cost unless SPL provides written
         approval). Licensor shall invoice SPL for such costs and expenses, and
         shall provide documentation for the invoice. The invoice shall be
         payable to Licensor or its designee(s) [ * ] days after receipt by SPL
         of the invoice, provided, however, that SPL shall be under no
         obligation to reimburse Licensor for [ * ] costs and expenses incurred
         by Licensor without SPL's agreement.

                           (ii) SPL shall reimburse Licensor for its reasonable
         [ * ] costs and expenses incurred in performing research and
         development activities under Section 2.6 (h) (but no more than [ * ] of
         those costs which Licensor estimated, as provided below, that the work
         would cost unless the JMC provides written approval). Licensor shall
         invoice SPL for such costs and expenses, and shall provide
         documentation for the invoice. The invoice shall be payable to Licensor
         or its designee(s) [ * ] days after receipt by SPL of the invoice,
         provided, however, that SPL shall be under no obligation to reimburse
         Licensor for research and development costs and expenses incurred by
         Licensor without the prior approval of the JMC.

                  (h)      Licensor's Additional Development Obligations. In
         addition to Licensor's obligations under Section 2.6(f), the JMC will
         assign to Licensor the responsibility to conduct, on SPL's behalf and
         at SPL's expense, certain of the research and development activities,
         including clinical studies involving Licensed Product, for which SPL is
         responsible under Section 2.6(c). The nature and extent of the research
         and development activities to be conducted by Licensor is generally set
         forth in Schedule 2.6(h). The JMC shall determine the specific aspects
         of such activities, including the timing and costs of the work to be
         performed by Licensor. Licensor agrees to use good faith reasonable
         efforts to complete such activities in the manner determined by the
         JMC, and shall have the right to utilize contract research
         organizations and other third party contractors in the performance of
         such activities, provided that Licensor shall remain responsible for
         the performance of all such contractors. To the extent that Licensor
         utilizes third party contractors to perform such activities, Licensor
         shall enter into suitable agreements with


                                       12
<PAGE>   19

         such contractors, which agreements shall incorporate provisions
         consistent with the terms and conditions of this Agreement, including,
         without limitation, provisions governing confidentiality, ownership of
         data, inventions and other intellectual property arising from such
         activities, financial obligations and termination rights. Licensor
         shall keep the JMC informed with regard to such third party contracts
         and shall provide SPL with a copy of all such agreements. Any research
         and development activities conducted by Licensor or its contractors
         pursuant to this Section 2.6(h) shall be performed in accordance with
         good laboratory practices and good clinical practices, and in
         compliance with all applicable laws, rules and regulations in the U.S.
         and the EU, and shall meet current regulatory standards. SPL shall
         promptly notify Licensor in the event that SPL reasonably determines
         that all or any part of the work performed by Licensor and/or its
         contractors under this Section 2.6(h) fails to meet such standards. If
         Licensor reasonably disagrees with such determination, the parties
         shall refer the matter to an independent expert (selected by mutual
         agreement of the parties) to determine whether or not the study must be
         repeated to support Regulatory Approval for Licensed Product. In the
         event that Licensor and/or the independent expert agrees with SPL's
         determination and such studies are repeated, then SPL shall have the
         right to deduct the [ * ] costs of repeating such work from [ * ]
         payments due Licensor under this Agreement.

                  (i)      Adverse Event Reporting Licensor shall promptly
         report to SPL any information regarding adverse events related to the
         use of the Licensed Product in accordance with the Adverse Event
         Reporting Procedures (as may be amended from time to time upon mutual
         agreement) set forth in Schedule 2.6(i) and incorporated herein by
         reference. To the extent that Licensor holds any INDs or otherwise has
         any adverse event reporting obligations with respect to Licensed
         Product, SPL shall promptly report to Licensor any information
         regarding adverse events related to the use of Licensed Product in
         accordance with such Adverse Event Reporting Procedures.

         2.7      Independent Discoveries by SPL. Licensor acknowledges that SPL
and/or its Affiliates have ongoing research programs which may now or in the
future independently discover, develop and/or acquire technologies and/or
products relating to treatment and prevention of any disease, disorder or
condition in humans or animals. Licensor agrees that such technologies and
products, to the extent discovered without use of Licensor Know-How, will not be
deemed to be Licensor Know-How and are outside the scope of this Agreement.

         2.8      Excused Performance. In addition to the provisions of Article
VIII and Section 9.9, the obligations of SPL with respect to a Licensed Product
under Sections 2.6(a), 2.6(c), 2.6(d) and 2.11(d) are expressly conditioned upon
the continuing absence of any adverse condition or event which warrants a delay
in commercialization of a Licensed Product including, but not limited to, an
adverse condition or event relating to the safety or efficacy of a Licensed
Product or unfavorable labeling, pricing or pricing reimbursement approvals, or
lack of Regulatory Approval, and the obligation of SPL to develop or market any
such Licensed Product shall be delayed or suspended so long as in SPL's
reasonable opinion any such condition or event exists.


                                       13
<PAGE>   20
         2.9      Supply of Licensed Compound/Licensed Product. Licensor shall
be responsible, at Licensor's expense, for supplying SPL with Licensed Compound
(in the form of bulk active), from Licensor's existing inventory of Licensed
Compound, to enable SPL to perform [ * ]. In addition, Licensor has the limited
option to supply all of SPL's requirements of Licensed Products as set forth in
Section 3.3(b). All Licensed Compound to be supplied by Licensor hereunder shall
be delivered FCA (Kenilworth, New Jersey) (Incoterms 1990) via a carrier to be
specified by SPL. Licensor warrants and represents that all supplies of Licensed
Compound provided to SPL by Licensor shall conform to the applicable
specifications for such Licensed Compound and were prepared in accordance with
current Good Manufacturing Practices ("cGMPs") and other applicable federal,
national, state and local laws and regulations in effect at the time of
manufacture. SPL shall be responsible for the formulation and packaging of the
Licensed Compound provided by Licensor hereunder, and for manufacture and supply
of all Licensed Compound and/or Licensed Product necessary for the performance
of [ * ] and for supplying all commercial quantities of Licensed Compound and
Licensed Products. Licensor shall transfer to SPL all Licensor Know-How relating
to the manufacture of Licensed Compound, and at SPL's request and expense shall
provide reasonable technical support to facilitate the implementation of such
manufacturing technology at SPL.

         2.10     Reports. SPL shall provide Licensor with quarterly reports of
the status of the research and development activities and progress of any
application for Regulatory Approval, as applicable, in connection with Licensed
Product in the Territory. Further, SPL shall inform Licensor of commencement,
completion, and results of the major phases of clinical development of Licensed
Product, including but not limited to Phase II and Phase III clinical trials,
NDA and HRD submissions, NDA and HRD filings, approvable and approval letters,
and launch.

         2.11     Non-Compete Provision. Subject to the terms of Section 9.1(b),
Licensor and its Affiliates shall be subject to the non-compete obligations set
forth in this Section 2.11.

                  (a)      During the Term of this Agreement, Licensor shall not
         undertake a development program for, or commercialize, either on its
         own or in collaboration with any third party:

         [  *  ]

                  (b)      For the period extending from the Effective Date
         until the earlier of [ * ] after the First Commercial Sale of Licensed
         Product in the Territory or [ * ], Licensor shall not, either on its
         own or in collaboration with any third party:

         [  *  ]

                  (c)      The foregoing notwithstanding, Licensor shall at all
         times retain the right to develop and commercialize topical products
         containing any compound other than the



                                       14
<PAGE>   21

         Licensed Compound for the treatment or prevention of dermatological
         conditions, diseases or disorders. In addition, Licensor shall have the
         right at all times to enter into agreements with third parties relating
         to the performance by Licensor of pre-clinical research activities with
         respect to compounds owned or controlled by such third parties,
         provided that such compounds do not compete through the same mechanism
         of action with the Licensed Compound (as determined using the same
         criteria as set forth in Section 6.2(k)) with respect to the Primary
         Indication and/or the Secondary Indication.

                  (d)      Licensor's non-compete obligations under Section
         2.11(b)(ii) are expressly conditioned upon SPL's initiating a
         development program for Licensed Product for the Secondary indication
         within [ * ] years after the Effective Date, and thereafter using good
         faith reasonable efforts to develop and commercialize one or more
         Licensed Products for the Secondary Indication.

                                   ARTICLE III
                         PAYMENTS; ROYALTIES AND REPORTS

         3.0      Coordination of Payments under the US Agreement. The license
fee, milestone payments and royalties payable by SPL under this Article III are
in consideration for the rights and licenses granted to SPL under this Agreement
and are in addition to any amounts payable to Licensor under the US Agreement.
It is understood and agreed that, with respect to the development milestone
payable under Section 3.2(a)(i) and the sales milestones payable under Section
3.2(b) the occurrence of one or more of such milestone events will result in
milestone payment obligations under both this Agreement and the corresponding
provisions of the US Agreement. It is further understood that SPL's financial
obligations with respect to development costs under Article II shall be [ * ]
apportioned between SPL and the corresponding obligations of Schering
Corporation under the US Agreement.

         3.1      License Fee. In partial consideration for the licenses and
other rights granted to SPL hereunder, SPL shall pay to Licensor a license fee
("License Fee") [ * ], which payment shall be due within [ * ] business days
following the Effective Date.

         3.2      Milestone Payments. In partial consideration for the licenses
and other rights granted to SPL hereunder, SPL shall promptly notify Licensor in
writing upon the occurrence of an event triggering one of the milestone payments
set forth in this Section 3.2, and within [ * ] days after the occurrence of
such event pay to Licensor the applicable milestone payment.

                  (a)      Development Milestones:

                      (i)   [ * ]

                      (ii)  [ * ]



                                       15
<PAGE>   22

                      (iii) [ * ]

                      (iv)  [ * ]

                      (v)   [ * ]

                  (b)      Sales Milestones:

                      (i)   [ * ]

                      (ii)  [ * ]

                      (iii) [ * ]

                      (iv)  [ * ]

         The foregoing sales milestone payments are in addition to any royalty
         payments due Licensor under Section 3.3 with respect to sales of
         Licensed Product. For purposes of clarity, the parties acknowledge that
         (1) the first achievement of more than one of the above sales
         milestones in the same Calendar Year shall not affect SPL's obligation
         to make the relevant sales milestone payments to Licensor, and (2)
         annual worldwide sales of the Licensed Product shall be determined
         based upon the aggregate total of sales in the Territory under this
         Agreement and sales in countries outside the Territory under the
         International Agreement.

                  (c)      Limitations. Except as expressly set forth below,
         each development milestone payment under Section 3.2(a) and each sales
         milestone payment under Section 3.2(b) shall be payable one (1) time
         only on the first occurrence of the indicated event regardless of the
         number of times the event triggering the payment of such milestone
         occurs. If the triggering event for a given milestone payment does not
         occur prior to the effective date of termination, or the expiration, of
         this Agreement, SPL shall have no obligation to pay such milestone
         payment to Licensor. The Parties acknowledge and agree that nothing
         herein shall be construed as representing an estimate or projection of
         anticipated sales or the actual value of Licensed Compounds or Licensed
         Products, and the figures set forth in Section 3.2(b) are merely
         intended to define SPL's obligations to Licensor in the event such
         sales performance is achieved.

         3.3      Royalties. In further consideration for the licenses granted
to SPL hereunder, for so long as the Licensed Product is covered by a Valid
Claim in the Territory at the time of sale by SPL, and subject to the provisions
of Section 3.3 (a)-(c), SPL shall pay to Licensor royalties on a
country-by-country basis of [ * ] of SPL's, its Affiliates' or its Sublicensees'
Net Sales of Licensed Product in the Territory. With respect to countries in the
Territory where no such Valid Claim exists, the royalty rate shall be [ * ], and
such royalties shall be paid for [ * ] years from



                                       16
<PAGE>   23

the first commercial sale of Licensed Product in such country. No royalties
shall be due upon the sale or other transfer among SPL, its Affiliates or
Sublicensees, but in such cases the royalty shall be due and calculated upon
SPL's or its Affiliates' or its Sublicensees' Net Sales to the first independent
third party. No royalties shall accrue on the disposition of Licensed Product by
SPL, its Affiliates or Sublicensees as samples (promotion or otherwise) or as
donations (for example, to non-profit institutions or government agencies for a
non-commercial purpose) or for clinical studies. Such dispositions by SPL shall
not be included in the determination of Net Sales during the period of time in
which such third party sales are occurring.

                  (a)      Cap on Royalties Plus Cost of Goods. The parties
         acknowledge and agree that the total of (i) royalties payable by SPL to
         Licensor under this Agreement, and (ii) the Cost of Goods of Licensed
         Product manufactured by SPL and/or paid by SPL to third parties for the
         manufacture of Licensed Product, shall not exceed [ * ] of Net Sales of
         Licensed Product. SPL shall use good faith reasonable efforts to keep
         the Cost of Goods of Licensed Product from exceeding [ * ] of Net
         Sales. SPL shall determine the Cost of Goods for the Licensed Product
         in a timely manner, and in no event later than the date of filing of
         the first NDA for the Licensed Product in the United States. In the
         event that notwithstanding such efforts by SPL the Cost of Goods for
         Licensed Product does exceed [ * ] of Net Sales, then SPL shall notify
         Licensor in writing to that effect. Following receipt of such notice,
         Licensor shall have the right to have an independent auditor review
         SPL's relevant records and make an independent determination of the
         Cost of Goods for the Licensed Product. Any such audit shall be
         conducted under terms and conditions essentially the same as those set
         forth in Section 3.7.

                  (b)      Licensor's Option to Manufacture. In the event that
         SPL's Cost of Goods for the Licensed Product is correctly determined to
         exceed [ * ] of Net Sales, Licensor shall have the right to manufacture
         and supply, or to seek a third party supplier able to manufacture and
         supply, SPL's requirements of Licensed Product at a Cost of Goods equal
         to or less than [ * ] of Net Sales for Licensed Product. If Licensor is
         able, or locates a third supplier able, to manufacture and supply
         Licensed Product at a Cost of Goods equal to or less than [ * ] of Net
         Sales, SPL shall in good faith negotiate and enter into a suitable
         supply agreement with Licensor or such third party, as appropriate, for
         the manufacture and supply of Licensed Product. Any such agreement
         shall include terms obligating SPL to purchase, and Licensor or the
         third party to manufacture and supply, all of SPL's requirements of
         Licensed Product at a Cost of Goods to be agreed upon, not to exceed [
         * ] of Net Sales of Licensed Product. All supplies of Licensed Product
         to be provided to SPL by Licensor or such third party manufacturer
         pursuant to this Section 3.3(b) shall be manufactured at a qualified
         manufacturing site, shall conform to the applicable specifications for
         Licensed Product and shall be prepared in accordance with cGMPs and all
         applicable federal, national, state and local laws and regulations in
         effect at the time of manufacture.


                                       17
<PAGE>   24

                  (c)      Royalty Reduction. In the event that SPL's Cost of
         Goods for Licensed Product are correctly determined to exceed [ * ] of
         Net Sales of Licensed Product and Licensor is unable to identify a
         third party capable of supplying SPL's requirements of Licensed Product
         at a price equal to or less than [ * ] of Net Sales of Licensed
         Product, then SPL shall remain responsible for the manufacture and
         supply of Licensed Product and the royalty rate to be paid by SPL under
         this Section 3.3 shall be reduced so that the total of (i) royalties
         payable by SPL to Licensor under this Agreement, and (ii) the Cost of
         Goods of Licensed Product manufactured by SPL and/or paid by SPL to
         third parties for the manufacture of Licensed Product, is equal to [ *
         ] of Net Sales of Licensed Product. Notwithstanding the foregoing, the
         royalty payable to Licensor under this Agreement shall not be reduced
         pursuant to this Section 3.3(c) to less then [ * ] where a Valid Claim
         exists, or [ * ] where no Valid Claim exists.

         3.4      Third Party Licenses. In the event that SPL's outside patent
counsel determines that patent licenses from third parties are required by SPL,
its Affiliates or its Sublicensees in order to discover, develop, make, have
made, import, export, use, distribute, promote, market, offer for sale or sell
Licensed Compound and/or Licensed Product (hereinafter "Third Party Licenses"),
SPL shall provide Licensor with written notice to that effect and shall be
solely responsible for acquiring such licenses at SPL's sole discretion. SPL may
reduce any royalty otherwise due Licensor hereunder to reimburse it for
royalties and or license fees actually paid to such third parties under any
Third Party Licenses of patent claims which would be infringed by the
manufacture, use, import, export or sale of Licensed Compound and/or Licensed
Product in the Territory. SPL shall have no right to reduce any royalty due
Licensor hereunder for any amounts paid to a third party under any Third Party
License to the extent it is a license to technology (other than Licensor
Know-How) or materials (other than Licensed Compound) selected by SPL for use in
connection with the Licensed Product. The amount of reduction of royalties due
Licensor and the amount of reimbursement to SPL shall be equal to [ * ] of the
royalties or license fees paid to such third parties in consideration for the
Third Party License but in no event shall the royalty due Licensor for any
Licensed Product in any country be thereby reduced to less than [ * ] of the
royalty rate otherwise due Licensor hereunder for such Licensed Product in such
country.

         3.5      Compulsory Licenses. If a compulsory license is granted under
the Patent Rights to a third party with respect to Licensed Compound and/or
Licensed Product in any country in the Territory with a royalty rate lower than
the royalty rate provided for under Section 3.3, then the royalty rate to be
paid by SPL on Net Sales in that country under Section 3.3 shall be reduced to
the rate paid by the compulsory licensee for so long as such compulsory license
is in effect.

         3.6      Reports; Payment of Royalty; Payment Exchange Rate and
Currency Conversions.

                  (a)      Royalties Paid Quarterly. Within [ * ] calendar days
         following the close of each Calendar Quarter, following the First
         Commercial Sale of a Licensed Product, SPL shall furnish to Licensor a
         written report for the Calendar Quarter showing the Net


                                       18
<PAGE>   25

         Sales of Licensed Product(s) sold by SPL, its Affiliates and its
         Sublicensees in the Territory during such Calendar Quarter and the
         royalties payable under this Agreement for such Calendar Quarter.
         Simultaneously with the submission of the written report, SPL shall pay
         to Licensor, for the account of SPL or the applicable Affiliate or
         Sublicensee, as the case may be, a sum equal to the aggregate royalty
         due for such Calendar Quarter calculated in accordance with this
         Agreement (reconciled for any previous overpayments or underpayments).

                  (b)      Method of Payment. Payments to be made by SPL to
         Licensor under this Agreement shall be paid by bank wire transfer in
         immediately available funds to such bank account as is designated in
         writing by Licensor from time to time. Royalties shall be deemed
         payable by the entity making the Net Sales from the country in which
         earned in local currency and subject to foreign exchange regulations
         then prevailing. Royalty payments shall be made in United States
         dollars to the extent that free conversions to United States dollars is
         permitted. The rate of exchange to be used in any such conversion from
         the currency in the country where such Net Sales are made shall be the
         rate of exchange used by Schering Corporation for reporting such sales
         for United States financial statement purposes. If, due to restrictions
         or prohibitions imposed by national or international authority,
         payments cannot be made as aforesaid, the Parties shall consult with a
         view to finding a prompt and acceptable solution, and SPL will deal
         with such monies as Licensor may lawfully direct at no additional
         out-of-pocket expense to SPL. Notwithstanding the foregoing, if
         royalties in any country cannot be remitted to Licensor for any reason
         within [ * ] after the end of the Calendar Quarter during which they
         are earned, then SPL shall be obligated to deposit the royalties in a
         bank account in such country in the name of Licensor.

         3.7      Maintenance of Records; Audits.

                  (a)      Record Keeping by SPL. SPL and its Affiliates shall
         keep complete and accurate records in sufficient detail to enable the
         royalties payable hereunder to be determined. Upon [ * ] days prior
         written notice from Licensor, SPL shall permit an independent certified
         public accounting firm of nationally recognized standing selected by
         Licensor, at Licensor's expense, to have access during normal business
         hours to examine pertinent books and records of SPL and/or its
         Affiliates as may be reasonably necessary to verify the accuracy of the
         royalty reports hereunder. The examination shall be limited to
         pertinent books and records for any year ending not more than [ * ]
         months prior to the date of such request. An examination under this
         Section 3.7(a) shall not occur more than once in any Calendar Year. SPL
         may designate competitively sensitive information, which such auditor
         may not disclose to Licensor; provided, however, that such designation
         shall not encompass the auditor's conclusions. The accounting firm
         shall disclose to Licensor only whether the royalty reports are correct
         or incorrect and the specific details concerning any discrepancies. No
         other information shall be provided to Licensor. All such accounting
         firms shall sign a confidentiality agreement (in form and


                                       19
<PAGE>   26

         substance reasonably acceptable to SPL) as to any of SPL's or its
         Affiliate's confidential information which they are provided, or to
         which they have access, while conducting any audit pursuant to this
         Section 3.7(a).

                  (b)      Underpayments/Overpayments. If such accounting firm
         correctly concludes that additional royalties were owed during such
         period, SPL shall pay the additional royalties within [ * ] days of the
         date Licensor delivers to SPL such accounting firm's written report so
         correctly concluding. If such underpayment exceeds [ * ] of the royalty
         correctly due Licensor then the fees charged by such accounting firm
         for the work associated with the underpayment audit shall be paid by
         SPL. Any overpayments by SPL will be credited against future royalty
         obligations. In the event that SPL disagrees with the audit report and
         the chief financial officers of SPL and Licensor (or their designees)
         fail to resolve such disagreement, the dispute will be resolved through
         the dispute resolution mechanism set forth in Section 9.2.

                  (c)      Record Keeping by Sublicensee. SPL shall include in
         each sublicense granted by it pursuant to this Agreement a provision
         requiring the Sublicensee to make reports to SPL, to keep and maintain
         records of sales made pursuant to such sublicense and to grant access
         to such records by Licensor's independent accountant to the same extent
         required of SPL under this Agreement.

                  (d)      Confidentiality. Licensor shall treat all financial
         information subject to review under this Section 3.7, or under any
         sublicense agreement, in accordance with the confidentiality provisions
         of this Agreement, and shall cause its accounting firm to enter into an
         acceptable confidentiality agreement with SPL obligating it to retain
         all such financial information in confidence pursuant to such
         confidentiality agreement.

                  (e)      Binding Records. Upon the expiration of [ * ] months
         following the end of any Calendar Year, the calculation of royalties
         payable under this Agreement with respect to such year shall be binding
         and conclusive upon the Parties, and SPL, its Affiliates and its
         Sublicensees shall be released from any liability or accountability
         with respect to royalties for such Calendar Year.


                                       20
<PAGE>   27

         3.8      Income Tax Withholding. If at any time, any jurisdiction
within the Territory requires the withholding of income taxes or other taxes
imposed upon payments set forth in this Article III, SPL shall make such
withholding payments as required and subtract such withholding payments from the
payments set forth in this Article III, or if applicable, Licensor will promptly
reimburse SPL or its designee(s) of the amount of such payments, it being
understood that such withholding taxes are the obligation of Licensor. SPL shall
provide Licensor with documentation of such withholding and payment in a manner
that is satisfactory for purposes of the U.S. Internal Revenue Service. Any
withholdings paid when due hereunder shall be for the account of Licensor and
shall not be included in the calculation of Net Sales. Payments of withholding
taxes made by SPL pursuant to this Section 3.8 will be made based upon financial
information to be provided to SPL by Licensor and, to the extent that such
information is incorrect or incomplete, Licensor shall be liable for any fine,
assessment or penalty, or any deficiency, imposed by any taxing authority in the
Territory for any deficiency in the amount of any such withholding or the
failure to make such withholding payment. If SPL is required to pay any such
deficiency, or any such fine, assessment or penalty for any such deficiency,
Licensor shall promptly reimburse SPL for such payments, which shall not be
included in the calculation of Net Sales.

         3.9      Direct Affiliate Licenses. Whenever SPL shall reasonably
demonstrate to Licensor that, in order to facilitate direct royalty payments by
an Affiliate, it is desirable that a separate license agreement be entered into
between Licensor and such Affiliate, Licensor will grant such licenses directly
to such Affiliate by means of an agreement which shall be consistent with all of
the provisions hereof, provided that SPL guarantees the Affiliate's obligations
thereunder.

                                   ARTICLE IV
                                     PATENTS

         4.1      Filing, Prosecution and Maintenance of Patents. Licensor
agrees to diligently file, prosecute and maintain in the Territory, at
Licensor's expense, all Patent Rights owned in whole or in part by Licensor and
licensed to SPL under this Agreement, including without limitation, any Patent
Rights covering any Improvement(s). SPL shall determine the country(ies) in the
Territory with respect to which SPL desires Licensor to perform such activities
and will promptly notify Licensor to that effect. All such determinations shall
be made by SPL in accordance with its standard practices with respect to the
filing, prosecution and maintenance of patents, and Licensor's obligation to
file, prosecute and maintain each patent application or patent within the Patent
Rights under this Section 4.1 shall be limited to those countries selected by
SPL for such patent application or patent. Licensor shall supply SPL with a copy
of the applications as filed, together with notice of its filing date and serial
number. Licensor shall keep SPL regularly advised of the status of pending
patent applications (including, without limitation, the grant of any Patent
Rights), and upon the written request of SPL shall provide copies of any
substantive papers provided to or received from government patent authorities
related to the filing, prosecution and maintenance of such patent filings. SPL
shall treat all information, papers, and



                                       21
<PAGE>   28

other materials provided by Licensor pursuant to this Section 4.1 in accordance
with the confidentiality provisions of this Agreement.

         4.2      Option of SPL to Prosecute and Maintain Patents. Licensor
shall give [ * ] days prior written notice to SPL of any desire to cease
prosecution and/or maintenance of a particular Patent Right and, in such case,
shall permit SPL, at its sole discretion, to continue prosecution or maintenance
at its own expense. If SPL elects to continue prosecution or maintenance,
Licensor shall execute such documents and perform such acts, at SPL's expense,
as may be reasonably necessary to effect an assignment of such Patent Rights to
SPL. Any such assignment shall be completed in a timely manner to allow SPL to
continue such prosecution or maintenance. Any patents or patent applications so
assigned shall not be considered Patent Rights.

         4.3      Enforcement.

                  (a)      Notice and Discontinuance of Infringement. In the
         event that either SPL or Licensor becomes aware of any third party
         infringement within the Territory of any Valid Claim, it will notify
         the other Party in writing to that effect. Any such notice shall
         include evidence to support an allegation of infringement by such third
         party. Licensor shall have a period of [ * ] months from the date of
         said notice to obtain a discontinuance of such infringement or bring
         suit against the third party infringer. Licensor shall bear all the
         expenses of any suit brought by it. SPL shall have the right, prior to
         commencement of the trial, suit or action brought by Licensor, to join
         any such suit or action, and in such event shall pay one-half of all
         costs of such suit or action. In the event that SPL has joined in the
         action and shared in the costs thereof as set forth above, no
         settlement, consent judgment or other voluntary final disposition of
         the suit may be entered into without the consent of SPL. In the event
         that SPL has not joined the suit or action, SPL will reasonably
         cooperate with Licensor in any such suit or action and shall have the
         right to consult with Licensor and be represented by its own counsel,
         provided that Licensor shall periodically reimburse SPL for its
         out-of-pocket costs (excluding the costs of retaining its own outside
         counsel) incurred in cooperating with Licensor. Any recovery or damages
         derived from any suit under this Section 4.3(a) where SPL has joined
         and shared costs shall be used first to reimburse each of Licensor and
         SPL for its documented out-of-pocket legal expenses relating to the
         suit, shall be used second to reimburse Licensor for royalties lost as
         a result of reduced sales of Licensed Product, shall be used third to
         reimburse SPL for amounts attributed to SPL's lost profits, with any
         remaining amounts, including but not limited to punitive, exemplary, or
         other enhanced damages, to be shared [ * ] by the Parties. Any recovery
         or damages derived from a suit which SPL has not joined shall be
         retained by Licensor.

                  (b)      Continuance of Infringement. If Licensor has neither
         obtained a discontinuance of such infringement nor brought suit against
         such infringer after the expiration of the [ * ] period specified in
         Subsection 4.3(a), SPL shall have the right, but not the obligation, to
         bring suit against such infringer under the Patent Rights and join


                                       22
<PAGE>   29

         Licensor as a party plaintiff, provided that SPL shall bear all the
         expenses of such suit. Licensor shall cooperate with SPL in any such
         suit for infringement of a Patent Right brought by SPL against a third
         party, and shall have the right to consult with SPL and to participate
         in and be represented by independent counsel in such litigation at its
         own expense. SPL shall periodically reimburse Licensor for its out of
         pocket costs (excluding Licensor's costs of retaining independent
         counsel) incurred in cooperating with SPL. SPL shall incur no liability
         to Licensor as a consequence of such litigation or any unfavorable
         decision resulting therefrom, including any decision holding any of the
         Patent Rights invalid or unenforceable, except that SPL shall indemnify
         and hold Licensor harmless for any monetary judgment or award against
         or penalty levied upon either Licensor or SPL arising out of SPL's acts
         in the enforcement of such Patent Rights. In the event that SPL
         recovers any sums through litigation under this Section 4.3(b) by way
         of damages or in settlement thereof, SPL shall retain all such sums.

         4.4      Third Party Infringement Suit.

                  (a)      Defense. In the event that a third party sues SPL
         alleging that SPL's, its Affiliates' or its Sublicensees' making,
         having made, importing, exporting, using, distributing, marketing,
         promoting, offering for sale or selling Licensed Compound and/or
         Licensed Product in one or more countries in the Territory infringes or
         will infringe said third party's patent, then SPL may elect to defend
         such suit at its sole expense and discretion. To the extent that the
         alleged infringement is based upon the use of Licensed Compound,
         another compound from the Compound Library or the Licensor Know-How,
         SPL shall have no obligation to pay royalties to Licensor under Section
         3.3 with respect to sales of Licensed Product in such country(ies)
         during the pendency of any such suit. Upon SPL's request and in
         connection with SPL's defense of any such third party infringement
         suit, Licensor shall cooperate with SPL for such defense provided, that
         SPL shall promptly reimburse Licensor for reasonable out-of-pocket
         costs and expenses incurred by Licensor in providing such cooperation
         (excluding Licensor's costs of retaining independent counsel). Licensor
         shall invoice SPL for such costs and expenses, and shall provide
         documentation for the invoice. The invoice shall be payable to Licensor
         or its designee(s) [ * ] days after receipt by SPL of the invoice.

                  (b)      Licensing. SPL shall have the right to negotiate with
         said third party for a suitable license or assignment of rights under
         the relevant patents. In the event that such negotiation results in a
         consummated agreement, then any lump sum payment and/or royalty
         payments to be made thereunder shall be paid by SPL and shall be offset
         against any royalties due Licensor in accordance with the terms of
         Article 3.4.

         4.5      Certification Under Drug Price Competition and Patent
Restoration Act. Licensor and SPL each shall immediately give written notice to
the other of any certification of which they become aware filed pursuant to 21
U.S.C. ss.355(b)(2)(A)(iv) and 355(j)(2)(A)(vii), or any amendment or successor
statute thereto, claiming that Patent Rights covering Licensed



                                       23
<PAGE>   30

Compound and/or Licensed Product(s) are invalid or that infringement will not
arise from the manufacture, use or sale of a product containing Licensed
Compound or otherwise equivalent to Licensed Product by a third party.
Notwithstanding any provision to the contrary, in the event that the Patent
Rights at issue are owned and/or controlled by Licensor and Licensor has failed
to bring an infringement action against such third party at least [ * ] business
days prior to expiration of the forty five (45) day period set forth in 21
U.S.C. ss.355(c)(3)(C) (or any amendment or successor statute thereto), SPL
shall have the right to bring such an infringement action, in its sole
discretion and at its own expense, in its own name and/or in the name of
Licensor. At SPL's request, Licensor shall, at its own expense, provide SPL
reasonable assistance to conduct such infringement action, including, without
limitation, causing the execution of such legal documents as SPL may deem
necessary for the prosecution of such action. SPL shall periodically reimburse
Licensor for its out-of-pocket costs (excluding any of Licensor's costs of
retaining independent counsel) incurred in assisting SPL. SPL shall incur no
liability to Licensor as a consequence of such litigation or any unfavorable
decision resulting therefrom, including any decision holding any of the Patent
Rights invalid or unenforceable, except that SPL shall indemnify and hold
Licensor harmless for any monetary judgment or award against or penalty levied
upon either Licensor or SPL arising out of SPL's acts in the enforcement of such
Patent Rights. In the event that SPL recovers any sums in such litigation by way
of damages or in settlement thereof, SPL shall have the right to retain all such
sums to offset its costs, losses and expenses.

         4.6      Abandonment. Subject to SPL's rights pursuant to Section 4.2,
Licensor shall at the earliest known date give notice to SPL of the grant,
lapse, revocation, surrender, invalidation or abandonment of any Patent Rights
licensed to SPL for which Licensor is responsible for the filing, prosecution
and maintenance under this Agreement.

         4.7      Patent Term Restoration. The Parties hereto shall cooperate
with each other in obtaining patent term restoration or its equivalent in the
Territory where applicable to Patent Rights. In the event that elections with
respect to obtaining such patent term restoration are to be made, SPL shall have
the right to make the election and Licensor agrees to abide by such election.

         4.8      Notices Regarding Patents. All notices, inquiries and
communications in connection with this Article IV shall be sent in the manner
set forth in Section 9.7 to the Parties at the addresses and facsimile numbers
indicated below.

If to Licensor:            AtheroGenics, Inc.
                           8995 Westside Parkway
                           Alpharetta, Georgia  30004
                           Attn.: Vice President, Business Development
                                   (with a copy to: President)
                           Fax No.:  (678) 336-2501


                                       24
<PAGE>   31

If to SPL:                 Schering Corporation
                           2000 Galloping Hill Road
                           Kenilworth, New Jersey  07033
                           Attn.:  Staff Vice President - Patents and Trademarks
                           Fax No.:  (908) 298-5388


                                    ARTICLE V
                         CONFIDENTIALITY AND PUBLICATION

         5.1      Confidentiality.

                  (a)      Nondisclosure Obligation. Each of Licensor and SPL
         shall use only in accordance with this Agreement, and shall not
         disclose to any third party, any of the other Party's Proprietary
         Information received by it pursuant to this Agreement without the prior
         written consent of the other Party. The foregoing obligations shall
         survive the expiration or termination of this Agreement for a period of
         [ * ] years. These obligations shall not apply when and to the extent
         Proprietary Information :

                           (i)      is known by the receiving Party at the time
                  of its receipt, and not through a prior disclosure by the
                  disclosing Party, as documented by business records;

                           (ii)     is at the time of disclosure or thereafter
                  becomes published or otherwise part of the public domain
                  without breach of this Agreement by the receiving Party;

                           (iii)    is subsequently disclosed to the receiving
                  Party by a third party that has the right to make such
                  disclosure;

                           (iv)     is developed by the receiving Party
                  independently of Proprietary Information or other information
                  received from the disclosing Party and such independent
                  development can be documented by the receiving Party;

                           (v)      is disclosed to any institutional review
                  board of any entity conducting clinical trials, or any
                  governmental or other regulatory agencies in order to obtain
                  patents, to gain approval to conduct clinical trials or to
                  market Licensed Compound and/or Licensed Product, but such
                  disclosure may be made only to the extent reasonably necessary
                  to obtain such patents or authorizations; or

                           (vi)     is required by law, regulation, rule, act or
                  order of any governmental authority or agency to be disclosed
                  by a Party, provided that notice is promptly delivered to the
                  other Party in order to provide an opportunity to seek



                                       25
<PAGE>   32

                  a protective order or other similar order with respect to such
                  Proprietary Information and thereafter the disclosing Party
                  discloses to the requesting entity only the minimum
                  Proprietary Information required to be disclosed in order to
                  comply with the request, whether or not a protective order or
                  other similar order is obtained by the other Party.


                  (b)      Disclosure to Agents. Notwithstanding the provisions
         of Section 5.1(a), SPL shall have the right to disclose Licensor's
         Proprietary Information to its Sublicensees, agents, consultants,
         Affiliates or other third parties (collectively "Agents") in accordance
         with this Section 5.1(b). Such disclosure shall be limited only to
         those Agents directly involved in the research, development,
         manufacture, marketing or promotion of Licensed Compound or Licensed
         Product (or for such Agents to determine their interest in performing
         such activities) in accordance with this Agreement. Any such Agents
         must agree in writing to be bound by confidentiality and non-use
         obligations essentially the same as those contained in this Agreement.
         The term of confidentiality and non-use obligations for such Agents
         shall be no less than [ * ] years. SPL shall be jointly and severally
         liable for any disclosure of Licensor Proprietary Information by
         Agents.

                  (c)      Disclosure to a Third Party. Licensor shall have the
         right to use and disclose any Licensor Know-How at its sole option and
         discretion for the limited purpose of filing, prosecuting, and
         supporting Patent Rights. Subject to the terms of Section 5.2, either
         Party may publish Licensor Know-How under the terms of Section 5.3
         below. Licensor shall not otherwise disclose, provide or transfer any
         Licensor Know-How to any third party without the prior written approval
         of SPL.

         5.2      Publicity. Except as provided in Section 5.1 and this Section
5.2, a Party may not use the name of the other Party in any publicity,
advertising or in any other public way and, may not issue press releases or
otherwise publicize or disclose any information related to the existence of this
Agreement, the terms or conditions of this Agreement, or any information
relating to the subject matter hereof, without the prior written consent of the
other Party. The Parties shall agree upon an initial press release to announce
the execution of this Agreement, together with a corresponding Q&A outline for
use in responding to inquiries about the Agreement. Following such initial press
release, Licensor may use the specific information contained therein, or in any
subsequent public announcements or publications made by SPL or by mutual
agreement of the Parties, in Licensor's investor relations and public relations
activities. Licensor shall make no public announcement, either written, oral or
in any medium relating to the safety of Licensed Compound and/or Licensed
Product, except for statements in official correspondence with government patent
authorities in support of Patent Rights as provided for in Section 5.1(c). [ * ]

         5.4      Publication. SPL and Licensor each acknowledge the potential
benefit in



                                       26
<PAGE>   33

publishing results of certain studies to obtain recognition within the
scientific community and to advance the state of scientific knowledge. Each
Party also recognizes the mutual interest in obtaining valid patent protection
and in protecting business interests and trade secret information. No
publication of Licensor Know-How or Patent Rights may be made without the prior
written consent of Licensor. The Parties agree that SPL, its Affiliates,
employees or consultants shall be free to make any publication which does not
disclose Licensor Know-How or Patent Rights. In the event that any proposed
publication (as defined below) discloses Licensor Know-How or Patent Rights, the
following procedure shall apply: Either Party, its Affiliates, employees or
consultants wishing to make a publication shall deliver to the other Party a
copy of the proposed written publication or an outline of an oral disclosure at
least [ * ] days prior to submission for publication or presentation. For
purposes of this Agreement, the term "publication" shall include, without
limitation, abstracts and manuscripts for publication, slides and texts of oral
or other public presentations, and texts of any transmission through any
electronic media, e.g. any computer access system such as the Internet,
including the World Wide Web. The reviewing Party shall have the right (i) to
propose modifications to the publication for patent reasons, trade secret
reasons or business reasons or (ii) to request delay of the publication or
presentation in order to protect patentable information. If the reviewing Party
requests a delay, the publishing Party shall delay submission or presentation
for a period of up to [ * ] from the filing date of the first patent application
in the Territory covering the information contained in the proposed publication
or presentation. If the reviewing Party requests modifications to the
publication, the publishing Party may edit such publication to prevent
disclosure of trade secret or proprietary business information prior to
submission of the publication or presentation.

                                   ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

         6.1      Representations and Warranties of Each Party. Each of Licensor
and SPL hereby represents, warrants and covenants to the other Party hereto that
as of the Execution date it has complied, and during the period extending from
the Execution Date until the expiration or termination of this Agreement it
shall comply, with all applicable material laws and regulations relating to its
activities under this Agreement. Each of Licensor and SPL further represents,
warrants and covenants to the other Party hereto that as of the Execution Date:

                  (a)      it is a corporation or entity duly organized and
         validly existing under the laws of the state or other jurisdiction of
         its incorporation or formation;

                  (b)      the execution, delivery and performance of this
         Agreement by such Party has been duly authorized by all requisite
         corporate action, subject only to receipt of requisite approval of its
         board of directors;

                  (c)      it has the power and authority to execute and deliver
         this Agreement and to perform its obligations hereunder;


                                       27
<PAGE>   34

                  (d)      the execution, delivery and performance by such Party
         of this Agreement and its compliance with the terms and provisions
         hereof does not and will not conflict with or result in a breach of any
         of the terms and provisions of or constitute a default under (i) a loan
         agreement, guaranty, financing agreement, agreement affecting a product
         or other agreement or instrument binding or affecting it or its
         property; (ii) the provisions of its charter or operative documents or
         bylaws; or (iii) any order, writ, injunction or decree of any court or
         governmental authority entered against it or by which any of its
         property is bound;

                  (e)      except for the governmental and Regulatory Approvals
         required to market Licensed Product in the Territory and any filings or
         approvals referred to in Section 2.4, the execution, delivery and
         performance of this Agreement by such Party does not require the
         consent, approval or authorization of, or notice, declaration, filing
         or registration with, any governmental or regulatory authority and the
         execution, delivery or performance of this Agreement will not violate
         any law, rule or regulation applicable to such Party;

                  (f)      this Agreement has been duly authorized, executed and
         delivered and constitutes such Party's legal, valid and binding
         obligation enforceable against it in accordance with its terms subject,
         as to enforcement, to bankruptcy, insolvency, reorganization and other
         laws of general applicability relating to or affecting creditors'
         rights and to the availability of particular remedies under general
         equity principles;

                  (g)      to the best of its knowledge there are no third party
         pending patent applications (excluding the Patent Rights) which, if
         issued, may cover the development, manufacture, use or sale of any
         Licensed Compound or Licensed Product.

         6.2      Licensor's Representations. Licensor hereby represents,
warrants and covenants to SPL that as of the Execution Date:

                  (a)      to the best of its knowledge, the Patent Rights and
         Licensor Know-How are subsisting and are not invalid or unenforceable,
         in whole or in part;

                  (b)      it has the full right, power and authority to grant
         all of the right, title and interest in the licenses granted to SPL
         under Article II hereof;

                  (c)      to the best of its knowledge, it has not previously
         assigned, transferred, conveyed or otherwise encumbered its right,
         title and interest in the Licensed Compound, Licensed Product, the
         Patent Rights, or Licensor Know-How ;

                  (d)      except as specifically set forth in Schedule 6.2(d),
         it is the sole and exclusive owner and/or licensee of the Patent Rights
         and Licensor Know-How, all of which are free and clear of any liens,
         charges and encumbrances, and to the best of its knowledge no other
         person, corporation or other private entity, or governmental entity or


                                       28
<PAGE>   35

         subdivision thereof, has or shall have any claim of ownership with
         respect to the Patent Rights or Licensor Know-How, whatsoever;

                  (e)      to the best of its knowledge, the Patent Rights and
         Licensor Know-How, and the development, manufacture, use, distribution,
         marketing, promotion and sale of Licensed Products do not interfere or
         infringe (as applicable) on any intellectual property rights owned or
         possessed by any third party;

                  (f)      there are no claims, judgments or settlements against
         or amounts with respect thereto owed by Licensor, and to the best of
         its knowledge no pending or threatened claims or litigation against
         Licensor relating to Licensed Compound, the Patent Rights and Licensor
         Know-How;

                  (g)      to the best of its knowledge, there are no
         circumstances that would adversely affect the commercial utility or the
         use of the Licensed Product;

                  (h)      it has provided to Schering Corporation a summary of
         all material adverse events known to it relating to the Licensed
         Compound;

                  (i)      there are no collaborative, licensing, material
         transfer, supply, distributorship or marketing agreements or
         arrangements or other similar agreements to which it or any of its
         Affiliates are a party relating to Licensed Compound, Licensed Product
         or Patent Rights which would materially limit the rights granted to SPL
         under this Agreement with respect to the Licensed Compound, Licensed
         Product or Patent Rights;

                  (j)      there are no trademark(s) chosen, owned or controlled
         by Licensor or its Affiliates specifically in connection with the
         Licensed Compound and/or the Licensed Product in the Territory; and

                  (k)      except as set forth in Schedule 6.2(k), it has not
         identified any compounds outside of the Compound Library which exhibit
         both (1) similar or better VCAM-1 inhibition than the Licensed Compound
         as determined using Licensor's currently available in vitro screens for
         VCAM-1 inhibitory activity (i.e., the human aortic endothelial cell
         based screen) and (2) histologically or morphologically demonstrated
         anti-atherosclerotic properties similar or better than Licensed
         Compound in the Licensor's animal models (i.e., the
         hypercholesterolemic rabbit).

Licensor further represents, warrants and covenants to SPL that:

                  (l)      during the period extending from the Execution Date
         until the expiration or termination of this Agreement it will use
         reasonable efforts not to diminish the rights under the Patent Rights
         and Licensor Know-How granted to SPL hereunder, including



                                       29
<PAGE>   36

         without limitation, by not committing or permitting any actions or
         omissions which would cause the breach of any license or other
         agreements between itself and third parties which provide for licenses,
         assignments or other rights to any Patent Rights or Licensor Know-How,
         that it will provide SPL promptly with notice of any such alleged
         breach, and that as of the Execution Date, it is in compliance in all
         material respects with any such licenses or other agreements with third
         parties;

                  (m)      as of the Execution Date, and to the best of its
         knowledge, all data summaries provided in writing to SPL by Licensor
         prior to the Execution Date relating to pre-clinical and clinical
         studies of the Licensed Compound accurately represent the raw data
         underlying such summaries; and

                  (n)      Licensor shall not seek or file for any trademark for
         use in connection with the Licensed Compound and/or the Licensed
         Product in the Territory during the period extending from the Execution
         Date until the expiration or termination of this Agreement.

         6.3      Continuing Representations. The representations and warranties
of each Party contained in Sections 6.1 and 6.2 shall survive the execution of
this Agreement.

         6.4      No Inconsistent Agreements. Neither Party has in effect and
after the Effective Date neither Party shall enter into any oral or written
agreement or arrangement that would be inconsistent with its obligations under
this Agreement.

         6.5      Representation by Legal Counsel. Each Party hereto represents
that it has been represented by legal counsel in connection with this Agreement
and acknowledges that it has participated in the drafting hereof. In
interpreting and applying the terms and provisions of this Agreement, the
Parties agree that no presumption shall exist or be implied against the Party
which drafted such terms and provisions.

         6.6      Additional Obligations of Licensor The Parties acknowledge and
agree that all data and information provided by Licensor to SPL arising out of
or relating to any preclinical and/or clinical studies involving the Licensed
Compound and/or Licensed Product conducted by or on behalf of Licensor (the
"Studies"), or relating to any patent applications or patents having claims
covering the Licensed Compound and/or Licensed Product, are of material
importance to the development and commercialization of the Licensed Compound
and/or Licensed Product and to SPL's decision to enter into this Agreement.

                  (a)      Licensor represents and warrants that, to the best of
         its knowledge and based upon Licensor's diligence in the performance of
         the relevant activities, as of the Execution Date it (and its
         subcontractors and/or collaborators, if any):

         (i)      has fully complied with all applicable laws, rules and
                  regulations, in the preparation, filing and prosecution of
                  patent applications or patents;


                                       30
<PAGE>   37

         (ii)     has fully complied with all applicable laws, rules and
                  regulations, in the conduct and evaluation of the Studies and
                  with regard to all applications or submissions for Regulatory
                  Approval in the Territory, if any;

         (iii)    knows of no irregularities or information suggesting any
                  irregularities in connection with the preparation, filing or
                  prosecution of patent applications or patents which may have a
                  material adverse effect with respect thereto; and

         (iv)     knows of no irregularities or information suggesting any
                  irregularities in connection with the conduct and evaluation
                  of the Studies which may have a material adverse effect with
                  respect thereto.

                  (b)      To the extent of Licensor's obligations under this
         Agreement, Licensor shall undertake to perform the following in
         accordance with all applicable laws, rules and regulations:

         (i)      to prepare, file, prosecute and maintain, or ensure that its
                  subcontractors, collaborators and/or agents prepare, file,
                  prosecute and maintain, any patent applications or patents
                  relating to the Licensed Compound and/or Licensed Product; and

         (ii)     to conduct, or ensure that its subcontractors and/or
                  collaborators, if any, shall conduct, any Studies.

                  (c)      In the event Licensor becomes aware of any known or
         suspected impropriety or misconduct relating to the preparation,
         filing, prosecution or maintenance of patent applications or patents,
         and/or the performance, analysis or reporting of any Studies, or any
         application or submission for Regulatory Approval, Licensor shall,
         within [ * ] hours notify SPL of such event in writing.


                                   ARTICLE VII
                   INDEMNIFICATION AND LIMITATION ON LIABILITY

         7.1      Indemnification by SPL. SPL shall indemnify, defend and hold
harmless Licensor and its Affiliates, and each of its and their respective
employees, officers, directors and agents (each, a "Licensor Indemnified Party")
from and against any and all third party claims, demands, lawsuits, proceedings,
settlement amounts, liability, loss, damage, cost, and expense (including
reasonable attorneys' fees), (collectively, a "Liability") which may be asserted
against the Licensor Indemnified Party or which the Licensor Indemnified Party
may incur, suffer or be required to pay resulting from or arising out of (i) the
discovery, development, manufacture, promotion, distribution, use, testing,
marketing, sale or other disposition of Licensed Compound



                                       31
<PAGE>   38

and/or Licensed Product(s) by SPL, its Affiliates or Sublicensees (including
without limitation any personal injury, death, or other injuries suffered by
users of Licensed Compound or Licensed Product), or (ii) the breach by SPL of
any covenant, representation or warranty contained in this Agreement; or (iii)
the successful enforcement by a Licensor Indemnified Party of its rights under
this Section 7.1. Notwithstanding the foregoing, SPL shall have no obligation
under this Agreement to indemnify, defend or hold harmless any Licensor
Indemnified Party with respect to any Liability which results from the willful
misconduct or negligent acts or omissions of Licensor, its Affiliates, or any of
their respective employees, officers, directors or agents.

         7.2      Indemnification by Licensor. Licensor shall indemnify, defend
and hold harmless SPL and its Affiliates, and each of its and their respective
employees, officers, directors and agents (each, a "SPL Indemnified Party") from
and against any Liability which the SPL Indemnified Party may incur, suffer or
be required to pay resulting from or arising out of (i) the breach by Licensor
of any covenant, representation or warranty contained in this Agreement; or (ii)
the successful enforcement by a SPL Indemnified Party of its rights under this
Section 7.2. Notwithstanding the foregoing, Licensor shall have no obligation
under this Agreement to indemnify, defend or hold harmless any SPL Indemnified
Party with respect to any Liability which results from willful misconduct or
negligent acts or omissions of SPL, its Affiliates, or any of their respective
employees, officers, directors or agents.

         7.3      Conditions to Indemnification. Each Party agrees to promptly
give the other Party notice of any claim for which indemnification may be
sought. Failure of an indemnified Party to provide notice of a claim to the
indemnifying Party shall affect the indemnified Party's right to indemnification
only to the extent that such failure has a material adverse effect on the
indemnifying Party's ability to defend or the nature or the amount of the
Liability. Subject to the provisions of Article IV, the indemnifying Party shall
have the right to assume the defense of any suit or claim related to the
Liability if it has assumed responsibility for the suit or claim in writing;
provided, however, that if in the reasonable judgment of the indemnified Party,
such suit or claim involves an issue or matter which could have a materially
adverse effect on the business operations or assets of the indemnified Party,
the indemnified Party may waive its rights to indemnity under this Agreement and
control the defense or settlement thereof, but in no event shall any such waiver
be construed as a waiver of any indemnification rights such Party may have at
law or in equity. If the indemnifying Party defends the suit or claim, the
indemnified Party may participate in (but not control) the defense thereof at
its sole cost and expense.

         7.4      Settlements. Subject to the provisions of Article IV, neither
Party may settle a claim or action related to a Liability without the consent of
the other Party if such settlement would impose any monetary obligation on the
other Party or require the other Party to submit to an injunction or otherwise
limit the other Party's rights under this Agreement, provided that such consent
shall not be unreasonably withheld or delayed. Any payment made by a Party to
settle any such claim or action shall be at its own cost and expense.

         7.5      Limitation of Liability. With respect to any claim by one
Party against the other



                                       32
<PAGE>   39

arising out of the performance or failure of performance of the other Party
under this Agreement, the Parties expressly agree that the liability of such
Party to the other Party for such breach shall be limited under this Agreement
or otherwise at law or equity to direct damages only and in no event shall a
Party be liable for, punitive, exemplary or consequential damages suffered or
incurred by the other Party.

         7.6      Insurance. Each Party acknowledges and agrees that during the
Term of this Agreement it shall maintain adequate insurance and/or a
self-insurance program for contractual liability insurance to cover such Party's
obligations under this Agreement. Each Party shall provide the other Party with
evidence of such insurance and/or self-insurance program, upon request.


                                  ARTICLE VIII
                              TERM AND TERMINATION

         8.1      Term and Expiration. This Agreement shall be effective as of
the Effective Date and unless terminated earlier by mutual written agreement of
the Parties or pursuant to Sections 8.2, 8.3 or 8.4 below, the Term of this
Agreement shall continue in effect on a product-by-product and
country-by-country basis until the expiration of the last to expire Patent Right
incorporating a Valid Claim covering the Licensed Product, or in countries where
no such Patent Rights exist until the tenth anniversary of the First Commercial
Sales of Licensed Product in such country. Upon expiration of this Agreement,
SPL's licenses pursuant to Section 2.1 and 2.2 shall become fully paid-up,
perpetual licenses.

         8.2      Termination by SPL Without Cause. SPL shall have the
unilateral right to terminate this Agreement on a product-by-product basis
(without cause) at any time by giving [ * ] days advance written notice to
Licensor. In the event of the exercise of such termination rights, the rights
and licenses granted to SPL under Sections 2.1 and 2.2 shall terminate and all
rights to Licensor Know-How, Licensed Compounds and Licensed Products with
respect to the applicable product which are granted pursuant to this Agreement
shall revert to Licensor.

         8.3      Termination Upon Cessation of Development.

                  (a)      Termination by Either Party Either Party shall have
         the unilateral right to terminate this Agreement on a
         product-by-product basis at any time by giving [ * ] advance written
         notice to the other Party if SPL ceases development or
         commercialization of Licensed Compound or Licensed Product pursuant to
         Sections 2.6(a) and (c), subject to Section 2.6(b). In the event of the
         exercise of such termination rights, the rights and licenses granted to
         SPL under Sections 2.1 and 2.2 shall terminate and all rights to
         Licensor Know-How, Licensed Compounds and Licensed Products with
         respect to the applicable product which are granted pursuant to this
         Agreement shall revert to Licensor.


                                       33
<PAGE>   40

                  (b)      Termination by Licensor Licensor shall have the
         unilateral right to terminate this Agreement by giving [ * ] days
         written notice to SPL in the event that:

                           (i)      [ * ]

                           (ii)     [ * ]

         In the event of the exercise of such termination rights, the rights and
         licenses granted to SPL under Sections 2.1 and 2.2 shall terminate and
         all rights to Licensor Know-How, Licensed Compounds and Licensed
         Products with respect to the applicable product which are granted
         pursuant to this Agreement shall revert to Licensor.

         8.4      Termination.

                  (a)      Termination for Cause. This Agreement may be
         terminated by written notice at any time during the Term of this
         Agreement:

                           (i)      by either Party, subject to Section 9.2, if
                  the other Party is in breach of its material obligations with
                  respect to such product hereunder and has not cured such
                  breach within [ * ] days ([ * ] days with respect to payment
                  obligations under Article III) after written notice requesting
                  cure of the breach with reasonable detail of the particulars
                  of the alleged breach, or within [ * ] days of receiving
                  notice initiated actions reasonably expected to cure the cited
                  failure and thereafter diligently pursued such actions to cure
                  the failure (even if requiring longer than the [ * ] days set
                  forth in this subsection); or

                           (ii)     by either Party upon the filing or
                  institution of bankruptcy, reorganization (in connection with
                  any insolvency), liquidation or receivership proceedings, or
                  upon an assignment of a substantial portion of the assets for
                  the benefit of creditors by the other Party, or in the event a
                  receiver or custodian is appointed for such other Party's
                  business, or if a substantial portion of such other Party's
                  business is subject to attachment or similar process;
                  provided, however, that in the case of any involuntary
                  bankruptcy proceeding such right to terminate shall only
                  become effective if the proceeding is not dismissed within
                  [ * ] days after the filing thereof.

                  (b)      Effect of Termination for Cause on License.

                           (i)      Termination by SPL. In the event SPL
                  terminates this Agreement under Section 8.4(a)(i), due to a
                  breach by Licensor of its material obligations under Section
                  2.1(a), 2.1(b) or 2.11(a) of this Agreement, then SPL's
                  licenses pursuant to Sections 2.1 and 2.2 shall become fully
                  paid-up, perpetual licenses.


                                       34
<PAGE>   41

                           (ii)     Termination by Licensor. In the event that
                  Licensor terminates this Agreement under Section 8.4(a)(i),
                  then the rights and licenses granted to SPL under Sections 2.1
                  and 2.2 shall terminate and all rights to Licensor Know-How,
                  Licensed Compounds and Licensed Products granted pursuant to
                  this Agreement shall revert to Licensor.

                           (iii)    Effect of Bankruptcy. In the event SPL
                  terminates this Agreement under Section 8.4(a)(ii) or this
                  Agreement is otherwise terminated under Section 8.4(a)(ii),
                  the Parties agree that SPL, as a licensee of rights to
                  intellectual property under this Agreement, shall retain and
                  may fully exercise all of its rights and elections under the
                  Insolvency Statute including as set forth in Section 9.8
                  hereof.

         8.5      Effect of Termination. Expiration or termination of the
Agreement shall not relieve the Parties of any obligation accruing prior to such
expiration or termination, and the provisions of Articles V and VII shall
survive the expiration of the Agreement. With regard to reimbursement for
development costs incurred by Licensor, including, without limitation, the costs
of clinical studies, SPL's obligations under Section 2.6 shall upon termination
be limited to the costs for actual work performed in accordance with the
relevant research plans or protocols up to the effective date of such
termination, or any irrevocable financial commitments made by Licensor prior to
the date of notice of termination. Any expiration or early termination of this
Agreement shall be without prejudice to the rights of either Party against the
other accrued or accruing under this Agreement prior to termination, including
the obligation to pay royalties for Licensed Product(s) or Licensed Compound
sold prior to such termination. In the event of termination of this Agreement,
SPL shall have the right to continue to sell its existing inventory of Licensed
Product during the [ * ] month period immediately following such termination,
provided that SPL shall continue to make royalty payments with respect to such
sales.

         8.6      Remedies for Breach. In addition to any and all other
remedies that SPL may have under this Agreement, or otherwise under law and/or
equity, in the event that Licensor materially breaches its obligations under
Sections 6.6(a) or (b) of this Agreement and/or materially breaches its
representation, warranties and covenants under Section 6.2(m), then SPL shall
have the right, at SPL's sole discretion, upon written notice to Licensor to
either: (i) deduct [ * ] of the remaining unpaid milestone(s) in Section 3.2;
(ii) permanently reduce by [ * ] the royalty rates provided for in Section 3.3;
or (iii) immediately terminate the Agreement.

         8.7      Licensor's Rights on Termination. In the event that Licensor
terminates this Agreement under Section 8.3 or 8.4(a)(i), or SPL terminates this
Agreement under Section 8.2 or 8.3, SPL shall provide to Licensor the following:

         (i)      all existing Regulatory Approvals and/or applications for
                  Regulatory Approval for the applicable Licensed Product(s) in
                  the Territory;

         (ii)     access, including the right to make copies, of all
                  preclinical, clinical,



                                       35
<PAGE>   42

                  pharmacokinetic, toxicology or other data owned or controlled
                  by SPL which is necessary to support any of the Regulatory
                  Approvals provided to Licensor under Section 8.7(i);

         (iii)    subject to the terms of Section 8.7 (iv), all preclinical and
                  clinical supplies of the applicable Licensed Product(s),
                  and/or Licensed Compound or other Compound Library compounds,
                  in SPL's possession or control;

         (iv)     access to all manufacturing information relating to the
                  Licensed Product, including assigning, sublicensing or
                  otherwise making available, as appropriate, any third party
                  manufacturing agreements relied upon by SPL for the
                  manufacture of Licensed Product, in each case to the extent
                  reasonably necessary for Licensor to manufacture the Licensed
                  Product following such termination;

         (v)      to the extent that termination occurs after the First
                  Commercial Sale of the applicable Licensed Product(s) and
                  subject to the terms of Section 8.5, Licensor shall have the
                  right to purchase SPL's remaining inventory of the applicable
                  Licensed Product(s) and/or Licensed Compound or other Compound
                  Library compounds for sale in the Territory at [ * ] of SPL's
                  fully absorbed manufacturing costs.

In addition, in the event of such termination, SPL shall grant to Licensor a
paid-up, non-exclusive, non-transferable license in the Territory under any
issued patents, or pending patent applications, owned or controlled by SPL which
would otherwise be infringed by the manufacture, use or sale of the applicable
Licensed Product(s) in the Territory, which license shall be restricted to the
sole purpose of making, having made, importing, exporting, using, distributing,
marketing, promoting, offering for sale and selling such Licensed Product(s).

         8.8      Concurrent Termination with the US Agreement. In the event of
any termination of the US Agreement by either Licensor or Schering Corporation
under the provisions of Sections 8.2, 8.3 or 8.4 of the US Agreement, this
Agreement shall automatically terminate concurrently under the corresponding
Section 8.2, 8.3 or 8.4 of this Agreement.


                                   ARTICLE IX
                                  MISCELLANEOUS

         9.1      Assignment/Change of Control.

                  (a)      Assignment. Neither this Agreement nor any or all of
         the rights and obligations of a Party hereunder shall be assigned,
         delegated, sold, transferred, sublicensed (except as expressly
         permitted hereunder) or otherwise disposed of, by operation of law or
         otherwise, to any third party (other than an Affiliate of an assigning
         Party under the condition that the assignor remain responsible to the
         other Party under



                                       36
<PAGE>   43

         this Agreement), without the prior written consent of the other Party.
         Any attempted assignment, delegation, sale, transfer, sublicense or
         other disposition, by operation of law or otherwise, of this Agreement
         or of any rights or obligations hereunder contrary to this Section 9.1
         shall be a material breach of this Agreement by the attempting Party,
         and shall be void and without force or effect; provided, however,
         either Party may, without such consent, assign the Agreement and its
         rights and obligations hereunder to an Affiliate or in connection with
         the transfer or sale of all or substantially all of its assets related
         to the division or the subject business, or in the event of its merger
         or consolidation or change in control or similar transaction. This
         Agreement shall be binding upon, and inure to the benefit of, each
         Party, its Affiliates, and its permitted successors and assigns. Each
         Party shall be responsible for the compliance by its Affiliates with
         the terms and conditions of this Agreement.

                  (b)      Change of Control. In the event the ownership or
         control of Licensor is acquired by another pharmaceutical company that
         has an ongoing development program or commercializes (directly or
         through any Affiliate) any compound or product for the Primary
         Indication and/or the Secondary Indication, Licensor shall promptly
         notify SPL in writing to that effect. Licensor's obligations under
         Section 2.11 shall not extend to any such compound or product.
         Effective upon such notice, the JMC shall be disbanded and SPL will
         assume and thereafter be responsible for all of the rights and
         obligations of the JMC. Licensor, and following the change of control
         the acquiring party, shall use best efforts to ensure that such
         acquiring party does not have any access to any of SPL's Proprietary
         Information or other proprietary information relating to the
         development and commercialization of Licensed Product. Such best
         efforts shall include, without limitation: (i) ensuring that the
         acquiring party does not have access to any such information prior to
         the change of control of Licensor; and (ii) promptly destroying or
         returning to SPL all such information in Licensor's possession or
         control upon completion of the change of control. The acquiring party
         shall have no rights to use any Licensor Know-How relating to the
         Primary Indication or the Secondary Indication in connection with the
         development and commercialization of its own compound or product for
         the Primary and/or Secondary Indication. All of SPL's obligations under
         Article II to provide Licensor and/or the JMC with reports or to
         otherwise keep Licensor informed with respect to the development and
         commercialization of Licensed Compound, any other compound within the
         Compound Library and/or Licensed Product shall immediately terminate;
         provided, however, that SPL shall provide such acquiring party with an
         annual summary of its activities in developing and commercializing
         Licensed Product.

         9.2      Governing Law. This Agreement shall be governed, interpreted
and construed in accordance with the laws of the State of New Jersey, without
giving effect to conflict of law principles. All disputes under this Agreement
shall be governed by binding arbitration pursuant to the mechanism set forth in
Schedule 9.2 attached hereto and incorporated hereby. The Parties expressly
exclude application of the United Nations Convention for the International Sale
of Goods.


                                       37
<PAGE>   44

         9.3      Waiver. Any delay or failure in enforcing a Party's rights
under this Agreement or any waiver as to a particular default or other matter
shall not constitute a waiver of such Party's rights to the future enforcement
of such rights under this Agreement, nor operate to bar the exercise or
enforcement thereof at any time or times thereafter, excepting only as to an
express written and signed waiver as to a particular matter for a particular
period of time.

         9.4      Independent Relationship. Nothing in this Agreement shall be
deemed to create an employment, agency, joint venture or partnership
relationship between the Parties hereto or any of their respective Affiliates,
agents or employees, or any other legal arrangement that would impose liability
upon one Party for the act or failure to act of the other Party. Neither Party
shall have any power to enter into any contracts or commitments or to incur any
liabilities in the name of, or on behalf of, the other Party, or to bind the
other Party in any respect whatsoever.

         9.5      Export Control. This Agreement is made subject to any
restrictions concerning the export of products or technical information from the
United States of America which may be imposed upon or related to Licensor or SPL
from time to time by the government of the United States of America.
Furthermore, SPL agrees that it will not export, directly or indirectly, any
technical information acquired from Licensor under this Agreement or any
products using such technical information to any country for which the United
States government or any agency thereof at the time of export requires an export
license or other governmental approval, without first obtaining the written
consent to do so from the Department of Commerce or other agency of the United
States government when required by an applicable statute or regulation.

         9.6      Complete Agreement.

                  (a)      Entire Agreement; Amendment. This Agreement,
         including the Exhibits and Schedules hereto and all the covenants,
         promises, agreements, warranties, representations, conditions and
         understandings contained herein sets forth the complete, final and
         exclusive agreement between the Parties with respect to the subject
         matter hereof and supersedes and terminates all prior and
         contemporaneous agreements and understandings between the Parties,
         whether oral or in writing. There are no covenants, promises,
         agreements, warranties, representations, conditions or understandings,
         either oral or written, between the Parties other than as are set forth
         herein. No subsequent alteration, amendment, change, waiver or addition
         to this Agreement shall be binding upon the Parties unless reduced to
         writing and signed by an authorized officer of each Party. Each Party
         in deciding to execute this Agreement has not relied on any
         understanding, agreement, representation or promise by the other Party
         which is not explicitly set forth herein.

                  (b)      Relationship to US Agreement; Controlling Provisions.
         The parties acknowledge and agree that this Agreement together with the
         US Agreement is intended to operate together as a single worldwide
         agreement governing the rights and



                                       38
<PAGE>   45

         obligations of Licensor, SPL and Schering Corporation. For purposes of
         clarity and avoidance of doubt, the parties agree that Sections 2.3 and
         2.5 of this Agreement shall be subject to and governed by the
         corresponding provisions of the US Agreement. The parties further agree
         that SPL's rights and obligations with respect to the filing,
         prosecution, maintenance and enforcement of patents and patent
         applications under Article IV of this Agreement shall be exercised and
         performed by the employees and/or agents of Schering Corporation having
         responsibility for Schering Corporation's rights and obligations under
         Article IV of the US Agreement, and that all such activities will be
         performed in a coordinated manner.

         9.7      Notices. Except as provided under Section 4.8 hereof, any
notice required or permitted to be given or sent under this Agreement shall be
hand delivered or sent by express delivery service or certified or registered
mail, postage prepaid, or by facsimile transmission (with written confirmation
copy by registered first-class mail) to the Parties at the addresses and
facsimile numbers indicated below.

         If to Licensor, to:     AtheroGenics, Inc.
                                 8995 Westside Parkway
                                 Alpharetta, Georgia  30004
                                 Attn.: Vice President, Business Development
                                 Fax No.: (678) 336-2501

         If to SPL to:           Schering-Plough Ltd.
                                 Toeperstrasse 5
                                 CH 6004 Lucerne, Switzerland
                                 Attn.:  President
                                 Fax No.:  41-41-418-1626

         with copies to:         Schering Corporation
                                 2000 Galloping Hill Road
                                 Kenilworth, New Jersey  07033
                                 Attn.: Vice President, Business Development
                                 Fax No.: (908) 298-5379

                  and            Attn.:  Law Department - Staff Vice President,
                                          Licensing
                                 Fax No.:  (908) 298-2739

         Any such notice shall be deemed to have been received on the date
actually received. Either Party may change its address or its facsimile number
by giving the other Party written notice, delivered in accordance with this
Section.


                                       39
<PAGE>   46

9.8      Provisions for Insolvency.

                  (a)      Effect on Licenses. All rights and licenses granted
         under or pursuant to this Agreement by Licensor to SPL are, for all
         purposes of Section 365(n) of Title 11 of the United States Code
         (together with its foreign equivalent, the "Insolvency Statute"),
         licenses of rights to "intellectual property" as defined in the
         Insolvency Statute. Licensor agrees that SPL, as licensee of such
         rights under this Agreement shall retain and may fully exercise all of
         its rights and elections under the Insolvency Statute provided that SPL
         makes all royalty payments under this Agreement. Licensor agrees during
         the Term of this Agreement to create and maintain current copies or, if
         not amenable to copying, detailed descriptions or other appropriate
         embodiments, to the extent feasible, of all such intellectual property.
         If a case is commenced by or against Licensor under the Insolvency
         Statute, Licensor (in any capacity, including debtor-in-possession) and
         its successors and assigns (including, without limitation, an
         Insolvency Statute trustee) shall,

                           (i)      as SPL may elect in a written request,
                  immediately upon such request:

                                    (A)      perform all of the obligations
                           provided in this Agreement to be performed by
                           Licensor including, where applicable and without
                           limitation, providing to SPL portions of such
                           intellectual property (including embodiments thereof)
                           held by Licensor and such successors and assigns or
                           otherwise available to them; or

                                    (B)      provide to SPL all such
                           intellectual property (including all embodiments
                           thereof) held by Licensor and such successors and
                           assigns or otherwise available to them; and

                           (ii)     not interfere with the rights of SPL under
                  this Agreement, or any agreement supplemental hereto, to such
                  intellectual property (including such embodiments), including
                  any right to obtain such intellectual property (or such
                  embodiments) from another entity.

                  (b)      Rights to Intellectual Property. If an Insolvency
         Statute case is commenced by or against Licensor, and this Agreement is
         rejected as provided in the Insolvency Statute, and SPL elects to
         retain its rights hereunder as provided in the Insolvency Statute, then
         Licensor (in any capacity, including debtor-in-possession) and its
         successors and assigns (including, without limitation, an Insolvency
         Statute trustee) shall provide to SPL all such intellectual property
         (including all embodiments thereof) held by Licensor and such
         successors and assigns, or otherwise available to them, immediately
         upon SPL's written request. Whenever Licensor or any of its successors
         or assigns provides to SPL any of the intellectual property licensed
         hereunder (or any embodiment thereof) pursuant to this Section 9.8, SPL
         shall have the right to perform the obligations


                                       40
<PAGE>   47

         of Licensor hereunder with respect to such intellectual property, but
         neither such provision nor such performance by SPL shall release
         Licensor from any such obligation or liability for failing to perform
         it.

                  (c)      SPL's Rights. All rights, powers and remedies of SPL
         provided herein are in addition to and not in substitution for any and
         all other rights, powers and remedies now or hereafter existing at law
         or in equity (including, without limitation, the Insolvency Statute) in
         the event of the commencement of an Insolvency Statute case by or
         against Licensor. SPL, in addition to the rights, power and remedies
         expressly provided herein, shall be entitled to exercise all other such
         rights and powers and resort to all other such remedies as may now or
         hereafter exist at law or in equity (including, without limitation, the
         Insolvency Statute) in such event. The Parties agree that they intend
         the foregoing SPL rights to extend to the maximum extent permitted by
         law, including, without limitation, for purposes of the Insolvency
         Statute:

                           (i)      the right of access to any intellectual
                  property (including all embodiments thereof) of Licensor, or
                  any third party with whom Licensor contracts to perform an
                  obligation of Licensor under this Agreement, and, in the case
                  of the third party, which is necessary for the development,
                  registration, manufacture and marketing of Licensed Compound
                  and/or Licensed Product(s); and

                           (ii)     the right to contract directly with any
                  third party described in (i) to complete the contracted work.

                  (d)      Deemed Grant of Rights. In the event of any
         insolvency of Licensor and if any statute and/or regulation in any
         country in the Territory requires that there be a specific grant or
         specific clause(s) in order for SPL to obtain the rights and benefits
         as licensee under this Agreement which are analogous to those rights
         under Section 365(n) of Title 11 of the United States Code, then this
         Agreement shall be deemed to include any and all such required
         grant(s), clause(s) and/or requirements.

                  (e)      Security Interests. In addition to any other rights
         granted to SPL hereunder, with respect to any country in the Territory
         in which SPL reasonably determines that its rights set forth in this
         Section 9.8 are nonexistent or inadequate to protect SPL's interests in
         the licenses granted hereunder, Licensor shall, upon SPL's request,
         execute a security agreement, or any foreign equivalent, for each
         country in the Territory, granting SPL a secured interest in all
         intellectual property licensed to SPL under this Agreement.


                                       41
<PAGE>   48

         9.9      Force Majeure. Failure of any Party to perform its obligations
under this Agreement (except the obligation to make payments when properly due)
shall not subject such Party to any liability or place them in breach of any
term or condition of this Agreement to the other Party if such failure is due to
any cause beyond the reasonable control of such non-performing Party ("force
majeure"), unless conclusive evidence to the contrary is provided. Causes of
non-performance constituting force majeure shall include, without limitation,
acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo,
strikes or other labor trouble, failure in whole or in part of suppliers to
deliver on schedule materials, equipment or machinery, interruption of or delay
in transportation, a national health emergency or compliance with any order or
regulation of any government entity acting with color of right. The Party
affected shall promptly notify the other Party of the condition constituting
force majeure as defined herein and shall exert reasonable efforts to eliminate,
cure and overcome any such causes and to resume performance of its obligations
with all possible speed; provided, however, that nothing contained herein shall
require any Party to settle on terms unsatisfactory to such Party any strike,
lock-out or other labor difficulty, any investigation or proceeding by any
public authority, or any litigation by any third party. If a condition
constituting force majeure as defined herein exists for more than ninety (90)
consecutive days, the Parties shall meet to negotiate a mutually satisfactory
resolution to the problem, if practicable.

         9.10     Severability. If any provision of this Agreement is declared
illegal, invalid or unenforceable by a court having competent jurisdiction, it
is mutually agreed that this Agreement shall endure except for the part declared
invalid or unenforceable by order of such court; provided, however, that in the
event that the terms and conditions of this Agreement are materially altered,
the Parties will, in good faith, renegotiate the terms and conditions of this
Agreement to reasonably substitute such invalid or unenforceable provisions in
light of the intent of this Agreement.

         9.11     Counterparts. This Agreement shall become binding when any one
or more counterparts hereof, individually or taken together, shall bear the
signatures of each of the Parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against either
Party whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.

         9.12     Captions. The captions of this Agreement are solely for the
convenience of reference and shall not affect its interpretation.

         9.13     Recording. Each Party shall have the right, at any time, to
record, register, or otherwise notify this Agreement in appropriate governmental
or regulatory offices anywhere in the world, and each Party shall provide
reasonable assistance to the other in effecting such recording, registering or
notifying. Notwithstanding the foregoing, prior to recording, registering, or
otherwise notifying this Agreement, the Party desiring to so record, register,
or notify shall provide a copy of all materials to be filed for review, comment,
and approval by the other Party, such approval not unreasonably to be withheld
or delayed.


                                       42
<PAGE>   49

         9.14     Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all other acts, as may be necessary
or appropriate in order to carry out the purposes and intent of this Agreement
including, without limitation, any filings with any antitrust agency which may
be required.

         IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized representatives of the Parties as of the date set forth below.

ATHEROGENICS, INC.                         SCHERING-PLOUGH LTD.

By:    Russell Medford                     By:    David Poorvin
       ------------------------                   ---------------------------

Title: President & CEO                     Title: Prokurist
       ------------------------                   ---------------------------

Date:  22 October 1999                     Date:  21 October 1999
       ------------------------                   ---------------------------





                                       43
<PAGE>   50
                                  SCHEDULE 1.6

             Elements of Fully Absorbed Manufacturing Cost of Goods

The following expenses are included in manufacturing costs:

1.       Direct Materials

Materials used in the manufacturing process that are traced directly to the
completed product, such as:

         -        Inert raw materials or excipients
         -        Active substances/ingredients
         -        Packaging components such as bottles, caps, labels, etc.

2.       Direct Labor

The cost of employees engaged in production activities that are directly
identifiable with product costs. Excludes supervision, which is included in
indirect labor, and production support activities such as inspection, plant and
equipment maintenance labor, and material handling personnel. Direct Labor cost
includes:

         -        Base pay, overtime, vacation and holidays, illness, personal
                  time with pay and shift differential.
         -        Cost of employee fringe benefits such as health and life
                  insurance, payroll taxes, welfare, pension and profit sharing.

3.       Indirect Manufacturing Costs

Costs which are ultimately allocated to product based on standard direct labor
hours of the operating departments. These costs include:

         -        Indirect Production Labor - salaries of employees engaged in
                  production activities who are not classified as direct labor,
                  including supervision, clerical, etc.

         -        Costs of Direct Labor - employees not utilized for the
                  manufacturing of product such as training, downtime and
                  general duties.

         -        Indirect Materials - supplies and chemicals which are used in
                  the manufacturing process and are not assigned to specific
                  products but are included in manufacturing overhead costs.
                  Includes supplies for which direct assignment to products is
                  not practical.


                                       i
<PAGE>   51

         -        Utilities - expenses incurred for fuel, electricity and water
                  in providing power for production and other plant equipment.

         -        Maintenance and Repairs - amount of expense incurred in-house
                  or purchased to provide services for plant maintenance and
                  repairs of facilities and equipment.

         -        Other Services - purchased outside services and rentals such
                  as the cost of security, ground maintenance, etc.

         -        Depreciation - of plant and equipment utilizing the
                  straight-line method of calculation.

         -        Insurance - cost of comprehensive and other insurance
                  necessary for the safeguard of manufacturing plant and
                  equipment.

         -        Taxes - expense incurred for taxes on real and personal
                  property (manufacturing site, buildings and the fixed assets
                  of equipment, furniture and fixtures, etc.). If manufacturing
                  site includes other operations (marketing, R&D, etc.), taxes
                  are allocated to manufacturing on the basis of total real and
                  personal property.

         -        Cost of manufacturing, service departments - such as:
                  (where applicable)

                  -        Packaging Engineering
                  -        Manufacturing Maintenance
                  -        Industrial Engineering
                  -        Receiving and Warehousing
                  -        Purchasing and Accounting
                  -        Production Scheduling
                  -        Inventory Management
                  -        Plant Materials Management
                  -        Central Weigh
                  -        Manufacturing Administration

         -        Allocated costs of services provided to manufacturing
                  including: (where applicable)

                  -        Cafeteria
                  -        Personnel Operations
                  -        Health and Safety Services
                  -        Division Engineering and Operations Services
                  -        Plant Services (housekeeping)
                  -        Manufacturing Information Systems
                  -        Plant Power
                  -        Office of V.P. Manufacturing

         Various bases are used for allocating these costs to manufacturing
         operating departments including headcount, square feet, metered
         utilities use, estimated

                                       ii
<PAGE>   52

         services rendered, EDP computer hours, etc.

4.       Quality Assurance Costs

Direct labor and indirect costs for Quality Assurance departments testing and
approving materials used in manufacturing and completed manufacturing batches
and finished products. This includes all manufacturing in-process testing and
testing of finished materials. Excluded from product costs are QA costs related
to research and development, stability testing, and other costs customarily
excluded from such Quality Assurance costs.

The following expenses are not included in manufacturing costs:
         a)       Inventory Carrying Costs
         b)       Regulatory Affairs Costs
         c)       Pilot plant costs, research batches and other similar costs
                  prior to turnover to manufacturing. These are handled as
                  development costs and expensed to R&D. This excludes
                  commercial goods produced by a research facility.
         d)       Costs incurred by Manufacturing for special projects (e.g.
                  requests by Schering-Plough Research Institute) to establish
                  and certify new production processes, batch sizes and product
                  line improvements, and new vendor certification of equipment
                  and primary materials components.
                  These costs are expensed to R&D.
         e)       Manufacturing start-up costs and initial one-time
                  extraordinary manufacturing costs incurred prior to plant
                  operation and achievement of a normal production activity
                  level. Includes costs of training, testing,
                  qualification/validation of new equipment and facilities and
                  initial, trial batches. These costs are deferred and then
                  amortized to Other Production Costs over five years.
         f)       Significant idle capacity is eliminated from factory overhead
                  and product cost. Idle or excess capacity costs are culled out
                  of the Manufacturing Budget and expensed as a period cost to
                  Other Production Costs.
         g)       Finished goods warehousing, shipping and other distribution
                  costs. These are included in distribution costs.
         h)       Product liability and/or business interruption insurance
                  expenses.
         i)       Intercompany profit.

5.       Other Production Costs

Three major types of expense are included in the Other Production Costs
classification.

         a)       Variances from standard cost the difference between the actual
                  and standard cost of inventory purchased and produced during
                  the period less any portion applicable to on-hand inventory
                  which has been capitalized.

                  (i)      Materials purchase price variance


                                      iii
<PAGE>   53

                  (ii)     Materials usage/yield variances
                  (iii)    Direct labor efficiency/inefficiency - reflects the
                           cost difference between the standard and actual
                           number of direct labor hours used for actual
                           production.
                  (iv)     Overhead - reflects all other labor and overhead cost
                           variances including activity and spending production
                           related and support.

                  With the exception of overhead, all of the other variances can
                  be identified by product and can be added (if unfavorable) or
                  subtracted (if favorable) to determine actual manufacturing
                  costs of a product.

         (b)      Non-standard costs: Cost of miscellaneous production related
                  operations for which standards are not established due to the
                  nature of the function, such as manufacturing start-up
                  operations, stock conversions and reclaiming (processing and
                  returning to finished goods inventory) of products returned by
                  customers. Also includes miscellaneous expenses incurred in
                  connection with the production of inventory which for various
                  reasons (e.g., cyclical, non-recurring) are not included in
                  standard costs. Examples include excess/idle capacity not
                  included in standards, abnormal waste or rework, experiments,
                  unallocated production costs, tooling and package design
                  costs.

                  Some of the above costs may be incurred for specific products,
                  e.g., rework, experiments, tooling, but the majority are
                  general to all products produced.

         (c)      Inventory adjustments: Consists of charges or credits due to
                  adjustments to inventory concerning revaluation to new
                  standards, stock conversions, capitalized/amortized production
                  variances, shortages or overages, and damage or obsolescence
                  of regular on-hand inventory or products returned by
                  customers.

Each of these charges or credits can be identified to a specific product.

                                       iv

<PAGE>   54





                                  Schedule 1.18

                                  PATENT RIGHTS



[ * ]

<PAGE>   55



                                 Schedule 2.1(e)

                             Third Party Agreements


License Agreement between Emory University and Atherogenics, Inc., dated January
11, 1995.

License to the United States Government dated March 27, 1995.

Patent Purchase Agreement between Sampath Parthasarathy, Ph.D. and Atherogenics,
Inc., dated April 26, 1995.





<PAGE>   56



                                 Schedule 2.6(h)

                  Development Work to be Performed by Licensor

Pre-clinical:

[  *  ]



<PAGE>   57



                                 SCHEDULE 2.6(i)

                 ADVERSE EVENT REPORTING PROCEDURES FOR PRODUCTS


         The Parties understand and agree that these procedures are intended to
comply with 21 CFR 314.80(b) and 21 CFR 310.305(a) concerning standard written
procedures for adverse event reporting in the United States. These procedures
may be amended by the Parties at any time, at the request of either Party, to
ensure that they fully and accurately reflect the procedures in place for
surveillance, receipt, evaluation and reporting of adverse drug experiences by
the pharmacovigilance departments of the Parties and comply with applicable laws
and regulations in the countries in which the product(s) is marketed and/or is
under investigation. In that regard, upon the written request of either Party,
the Parties shall meet to renegotiate in good faith, all or some of these
procedures. Each Party may request such a meeting no more often than once in any
twelve (12) month period.


1.       Definitions:

         (a)      An Adverse Event ("AE") is defined as:

                  i)       any experience which is adverse, including what are
                           commonly described as adverse or undesirable
                           experiences, adverse events, adverse reactions, side
                           effects, or death due to any cause associated with,
                           or observed in conjunction with the use of a drug,
                           biological product, or device in humans, whether or
                           not considered related to the use of that product:

                           -        occurring in the course of the use of a
                                    drug, biological product or device,

                           -        associated with, or observed in conjunction
                                    with product overdose, whether accidental or
                                    intentional,

                           -        associated with, or observed in conjunction
                                    with product abuse,

                           -        associated with, or observed in conjunction
                                    with product withdrawal

                  ii)      Any significant failure of expected pharmacological
                           or biologic therapeutical action (with the exception
                           of in clinical trials).

         (b).     Associated with or related to the use of the drug is defined
as: A


<PAGE>   58

reasonable possibility exists that the AE was caused by the drug.

         (c)      Expected or unexpected are defined as:

                  i)       Expected ("labeled") AE - An AE which is included in
                           the Investigators' Brochure for clinical trials,
                           included in local labeling (e.g., summary of product
                           characteristics) for Marketed Drugs, or in countries
                           with no local labeling, in the Company Core Data
                           Sheet (CCDS).


                  ii)      Unexpected ("unlabeled") AE - An AE that does not
                           meet the criteria for an expected AE or an AE which
                           is listed but differs from that event in terms of
                           severity or specificity.

         (d)      IND Holder is defined as: A "Sponsor" as defined in 21 CFR
Part 312.2(b) of an investigational new drug in any regulatory jurisdiction,
including a holder of a foreign equivalent thereto.

         (e)      Life-threatening is defined as: any adverse drug experience
that places the patient, in the view of the initial reporter, at immediate risk
of death from the adverse drug experience as it occurred, i.e., it does not
include an AE that, had it occurred in more severe form, might have caused
death.

         (f)      NDA Holder is defined as: An "Applicant" as defined in 21 CFR
Part 314.3(b), for regulatory approval of a Licensed Product in any regulatory
jurisdiction, including a holder of a foreign equivalent thereto.

         (g)      Serious or Non-Serious are defined as:

                  i)       Any adverse drug experience occurring at any dose
                           that results in any of the following outcomes: Death,
                           a life-threatening adverse drug experience, inpatient
                           hospitalization or prolongation of existing
                           hospitalization, a persistent or significant
                           disability/incapacity, or a congenital anomaly/birth
                           defect. Important medical events that may not result
                           in death, be life-threatening, or require
                           hospitalization may be considered serious when, based
                           upon appropriate medical judgment, they may
                           jeopardize the patient or subject and may require
                           medical or surgical intervention to prevent one of
                           the outcomes listed in this definition. Examples of
                           such medical events include allergic bronchospasm
                           requiring intensive treatment in an emergency room or
                           at home, blood dyscrasias or convulsions that do not
                           result in inpatient hospitalization, or the
                           development of drug dependency or drug abuse.

<PAGE>   59

                  ii)      A Non-serious AE is any AE which does not meet the
                           criteria for a serious AE.

         (h)      Not associated or unrelated to the use of the drug means it
does not meet the definition of "associated."

2.       Capitalized terms not defined in this Appendix shall have the meaning
         assigned thereto in the Agreement.

3.       With respect to all Licensed Products:

                  All initial reports (oral or written) for any and all serious
                  AEs as defined above which become known to either Party (other
                  than from disclosure by or on behalf of the other Party) must
                  be communicated by telephone, telefax or electronically
                  directly to the other Party, NDA Holder, and/or IND Holder
                  (individually and collectively referred to as "Holders")
                  within five (5) calendar days of receipt of the information.
                  Written confirmation of the Serious AE received by the Party
                  should be sent to the other Party and the Holders as soon as
                  it becomes available, but in any event within two (2) business
                  days of initial report of the Serious AE by such Party.

                  All Parties and Holders should exchange Medwatch and/or CIOMS
                  forms and other health authority reports within two (2)
                  business days of submission to any regulatory agency.

                  All initial reports and follow-up information received for all
                  non-serious AEs for marketed Licensed Products which become
                  known to a Party (other than from disclosure by or on behalf
                  of the other Party) must be communicated in writing, by
                  telefax or electronically to the other Party and all Holders
                  on a monthly basis, on Medwatch or CIOMs forms (where
                  possible). All follow-up on any AE reports forwarded to either
                  Party by FDA must be submitted to FDA.

                  Each Party shall coordinate and cooperate with the other
                  whenever practicable to prepare a single written report
                  regarding all Serious AEs, provided, however, that neither
                  Party shall be obligated to delay reporting or any AE in
                  violation of applicable law or regulations regarding the
                  reporting of adverse events.

4.       The Parties further agree that:

         (a)      a written report for AEs for animal studies which suggest a
potential significant risk for humans shall be forwarded to the other Party
within two (2) business days of receipt by the Party making the report,

<PAGE>   60
 (b)      each Party will give the other Party a print-out or computer disk of
all AEs reported to it relating to Products within the preceding 365
days/calendar year, within [ * ] days of receipt of a request from the other
Party;

         (c)      upon request of a Party, the other Party shall make available
its AE records relating to Licensed Products (including computer disks) for
viewing and copying by the other Party,

         (d)      disclosure of information hereunder by a Party to the other
Party shall continue as long as either Party continues to clinically test or
market product(s) containing Licensed Products or holds an open IND, NDA or
foreign equivalent thereto.

         (e)      all written regulatory reports, including periodic NDA, annual
IND, safety updates, or foreign equivalents thereto, etc. should be sent by a
Party to the other Party within 2 business days of submission to the appropriate
regulatory agency. The Parties shall agree on a procedure for preparing these
reports (e.g. electronic mail, facsimile transmission, overnight service, etc.).

5.       Each Party shall diligently undertake the following further obligations
where both Parties are or will be commercializing products hereunder and/or
performing clinical trials with respect to Licensed Product:

         (a)      to immediately consult with the other Party, with respect to
the investigation and handling of any serious AE disclosed to it by the other
Party or by a third Party, including government agencies, and to allow the other
Party to review the serious AE and to participate in the follow-up
investigation;

         (b)      to immediately advise the other Party of any Product safety
communication received from a health authority and consult with the other Party
with respect to any proposed change to product warnings, labeling or an
Investigator's Brochure involving safety issues, including, but not limited to,
safety issues agreed to by the Parties;

         (c)      to diligently handle in a timely manner the investigation and
resolution of each AE reported to it; and

         (d)      to provide the other Party reasonable annual audit rights of
its AE reporting system and documentation, upon prior notice, during normal
business hours, at the expense of the auditing Party and under customary
confidentiality obligations.

         (e)      to meet in a timely fashion from time to time as may be
reasonably required to implement the adverse event reporting and consultation
procedures described in this Appendix, including identification of those
individuals in each Party's pharmacovigilance group who will be responsible for
reporting to and receiving AE information from the other Party, and the
development of a written standard operating


<PAGE>   61

procedure with respect to adverse event reporting responsibilities, including
reporting responsibilities to investigators;

         (f)      where possible, to transmit all data electronically;

         (g)      to report to each other any addenda, revisions or changes to
this Agreement (e.g., change in territories, local regulations, addition of new
licensors/licensees to the agreement, etc.) which might alter the adverse event
reporting responsibilities hereunder;

         (h)      to utilize English as the language of communication and data
exchange between the Parties;

         (i)      to develop a system of exchange of documents and information
in the event that the Agreement involves more than two Holders.




<PAGE>   62




                                  Schedule 3.2

                       DEFINITION OF SUCCESSFUL COMPLETION

CART STUDY:

         Schering recognizes that Licensor's Phase II Study 027, commonly
referred to as the CART Study, is pivotal to the determination of
proof-of-activity in man. Determination by the JMC of "successful completion" of
this study will be based upon the study achieving all of the following three
points, as reflected in the final study report:

[  *  ]



<PAGE>   63




                                 Schedule 6.2(d)

                                GOVERNMENT RIGHTS


         Pursuant to that certain Assignment agreement between Licensor and
Sampath Parthasarathy dated May 2, 1995, U.S. Patent No. 5,262,439 is subject to
a license of rights to the United States Government, as specifically set forth
in the License to the United States Government attached hereto as Exhibit A.




<PAGE>   64




                                 Schedule 6.2(k)

                             Other VCAM-1 Inhibitors


         [  *  ]





<PAGE>   65



                                  Schedule 9.2

                             ARBITRATION PROVISIONS

         (a) Scope. Subject to and in accordance with the terms of this
Agreement and this Schedule 9.2, all differences, disputes, claims or
controversies arising out of or in any way connected or related to this
Agreement, whether arising before or after the expiration of the Term of this
Agreement, and including, without limitation, its negotiation, execution,
delivery, enforceability, performance, breach, discharge, interpretation and
construction, existence, validity and any damages resulting therefrom or the
rights, privileges, duties and obligations of the Parties under or in relation
to this Agreement (including any dispute as to whether an issue is arbitrable)
shall be referred to binding arbitration in accordance with the rules of the
American Arbitration Association, as in effect at the time of the arbitration.

         (b) Parties to Arbitration. For the purposes of each arbitration under
this Agreement, SPL shall constitute one party to the arbitration and Licensor
shall constitute the other party to the arbitration.

         (c) Notice of Arbitration. A Party requesting arbitration hereunder
shall give a notice of arbitration to the other Party containing a concise
description of the matter submitted for arbitration, including references to the
relevant provisions of the Agreement and a proposed solution (a "Notice of
Arbitration"). Notice of Arbitration shall be delivered to the other Party in
accordance with Section 9.7 of the Agreement.

         (d) Response. The non-requesting Party must respond in writing within
forty-five (45) days of receiving a Notice of Arbitration with an explanation,
including references to the relevant provisions of the Agreement and a response
to the proposed solution and suggested time frame for action. The non-requesting
Party may add additional issues to be resolved.

         (e) Meeting. Within fifteen (15) days of receipt of the response from
the non-requesting Party pursuant to Paragraph (d), the Parties shall meet and
discuss in good faith options for resolving the dispute. The requesting Party
must initiate the scheduling of this resolution meeting. Each Party shall make
available appropriate personnel to meet and confer with the other Party during
such fifteen-(15) day period.

         (f) Selection of Arbitrator. Any and all disputes that cannot be
resolved pursuant to Paragraphs (c), (d) and (e) shall be submitted to an
arbitrator (the "Arbitrator") to be selected by mutual agreement of the Parties.
The Arbitrator shall be a retired judge of a state or federal court, to be
chosen from a list of such retired judges to be prepared jointly by the Parties,
with each Party entitled to submit the names of three such retired judges for
inclusion in the list. No Arbitrator appointed or selected hereunder shall be an
employee, director or shareholder of, or otherwise have any current or previous
relationship with, any Party or its respective Affiliates. If the Parties fail
to


<PAGE>   66
agree on the selection of the Arbitrator, the Arbitrator shall be designated by
a judge of the Federal District Court in New York upon application by either
Party.

         (g) Powers of Arbitrator. The Arbitrator may determine all questions of
law and jurisdiction (including questions as to whether a dispute is arbitrable)
and all matters of procedure relating to the arbitration. The Arbitrator shall
have the right to grant legal and equitable relief (including injunctive relief)
and to award costs (including reasonable legal fees and costs of arbitration)
and interest. Nothing contained herein shall be construed to permit the
Arbitrator to award punitive, exemplary or any similar damages.

         (h) Arbitration Procedure. In the event that SPL is the Party
requesting arbitration, the arbitration shall take place in the State of
Georgia, unless otherwise agreed by the Parties, at such place and time as the
Arbitrator may fix for the purpose of hearing the evidence and representations
that the Parties may present. In the event that Licensor is the Party requesting
arbitration, the arbitration shall take place in the State of New Jersey, unless
otherwise agreed by the Parties, at such place and time as the Arbitrator may
fix for the purpose of hearing the evidence and representations that the Parties
may present. The arbitration proceedings shall be conducted in the English
language. The law applicable to the arbitration shall be the law of the State of
New Jersey. No later than twenty (20) business days after hearing the
representations and evidence of the Parties, the Arbitrator shall make its
determination in writing and deliver one copy to each of the Parties.

         (i) Discovery and Hearing. During the meeting referred to in Paragraph
(e), the Parties shall negotiate in good faith the scope and schedule of
discovery, relating to depositions, document production and other discovery
devices, taking into account the nature of the dispute submitted for resolution.
If the Parties are unable to reach agreement as to the scope and schedule of
discovery, the Arbitrator may order such discovery as it deems necessary. To the
extent practicable taking into account the nature of the dispute submitted for
resolution, such discovery shall be completed within [ * ] days from the date of
the selection of the Arbitrator. At the hearing, which shall commence within
[ * ] days after completion of discovery unless the Arbitrator otherwise orders,
the Parties may present testimony (either live witness or deposition), subject
to cross-examination, and documentary evidence. To the extent practicable taking
into account the nature of the dispute submitted for resolution and the
availability of the Arbitrator, the hearing shall be conducted over a period not
to exceed [ * ] consecutive business days, with each Party entitled to
approximately half of the allotted time unless otherwise ordered by the
Arbitrator. Each Party shall have sole discretion with regard to the
admissibility of any evidence and all other matters relating to the conduct of
the hearing.

         (j) Witness Lists. At least [ * ] business days prior to the date set
for the hearing, each Party shall submit to the other Party and the Arbitrator a
list of all documents on which such Party intends to rely in any oral or written
presentation to the Arbitrator and a list of all witnesses, if any, such Party
intends to call at such hearing and


<PAGE>   67

a brief summary of each witness' testimony. At least five (5) business days
prior to the hearing, each Party must submit to the Arbitrator and serve on each
other Party a proposed findings of fact and conclusions of law on each issue to
be resolved. Following the close of hearings, the Parties shall each submit such
post-hearing briefs to the Arbitrator addressing the evidence and issues to be
resolved as may be required or permitted by the Arbitrator.

         (k) Confidentiality. The arbitration proceedings shall be confidential
and, except as required by law, no Party shall make, or instruct the Arbitrator
to make, any public announcement with respect to the proceedings or decision of
the Arbitrator without the prior written consent of the other Party. The
existence of any dispute submitted to arbitration and the award of the
Arbitrator shall be kept in confidence by the Parties and the Arbitrator, except
as required in connection with the enforcement of such award or as otherwise
required by law.

         (l) Awards and Appeal. Subject to the provisions of this Schedule 9.2,
the decision of the Arbitrator shall be final and binding upon the Parties in
respect of all matters relating to the arbitration, the conduct of the Parties
during the proceedings, and the final determination of the issues in the
arbitration. There shall be no appeal from the final determination of the
Arbitrator to any court, except in the case of fraud or bad faith on the part of
the Arbitrator or any Party to the arbitration proceeding in connection with the
conduct of such proceedings. Judgment upon any award rendered by the Arbitrator
may be entered in any court having jurisdiction thereof.

         (m) Costs of Arbitration. The costs of any arbitration hereunder shall
be borne by the Parties in the manner specified by the Arbitrator in its
determination.

         (n) Performance of the Agreement. During the pendency of the
arbitration proceedings, the matter which is the subject of such arbitration
proceedings shall be performed by the Parties (A) in the manner determined by
SPL in its sole discretion if it is a matter relating to SPL's development of
Licensed Product, and (B) in the manner determined by Licensor in its sole
discretion if it is a matter involving payment of License Fees under Section 3.1
and royalty payments under Sections 3.2 or 3.3. Notwithstanding the foregoing,
in the event that SPL makes payments pursuant to Sections 3.1, 3.2 or 3.3 and it
is subsequently determined by the Arbitrator that SPL was not required to make
such payment(s) then Licensor shall promptly repay to SPL all such payments.
Further notwithstanding the foregoing, the time periods set forth in Section
2.6(b) of the Agreement shall be suspended during the pendency of the
arbitration proceedings. For purposes of this Paragraph (n) the term "pendency
of the arbitration proceeding" shall mean the period starting on the date on
which arbitration proceedings are commenced by a Party in accordance with
Paragraph (c) of this Schedule 9.2 and ending on the date on which the
Arbitrator delivers its final determination in writing to the Parties.

<PAGE>   68


                           EXCLUSIVE LICENSE AGREEMENT


                                 BY AND BETWEEN


                               ATHEROGENICS, INC.

                                       AND

                              SCHERING CORPORATION





[*]  Certain confidential information contained in this document, marked by an
     asterisk within brackets, has been omitted and filed separately with the
     Securities and Exchange Commission pursuant to a request for confidential
     treatment under Rule 406 of the Securities Act of 1933, as amended.

<PAGE>   69

                                TABLE OF CONTENTS
                           EXCLUSIVE LICENSE AGREEMENT

<TABLE>
<CAPTION>
                                                                                                        PAGE
                                                                                                        ----
<S>                                                                                                     <C>
ARTICLE I - DEFINITIONS..................................................................................1

1.1        AFFILIATE.....................................................................................1
1.2        CALENDAR QUARTER..............................................................................1
1.3        CALENDAR YEAR.................................................................................2
1.4        COMBINATION PRODUCT...........................................................................2
1.5        COMPOUND LIBRARY..............................................................................2
1.6        COST OF GOODS.................................................................................2
1.7        EFFECTIVE DATE................................................................................2
1.9        FIRST COMMERCIAL SALE.........................................................................2
1.9        HRD...........................................................................................2
1.10       HSR ACT.......................................................................................2
1.11       "IMPROVEMENT\.................................................................................2
1.12       "INTERNATIONAL AGREEMENT\.....................................................................3
1.13       LICENSED COMPOUND.............................................................................3
1.14       LICENSED PRODUCT(S)...........................................................................3
1.15       LICENSOR KNOW-HOW.............................................................................3
1.16       NDA...........................................................................................4
1.17       NET SALES.....................................................................................4
1.18       PATENT RIGHTS.................................................................................5
1.19       PRIMARY INDICATION............................................................................5
1.20       PROPRIETARY INFORMATION.......................................................................5
1.21       REGULATORY APPROVAL...........................................................................5
1.22       SECONDARY INDICATION..........................................................................6
1.23       "SUBLICENSEE\.................................................................................6
1.24       TERRITORY.....................................................................................6
1.25       "TERM\........................................................................................6
1.26       VALID CLAIM...................................................................................6

ARTICLE II - LICENSE; DISCLOSURE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION.......................6

2.1        EXCLUSIVE LICENSE GRANT.......................................................................6
      (a)  License.......................................................................................6
      (a)  Co-Exclusive License to Other Indications.....................................................6
      (c)  Right to Sublicense...........................................................................7
      (d)  Retained Rights...............................................................................7
      (e)  Third Party Agreements........................................................................7
2.2        NON-EXCLUSIVE LICENSE GRANT...................................................................7
2.3        DISCLOSURE OF INFORMATION.....................................................................8
</TABLE>


                                       i
<PAGE>   70

<TABLE>
<S>                                                                                                     <C>
2.4        HSR FILING AND APPROVALS......................................................................8
      (a)  HSR Filing....................................................................................8
      (b)  Licensor's Obligations........................................................................9
      (c)  Additional Approvals..........................................................................9
2.5        JOINT MANAGEMENT COMMITTEE....................................................................9
      (a)  Composition of the JMC........................................................................9
      (b)  JMC Meetings.................................................................................10
      (c)  JMC Responsibilities.........................................................................10
      (d)  Deadlock.....................................................................................10
2.6        SCHERING'S DEVELOPMENT OBLIGATIONS...........................................................10
      (a)  Schering Diligence...........................................................................10
      (b)  Opportunity to Cure..........................................................................11
      (c)  Research and Development Activities..........................................................11
      (d)  Licensed Product Registrations; Pricing Reimbursement Approvals..............................11
      (e)  Data.........................................................................................12
      (f)  Assistance by Licensor.......................................................................12
      (g)  Reimbursement of Costs by Schering...........................................................12
      (h)  Licensor's Additional Development Obligations................................................13
      (i)  Adverse Event Reporting......................................................................13
2.7        INDEPENDENT DISCOVERIES BY SCHERING..........................................................14
2.8        EXCUSED PERFORMANCE..........................................................................14
2.9        SUPPLY OF LICENSED COMPOUND/LICENSED PRODUCT.................................................14
2.10       REPORTS......................................................................................14
2.11       NON-COMPETE PROVISION........................................................................15

ARTICLE III - PAYMENTS; ROYALTIES AND REPORTS...........................................................16

3.0        COORDINATION OF PAYMENTS UNDER THE INTERNATIONAL AGREEMENT...................................16
3.1        LICENSE FEE..................................................................................16
      (a)  Development Milestones.......................................................................16
      (b)  Sales Milestones.............................................................................16
      (c)  Limitations..................................................................................17
3.3        ROYALTIES....................................................................................17
      (a)  Cap on Royalties Plus Cost of Goods..........................................................18
      (b)  Licensor's Option to Manufacture.............................................................18
      (c)  Royalty Reduction............................................................................18
3.4        THIRD PARTY LICENSES.........................................................................19
3.5        COMPULSORY LICENSES..........................................................................19
3.6        REPORTS AND PAYMENT OF ROYALTY; PAYMENT EXCHANGE RATE AND CURRENCY CONVERSIONS...............19
      (a)  Royalties Paid Quarterly.....................................................................19
      (b)  Method of Payment............................................................................20
3.7        MAINTENANCE OF RECORDS; AUDITS...............................................................20
      (a)  Record Keeping by Schering...................................................................20
</TABLE>

                                       ii
<PAGE>   71
<TABLE>
<S>                                                                                                     <C>
      (b)  Underpayments/Overpayments...................................................................21
      (c)  Record Keeping by Sublicensee................................................................21
      (d)  Confidentiality..............................................................................21
      (e)  Binding Records..............................................................................21
3.8        INCOME TAX WITHHOLDING.......................................................................21
3.9        DIRECT AFFILIATE LICENSES....................................................................22

ARTICLE IV - PATENTS....................................................................................22

4.1        FILING, PROSECUTION AND MAINTENANCE OF PATENTS...............................................22
4.2        OPTION OF SCHERING TO PROSECUTE AND MAINTAIN PATENTS.........................................22
4.3        ENFORCEMENT..................................................................................23
      (a)  Notice and Discontinuance of Infringement....................................................23
      (b)  Continuance of Infringement..................................................................23
4.4        THIRD PARTY INFRINGEMENT SUIT................................................................24
      (a)  Defense......................................................................................24
      (b)  Licensing....................................................................................24
4.5        CERTIFICATION UNDER DRUG PRICE COMPETITION AND PATENT RESTORATION ACT........................24
4.6        ABANDONMENT..................................................................................25
4.7        PATENT TERM RESTORATION......................................................................25
4.8        NOTICES REGARDING PATENTS....................................................................25

ARTICLE V - CONFIDENTIALITY AND PUBLICATION.............................................................26

5.1        CONFIDENTIALITY..............................................................................26
      (a)  Nondisclosure Obligation.....................................................................26
      (b)  Disclosure to Agents.........................................................................27
      (c)  Disclosure to a Third Party..................................................................27
5.2        PUBLICITY....................................................................................27
5.3        PUBLICATION..................................................................................28

ARTICLE VI - REPRESENTATIONS AND WARRANTIES.............................................................28

6.1        REPRESENTATIONS AND WARRANTIES OF EACH PARTY.................................................28
6.2        LICENSOR'S REPRESENTATIONS...................................................................29
6.3        CONTINUING REPRESENTATIONS...................................................................31
6.4        NO INCONSISTENT AGREEMENTS...................................................................31
6.5        REPRESENTATION BY LEGAL COUNSEL..............................................................31
6.6        ADDITIONAL OBLIGATIONS OF LICENSOR...........................................................31

ARTICLE VII - INDEMNIFICATION AND LIMITATION ON LIABILITY...............................................32

7.1        INDEMNIFICATION BY SCHERING..................................................................32
7.2        INDEMNIFICATION BY LICENSOR..................................................................33
7.3        CONDITIONS TO INDEMNIFICATION................................................................33
7.4        SETTLEMENTS..................................................................................34
7.5        LIMITATION OF LIABILITY......................................................................34
</TABLE>

                                      iii


<PAGE>   72

<TABLE>
<S>                                                                                                     <C>
7.6        INSURANCE....................................................................................34

ARTICLE VIII - TERM AND TERMINATION.....................................................................34

8.1        TERM AND EXPIRATION..........................................................................34
8.2        TERMINATION BY SCHERING WITHOUT CAUSE........................................................34
8.3        TERMINATION UPON CESSATION OF DEVELOPMENT....................................................35
      (a)  Termination by Either Party..................................................................35
      (b)  Termination by Licensor......................................................................35
8.4        TERMINATION..................................................................................35
      (a)  Termination for Cause........................................................................35
      (b)  Effect of Termination for Cause on License...................................................36
           (i) Termination by Schering..................................................................36
           (ii)Termination by Licensor..................................................................36
           (iii)Effect of Bankruptcy....................................................................36
8.5        EFFECT OF TERMINATION........................................................................36
8.6        REMEDIES FOR BREACH..........................................................................37
8.7        LICENSOR'S RIGHTS ON TERMINATION.............................................................37
8.8        CONCURRENT TERMINATION WITH THE INTERNATIONAL AGREEMENT......................................38

ARTICLE IX - MISCELLANEOUS..............................................................................38

9.1        ASSIGNMENT/CHANGE OF CONTROL.................................................................38
      (a)  Assignment...................................................................................38
      (a)  Change of Control............................................................................38
9.2        GOVERNING LAW................................................................................39
9.3        WAIVER.......................................................................................39
9.4        INDEPENDENT RELATIONSHIP.....................................................................39
9.5        EXPORT CONTROL...............................................................................39
9.6        ENTIRE AGREEMENT; AMENDMENT..................................................................40
9.7        NOTICES......................................................................................40
9.8        PROVISIONS FOR INSOLVENCY....................................................................41
      (a)  Effect on Licenses...........................................................................41
      (b)  Rights to Intellectual Property..............................................................41
      (c)  Schering's Rights............................................................................42
      (d)  Deemed Grant of Rights.......................................................................42
      (e)  Security Interests...........................................................................42
9.9        FORCE MAJEURE................................................................................43
9.10       SEVERABILITY.................................................................................43
9.11       COUNTERPARTS.................................................................................43
9.12       CAPTIONS.....................................................................................43
9.13       RECORDING....................................................................................43
9.14       FURTHER ACTIONS..............................................................................44
</TABLE>

                                       iv
<PAGE>   73



SCHEDULES

SCHEDULE 1.6               COST OF GOODS
SCHEDULE 1.18              PATENT RIGHTS
SCHEDULE 2.1(E)            THIRD PARTY AGREEMENTS
SCHEDULE 2.6(H)            DEVELOPMENT WORK TO BE PERFORMED BY LICENSOR
SCHEDULE 2.6(I)            ADVERSE EVENT REPORTING PROCEDURES
SCHEDULE 3.2               DEFINITION OF SUCCESSFUL COMPLETION
SCHEDULE 6.2(D)            GOVERNMENT RIGHTS
SCHEDULE 6.2(K)            OTHER VCAM-1 INHIBITORS
SCHEDULE 9.2               ARBITRATION PROVISIONS



                                       v
<PAGE>   74


                         EXCLUSIVE LICENSE AGREEMENT

         THIS EXCLUSIVE LICENSE AGREEMENT (the "Agreement") is made as of
October 22, 1999 by and between ATHEROGENICS, INC., a Georgia corporation having
its principal place of business at 8995 Westside Parkway, Alpharetta, Georgia
30004 (hereinafter referred to as "Licensor") and SCHERING CORPORATION, a
corporation organized and existing under the laws of New Jersey and having its
principal place of business at 2000 Galloping Hill Road, Kenilworth, New Jersey
07033 (hereinafter referred to as "Schering"). Licensor and Schering are
sometimes referred to herein individually as a Party and collectively as the
Parties. References to "Schering" and "Licensor" shall include their respective
Affiliates (as hereinafter defined).

         WHEREAS, Licensor has developed certain Licensor Know-How and has
rights to Patent Rights relating to soluble analogs of probucol, including
without limitation the Licensed Compound (each as hereinafter defined); and

         WHEREAS, Schering, together with its Affiliates (as hereinafter
defined) possesses extensive capabilities in the development and
commercialization of pharmaceutical products on a worldwide basis; and

         WHEREAS, Schering desires to obtain and Licensor is willing to grant to
Schering, an exclusive license under the Patent Rights and to use the Licensor
Know-How, upon the terms and conditions set forth herein.

                  NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, Schering and Licensor hereby agree as
follows:

                                    ARTICLE I
                                   DEFINITIONS

         As used in this Agreement, the following initially capitalized terms,
whether used in the singular or plural, shall have the respective meanings set
forth below:

         1.1 "Affiliate" shall mean any individual or entity directly or
indirectly controlling, controlled by or under common control with, a Party to
this Agreement. For purposes of this Agreement, the direct or indirect ownership
of [ * ] or more of the outstanding voting securities of an entity, or the right
to receive [ * ] or more of the profits or earnings of an entity shall be deemed
to constitute control. Such other relationship as in fact results in actual
control over the management, business and affairs of an entity shall also be
deemed to constitute control.

         1.2 "Calendar Quarter" shall mean the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 or
December 31, for so long as this Agreement is in effect.


<PAGE>   75

         1.3 "Calendar Year" shall mean each successive period of twelve (12)
months commencing on January 1 and ending on December 31, for so long as this
Agreement is in effect.

         1.4 "Combination Product" shall mean any form or dosage of
pharmaceutical composition or preparation in final form for sale by
prescription, over-the-counter or any other method and which comprises two (2)
or more active ingredients within the same pharmaceutical formulation, at least
one (1) of which is Licensed Compound and/or any other compound from the
Compound Library.

         1.5 "Compound Library" shall mean the collection of compounds
(including, without limitation, the Licensed Compound) which as of the Execution
Date is specifically and/or generically covered by one or more claims in U.S.
Patent No. 5,262,439, entitled "Soluble Monoesters of Probucol", or any
corresponding foreign patents or patent applications. The Compound Library shall
include such compounds in any form, including any salt, hydrate or crystalline
structure thereof.

         1.6 "Cost of Goods" shall mean Schering's fully allocated manufacturing
cost of goods as determined in accordance with Schedule 1.6.

         1.7 "Effective Date" shall mean the next business day following the
last to occur of (i) expiration or earlier termination of any notice and waiting
period under the HSR Act; or (ii) the date of delivery of fully executed
counterparts of this Agreement (the "Execution Date").

         1.8 "First Commercial Sale" shall mean, with respect to any Licensed
Product, the first sale by Schering to any third party, not an Affiliate or
Sublicensee, of such Licensed Product for an indication for which Schering has
obtained Regulatory Approval.

         1.9 "HRD" shall mean a health registration dossier or its equivalent,
submitted to a national government or a supranational governmental authority,
consisting of the chemical, pharmaceutical and biological documentation; the
toxicological and pharmacological documentation; and the clinical documentation
respectively, and covering a Licensed Product which is filed in any country
outside the United States and which is analogous to a new drug application,
product license application or its equivalent filed with the United States Food
and Drug Administration seeking approval to market and sell a Licensed Product
in the Territory and including, where applicable, applications for pricing,
pricing reimbursement approval, labeling and Regulatory Approval.

         1.10 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.

         1.11 "Improvement" shall mean any enhancement in the formulation,
preparation, presentation, means of delivery, dosage, packaging of, manufacture,
or any new or expanded therapeutic indications(s) for, Licensed Product or
Licensed Compound,


                                       2
<PAGE>   76

in each case which is developed prior to or during the Term of this Agreement by
or on behalf of Licensor.

         1.12 "International Agreement" shall mean that certain exclusive
license agreement by and between Licensor and Schering-Plough Ltd. entered into
concurrently herewith.

         1.13 "Licensed Compound" shall mean the soluble analog of probucol
AGI-1067, having the chemical name butanedioic acid, mono[4-[[1-[3,5-bis
(1,1-dimethyethyl)-4-hydroxyphenyl]thio]-1-[methylethylthio]-2,6-bis
(1,1-dimethylethyl)-phenyl]ester, and any stereoisomers, salts, hydrates and/or
crystalline forms thereof.

         1.14 "Licensed Product(s)" shall mean any form or dosage of
pharmaceutical composition or preparation in final form for sale by
prescription, over-the-counter or any other method, which contains as an active
ingredient the Licensed Compound and/or any other compound from the Compound
Library, including, without limitation, Combination Products; provided, however,
that Licensed Product shall not include topical dermatological products as
described in Section 2.11(c).

         1.15 "Licensor Know-How" shall mean any of Licensor's information and
materials specifically relating to the research, development, registration,
manufacture, marketing, use or sale of Licensed Compound and/or Licensed Product
and/or the Compound Library, and which prior to or during the Term of this
Agreement are developed by or at the request of Licensor, or those of its
Affiliates involved in the performance of development of Licensed Product under
Article 2, or are in Licensor's or such Affiliates' possession or control
through license or otherwise (provided that Licensor is permitted to make
disclosure thereof to Schering without violating the terms of any third party
agreement), and which are not generally known. Licensor Know-How shall include,
without limitation, discoveries, practices, methods, knowledge, Improvements,
processes, formulas, data, ideas, skill, experience, inventions, know-how,
technology, trade secrets, manufacturing procedures, purification and isolation
techniques, instructions, test data and other intellectual property, patentable
or otherwise, relating to Licensed Compound, Licensed Product or any
Improvements. Licensor Know-How shall also include, without limitation:

         (i)      all biological, chemical, pharmacological, toxicological,
                  pharmaceutical, physical and analytical, clinical, safety,
                  manufacturing and quality control data and information related
                  thereto;

         (ii)     compositions of matter, assays and biological materials
                  specifically relating to development, manufacture, use or sale
                  of any Licensed Compound, Licensed Product or Improvement; and

         (iii)    all applications, registrations, licenses, authorizations,
                  approvals and correspondence submitted to or received from any
                  regulatory authorities




                                       3
<PAGE>   77

                  with jurisdiction in the Territory over an investigational
                  drug containing Licensed Compound and/or Licensed Product
                  (including, without limitation, minutes and meeting notes
                  relating to any communications with any regulatory authority
                  with jurisdiction in the Territory over an investigational
                  drug containing Licensed Compound and/or Licensed Product).

         1.16 "NDA" shall mean a New Drug Application or its equivalent filed
with the United States Food and Drug Administration seeking approval to market
and sell a Licensed Product in the United States.

         1.17 "Net Sales" shall mean the amounts actually received on all sales
of Licensed Product by Schering, its Affiliates or Sublicensees to an
unaffiliated third party, and exclusive of intercompany transfers or
inter-company sales, less the following reasonable and customary deductions from
such gross amounts (to the extent actually taken):

         (i)      normal and customary trade, cash and quantity discounts,
                  allowances and credits;

         (ii)     credits or allowances actually granted for damaged goods,
                  returns or rejections of Licensed Product and retroactive
                  price reductions;

         (iii)    sales taxes, duties or other taxes with respect to such sales
                  (including duties or other governmental charges levied on,
                  absorbed or otherwise imposed on the sale of Licensed Product
                  including, without limitation, value added taxes or other
                  governmental charges otherwise measured by the billing amount,
                  when included in billing);

         (iv)     insurance, postage, customs duties and transportation costs,
                  when included in billing;

         (v)      charge back payments and rebates granted to managed health
                  care organizations or to federal, state and local governments,
                  their agencies, and purchasers and reimbursers or to trade
                  customers, including but not limited to, wholesalers and chain
                  and pharmacy buying groups; and

         (vi)     rebates (or equivalents thereof) granted to or charged by
                  national, state or local governmental authorities in countries
                  other than the United States.

In determining Net Sales of a Licensed Product any of the above discounts shall
be accounted for and apportioned based on the list price of each such Licensed
Product.

         In the event that Licensed Product is sold in the form of a Combination
Product containing Licensed Compound and one or more other active ingredients
then Net Sales




                                       4
<PAGE>   78

for such Combination Product will be calculated by multiplying actual Net Sales
of such Combination Product by the fraction A/(A+B) where: A is the invoice
price of the Licensed Compound contained in the Combination Product if sold
separately by Schering, an Affiliate or Sublicensee and B is the invoice price
of any other active component or components in the Combination Product if sold
separately by Schering, an Affiliate or Sublicensee. In the event that the
Licensed Product is sold in the form of a Combination Product containing one or
more active ingredients other than Licensed Compound and one or more such active
ingredients of the Combination Product are not sold separately, then the above
formula shall be modified such that A shall be the total cost to Schering, its
Affiliate or Sublicensee(s) of the Licensed Compound and B shall be the total
cost to Schering, its Affiliate or Sublicensee of any other active component or
components in the combination.

         1.18 "Patent Rights" shall mean all patents and patent applications in
the Territory which during the Term of this Agreement are owned or controlled
(with the right to grant sublicenses) by Licensor and which contain one or more
claims covering Licensed Compound(s), Licensed Product(s), one or more compounds
contained in Compound Library, or any uses, formulations, processes or methods
of preparing any of the foregoing, or any Improvements, including, but not
limited to, those set forth in Schedule 1.18, any and all substitutions,
divisions, continuations, continuations-in-part, reissues, renewals,
registrations, confirmations, re-examinations, extensions, supplementary
protection certificates or any like filing thereof, and provisional applications
of any such patents and patent applications and any international equivalent of
any of the foregoing.

         1.19 "Primary Indication" shall mean the treatment and prevention of
[ * ].

         1.20 "Proprietary Information" shall mean all other scientific,
clinical, regulatory, marketing, financial and commercial information or data,
whether communicated in writing, verbally or electronically, which is provided
by one Party to the other Party in connection with this Agreement including,
without limitation, Licensor Know-How. When Propriety Information is disclosed
in a manner other than in writing, it shall be reduced to written form, marked
"Confidential" and transmitted to the receiving Party within [ * ] business days
of disclosure to the receiving Party.

         1.21 "Regulatory Approval" shall mean any approvals, including any
NDA's, HRD's, supplements, amendments, pre- and post-approvals, marketing
authorizations based upon such approvals (including any prerequisite
manufacturing approvals or authorizations related thereto) and labeling
approval(s), technical, medical and scientific licenses, registrations or
authorizations of any national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity, necessary
for the development, manufacture, distribution, marketing, promotion, offer for
sale, use, import, export or sale of Licensed Product(s) and/or Licensed
Compound(s) in the Territory.



                                       5
<PAGE>   79

         1.22 "Secondary Indication" shall mean [ * ].

         1.23 "Sublicensee" shall mean any party not an Affiliate of Schering,
which party is authorized by Schering or its Affiliates through express or
implied license or consent to import, export, use, distribute, market, promote,
offer for sale and sell Licensed Product(s) under Section 2.1(b).

         1.24 "Territory" shall mean the United States, including its
territories, possessions and commonwealths.

         1.25 "Term" shall mean the period described in Section 8.1 of the
Agreement.

         1.26 "Valid Claim" shall mean a composition of matter claim, or method
of use claim (or its equivalent) for the Primary Indication and/or the Secondary
Indication, of an issued and unexpired patent in a country in the Territory
which covers the Licensed Compound and/or any other compound from the Compound
Library, which is included within the Patent Rights, and which (i) has not been
revoked or held unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal; or (ii) has not been abandoned, disclaimed, or
admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise.


                                   ARTICLE II
               LICENSE; DISCLOSURE OF INFORMATION; DEVELOPMENT AND
                               COMMERCIALIZATION

         2.1      Exclusive License Grant.

                  (a) License. Subject to the terms and conditions of this
         Agreement, Licensor hereby grants to Schering, as of the Effective
         Date, an exclusive license (exclusive even as to Licensor) under the
         Patent Rights and Licensor Know-How in the Territory to develop, make,
         have made, import, export, use, distribute, market, promote, offer for
         sale and sell: (i) Licensed Compound(s) and/or Licensed Product(s)
         containing Licensed Compound; and (ii) compound(s) in the Compound
         Library other than Licensed Compound, and/or Licensed Product(s)
         containing such compound(s) for the Primary Indication and the
         Secondary Indication.

                  (b) Co-Exclusive License to Other Indications Subject to the
         terms and conditions of this Agreement, Licensor hereby grants to
         Schering, as of the Effective Date, a co-exclusive license under the
         Patent Rights and Licensor Know-How in the Territory to develop, make,
         have made, import, export, use, distribute, market, promote, offer for
         sale and sell compound(s) in the Compound Library other than Licensed
         Compound, and/or Licensed Product(s) containing


                                       6
<PAGE>   80

         such compound(s), for any and all indications other than the Primary
         Indication and Secondary Indication. The term "co-exclusive license"
         shall mean that with respect to the rights granted to Schering under
         this Section 2.1(b), Licensor retains the same rights as are granted to
         Schering. With respect to a given compound, indication or territory,
         each of Licensor and Schering may either directly exercise and exploit
         its co-exclusive rights or grant a co-exclusive license under such
         rights, either in whole or in part, to one (1) third party or
         Affiliate.

                  (c) Right to Sublicense. The licenses granted to Schering
         under Sections 2.1(a) and 2.1(b) shall include the right to grant
         sublicenses to Affiliates and/or any third party (to the extent
         provided therein), provided that Schering remains responsible to
         Licensor under this Agreement for the performance of its Sublicensees.

                  (d) Retained Rights Subject to the restrictions set forth in
         Section 2.11, Licensor retains all rights under the Patent Rights not
         expressly granted to Schering by this Section 2.1, and the right to use
         Licensor Know-How pursuant to Sections 2.6(h) and 5.1(c) below.

                  (e) Third Party Agreements. As of the Execution Date, Licensor
         is a party to certain agreements (as listed in Schedule 2.1(e),
         redacted copies of which have been provided to Schering) with third
         parties pursuant to which Licensor has acquired rights to certain
         patent applications, patents and technology, which agreements are
         relevant to the Patent Rights and/or Licensor Know-How. The parties
         acknowledge that the licenses granted to Schering under this Agreement
         are subject to the specific rights retained by or granted to the U.S.
         Government, and/or the rights for research use retained by such third
         parties, under those agreements. In the event that on or after the
         Execution Date and during the Term of this Agreement, Licensor acquires
         any additional Patent Rights or Licensor Know-How from any third
         parties, by assignment, license or otherwise, Licensor shall promptly
         notify Schering in writing to that effect, and provide Schering with a
         copy (which may be redacted) of the agreement(s) with such third party.
         To the extent that the copies of the agreements listed in Schedule
         2.1(e) which were provided to Schering, or any other agreements
         provided to Schering under this Section 2.1(e), have been redacted,
         Licensor represents and warrants that the redacted portions of such
         agreements have no material effect on the scope of the licenses or
         other rights granted to Schering under this Agreement. Nothing herein
         shall be construed as granting to Schering any greater rights under the
         Patent Rights and/or Licensor Know-How than those held by Licensor

         2.2 Non-Exclusive License Grant. In the event that the development,
making, having made, importing, exporting, use, distribution, marketing,
promotion, offering for sale or sale by Schering, its Affiliates and/or
Sublicensees of Licensed Product in the Territory would infringe during the Term
of this Agreement a claim of an issued letters patent, and/or any patent rights
which Licensor owns or has the rights to license and


                                       7
<PAGE>   81
which patents are not covered by the grant in Section 2.1, Licensor hereby
grants to Schering and its Affiliates, to the extent Licensor is legally able to
do so, a non-exclusive, royalty-free license in the Territory under such issued
letters patent solely for Schering, its Affiliates and/or Sublicensees to
discover, develop, make, have made, use, distribute, market, promote, offer for
sale and sell Licensed Compound and/or Licensed Product(s) in the Territory.

         2.3 Disclosure of Information. Promptly after the Effective Date,
Licensor shall, at its own cost, disclose to Schering in writing, or via
mutually acceptable electronic media, copies or reproductions of all existing
Licensor Know-How not previously disclosed to Schering in order to enable
Schering to exploit its rights granted under Section 2.1 and, if applicable,
Section 2.2 of this Agreement. In addition, during the Term of this Agreement,
Licensor shall promptly disclose to Schering in writing, or via mutually
acceptable electronic media, on an ongoing basis copies or reproductions of all
new Licensor Know-How that is reasonably necessary for research, development,
registration, manufacture, marketing, use or sale of Licensed Compound and/or
Licensed Product. Such Licensor Know-How and other information shall be
automatically deemed to be within the scope of the licenses granted herein
without payment of any additional compensation. Upon Schering's request but
reasonably subject to Licensor's other business requirements, Licensor shall
provide reasonable technical assistance to enable Schering to utilize such
additional Licensor Know-How, provided, that Schering shall promptly reimburse
Licensor for reasonable out-of-pocket costs and expenses incurred by Licensor in
providing such technical assistance. Licensor shall invoice Schering for such
costs and expenses, and shall provide documentation for the invoice. The invoice
shall be payable to Licensor or its designee(s) [ * ] days after receipt by
Schering of the invoice provided, however, that such cost and out-of-pocket
expenses must be identified prior to being committed to by Licensor and provided
to Schering to determine whether Schering agrees to have the technical
assistance provided at such cost and the final amount sought to be reimbursed
shall not exceed [ * ] of the estimated cost without Schering's prior written
consent. Schering shall be under no obligation to reimburse Licensor for
out-of-pocket costs and expenses incurred by Licensor without Schering's
agreement. Schering shall have the right to use for all purposes in connection
with obtaining any Regulatory Approval for the Licensed Product(s) all Licensor
Know-How and other information, disclosed pursuant to this Section and under
this Agreement.

         2.4      HSR Filing and Approvals.

                  (a) HSR Filing. To the extent necessary, each of Licensor and
         Schering shall file, within ten (10) days after the date of this
         Agreement, with the Federal Trade Commission (the "FTC") and the
         Antitrust Division of the United States Department of Justice (the
         "Antitrust Division") any notification and report form (the "Report")
         required of it in the reasonable opinion of either or both Parties
         under the HSR Act with respect to the transactions as contemplated
         hereby and shall cooperate with the other Party to the extent necessary
         to assist the other Party in the preparation of its Report and to
         proceed to obtain necessary approvals


                                       8
<PAGE>   82

         under the HSR Act, including but not limited to the expiration or
         earlier termination of any and all applicable waiting periods required
         by the HSR Act.

                  (b) Licensor's Obligations. Licensor shall use good faith
         reasonable efforts to assist Schering in eliminating any concern on the
         part of any court or government authority regarding the legality of the
         proposed transaction, including, if required by federal or state
         antitrust authorities, Schering's promptly taking all reasonable steps
         to secure government antitrust clearance. Licensor shall cooperate in
         good faith at its own cost with any government investigation and
         promptly produce documents and information demanded by a second request
         for documents and of witnesses if requested.

                  (c) Additional Approvals. Each of Licensor and Schering will
         cooperate and use all reasonable efforts to make all other
         registrations, filings and applications, to give all notices and to
         obtain as soon as practicable all governmental or other consents,
         transfers, approvals, orders, qualifications authorizations, permits
         and waivers, if any, and to do all other things reasonably necessary or
         desirable in Schering's opinion for the consummation of the
         transactions as contemplated hereby (including, without limitation,
         those acts required to obtain necessary approvals under any foreign
         equivalent antitrust statute to the HSR Act or regulation from any
         government or regulatory authority having the requisite jurisdiction;
         provided, however, that Schering shall promptly reimburse Licensor for
         reasonable out-of-pocket costs and expenses incurred by Licensor in
         providing such cooperation. Licensor shall invoice Schering for such
         costs and expenses, and shall provide supporting documentation for the
         invoice. The invoice shall be payable to Licensor or its designee(s)
         [ * ] days after receipt by Schering of the invoice.

         2.5 Joint Management Committee. The Parties shall establish a Joint
Management Committee (the "JMC") to oversee the development and
commercialization program for Licensed Product for the Primary Indication and
the Secondary Indication, and to facilitate the exchange of information between
the Parties. The JMC will generally serve in an advisory capacity with respect
to the development and commercialization activities to be performed by Schering
under this Agreement, with Schering retaining final decision making authority
with respect to all such matters.

                  (a) Composition of the JMC. The JMC shall be composed of up to
         three (3) representatives from each of Schering and Licensor, and a
         quorum shall consist of at least one (1) JMC representative from each
         Party. In any matter before the JMC, each Party shall have one (1)
         vote, with decisions being made by unanimous decision. Schering shall
         seriously consider the recommendations and decisions of the JMC. A
         Party's representatives to the JMC shall serve at the discretion of
         such Party and may be substituted for or replaced at any time by such
         Party. The JMC shall be chaired by a representative of Schering. The
         Chairperson shall be responsible for calling meetings, preparing
         agendas and




                                       9
<PAGE>   83

         preparing and issuing minutes of each meeting within [ * ] days
         thereafter.

                  (b) JMC Meetings. The JMC shall meet at least once each
         Calendar Quarter during the Term of this Agreement, until such time as
         the Parties agree to a more or less frequent meeting schedule. The site
         of such meetings shall alternate between the offices of Schering and
         Licensor (or any other site mutually agreed upon by the Parties) and
         each Party shall bear its own costs of attending such meetings. All
         meetings of the JMC shall be summarized in writing and sent to both
         Parties and countersigned by both Parties.

                  (c) JMC Responsibilities. The JMC will be generally
         responsible for monitoring the status of Schering's development and
         commercialization activities with respect to Licensed Product and for
         preparing recommendations for implementation by Schering with regard
         to: (i) selection of Licensed Compounds for development by Schering as
         Licensed Products for the Primary Indication; (ii) preclinical and
         clinical development plans; (iii) development timelines and scheduling;
         (iv) strategies for obtaining and maintaining Regulatory Approvals; (v)
         marketing and sales strategies for Licensed Product.

                  (d) Deadlock. In the event that the JMC is unable to reach a
         decision by unanimous vote with respect to any matter, then Schering
         shall have final decision making authority with respect thereto.


         2.6      Schering's Development Obligations.

                  (a) Schering Diligence. Schering shall, at Schering's expense,
         and subject to Licensor's compliance with its obligations under
         Sections 2.3 and 2.4, use good faith reasonable efforts to develop,
         obtain Regulatory Approval for, and commercialize the Licensed
         Product(s) in the Territory for the Primary Indication. Schering shall
         have the option, in its sole discretion, to seek Regulatory Approval
         for the Licensed Product for any additional indications it determines
         are desirable, but shall have no diligence obligations to Licensor with
         respect thereto with the exception of those expressly set forth in
         Section 2.11(d). The Parties acknowledge and agree that all business
         decisions including, without limitation, decisions relating to
         Schering's research, development, registration, manufacture, sale,
         commercialization, design, price, distribution, marketing and promotion
         of Licensed Products covered under this Agreement, shall be within the
         sole discretion of Schering. Licensor acknowledges that Schering is in
         the business of developing, manufacturing and selling pharmaceutical
         products and, subject to the provisions of this Section, nothing in
         this Agreement shall be construed as restricting such business or
         imposing on Schering the duty to market and/or sell and exploit
         Licensed Compound or Licensed Product for which royalties are payable
         hereunder to the exclusion of, or in preference to, any other product,
         or in any way other than in accordance with its normal commercial
         practices.



                                       10
<PAGE>   84

                  (b) Opportunity to Cure. If, in Licensor's reasonable opinion,
         Schering fails to comply with any of its diligence obligations under
         Sections 2.6(a) and (c), then Licensor shall have the right to give
         Schering written notice thereof stating in reasonable detail the
         particular failure(s). Schering shall have a period of [ * ] days from
         the receipt of such notice to correct the failure or, in the event that
         the failure cannot be reasonably cured within a [ * ] day period, then
         Schering shall initiate actions reasonably expected to cure the failure
         within [ * ] days of receiving notice and shall thereafter diligently
         pursue such actions to cure the failure (even if requiring longer than
         the [ * ] days specified in Section 8.4(a)(i)). In the event of a
         dispute as to whether or not Schering has failed to exercise due
         diligence under Sections 2.6(a) and 2.6(c), or whether Schering is
         diligently pursuing actions reasonably expected to cure such failure
         under this Section 2.6(b), such dispute shall be resolved through
         binding arbitration in accordance with Section 9.2.

                  (c) Research and Development Activities. As of the Effective
         Date, Schering shall be responsible, at its cost and expense, and in
         its sole judgment, for all research and development activities which
         are necessary to obtain Regulatory Approval for a Licensed Product in
         the Territory for the Primary Indication and any post-approval studies
         required as a condition of obtaining any Regulatory Approval for a
         Licensed Product for the Primary Indication. The parties acknowledge
         and agree that Schering's obligations under this Section 2.6(c) shall
         include all of the costs of conducting the CART Study (whether incurred
         before or after the Effective Date) which are estimated at [ * ]. In
         addition, Schering shall be responsible for any other studies (or
         portions of studies) necessary or desirable, in its sole judgment, for
         maintaining any Regulatory Approval (for the Primary Indication or any
         other indication for which Schering, in its sole discretion, may decide
         to seek Regulatory Approval) in the Territory, as well as any
         pre-marketing studies prior to such Regulatory Approval and
         post-marketing studies conducted following a Regulatory Approval.

                  (d) Licensed Product Registrations; Pricing Reimbursement
         Approvals. Subject to its diligence obligations set forth in Section
         2.6(a), Schering shall be responsible, at its cost and expense, and in
         its sole judgment, for determining the appropriate regulatory strategy,
         for obtaining and maintaining all Regulatory Approvals and for
         obtaining and maintaining any pricing and reimbursement approvals
         required for the sale of Licensed Product in the Territory. Each
         Regulatory Approval and each pricing and reimbursement approval shall
         be placed in Schering's name or the name of a Schering Affiliate unless
         applicable law requires, or Licensor and Schering otherwise agree, that
         an approval be solely or jointly in the name of Licensor or a
         designated Licensor Affiliate. Licensor agrees that notwithstanding
         such Regulatory Approval or pricing and reimbursement approval in its
         name, Schering retains the exclusive rights to make, have made, import,
         export, use, distribute, promote, offer for sale




                                       11
<PAGE>   85

         and sell Licensed Compound and/or Licensed Product(s) as granted
         Schering in Section 2.1.

                  (e) Data. Schering shall own all data arising out of studies
         performed by or on behalf of Schering under this Article II.

                  (f) Assistance by Licensor. In connection with any NDA, HRD or
         other application for Regulatory Approval relating to Licensed Product,
         Licensor shall, at Schering's request, provide to Schering in a prompt
         manner responses to questions which have been raised by any regulatory
         authority in connection with such application for Regulatory Approval
         and further provide to Schering estimates of Licensor's [ * ] costs for
         rendering such assistance. Licensor shall assist Schering from time to
         time, at Schering's request, in the design and implementation of
         clinical studies. Subject to Licensor's rights under Section 3.3(b),
         Licensor shall assist Schering to enable Schering to self-source bulk
         material for the manufacture of Licensed Compound and/or Licensed
         Product; provided, however, that Schering shall have no obligation
         whatsoever to purchase any bulk material or Licensed Compound from
         Licensor.

                  (g)      Reimbursement of Costs by Schering

                           (i)  Schering shall reimburse Licensor for its
                  reasonable [ * ] costs and expenses incurred in rendering
                  assistance under Section 2.6(f) (but no more than [ * ] of
                  those costs which Licensor estimated, as provided above, that
                  the work would cost unless Schering provides written
                  approval). Licensor shall invoice Schering for such costs and
                  expenses, and shall provide documentation for the invoice. The
                  invoice shall be payable to Licensor or its designee(s) [ * ]
                  days after receipt by Schering of the invoice, provided,
                  however, that Schering shall be under no obligation to
                  reimburse Licensor for [ * ] costs and expenses incurred by
                  Licensor without Schering's agreement.

                           (ii) Schering shall reimburse Licensor for its
                  reasonable [ * ] costs and expenses incurred in performing
                  research and development activities under Section 2.6 (h) (but
                  no more than [ * ] of those costs which Licensor estimated, as
                  provided below, that the work would cost unless the JMC
                  provides written approval). Licensor shall invoice Schering
                  for such costs and expenses, and shall provide documentation
                  for the invoice. The invoice shall be payable to Licensor or
                  its designee(s) [ * ] days after receipt by Schering of the
                  invoice, provided, however, that Schering shall be under no
                  obligation to reimburse Licensor for research and development
                  costs and expenses incurred by Licensor without the prior
                  approval of the JMC.



                                       12
<PAGE>   86

         (h) Licensor's Additional Development Obligations. In addition to
Licensor's obligations under Section 2.6(f), the JMC will assign to Licensor the
responsibility to conduct, on Schering's behalf and at Schering's expense,
certain of the research and development activities, including clinical studies
involving Licensed Product, for which Schering is responsible under Section
2.6(c). The nature and extent of the research and development activities to be
conducted by Licensor is generally set forth in Schedule 2.6(h). The JMC shall
determine the specific aspects of such activities, including the timing and
costs of the work to be performed by Licensor. Licensor agrees to use good faith
reasonable efforts to complete such activities in the manner determined by the
JMC, and shall have the right to utilize contract research organizations and
other third party contractors in the performance of such activities, provided
that Licensor shall remain responsible for the performance of all such
contractors. To the extent that Licensor utilizes third party contractors to
perform such activities, Licensor shall enter into suitable agreements with such
contractors, which agreements shall incorporate provisions consistent with the
terms and conditions of this Agreement, including, without limitation,
provisions governing confidentiality, ownership of data, inventions and other
intellectual property arising from such activities, financial obligations and
termination rights. Licensor shall keep the JMC informed with regard to such
third party contracts and shall provide Schering with a copy of all such
agreements. Any research and development activities conducted by Licensor or its
contractors pursuant to this Section 2.6(h) shall be performed in accordance
with good laboratory practices and good clinical practices, and in compliance
with all applicable laws, rules and regulations in the U.S. and the EU, and
shall meet current regulatory standards. Schering shall promptly notify Licensor
in the event that Schering reasonably determines that all or any part of the
work performed by Licensor and/or its contractors under this Section 2.6(h)
fails to meet such standards. If Licensor reasonably disagrees with such
determination, the parties shall refer the matter to an independent expert
(selected by mutual agreement of the parties) to determine whether or not the
study must be repeated to support Regulatory Approval for Licensed Product. In
the event that Licensor and/or the independent expert agrees with Schering's
determination and such studies are repeated, then Schering shall have the right
to deduct the [ * ] costs of repeating such work from the [ * ] payments due
Licensor under this Agreement.

         (i) Adverse Event Reporting Licensor shall promptly report to Schering
any information regarding adverse events related to the use of the Licensed
Product in accordance with the Adverse Event Reporting Procedures (as may be
amended from time to time upon mutual agreement) set forth in Schedule 2.6(i)
and incorporated herein by reference. To the extent that Licensor holds any INDs
or otherwise has any adverse event reporting obligations with respect to
Licensed Product, Schering shall promptly report to Licensor any information
regarding adverse events related to the use of Licensed Product in accordance
with such Adverse Event Reporting Procedures.





                                       13
<PAGE>   87

         2.7  Independent Discoveries by Schering. Licensor acknowledges that
Schering and/or its Affiliates have ongoing research programs which may now or
in the future independently discover, develop and/or acquire technologies and/or
products relating to treatment and prevention of any disease, disorder or
condition in humans or animals. Licensor agrees that such technologies and
products, to the extent discovered without use of Licensor Know-How, will not be
deemed to be Licensor Know-How and are outside the scope of this Agreement.

         2.8  Excused Performance. In addition to the provisions of Article
VIII and Section 9.9, the obligations of Schering with respect to a Licensed
Product under Sections 2.6(a), 2.6(c), 2.6(d) and 2.11(d) are expressly
conditioned upon the continuing absence of any adverse condition or event which
warrants a delay in commercialization of a Licensed Product including, but not
limited to, an adverse condition or event relating to the safety or efficacy of
a Licensed Product or unfavorable labeling, pricing or pricing reimbursement
approvals, or lack of Regulatory Approval, and the obligation of Schering to
develop or market any such Licensed Product shall be delayed or suspended so
long as in Schering's reasonable opinion any such condition or event exists.

         2.9  Supply of Licensed Compound/Licensed Product. Licensor shall be
responsible, at Licensor's expense, for supplying Schering with Licensed
Compound (in the form of bulk active), from Licensor's existing inventory of
Licensed Compound, to enable Schering to perform [ * ], for such Licensed
Compound for the Primary Indication. In addition, Licensor has the limited
option to supply all of Schering's requirements of Licensed Products as set
forth in Section 3.3(b). All Licensed Compound to be supplied by Licensor
hereunder shall be delivered FCA (Kenilworth, New Jersey) (Incoterms 1990) via a
carrier to be specified by Schering. Licensor warrants and represents that all
supplies of Licensed Compound provided to Schering by Licensor shall conform to
the applicable specifications for such Licensed Compound and were prepared in
accordance with current Good Manufacturing Practices ("cGMPs") and other
applicable federal, national, state and local laws and regulations in effect at
the time of manufacture. Schering shall be responsible for the formulation and
packaging of the Licensed Compound provided by Licensor hereunder, and for
manufacture and supply of all Licensed Compound and/or Licensed Product
necessary for the performance of [ * ] and for supplying all commercial
quantities of Licensed Compound and Licensed Products. Licensor shall transfer
to Schering all Licensor Know-How relating to the manufacture of Licensed
Compound, and at Schering's request and expense shall provide reasonable
technical support to facilitate the implementation of such manufacturing
technology at Schering.

         2.10 Reports. Schering shall provide Licensor with quarterly reports of
the status of the research and development activities and progress of any
application for Regulatory Approval, as applicable, in connection with Licensed
Product in the Territory. Further, Schering shall inform Licensor of
commencement, completion, and results of the major phases of clinical
development of Licensed Product, including but not limited to Phase II and Phase
III clinical trials, NDA and HRD submissions, NDA and HRD filings,


                                       14
<PAGE>   88

approvable and approval letters, and launch.

         2.11 Non-Compete Provision. Subject to the terms of Section 9.1(b),
Licensor and its Affiliates shall be subject to the non-compete obligations set
forth in this Section 2.11.

                  (a) During the Term of this Agreement, Licensor shall not
         undertake a development program for, or commercialize, either on its
         own or in collaboration with any third party:

                  [  *  ]

                  [  *  ]

                  [  *  ]

                  (b) For the period extending from the Effective Date until the
         earlier of [ * ] years after the First Commercial Sale of Licensed
         Product in the Territory or [ * ], licensor shall not, either on its
         own or in collaboration with any third party:

                  [ * ]

                  [ * ]

                  (c) The foregoing notwithstanding, Licensor shall at all times
         retain the right to develop and commercialize topical products
         containing any compound other than the Licensed Compound for the
         treatment or prevention of dermatological conditions, diseases or
         disorders. In addition, Licensor shall have the right at all times to
         enter into agreements with third parties relating to the performance by
         Licensor of pre-clinical research activities with respect to compounds
         owned or controlled by such third parties, provided that such compounds
         do not compete through the same mechanism of action with the Licensed
         Compound (as determined using the same criteria as set forth in Section
         6.2(k)) with respect to the Primary Indication and/or the Secondary
         Indication.

                  (d) Licensor's non-compete obligations under Section
         2.11(b)(ii) are expressly conditioned upon Schering's initiating a
         development program for Licensed Product for the Secondary indication
         within [ * ] years after the Effective Date, and thereafter using good
         faith reasonable efforts to develop and commercialize one or more
         Licensed Products for the Secondary Indication.


                                       15
<PAGE>   89

                                   ARTICLE III
                         PAYMENTS; ROYALTIES AND REPORTS

         3.0 Coordination of Payments under the International Agreement. The
license fee, milestone payments and royalties payable by Schering under this
Article III are in consideration for the rights and licenses granted to Schering
under this Agreement and are in addition to any amounts payable to Licensor
under the International Agreement. It is understood and agreed that, with
respect to the development milestone payable under Section 3.2(a)(i) and the
sales milestones payable under Section 3.2(b) the occurrence of one or more of
such milestone events will result in milestone payment obligations under both
this Agreement and the corresponding provisions of the International Agreement.
It is further understood that Schering's financial obligations with respect to
development costs under Article II shall be [ * ] apportioned between Schering
and the corresponding obligations of Schering-Plough Ltd. under the
International Agreement.

         3.1 License Fee. In partial consideration for the licenses and other
rights granted to Schering hereunder, Schering shall pay to Licensor a license
fee ("License Fee") of [ * ], which payment shall be due within [ * ] business
days following the Effective Date.

         3.2 Milestone Payments. In partial consideration for the licenses and
other rights granted to Schering hereunder, Schering shall promptly notify
Licensor in writing upon the occurrence of an event triggering one of the
milestone payments set forth in this Section 3.2, and within [ * ] days after
the occurrence of such event pay to Licensor the applicable milestone payment.

             (a)      Development Milestones:

                      (i)   [  *  ]

                      (ii)  [  *  ]

                      (iii) [  *  ]

             (b)      Sales Milestones:

                      (i)   [  *  ]

                      (ii)  [  *  ]

                      (iii) [  *  ]

                      (iv)  [  *  ]


                                       16
<PAGE>   90

         The foregoing sales milestone payments are in addition to any royalty
         payments due Licensor under Section 3.3 with respect to sales of
         Licensed Product. For purposes of clarity, the parties acknowledge that
         (1) the first achievement of more than one of the above sales
         milestones in the same Calendar Year shall not affect Schering's
         obligation to make the relevant sales milestone payments to Licensor,
         and (2) annual worldwide sales of the Licensed Product shall be
         determined based upon the aggregate total of sales in the Territory
         under this Agreement and sales in countries outside the Territory under
         the International Agreement.

                  (c) Limitations. Except as expressly set forth below, each
         development milestone payment under Section 3.2(a) and each sales
         milestone payment under Section 3.2(b) shall be payable one (1) time
         only on the first occurrence of the indicated event regardless of the
         number of times the event triggering the payment of such milestone
         occurs. The development milestone payment set forth in Section
         3.2(a)(iii) for U.S. Regulatory Approval of a Licensed Product shall be
         payable for the first Licensed Product developed by Schering and
         thereafter shall again be payable for each successive Licensed Product
         successfully developed by Schering which contains as the active
         ingredient a different compound from the Compound Library. For purposes
         of clarity and avoidance of doubt, the parties acknowledge that
         development milestone 3.2(a)(iii) will not be triggered by repeated
         occurrences of that milestone event involving different Licensed
         Products containing the same compound from the Compound Library. If the
         triggering event for a given milestone payment does not occur prior to
         the effective date of termination, or the expiration, of this
         Agreement, Schering shall have no obligation to pay such milestone
         payment to Licensor. The Parties acknowledge and agree that nothing
         herein shall be construed as representing an estimate or projection of
         anticipated sales or the actual value of Licensed Compounds or Licensed
         Products, and the figures set forth in Section 3.2(b) are merely
         intended to define Schering's obligations to Licensor in the event such
         sales performance is achieved.

         3.3 Royalties. In further consideration for the licenses granted to
Schering hereunder, for so long as the Licensed Product is covered by a Valid
Claim in the Territory at the time of sale by Schering, and subject to the
provisions of Section 3.3 (a)-(c), Schering shall pay to Licensor royalties on a
country-by-country basis of [ * ] of Schering's, its Affiliates' or its
Sublicensees' Net Sales of Licensed Product in the Territory. With respect to
countries in the Territory where no such Valid Claim exists, the royalty rate
shall be [ * ], and such royalties shall be paid for [ * ] years from the first
commercial sale of Licensed Product in such country. No royalties shall be due
upon the sale or other transfer among Schering, its Affiliates or Sublicensees,
but in such cases the royalty shall be due and calculated upon Schering's or its
Affiliates' or its Sublicensees' Net Sales to the first independent third party.
No royalties shall accrue on the disposition of Licensed Product by Schering,
its Affiliates or Sublicensees as samples (promotion or otherwise) or as
donations (for example, to non-profit institutions or government agencies for a
non-commercial purpose) or for clinical studies. Such




                                       17
<PAGE>   91
dispositions by Schering shall not be included in the determination of Net Sales
during the period of time in which such third party sales are occurring.

                  (a) Cap on Royalties Plus Cost of Goods. The parties
         acknowledge and agree that the total of (i) royalties payable by
         Schering to Licensor under this Agreement, and (ii) the Cost of Goods
         of Licensed Product manufactured by Schering and/or paid by Schering to
         third parties for the manufacture of Licensed Product, shall not exceed
         [ * ] of Net Sales of Licensed Product. Schering shall use good faith
         reasonable efforts to keep the Cost of Goods of Licensed Product from
         exceeding [ * ] of Net Sales. Schering shall determine the Cost of
         Goods for the Licensed Product in a timely manner, and in no event
         later than [ * ]. In the event that notwithstanding such efforts by
         Schering the Cost of Goods for Licensed Product does exceed [ * ] of
         Net Sales, then Schering shall notify Licensor in writing to that
         effect. Following receipt of such notice, Licensor shall have the right
         to have an independent auditor review Schering's relevant records and
         make an independent determination of the Cost of Goods for the Licensed
         Product. Any such audit shall be conducted under terms and conditions
         essentially the same as those set forth in Section 3.7.

                  (b) Licensor's Option to Manufacture. In the event that
         Schering's Cost of Goods for the Licensed Product is correctly
         determined to exceed [ * ] of Net Sales, Licensor shall have the right
         to manufacture and supply, or to seek a third party supplier able to
         manufacture and supply, Schering's requirements of Licensed Product at
         a Cost of Goods equal to or less than [ * ] of Net Sales for Licensed
         Product. If Licensor is able, or locates a third supplier able, to
         manufacture and supply Licensed Product at a Cost of Goods equal to or
         less than [ * ] of Net Sales, Schering shall in good faith negotiate
         and enter into a suitable supply agreement with Licensor or such third
         party, as appropriate, for the manufacture and supply of Licensed
         Product. Any such agreement shall include terms obligating Schering to
         purchase, and Licensor or the third party to manufacture and supply,
         all of Schering's requirements of Licensed Product at a Cost of Goods
         to be agreed upon, not to exceed [ * ] of Net Sales of Licensed
         Product. All supplies of Licensed Product to be provided to Schering by
         Licensor or such third party manufacturer pursuant to this Section
         3.3(b) shall be manufactured at a qualified manufacturing site, shall
         conform to the applicable specifications for Licensed Product and shall
         be prepared in accordance with cGMPs and all applicable federal,
         national, state and local laws and regulations in effect at the time of
         manufacture.

                  (c) Royalty Reduction. In the event that Schering's Cost of
         Goods for Licensed Product are correctly determined to exceed [ * ] of
         Net Sales of Licensed Product and Licensor is unable to identify a
         third party capable of supplying Schering's requirements of Licensed
         Product at a price equal to or less than [ * ] of Net Sales of Licensed
         Product, then Schering shall remain responsible for the manufacture and
         supply of Licensed Product and the royalty


                                       18
<PAGE>   92

         rate to be paid by Schering under this Section 3.3 shall be reduced so
         that the total of (i) royalties payable by Schering to Licensor under
         this Agreement, and (ii) the Cost of Goods of Licensed Product
         manufactured by Schering and/or paid by Schering to third parties for
         the manufacture of Licensed Product, is equal to [ * ] of Net Sales of
         Licensed Product. Notwithstanding the foregoing, the royalty payable to
         Licensor under this Agreement shall not be reduced pursuant to this
         Section 3.3(c) to less then [ * ] where a Valid Claim exists, or [ * ]
         where no Valid Claim exists.

         3.4 Third Party Licenses. In the event that Schering's outside patent
counsel determines that patent licenses from third parties are required by
Schering, its Affiliates or its Sublicensees in order to discover, develop,
make, have made, import, export, use, distribute, promote, market, offer for
sale or sell Licensed Compound and/or Licensed Product (hereinafter "Third Party
Licenses"), Schering shall provide Licensor with written notice to that effect
and shall be solely responsible for acquiring such licenses at Schering's sole
discretion. Schering may reduce any royalty otherwise due Licensor hereunder to
reimburse it for royalties and or license fees actually paid to such third
parties under any Third Party Licenses of patent claims which would be infringed
by the manufacture, use, import, export or sale of Licensed Compound and/or
Licensed Product in the Territory. Schering shall have no right to reduce any
royalty due Licensor hereunder for any amounts paid to a third party under any
Third Party License to the extent it is a license to technology (other than
Licensor Know-How) or materials (other than Licensed Compound) selected by
Schering for use in connection with the Licensed Product. The amount of
reduction of royalties due Licensor and the amount of reimbursement to Schering
shall be equal to [ * ] of the royalties or license fees paid to such third
parties in consideration for the Third Party License but in no event shall the
royalty due Licensor for any Licensed Product in any country be thereby reduced
to less than [ * ] of the royalty rate otherwise due Licensor hereunder for such
Licensed Product in such country.

         3.5 Compulsory Licenses. If a compulsory license is granted under the
Patent Rights to a third party with respect to Licensed Compound and/or Licensed
Product in any country in the Territory with a royalty rate lower than the
royalty rate provided for under Section 3.3, then the royalty rate to be paid by
Schering on Net Sales in that country under Section 3.3 shall be reduced to the
rate paid by the compulsory licensee for so long as such compulsory license is
in effect.

         3.6 Reports; Payment of Royalty; Payment Exchange Rate and Currency
Conversions.

             (a) Royalties Paid Quarterly. Within [ * ] calendar days
         following the close of each Calendar Quarter, following the First
         Commercial Sale of a Licensed Product, Schering shall furnish to
         Licensor a written report for the Calendar Quarter showing the Net
         Sales of Licensed Product(s) sold by Schering, its Affiliates and its
         Sublicensees in the Territory during such Calendar


                                       19
<PAGE>   93

         Quarter and the royalties payable under this Agreement for such
         Calendar Quarter. Simultaneously with the submission of the written
         report, Schering shall pay to Licensor, for the account of Schering or
         the applicable Affiliate or Sublicensee, as the case may be, a sum
         equal to the aggregate royalty due for such Calendar Quarter calculated
         in accordance with this Agreement (reconciled for any previous
         overpayments or underpayments).

             (b) Method of Payment. Payments to be made by Schering to
         Licensor under this Agreement shall be paid by bank wire transfer in
         immediately available funds to such bank account as is designated in
         writing by Licensor from time to time. Royalties shall be deemed
         payable by the entity making the Net Sales from the country in which
         earned in local currency and subject to foreign exchange regulations
         then prevailing. Royalty payments shall be made in United States
         dollars to the extent that free conversions to United States dollars is
         permitted. The rate of exchange to be used in any such conversion from
         the currency in the country where such Net Sales are made shall be the
         rate of exchange used by Schering Corporation for reporting such sales
         for United States financial statement purposes. If, due to restrictions
         or prohibitions imposed by national or international authority,
         payments cannot be made as aforesaid, the Parties shall consult with a
         view to finding a prompt and acceptable solution, and Schering will
         deal with such monies as Licensor may lawfully direct at no additional
         out-of-pocket expense to Schering. Notwithstanding the foregoing, if
         royalties in any country cannot be remitted to Licensor for any reason
         within [ * ] months after the end of the Calendar Quarter during which
         they are earned, then Schering shall be obligated to deposit the
         royalties in a bank account in such country in the name of Licensor.

         3.7     Maintenance of Records; Audits.

                 (a) Record Keeping by Schering. Schering and its Affiliates
         shall keep complete and accurate records in sufficient detail to enable
         the royalties payable hereunder to be determined. Upon [ * ] days prior
         written notice from Licensor, Schering shall permit an independent
         certified public accounting firm of nationally recognized standing
         selected by Licensor, at Licensor's expense, to have access during
         normal business hours to examine pertinent books and records of
         Schering and/or its Affiliates as may be reasonably necessary to verify
         the accuracy of the royalty reports hereunder. The examination shall be
         limited to pertinent books and records for any year ending not more
         than [ * ] months prior to the date of such request. An examination
         under this Section 3.7(a) shall not occur more than once in any
         Calendar Year. Schering may designate competitively sensitive
         information, which such auditor may not disclose to Licensor; provided,
         however, that such designation shall not encompass the auditor's
         conclusions. The accounting firm shall disclose to Licensor only
         whether the royalty reports are correct or incorrect and the specific
         details concerning any discrepancies. No other information shall be
         provided to


                                       20
<PAGE>   94


         Licensor. All such accounting firms shall sign a confidentiality
         agreement (in form and substance reasonably acceptable to Schering) as
         to any of Schering's or its Affiliate's confidential information which
         they are provided, or to which they have access, while conducting any
         audit pursuant to this Section 3.7(a).

                  (b) Underpayments/Overpayments. If such accounting firm
         correctly concludes that additional royalties were owed during such
         period, Schering shall pay the additional royalties within [ * ] days
         of the date Licensor delivers to Schering such accounting firm's
         written report so correctly concluding. If such underpayment exceeds
         [ * ] of the royalty correctly due Licensor then the fees charged by
         such accounting firm for the work associated with the underpayment
         audit shall be paid by Schering. Any overpayments by Schering will be
         credited against future royalty obligations. In the event that
         Schering disagrees with the audit report and the chief financial
         officers of Schering and Licensor (or their designees) fail to resolve
         such disagreement, the dispute will be resolved through the dispute
         resolution mechanism set forth in Section 9.2.

                  (c) Record Keeping by Sublicensee. Schering shall include in
         each sublicense granted by it pursuant to this Agreement a provision
         requiring the Sublicensee to make reports to Schering, to keep and
         maintain records of sales made pursuant to such sublicense and to grant
         access to such records by Licensor's independent accountant to the same
         extent required of Schering under this Agreement.

                  (d) Confidentiality. Licensor shall treat all financial
         information subject to review under this Section 3.7, or under any
         sublicense agreement, in accordance with the confidentiality provisions
         of this Agreement, and shall cause its accounting firm to enter into an
         acceptable confidentiality agreement with Schering obligating it to
         retain all such financial information in confidence pursuant to such
         confidentiality agreement.

                  (e) Binding Records. Upon the expiration of [ * ] months
         following the end of any Calendar Year, the calculation of royalties
         payable under this Agreement with respect to such year shall be binding
         and conclusive upon the Parties, and Schering, its Affiliates and its
         Sublicensees shall be released from any liability or accountability
         with respect to royalties for such Calendar Year.

         3.8 Income Tax Withholding. If at any time, any jurisdiction within the
Territory requires the withholding of income taxes or other taxes imposed upon
payments set forth in this Article III, Schering shall make such withholding
payments as required and subtract such withholding payments from the payments
set forth in this Article III, or if applicable, Licensor will promptly
reimburse Schering or its designee(s) of the amount of such payments, it being
understood that such withholding taxes are the obligation of Licensor. Schering
shall provide Licensor with documentation of such withholding and payment in a
manner that is satisfactory for purposes of the U.S. Internal Revenue


                                       21
<PAGE>   95

Service. Any withholdings paid when due hereunder shall be for the account of
Licensor and shall not be included in the calculation of Net Sales. Payments of
withholding taxes made by Schering pursuant to this Section 3.8 will be made
based upon financial information to be provided to Schering by Licensor and, to
the extent that such information is incorrect or incomplete, Licensor shall be
liable for any fine, assessment or penalty, or any deficiency, imposed by any
taxing authority in the Territory for any deficiency in the amount of any such
withholding or the failure to make such withholding payment. If Schering is
required to pay any such deficiency, or any such fine, assessment or penalty for
any such deficiency, Licensor shall promptly reimburse Schering for such
payments, which shall not be included in the calculation of Net Sales.

         3.9 Direct Affiliate Licenses. Whenever Schering shall reasonably
demonstrate to Licensor that, in order to facilitate direct royalty payments by
an Affiliate, it is desirable that a separate license agreement be entered into
between Licensor and such Affiliate, Licensor will grant such licenses directly
to such Affiliate by means of an agreement which shall be consistent with all of
the provisions hereof, provided that Schering guarantees the Affiliate's
obligations thereunder.

                                   ARTICLE IV
                                     PATENTS

         4.1 Filing, Prosecution and Maintenance of Patents. Licensor agrees to
diligently file, prosecute and maintain in the Territory, at Licensor's expense,
all Patent Rights owned in whole or in part by Licensor and licensed to Schering
under this Agreement, including without limitation, any Patent Rights covering
any Improvement(s). Schering shall determine the country(ies) in the Territory
with respect to which Schering desires Licensor to perform such activities and
will promptly notify Licensor to that effect. All such determinations shall be
made by Schering in accordance with its standard practices with respect to the
filing, prosecution and maintenance of patents, and Licensor's obligation to
file, prosecute and maintain each patent application or patent within the Patent
Rights under this Section 4.1 shall be limited to those countries selected by
Schering for such patent application or patent. Licensor shall supply Schering
with a copy of the applications as filed, together with notice of its filing
date and serial number. Licensor shall keep Schering regularly advised of the
status of pending patent applications (including, without limitation, the grant
of any Patent Rights), and upon the written request of Schering shall provide
copies of any substantive papers provided to or received from government patent
authorities related to the filing, prosecution and maintenance of such patent
filings. Schering shall treat all information, papers, and other materials
provided by Licensor pursuant to this Section 4.1 in accordance with the
confidentiality provisions of this Agreement.

         4.2 Option of Schering to Prosecute and Maintain Patents. Licensor
shall give [ * ] days prior written notice to Schering of any desire to cease
prosecution and/or maintenance of a particular Patent Right and, in such case,
shall permit Schering, at its sole discretion, to continue prosecution or
maintenance at its own expense. If Schering


                                       22
<PAGE>   96

elects to continue prosecution or maintenance, Licensor shall execute such
documents and perform such acts, at Schering's expense, as may be reasonably
necessary to effect an assignment of such Patent Rights to Schering. Any such
assignment shall be completed in a timely manner to allow Schering to continue
such prosecution or maintenance. Any patents or patent applications so assigned
shall not be considered Patent Rights.

         4.3      Enforcement.

                  (a) Notice and Discontinuance of Infringement. In the event
         that either Schering or Licensor becomes aware of any third party
         infringement within the Territory of any Valid Claim, it will notify
         the other Party in writing to that effect. Any such notice shall
         include evidence to support an allegation of infringement by such third
         party. Licensor shall have a period of [ * ] months from the date of
         said notice to obtain a discontinuance of such infringement or bring
         suit against the third party infringer. Licensor shall bear all the
         expenses of any suit brought by it. Schering shall have the right,
         prior to commencement of the trial, suit or action brought by Licensor,
         to join any such suit or action, and in such event shall pay one-half
         of all costs of such suit or action. In the event that Schering has
         joined in the action and shared in the costs thereof as set forth
         above, no settlement, consent judgment or other voluntary final
         disposition of the suit may be entered into without the consent of
         Schering. In the event that Schering has not joined the suit or action,
         Schering will reasonably cooperate with Licensor in any such suit or
         action and shall have the right to consult with Licensor and be
         represented by its own counsel, provided that Licensor shall
         periodically reimburse Schering for its out-of-pocket costs (excluding
         the costs of retaining its own outside counsel) incurred in cooperating
         with Licensor. Any recovery or damages derived from any suit under this
         Section 4.3(a) where Schering has joined and shared costs shall be used
         first to reimburse each of Licensor and Schering for its documented
         out-of-pocket legal expenses relating to the suit, shall be used second
         to reimburse Licensor for royalties lost as a result of reduced sales
         of Licensed Product, shall be used third to reimburse Schering for
         amounts attributed to Schering's lost profits, with any remaining
         amounts, including but not limited to punitive, exemplary, or other
         enhanced damages, to be shared [ * ] by the Parties. Any recovery or
         damages derived from a suit which Schering has not joined shall be
         retained by Licensor.

                  (b) Continuance of Infringement. If Licensor has neither
         obtained a discontinuance of such infringement nor brought suit against
         such infringer after the expiration of the [ * ] period specified in
         Subsection 4.3(a), Schering shall have the right, but not the
         obligation, to bring suit against such infringer under the Patent
         Rights and join Licensor as a party plaintiff, provided that Schering
         shall bear all the expenses of such suit. Licensor shall cooperate with
         Schering in any such suit for infringement of a Patent Right brought by
         Schering against a third party, and shall have the right to consult
         with Schering and to participate in and be represented by independent
         counsel in such litigation at its own expense.


                                       23
<PAGE>   97

         Schering shall periodically reimburse Licensor for its out of pocket
         costs (excluding Licensor's costs of retaining independent counsel)
         incurred in cooperating with Schering. Schering shall incur no
         liability to Licensor as a consequence of such litigation or any
         unfavorable decision resulting therefrom, including any decision
         holding any of the Patent Rights invalid or unenforceable, except that
         Schering shall indemnify and hold Licensor harmless for any monetary
         judgment or award against or penalty levied upon either Licensor or
         Schering arising out of Schering's acts in the enforcement of such
         Patent Rights. In the event that Schering recovers any sums through
         litigation under this Section 4.3(b) by way of damages or in settlement
         thereof, Schering shall retain all such sums.

         4.4      Third Party Infringement Suit.

                  (a) Defense. In the event that a third party sues Schering
         alleging that Schering's, its Affiliates' or its Sublicensees' making,
         having made, importing, exporting, using, distributing, marketing,
         promoting, offering for sale or selling Licensed Compound and/or
         Licensed Product in one or more countries in the Territory infringes or
         will infringe said third party's patent, then Schering may elect to
         defend such suit at its sole expense and discretion. To the extent that
         the alleged infringement is based upon the use of Licensed Compound,
         another compound from the Compound Library or the Licensor Know-How,
         Schering shall have no obligation to pay royalties to Licensor under
         Section 3.3 with respect to sales of Licensed Product in such
         country(ies) during the pendency of any such suit. Upon Schering's
         request and in connection with Schering's defense of any such third
         party infringement suit, Licensor shall cooperate with Schering for
         such defense provided, that Schering shall promptly reimburse Licensor
         for reasonable out-of-pocket costs and expenses incurred by Licensor in
         providing such cooperation (excluding Licensor's costs of retaining
         independent counsel). Licensor shall invoice Schering for such costs
         and expenses, and shall provide documentation for the invoice. The
         invoice shall be payable to Licensor or its designee(s) [ * ] days
         after receipt by Schering of the invoice.

                  (b) Licensing. Schering shall have the right to negotiate with
         said third party for a suitable license or assignment of rights under
         the relevant patents. In the event that such negotiation results in a
         consummated agreement, then any lump sum payment and/or royalty
         payments to be made thereunder shall be paid by Schering and shall be
         offset against any royalties due Licensor in accordance with the terms
         of Article 3.4.

         4.5 Certification Under Drug Price Competition and Patent Restoration
Act. Licensor and Schering each shall immediately give written notice to the
other of any certification of which they become aware filed pursuant to 21
U.S.C. ss.355(b)(2)(A)(iv) and 355(j)(2)(A)(vii), or any amendment or successor
statute thereto, claiming that Patent Rights covering Licensed Compound and/or
Licensed Product(s) are invalid or that infringement will not arise from the
manufacture, use or sale of a product containing


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<PAGE>   98

Licensed Compound or otherwise equivalent to Licensed Product by a third party.
Notwithstanding any provision to the contrary, in the event that the Patent
Rights at issue are owned and/or controlled by Licensor and Licensor has failed
to bring an infringement action against such third party at least [ * ] business
days prior to expiration of the forty five (45) day period set forth in 21
U.S.C. ss.355(c)(3)(C) (or any amendment or successor statute thereto), Schering
shall have the right to bring such an infringement action, in its sole
discretion and at its own expense, in its own name and/or in the name of
Licensor. At Schering's request, Licensor shall, at its own expense, provide
Schering reasonable assistance to conduct such infringement action, including,
without limitation, causing the execution of such legal documents as Schering
may deem necessary for the prosecution of such action. Schering shall
periodically reimburse Licensor for its out-of-pocket costs (excluding any of
Licensor's costs of retaining independent counsel) incurred in assisting
Schering. Schering shall incur no liability to Licensor as a consequence of such
litigation or any unfavorable decision resulting therefrom, including any
decision holding any of the Patent Rights invalid or unenforceable, except that
Schering shall indemnify and hold Licensor harmless for any monetary judgment or
award against or penalty levied upon either Licensor or Schering arising out of
Schering's acts in the enforcement of such Patent Rights. In the event that
Schering recovers any sums in such litigation by way of damages or in settlement
thereof, Schering shall have the right to retain all such sums to offset its
costs, losses and expenses.

         4.6 Abandonment. Subject to Schering's rights pursuant to Section 4.2,
Licensor shall at the earliest known date give notice to Schering of the grant,
lapse, revocation, surrender, invalidation or abandonment of any Patent Rights
licensed to Schering for which Licensor is responsible for the filing,
prosecution and maintenance under this Agreement.

         4.7 Patent Term Restoration. The Parties hereto shall cooperate with
each other in obtaining patent term restoration or its equivalent in the
Territory where applicable to Patent Rights. In the event that elections with
respect to obtaining such patent term restoration are to be made, Schering shall
have the right to make the election and Licensor agrees to abide by such
election.

         4.8 Notices Regarding Patents. All notices, inquiries and
communications in connection with this Article IV shall be sent in the manner
set forth in Section 9.7 to the Parties at the addresses and facsimile numbers
indicated below.

If to Licensor:            AtheroGenics, Inc.
                           8995 Westside Parkway
                           Alpharetta, Georgia  30004
                           Attn.: Vice President, Business Development
                                  (with a copy to: President)
                           Fax No.:  (678) 336-2501


                                       25
<PAGE>   99

If to Schering:            Schering Corporation
                           2000 Galloping Hill Road
                           Kenilworth, New Jersey  07033
                           Attn.:  Staff Vice President - Patents and Trademarks
                           Fax No.:  (908) 298-5388


                                    ARTICLE V
                         CONFIDENTIALITY AND PUBLICATION

         5.1      Confidentiality.

                  (a) Nondisclosure Obligation. Each of Licensor and Schering
         shall use only in accordance with this Agreement, and shall not
         disclose to any third party, any of the other Party's Proprietary
         Information received by it pursuant to this Agreement without the prior
         written consent of the other Party. The foregoing obligations shall
         survive the expiration or termination of this Agreement for a period of
         [ * ] years. These obligations shall not apply when and to the extent
         Proprietary Information:

                           (i) is known by the receiving Party at the time of
                  its receipt, and not through a prior disclosure by the
                  disclosing Party, as documented by business records;

                           (ii) is at the time of disclosure or thereafter
                  becomes published or otherwise part of the public domain
                  without breach of this Agreement by the receiving Party;

                           (iii) is subsequently disclosed to the receiving
                  Party by a third party that has the right to make such
                  disclosure;

                           (iv) is developed by the receiving Party
                  independently of Proprietary Information or other information
                  received from the disclosing Party and such independent
                  development can be documented by the receiving Party;

                           (v) is disclosed to any institutional review board of
                  any entity conducting clinical trials, or any governmental or
                  other regulatory agencies in order to obtain patents, to gain
                  approval to conduct clinical trials or to market Licensed
                  Compound and/or Licensed Product, but such disclosure may be
                  made only to the extent reasonably necessary to obtain such
                  patents or authorizations; or

                           (vi) is required by law, regulation, rule, act or
                  order of any governmental authority or agency to be disclosed
                  by a Party, provided that


                                       26
<PAGE>   100

                  notice is promptly delivered to the other Party in order to
                  provide an opportunity to seek a protective order or other
                  similar order with respect to such Proprietary Information and
                  thereafter the disclosing Party discloses to the requesting
                  entity only the minimum Proprietary Information required to be
                  disclosed in order to comply with the request, whether or not
                  a protective order or other similar order is obtained by the
                  other Party.


                  (b) Disclosure to Agents. Notwithstanding the provisions of
         Section 5.1(a), Schering shall have the right to disclose Licensor's
         Proprietary Information to its Sublicensees, agents, consultants,
         Affiliates or other third parties (collectively "Agents") in accordance
         with this Section 5.1(b). Such disclosure shall be limited only to
         those Agents directly involved in the research, development,
         manufacture, marketing or promotion of Licensed Compound or Licensed
         Product (or for such Agents to determine their interest in performing
         such activities) in accordance with this Agreement. Any such Agents
         must agree in writing to be bound by confidentiality and non-use
         obligations essentially the same as those contained in this Agreement.
         The term of confidentiality and non-use obligations for such Agents
         shall be no less than [ * ] years. Schering shall be jointly and
         severally liable for any disclosure of Licensor Proprietary Information
         by Agents.

                  (c) Disclosure to a Third Party. Licensor shall have the right
         to use and disclose any Licensor Know-How at its sole option and
         discretion for the limited purpose of filing, prosecuting, and
         supporting Patent Rights. Subject to the terms of Section 5.2, either
         Party may publish Licensor Know-How under the terms of Section 5.3
         below. Licensor shall not otherwise disclose, provide or transfer any
         Licensor Know-How to any third party without the prior written approval
         of Schering.

         5.2 Publicity. Except as provided in Section 5.1 and this Section 5.2,
a Party may not use the name of the other Party in any publicity, advertising or
in any other public way and, may not issue press releases or otherwise publicize
or disclose any information related to the existence of this Agreement, the
terms or conditions of this Agreement, or any information relating to the
subject matter hereof, without the prior written consent of the other Party. The
Parties shall agree upon an initial press release to announce the execution of
this Agreement, together with a corresponding Q&A outline for use in responding
to inquiries about the Agreement. Following such initial press release, Licensor
may use the specific information contained therein, or in any subsequent public
announcements or publications made by Schering or by mutual agreement of the
Parties, in Licensor's investor relations and public relations activities.
Licensor shall make no public announcement, either written, oral or in any
medium relating to the safety of Licensed Compound and/or Licensed Product,
except for statements in official correspondence with government patent
authorities in support of Patent Rights as provided for in Section 5.1(c) [ * ].


                                       27
<PAGE>   101

         5.4 Publication. Schering and Licensor each acknowledge the potential
benefit in publishing results of certain studies to obtain recognition within
the scientific community and to advance the state of scientific knowledge. Each
Party also recognizes the mutual interest in obtaining valid patent protection
and in protecting business interests and trade secret information. No
publication of Licensor Know-How or Patent Rights may be made without the prior
written consent of Licensor. The Parties agree that Schering, its Affiliates,
employees or consultants shall be free to make any publication which does not
disclose Licensor Know-How or Patent Rights. In the event that any proposed
publication (as defined below) discloses Licensor Know-How or Patent Rights, the
following procedure shall apply: Either Party, its Affiliates, employees or
consultants wishing to make a publication shall deliver to the other Party a
copy of the proposed written publication or an outline of an oral disclosure at
least [ * ] days prior to submission for publication or presentation. For
purposes of this Agreement, the term "publication" shall include, without
limitation, abstracts and manuscripts for publication, slides and texts of oral
or other public presentations, and texts of any transmission through any
electronic media, e.g. any computer access system such as the Internet,
including the World Wide Web. The reviewing Party shall have the right (i) to
propose modifications to the publication for patent reasons, trade secret
reasons or business reasons or (ii) to request delay of the publication or
presentation in order to protect patentable information. If the reviewing Party
requests a delay, the publishing Party shall delay submission or presentation
for a period of up to [ * ] months from the filing date of the first patent
application in the Territory covering the information contained in the proposed
publication or presentation. If the reviewing Party requests modifications to
the publication, the publishing Party may edit such publication to prevent
disclosure of trade secret or proprietary business information prior to
submission of the publication or presentation.

                                   ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

         6.1 Representations and Warranties of Each Party. Each of Licensor and
Schering hereby represents, warrants and covenants to the other Party hereto
that as of the Execution date it has complied, and during the period extending
from the Execution Date until the expiration or termination of this Agreement it
shall comply, with all applicable material laws and regulations relating to its
activities under this Agreement. Each of Licensor and Schering further
represents, warrants and covenants to the other Party hereto that as of the
Execution Date:

                  (a) it is a corporation or entity duly organized and validly
         existing under the laws of the state or other jurisdiction of its
         incorporation or formation;

                  (b) the execution, delivery and performance of this Agreement
         by such Party has been duly authorized by all requisite corporate
         action, subject only to receipt of requisite approval of its board of
         directors;


                                       28
<PAGE>   102

                  (c) it has the power and authority to execute and deliver this
         Agreement and to perform its obligations hereunder;

                  (d) the execution, delivery and performance by such Party of
         this Agreement and its compliance with the terms and provisions hereof
         does not and will not conflict with or result in a breach of any of the
         terms and provisions of or constitute a default under (i) a loan
         agreement, guaranty, financing agreement, agreement affecting a product
         or other agreement or instrument binding or affecting it or its
         property; (ii) the provisions of its charter or operative documents or
         bylaws; or (iii) any order, writ, injunction or decree of any court or
         governmental authority entered against it or by which any of its
         property is bound;

                  (e) except for the governmental and Regulatory Approvals
         required to market Licensed Product in the Territory and any filings or
         approvals referred to in Section 2.4, the execution, delivery and
         performance of this Agreement by such Party does not require the
         consent, approval or authorization of, or notice, declaration, filing
         or registration with, any governmental or regulatory authority and the
         execution, delivery or performance of this Agreement will not violate
         any law, rule or regulation applicable to such Party;

                  (f) this Agreement has been duly authorized, executed and
         delivered and constitutes such Party's legal, valid and binding
         obligation enforceable against it in accordance with its terms subject,
         as to enforcement, to bankruptcy, insolvency, reorganization and other
         laws of general applicability relating to or affecting creditors'
         rights and to the availability of particular remedies under general
         equity principles;

                  (g) to the best of its knowledge there are no third party
         pending patent applications (excluding the Patent Rights), which, if
         issued, may cover the development, manufacture, use or sale of any
         Licensed Compound or Licensed Product.

         6.2      Licensor's  Representations. Licensor hereby represents,
warrants and covenants to Schering that as of the Execution Date:

                  (a)      to the best of its knowledge, the Patent Rights and
         Licensor Know-How are subsisting and are not invalid or unenforceable,
         in whole or in part;

                  (b) it has the full right, power and authority to grant all of
         the right, title and interest in the licenses granted to Schering under
         Article II hereof;

                  (c) to the best of its knowledge, it has not previously
         assigned, transferred, conveyed or otherwise encumbered its right,
         title and interest in the Licensed Compound, Licensed Product, the
         Patent Rights, or Licensor Know-


                                       29
<PAGE>   103

         How;

                  (d) except as specifically set forth in Schedule 6.2(d), it is
         the sole and exclusive owner and/or licensee of the Patent Rights and
         Licensor Know-How, all of which are free and clear of any liens,
         charges and encumbrances, and to the best of its knowledge no other
         person, corporation or other private entity, or governmental entity or
         subdivision thereof, has or shall have any claim of ownership with
         respect to the Patent Rights or Licensor Know-How, whatsoever;

                  (e) to the best of its knowledge, the Patent Rights and
         Licensor Know-How, and the development, manufacture, use, distribution,
         marketing, promotion and sale of Licensed Products do not interfere or
         infringe (as applicable) on any intellectual property rights owned or
         possessed by any third party;

                  (f) there are no claims, judgments or settlements against or
         amounts with respect thereto owed by Licensor, and to the best of its
         knowledge no pending or threatened claims or litigation against
         Licensor relating to Licensed Compound, the Patent Rights and Licensor
         Know-How;

                  (g) to the best of its knowledge, there are no circumstances
         that would adversely affect the commercial utility or the use of the
         Licensed Product;

                  (h) it has provided to Schering a summary of all material
         adverse events known to it relating to the Licensed Compound;

                  (i) there are no collaborative, licensing, material transfer,
         supply, distributorship or marketing agreements or arrangements or
         other similar agreements to which it or any of its Affiliates are a
         party relating to Licensed Compound, Licensed Product or Patent Rights
         which would materially limit the rights granted to Schering under this
         Agreement with respect to the Licensed Compound, Licensed Product or
         Patent Rights;

                  (j) there are no trademark(s) chosen, owned or controlled by
         Licensor or its Affiliates specifically in connection with the Licensed
         Compound and/or the Licensed Product in the Territory; and

                  (k) except as set forth in Schedule 6.2(k), it has not
         identified any compounds outside of the Compound Library which exhibit
         both (1) similar or better VCAM-1 inhibition than the Licensed Compound
         as determined using Licensor's currently available in vitro screens for
         VCAM-1 inhibitory activity (i.e., the human aortic endothelial cell
         based screen) and (2) histologically or morphologically demonstrated
         anti-atherosclerotic properties similar or better than Licensed
         Compound in the Licensor's animal models (i.e., the
         hypercholesterolemic rabbit).


                                       30
<PAGE>   104

Licensor further represents, warrants and covenants to Schering that:

                  (l) during the period extending from the Execution Date until
         the expiration or termination of this Agreement it will use reasonable
         efforts not to diminish the rights under the Patent Rights and Licensor
         Know-How granted to Schering hereunder, including without limitation,
         by not committing or permitting any actions or omissions which would
         cause the breach of any license or other agreements between itself and
         third parties which provide for licenses, assignments or other rights
         to any Patent Rights or Licensor Know-How, that it will provide
         Schering promptly with notice of any such alleged breach, and that as
         of the Execution Date, it is in compliance in all material respects
         with any such licenses or other agreements with third parties;

                  (m) as of the Execution Date, and to the best of its
         knowledge, all data summaries provided in writing to Schering by
         Licensor prior to the Execution Date relating to pre-clinical and
         clinical studies of the Licensed Compound accurately represent the raw
         data underlying such summaries; and

                  (n) Licensor shall not seek or file for any trademark for use
         in connection with the Licensed Compound and/or the Licensed Product in
         the Territory during the period extending from the Execution Date until
         the expiration or termination of this Agreement.

         6.3 Continuing Representations. The representations and warranties of
each Party contained in Sections 6.1 and 6.2 shall survive the execution of this
Agreement.

         6.4 No Inconsistent Agreements. Neither Party has in effect and after
the Effective Date neither Party shall enter into any oral or written agreement
or arrangement that would be inconsistent with its obligations under this
Agreement.

         6.5 Representation by Legal Counsel. Each Party hereto represents that
it has been represented by legal counsel in connection with this Agreement and
acknowledges that it has participated in the drafting hereof. In interpreting
and applying the terms and provisions of this Agreement, the Parties agree that
no presumption shall exist or be implied against the Party which drafted such
terms and provisions.

         6.6 Additional Obligations of Licensor The Parties acknowledge and
agree that all data and information provided by Licensor to Schering arising out
of or relating to any preclinical and/or clinical studies involving the Licensed
Compound and/or Licensed Product conducted by or on behalf of Licensor (the
"Studies"), or relating to any patent applications or patents having claims
covering the Licensed Compound and/or Licensed Product, are of material
importance to the development and commercialization of the Licensed Compound
and/or Licensed Product and to Schering's decision to enter into this Agreement.


                                       31
<PAGE>   105

                  (a) Licensor represents and warrants that, to the best of its
         knowledge and based upon Licensor's diligence in the performance of the
         relevant activities, as of the Execution Date it (and its
         subcontractors and/or collaborators, if any):

         (i)      has fully complied with all applicable laws, rules and
                  regulations, in the preparation, filing and prosecution of
                  patent applications or patents;

         (ii)     has fully complied with all applicable laws, rules and
                  regulations, in the conduct and evaluation of the Studies and
                  with regard to all applications or submissions for Regulatory
                  Approval in the Territory, if any;

         (iii)    knows of no irregularities or information suggesting any
                  irregularities in connection with the preparation, filing or
                  prosecution of patent applications or patents which may have a
                  material adverse effect with respect thereto; and

         (iv)     knows of no irregularities or information suggesting any
                  irregularities in connection with the conduct and evaluation
                  of the Studies which may have a material adverse effect with
                  respect thereto.

                  (b) To the extent of Licensor's obligations under this
         Agreement, Licensor shall undertake to perform the following in
         accordance with all applicable laws, rules and regulations:

         (i)      to prepare, file, prosecute and maintain, or ensure that its
                  subcontractors, collaborators and/or agents prepare, file,
                  prosecute and maintain, any patent applications or patents
                  relating to the Licensed Compound and/or Licensed Product; and

         (ii)     to conduct, or ensure that its subcontractors and/or
                  collaborators, if any, shall conduct, any Studies.

                  (c) In the event Licensor becomes aware of any known or
         suspected impropriety or misconduct relating to the preparation,
         filing, prosecution or maintenance of patent applications or patents,
         and/or the performance, analysis or reporting of any Studies, or any
         application or submission for Regulatory Approval, Licensor shall,
         within [ * ] hours notify Schering of such event in writing.


                                   ARTICLE VII
                   INDEMNIFICATION AND LIMITATION ON LIABILITY

         7.1 Indemnification by Schering. Schering shall indemnify, defend and
hold harmless Licensor and its Affiliates, and each of its and their respective
employees,


                                       32
<PAGE>   106

officers, directors and agents (each, a "Licensor Indemnified Party") from and
against any and all third party claims, demands, lawsuits, proceedings,
settlement amounts, liability, loss, damage, cost, and expense (including
reasonable attorneys' fees), (collectively, a "Liability") which may be asserted
against the Licensor Indemnified Party or which the Licensor Indemnified Party
may incur, suffer or be required to pay resulting from or arising out of (i) the
discovery, development, manufacture, promotion, distribution, use, testing,
marketing, sale or other disposition of Licensed Compound and/or Licensed
Product(s) by Schering, its Affiliates or Sublicensees (including without
limitation any personal injury, death, or other injuries suffered by users of
Licensed Compound or Licensed Product), or (ii) the breach by Schering of any
covenant, representation or warranty contained in this Agreement; or (iii) the
successful enforcement by a Licensor Indemnified Party of its rights under this
Section 7.1. Notwithstanding the foregoing, Schering shall have no obligation
under this Agreement to indemnify, defend or hold harmless any Licensor
Indemnified Party with respect to any Liability which results from the willful
misconduct or negligent acts or omissions of Licensor, its Affiliates, or any of
their respective employees, officers, directors or agents.

         7.2 Indemnification by Licensor. Licensor shall indemnify, defend and
hold harmless Schering and its Affiliates, and each of its and their respective
employees, officers, directors and agents (each, a "Schering Indemnified Party")
from and against any Liability which the Schering Indemnified Party may incur,
suffer or be required to pay resulting from or arising out of (i) the breach by
Licensor of any covenant, representation or warranty contained in this
Agreement; or (ii) the successful enforcement by a Schering Indemnified Party of
its rights under this Section 7.2. Notwithstanding the foregoing, Licensor shall
have no obligation under this Agreement to indemnify, defend or hold harmless
any Schering Indemnified Party with respect to any Liability which results from
willful misconduct or negligent acts or omissions of Schering, its Affiliates,
or any of their respective employees, officers, directors or agents.

         7.3 Conditions to Indemnification. Each Party agrees to promptly give
the other Party notice of any claim for which indemnification may be sought.
Failure of an indemnified Party to provide notice of a claim to the indemnifying
Party shall affect the indemnified Party's right to indemnification only to the
extent that such failure has a material adverse effect on the indemnifying
Party's ability to defend or the nature or the amount of the Liability. Subject
to the provisions of Article IV, the indemnifying Party shall have the right to
assume the defense of any suit or claim related to the Liability if it has
assumed responsibility for the suit or claim in writing; provided, however, that
if in the reasonable judgment of the indemnified Party, such suit or claim
involves an issue or matter which could have a materially adverse effect on the
business operations or assets of the indemnified Party, the indemnified Party
may waive its rights to indemnity under this Agreement and control the defense
or settlement thereof, but in no event shall any such waiver be construed as a
waiver of any indemnification rights such Party may have at law or in equity. If
the indemnifying Party defends the suit or claim, the indemnified Party may
participate in (but not control) the defense thereof at its sole cost and
expense.


                                       33
<PAGE>   107

         7.4 Settlements. Subject to the provisions of Article IV, neither Party
may settle a claim or action related to a Liability without the consent of the
other Party if such settlement would impose any monetary obligation on the other
Party or require the other Party to submit to an injunction or otherwise limit
the other Party's rights under this Agreement, provided that such consent shall
not be unreasonably withheld or delayed. Any payment made by a Party to settle
any such claim or action shall be at its own cost and expense.

         7.5 Limitation of Liability. With respect to any claim by one Party
against the other arising out of the performance or failure of performance of
the other Party under this Agreement, the Parties expressly agree that the
liability of such Party to the other Party for such breach shall be limited
under this Agreement or otherwise at law or equity to direct damages only and in
no event shall a Party be liable for, punitive, exemplary or consequential
damages suffered or incurred by the other Party.

         7.6 Insurance. Each Party acknowledges and agrees that during the Term
of this Agreement it shall maintain adequate insurance and/or a self-insurance
program for contractual liability insurance to cover such Party's obligations
under this Agreement. Each Party shall provide the other Party with evidence of
such insurance and/or self-insurance program, upon request.


                                  ARTICLE VIII
                              TERM AND TERMINATION

         8.1 Term and Expiration. This Agreement shall be effective as of the
Effective Date and unless terminated earlier by mutual written agreement of the
Parties or pursuant to Sections 8.2, 8.3 or 8.4 below, the Term of this
Agreement shall continue in effect on a product-by-product and
country-by-country basis until the expiration of the last to expire Patent Right
incorporating a Valid Claim covering the Licensed Product, or in countries where
no such Patent Rights exist until the tenth anniversary of the First Commercial
Sales of Licensed Product in such country. Upon expiration of this Agreement,
Schering's licenses pursuant to Section 2.1 and 2.2 shall become fully paid-up,
perpetual licenses.

         8.2 Termination by Schering Without Cause. Schering shall have the
unilateral right to terminate this Agreement on a product-by-product basis
(without cause) at any time by giving [ * ] days advance written notice to
Licensor. In the event of the exercise of such termination rights, the rights
and licenses granted to Schering under Sections 2.1 and 2.2 shall terminate and
all rights to Licensor Know-How, Licensed Compounds and Licensed Products with
respect to the applicable product which are granted pursuant to this Agreement
shall revert to Licensor.


                                       34
<PAGE>   108

         8.3      Termination Upon Cessation of Development.

                  (a) Termination by Either Party Either Party shall have the
         unilateral right to terminate this Agreement on a product-by-product
         basis at any time by giving [ * ] days advance written notice to the
         other Party if Schering ceases development or commercialization of
         Licensed Compound or Licensed Product pursuant to Sections 2.6(a) and
         (c), subject to Section 2.6(b). In the event of the exercise of such
         termination rights, the rights and licenses granted to Schering under
         Sections 2.1 and 2.2 shall terminate and all rights to Licensor
         Know-How, Licensed Compounds and Licensed Products with respect to the
         applicable product which are granted pursuant to this Agreement shall
         revert to Licensor.

                  (b) Termination by Licensor Licensor shall have the unilateral
         right to terminate this Agreement by giving [ * ] days written notice
         to Schering in the event that:

                           (i)      [  *  ]; or

                           (ii)     [  *  ].

         In the event of the exercise of such termination rights, the rights and
         licenses granted to Schering under Sections 2.1 and 2.2 shall terminate
         and all rights to Licensor Know-How, Licensed Compounds and Licensed
         Products with respect to the applicable product which are granted
         pursuant to this Agreement shall revert to Licensor.

         8.4      Termination.

                  (a) Termination for Cause. This Agreement may be terminated by
         written notice at any time during the Term of this Agreement:

                           (i) by either Party, subject to Section 9.2, if the
                  other Party is in breach of its material obligations with
                  respect to such product hereunder and has not cured such
                  breach within [ * ] days ([ * ] days with respect to payment
                  obligations under Article III) after written notice requesting
                  cure of the breach with reasonable detail of the particulars
                  of the alleged breach, or within [ * ] days of receiving
                  notice initiated actions reasonably expected to cure the cited
                  failure and thereafter diligently pursued such actions to cure
                  the failure (even if requiring longer than the [ * ] days set
                  forth in this subsection); or

                           (ii) by either Party upon the filing or institution
                  of bankruptcy, reorganization (in connection with any
                  insolvency), liquidation or receivership proceedings, or upon
                  an assignment of a substantial portion of the assets for the
                  benefit of creditors by the other Party, or in the event a


                                       35
<PAGE>   109

                  receiver or custodian is appointed for such other Party's
                  business, or if a substantial portion of such other Party's
                  business is subject to attachment or similar process;
                  provided, however, that in the case of any involuntary
                  bankruptcy proceeding such right to terminate shall only
                  become effective if the proceeding is not dismissed within
                  [ * ] days after the filing thereof.

                  (b)      Effect of Termination for Cause on License.

                           (i) Termination by Schering. In the event Schering
                  terminates this Agreement under Section 8.4(a)(i), due to a
                  breach by Licensor of its material obligations under Section
                  2.1(a), 2.1(b) or 2.11(a) of this Agreement, then Schering's
                  licenses pursuant to Sections 2.1 and 2.2 shall become fully
                  paid-up, perpetual licenses.

                           (ii) Termination by Licensor. In the event that
                  Licensor terminates this Agreement under Section 8.4(a)(i),
                  then the rights and licenses granted to Schering under
                  Sections 2.1 and 2.2 shall terminate and all rights to
                  Licensor Know-How, Licensed Compounds and Licensed Products
                  granted pursuant to this Agreement shall revert to Licensor.

                           (iii) Effect of Bankruptcy. In the event Schering
                  terminates this Agreement under Section 8.4(a)(ii) or this
                  Agreement is otherwise terminated under Section 8.4(a)(ii),
                  the Parties agree that Schering, as a licensee of rights to
                  intellectual property under this Agreement, shall retain and
                  may fully exercise all of its rights and elections under the
                  Insolvency Statute including as set forth in Section 9.8
                  hereof.

         8.5 Effect of Termination. Expiration or termination of the Agreement
shall not relieve the Parties of any obligation accruing prior to such
expiration or termination, and the provisions of Articles V and VII shall
survive the expiration of the Agreement. With regard to reimbursement for
development costs incurred by Licensor, including, without limitation, the costs
of clinical studies, Schering's obligations under Section 2.6 shall upon
termination be limited to the costs for actual work performed in accordance with
the relevant research plans or protocols up to the effective date of such
termination, or any irrevocable financial commitments made by Licensor prior to
the date of notice of termination. Any expiration or early termination of this
Agreement shall be without prejudice to the rights of either Party against the
other accrued or accruing under this Agreement prior to termination, including
the obligation to pay royalties for Licensed Product(s) or Licensed Compound
sold prior to such termination. In the event of termination of this Agreement,
Schering shall have the right to continue to sell its existing inventory of
Licensed Product during the [ * ] month period immediately following such
termination, provided that Schering shall continue to make royalty payments with
respect to such sales.


                                       36
<PAGE>   110

         8.6 Remedies for Breach. In addition to any and all other remedies that
Schering may have under this Agreement, or otherwise under law and/or equity, in
the event that Licensor materially breaches its obligations under Sections
6.6(a) or (b) of this Agreement and/or materially breaches its representation,
warranties and covenants under Section 6.2(m), then Schering shall have the
right, at Schering's sole discretion, upon written notice to Licensor to either:
(i) deduct [ * ] of the remaining unpaid milestone(s) in Section 3.2; (ii)
permanently reduce by [ * ] the royalty rates provided for in Section 3.3; or
(iii) immediately terminate the Agreement.

         8.7 Licensor's Rights on Termination. In the event that Licensor
terminates this Agreement under Section 8.3 or 8.4(a)(i), or Schering terminates
this Agreement under Section 8.2 or 8.3, Schering shall provide to Licensor the
following:

         (i)      all existing Regulatory Approvals and/or applications for
                  Regulatory Approval for the applicable Licensed Product(s) in
                  the Territory;

         (ii)     access, including the right to make copies, of all
                  preclinical, clinical, pharmacokinetic, toxicology or other
                  data owned or controlled by Schering which is necessary to
                  support any of the Regulatory Approvals provided to Licensor
                  under Section 8.7(i);

         (iii)    subject to the terms of Section 8.7 (iv), all preclinical and
                  clinical supplies of the applicable Licensed Product(s),
                  and/or Licensed Compound or other Compound Library compounds,
                  in Schering's possession or control;

         (iv)     access to all manufacturing information relating to the
                  Licensed Product, including assigning, sublicensing or
                  otherwise making available, as appropriate, any third party
                  manufacturing agreements relied upon by Schering for the
                  manufacture of Licensed Product, in each case to the extent
                  reasonably necessary for Licensor to manufacture the Licensed
                  Product following such termination;

         (v)      to the extent that termination occurs after the First
                  Commercial Sale of the applicable Licensed Product(s) and
                  subject to the terms of Section 8.5, Licensor shall have the
                  right to purchase Schering's remaining inventory of the
                  applicable Licensed Product(s) and/or Licensed Compound or
                  other Compound Library compounds for sale in the Territory at
                  [ * ] of Schering's fully absorbed manufacturing costs.

In addition, in the event of such termination, Schering shall grant to Licensor
a paid-up, non-exclusive, non-transferable license in the Territory under any
issued patents, or pending patent applications, owned or controlled by Schering
which would otherwise be infringed by the manufacture, use or sale of the
applicable Licensed Product(s) in the Territory, which license shall be
restricted to the sole purpose of making, having made, importing, exporting,
using, distributing, marketing, promoting, offering for sale


                                       37
<PAGE>   111

and selling such Licensed Product(s).

         8.8 Concurrent Termination with the International Agreement. In the
event of any termination of the International Agreement by either Licensor or
Schering-Plough Ltd. under the provisions of Sections 8.2, 8.3 or 8.4 of the
International Agreement, this Agreement shall automatically terminate
concurrently under the corresponding Section 8.2, 8.3 or 8.4 of this Agreement.


                                   ARTICLE IX
                                  MISCELLANEOUS

         9.1      Assignment/Change of Control.

                  (a) Assignment. Neither this Agreement nor any or all of the
         rights and obligations of a Party hereunder shall be assigned,
         delegated, sold, transferred, sublicensed (except as expressly
         permitted hereunder) or otherwise disposed of, by operation of law or
         otherwise, to any third party (other than an Affiliate of an assigning
         Party under the condition that the assignor remain responsible to the
         other Party under this Agreement), without the prior written consent of
         the other Party. Any attempted assignment, delegation, sale, transfer,
         sublicense or other disposition, by operation of law or otherwise, of
         this Agreement or of any rights or obligations hereunder contrary to
         this Section 9.1 shall be a material breach of this Agreement by the
         attempting Party, and shall be void and without force or effect;
         provided, however, either Party may, without such consent, assign the
         Agreement and its rights and obligations hereunder to an Affiliate or
         in connection with the transfer or sale of all or substantially all of
         its assets related to the division or the subject business, or in the
         event of its merger or consolidation or change in control or similar
         transaction. This Agreement shall be binding upon, and inure to the
         benefit of, each Party, its Affiliates, and its permitted successors
         and assigns. Each Party shall be responsible for the compliance by its
         Affiliates with the terms and conditions of this Agreement.

                  (b) Change of Control. In the event the ownership or control
         of Licensor is acquired by another pharmaceutical company that has an
         ongoing development program or commercializes (directly or through any
         Affiliate) any compound or product for the Primary Indication and/or
         the Secondary Indication, Licensor shall promptly notify Schering in
         writing to that effect. Licensor's obligations under Section 2.11 shall
         not extend to any such compound or product. Effective upon such notice,
         the JMC shall be disbanded and Schering will assume and thereafter be
         responsible for all of the rights and obligations of the JMC. Licensor,
         and following the change of control the acquiring party, shall use best
         efforts to ensure that such acquiring party does not have any access to
         any of Schering's Proprietary Information or other proprietary
         information relating to the development and commercialization of
         Licensed Product. Such best efforts shall


                                       38
<PAGE>   112

         include, without limitation: (i) ensuring that the acquiring party does
         not have access to any such information prior to the change of control
         of Licensor; and (ii) promptly destroying or returning to Schering all
         such information in Licensor's possession or control upon completion of
         the change of control. The acquiring party shall have no rights to use
         any Licensor Know-How relating to the Primary Indication or the
         Secondary Indication in connection with the development and
         commercialization of its own compound or product for the Primary and/or
         Secondary Indication. All of Schering's obligations under Article II to
         provide Licensor and/or the JMC with reports or to otherwise keep
         Licensor informed with respect to the development and commercialization
         of Licensed Compound, any other compound within the Compound Library
         and/or Licensed Product shall immediately terminate; provided, however,
         that Schering shall provide such acquiring party with an annual summary
         of its activities in developing and commercializing Licensed Product.

         9.2 Governing Law. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New Jersey, without giving
effect to conflict of law principles. All disputes under this Agreement shall be
governed by binding arbitration pursuant to the mechanism set forth in Schedule
9.2 attached hereto and incorporated hereby.

         9.3 Waiver. Any delay or failure in enforcing a Party's rights under
this Agreement or any waiver as to a particular default or other matter shall
not constitute a waiver of such Party's rights to the future enforcement of such
rights under this Agreement, nor operate to bar the exercise or enforcement
thereof at any time or times thereafter, excepting only as to an express written
and signed waiver as to a particular matter for a particular period of time.

         9.4 Independent Relationship. Nothing in this Agreement shall be deemed
to create an employment, agency, joint venture or partnership relationship
between the Parties hereto or any of their respective Affiliates, agents or
employees, or any other legal arrangement that would impose liability upon one
Party for the act or failure to act of the other Party. Neither Party shall have
any power to enter into any contracts or commitments or to incur any liabilities
in the name of, or on behalf of, the other Party, or to bind the other Party in
any respect whatsoever.

         9.5 Export Control. This Agreement is made subject to any restrictions
concerning the export of products or technical information from the United
States of America which may be imposed upon or related to Licensor or Schering
from time to time by the government of the United States of America.
Furthermore, Schering agrees that it will not export, directly or indirectly,
any technical information acquired from Licensor under this Agreement or any
products using such technical information to any country for which the United
States government or any agency thereof at the time of export requires an export
license or other governmental approval, without first obtaining the written
consent to do so from the Department of Commerce or other agency of the


                                       39
<PAGE>   113

United States government when required by an applicable statute or regulation.

         9.6 Entire Agreement; Amendment. This Agreement, including the Exhibits
and Schedules hereto and all the covenants, promises, agreements, warranties,
representations, conditions and understandings contained herein sets forth the
complete, final and exclusive agreement between the Parties with respect to the
subject matter hereof and supersedes and terminates all prior and
contemporaneous agreements and understandings between the Parties, whether oral
or in writing. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as are set forth herein. No subsequent alteration,
amendment, change, waiver or addition to this Agreement shall be binding upon
the Parties unless reduced to writing and signed by an authorized officer of
each Party. Each Party in deciding to execute this Agreement has not relied on
any understanding, agreement, representation or promise by the other Party which
is not explicitly set forth herein.

         9.7 Notices. Except as provided under Section 4.8 hereof, any notice
required or permitted to be given or sent under this Agreement shall be hand
delivered or sent by express delivery service or certified or registered mail,
postage prepaid, or by facsimile transmission (with written confirmation copy by
registered first-class mail) to the Parties at the addresses and facsimile
numbers indicated below.

         If to Licensor, to:        AtheroGenics, Inc.
                                   8995 Westside Parkway
                                   Alpharetta, Georgia  30004
                                   Attn.: Vice President, Business Development
                                   Fax No.: (678) 336-2501


         If to Schering to:        Schering Corporation
                                   2000 Galloping Hill Road
                                   Kenilworth, New Jersey  07033
                                   Attn.: Vice President, Business Development
                                   Fax No.: (908) 298-5379

         with copies to:           Schering Corporation
                                   2000 Galloping Hill Road
                                   Kenilworth, New Jersey  07033
                                   Attn.: Law Department - Staff Vice President,
                                           Licensing
                                   Fax No.: (908) 298-2739

         Any such notice shall be deemed to have been received on the date
actually received. Either Party may change its address or its facsimile number
by giving the other Party written notice, delivered in accordance with this
Section.


                                       40
<PAGE>   114

9.8      Provisions for Insolvency.

                  (a) Effect on Licenses. All rights and licenses granted under
         or pursuant to this Agreement by Licensor to Schering are, for all
         purposes of Section 365(n) of Title 11 of the United States Code
         (together with its foreign equivalent, the "Insolvency Statute"),
         licenses of rights to "intellectual property" as defined in the
         Insolvency Statute. Licensor agrees that Schering, as licensee of such
         rights under this Agreement shall retain and may fully exercise all of
         its rights and elections under the Insolvency Statute provided that
         Schering makes all royalty payments under this Agreement. Licensor
         agrees during the Term of this Agreement to create and maintain current
         copies or, if not amenable to copying, detailed descriptions or other
         appropriate embodiments, to the extent feasible, of all such
         intellectual property. If a case is commenced by or against Licensor
         under the Insolvency Statute, Licensor (in any capacity, including
         debtor-in-possession) and its successors and assigns (including,
         without limitation, an Insolvency Statute trustee) shall,

                           (i)      as Schering may elect in a written request,
                  immediately upon such request:

                                    (A) perform all of the obligations provided
                           in this Agreement to be performed by Licensor
                           including, where applicable and without limitation,
                           providing to Schering portions of such intellectual
                           property (including embodiments thereof) held by
                           Licensor and such successors and assigns or otherwise
                           available to them; or

                                    (B) provide to Schering all such
                           intellectual property (including all embodiments
                           thereof) held by Licensor and such successors and
                           assigns or otherwise available to them; and

                           (ii) not interfere with the rights of Schering under
                  this Agreement, or any agreement supplemental hereto, to such
                  intellectual property (including such embodiments), including
                  any right to obtain such intellectual property (or such
                  embodiments) from another entity.

                  (b) Rights to Intellectual Property. If an Insolvency Statute
         case is commenced by or against Licensor, and this Agreement is
         rejected as provided in the Insolvency Statute, and Schering elects to
         retain its rights hereunder as provided in the Insolvency Statute, then
         Licensor (in any capacity, including debtor-in-possession) and its
         successors and assigns (including, without limitation, an Insolvency
         Statute trustee) shall provide to Schering all such intellectual
         property (including all embodiments thereof) held by Licensor and such
         successors and assigns, or otherwise available to them, immediately
         upon


                                       41
<PAGE>   115

         Schering's written request. Whenever Licensor or any of its successors
         or assigns provides to Schering any of the intellectual property
         licensed hereunder (or any embodiment thereof) pursuant to this Section
         9.8, Schering shall have the right to perform the obligations of
         Licensor hereunder with respect to such intellectual property, but
         neither such provision nor such performance by Schering shall release
         Licensor from any such obligation or liability for failing to perform
         it.

                  (c) Schering's Rights. All rights, powers and remedies of
         Schering provided herein are in addition to and not in substitution for
         any and all other rights, powers and remedies now or hereafter existing
         at law or in equity (including, without limitation, the Insolvency
         Statute) in the event of the commencement of an Insolvency Statute case
         by or against Licensor. Schering, in addition to the rights, power and
         remedies expressly provided herein, shall be entitled to exercise all
         other such rights and powers and resort to all other such remedies as
         may now or hereafter exist at law or in equity (including, without
         limitation, the Insolvency Statute) in such event. The Parties agree
         that they intend the foregoing Schering rights to extend to the maximum
         extent permitted by law, including, without limitation, for purposes of
         the Insolvency Statute:

                           (i) the right of access to any intellectual property
                  (including all embodiments thereof) of Licensor, or any third
                  party with whom Licensor contracts to perform an obligation of
                  Licensor under this Agreement, and, in the case of the third
                  party, which is necessary for the development, registration,
                  manufacture and marketing of Licensed Compound and/or Licensed
                  Product(s); and

                           (ii) the right to contract directly with any third
                  party described in (i) to complete the contracted work.

                  (d) Deemed Grant of Rights. In the event of any insolvency of
         Licensor and if any statute and/or regulation in any country in the
         Territory requires that there be a specific grant or specific clause(s)
         in order for Schering to obtain the rights and benefits as licensee
         under this Agreement which are analogous to those rights under Section
         365(n) of Title 11 of the United States Code, then this Agreement shall
         be deemed to include any and all such required grant(s), clause(s)
         and/or requirements.

                  (e) Security Interests. In addition to any other rights
         granted to Schering hereunder, with respect to any country in the
         Territory in which Schering reasonably determines that its rights set
         forth in this Section 9.8 are nonexistent or inadequate to protect
         Schering's interests in the licenses granted hereunder, Licensor shall,
         upon Schering's request, execute a security agreement, or any foreign
         equivalent, for each country in the Territory, granting Schering a
         secured interest in all intellectual property licensed to Schering
         under this Agreement.


                                       42
<PAGE>   116

         9.9 Force Majeure. Failure of any Party to perform its obligations
under this Agreement (except the obligation to make payments when properly due)
shall not subject such Party to any liability or place them in breach of any
term or condition of this Agreement to the other Party if such failure is due to
any cause beyond the reasonable control of such non-performing Party ("force
majeure"), unless conclusive evidence to the contrary is provided. Causes of
non-performance constituting force majeure shall include, without limitation,
acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo,
strikes or other labor trouble, failure in whole or in part of suppliers to
deliver on schedule materials, equipment or machinery, interruption of or delay
in transportation, a national health emergency or compliance with any order or
regulation of any government entity acting with color of right. The Party
affected shall promptly notify the other Party of the condition constituting
force majeure as defined herein and shall exert reasonable efforts to eliminate,
cure and overcome any such causes and to resume performance of its obligations
with all possible speed; provided, however, that nothing contained herein shall
require any Party to settle on terms unsatisfactory to such Party any strike,
lock-out or other labor difficulty, any investigation or proceeding by any
public authority, or any litigation by any third party. If a condition
constituting force majeure as defined herein exists for more than ninety (90)
consecutive days, the Parties shall meet to negotiate a mutually satisfactory
resolution to the problem, if practicable.

         9.10 Severability. If any provision of this Agreement is declared
illegal, invalid or unenforceable by a court having competent jurisdiction, it
is mutually agreed that this Agreement shall endure except for the part declared
invalid or unenforceable by order of such court; provided, however, that in the
event that the terms and conditions of this Agreement are materially altered,
the Parties will, in good faith, renegotiate the terms and conditions of this
Agreement to reasonably substitute such invalid or unenforceable provisions in
light of the intent of this Agreement.

         9.11 Counterparts. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of each of the Parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against either
Party whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.

         9.12 Captions. The captions of this Agreement are solely for the
convenience of reference and shall not affect its interpretation.

         9.13 Recording. Each Party shall have the right, at any time, to
record, register, or otherwise notify this Agreement in appropriate governmental
or regulatory offices anywhere in the world, and each Party shall provide
reasonable assistance to the other in effecting such recording, registering or
notifying. Notwithstanding the foregoing, prior to recording, registering, or
otherwise notifying this Agreement, the Party desiring to so record, register,
or notify shall provide a copy of all materials to be filed for review, comment,
and approval by the other Party, such approval not unreasonably to be withheld
or delayed.


                                       43
<PAGE>   117

         9.14 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all other acts, as may be necessary
or appropriate in order to carry out the purposes and intent of this Agreement
including, without limitation, any filings with any antitrust agency which may
be required.


                                       44
<PAGE>   118

         IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized representatives of the Parties as of the date set forth below.

ATHEROGENICS, INC.                          SCHERING CORPORATION

By:      Russell Medford                    By:      David Poorvin
      ------------------------------              ------------------------------

Title:   President & CEO                    Title:   Vice President
      ------------------------------              ------------------------------

Date:    22 October 1999                    Date:    21 October 1999
      ------------------------------              ------------------------------


                                       45
<PAGE>   119

                                  SCHEDULE 1.6

             Elements of Fully Absorbed Manufacturing Cost of Goods

The following expenses are included in manufacturing costs:

1.       Direct Materials

Materials used in the manufacturing process that are traced directly to the
completed product, such as:

         -        Inert raw materials or excipients

         -        Active substances/ingredients

         -        Packaging components such as bottles, caps, labels, etc.

2.       Direct Labor

The cost of employees engaged in production activities that are directly
identifiable with product costs. Excludes supervision, which is included in
indirect labor, and production support activities such as inspection, plant and
equipment maintenance labor, and material handling personnel. Direct Labor cost
includes:

         -        Base pay, overtime, vacation and holidays, illness, personal
                  time with pay and shift differential.

         -        Cost of employee fringe benefits such as health and life
                  insurance, payroll taxes, welfare, pension and profit sharing.

3.       Indirect Manufacturing Costs

Costs which are ultimately allocated to product based on standard direct labor
hours of the operating departments. These costs include:

         -        Indirect Production Labor - salaries of employees engaged in
                  production activities who are not classified as direct labor,
                  including supervision, clerical, etc.

         -        Costs of Direct Labor - employees not utilized for the
                  manufacturing of product such as training, downtime and
                  general duties.

         -        Indirect Materials - supplies and chemicals which are used in
                  the manufacturing process and are not assigned to specific
                  products but are included in manufacturing overhead costs.
                  Includes supplies for which direct assignment to products is
                  not practical.

         -        Utilities - expenses incurred for fuel, electricity and water
                  in providing


                                        i
<PAGE>   120

                  power for production and other plant equipment.

         -        Maintenance and Repairs - amount of expense incurred in-house
                  or purchased to provide services for plant maintenance and
                  repairs of facilities and equipment.

         -        Other Services - purchased outside services and rentals such
                  as the cost of security, ground maintenance, etc.

         -        Depreciation - of plant and equipment utilizing the
                  straight-line method of calculation.

         -        Insurance - cost of comprehensive and other insurance
                  necessary for the safeguard of manufacturing plant and
                  equipment.

         -        Taxes - expense incurred for taxes on real and personal
                  property (manufacturing site, buildings and the fixed assets
                  of equipment, furniture and fixtures, etc.). If manufacturing
                  site includes other operations (marketing, R&D, etc.), taxes
                  are allocated to manufacturing on the basis of total real and
                  personal property.

         -        Cost of manufacturing, service departments - such as:
                  (where applicable)

                  -        Packaging Engineering

                  -        Manufacturing Maintenance

                  -        Industrial Engineering

                  -        Receiving and Warehousing

                  -        Purchasing and Accounting

                  -        Production Scheduling

                  -        Inventory Management

                  -        Plant Materials Management

                  -        Central Weigh

                  -        Manufacturing Administration

         -        Allocated costs of services provided to manufacturing
                  including: (where applicable)

                  -        Cafeteria

                  -        Personnel Operations

                  -        Health and Safety Services

                  -        Division Engineering and Operations Services

                  -        Plant Services (housekeeping)

                  -        Manufacturing Information Systems

                  -        Plant Power

                  -        Office of V.P. Manufacturing

         Various bases are used for allocating these costs to manufacturing
         operating departments including headcount, square feet, metered
         utilities use, estimated services rendered, EDP computer hours, etc.


                                       ii
<PAGE>   121

4.       Quality Assurance Costs

Direct labor and indirect costs for Quality Assurance departments testing and
approving materials used in manufacturing and completed manufacturing batches
and finished products. This includes all manufacturing in-process testing and
testing of finished materials. Excluded from product costs are QA costs related
to research and development, stability testing, and other costs customarily
excluded from such Quality Assurance costs.

The following expenses are not included in manufacturing costs:
         a)       Inventory Carrying Costs

         b)       Regulatory Affairs Costs

         c)       Pilot plant costs, research batches and other similar costs
                  prior to turnover to manufacturing. These are handled as
                  development costs and expensed to R&D. This excludes
                  commercial goods produced by a research facility.

         d)       Costs incurred by Manufacturing for special projects (e.g.
                  requests by Schering-Plough Research Institute) to establish
                  and certify new production processes, batch sizes and product
                  line improvements, and new vendor certification of equipment
                  and primary materials components. These costs are expensed to
                  R&D.

         e)       Manufacturing start-up costs and initial one-time
                  extraordinary manufacturing costs incurred prior to plant
                  operation and achievement of a normal production activity
                  level. Includes costs of training, testing,
                  qualification/validation of new equipment and facilities and
                  initial, trial batches. These costs are deferred and then
                  amortized to Other Production Costs over five years.

         f)       Significant idle capacity is eliminated from factory overhead
                  and product cost. Idle or excess capacity costs are culled out
                  of the Manufacturing Budget and expensed as a period cost to
                  Other Production Costs.

         g)       Finished goods warehousing, shipping and other distribution
                  costs. These are included in distribution costs.

         h)       Product liability and/or business interruption insurance
                  expenses.

         i)       Intercompany profit.

5.       Other Production Costs

Three major types of expense are included in the Other Production Costs
classification.

         a)       Variances from standard cost the difference between the actual
                  and standard cost of inventory purchased and produced during
                  the period less any portion applicable to on-hand inventory
                  which has been capitalized.

                  (i)      Materials purchase price variance

                  (ii)     Materials usage/yield variances

                  (iii)    Direct labor efficiency/inefficiency - reflects the
                           cost difference between the standard and actual
                           number of direct labor


                                      iii
<PAGE>   122

                           hours used for actual production.

                  (iv)     Overhead - reflects all other labor and overhead cost
                           variances including activity and spending production
                           related and support.

                  With the exception of overhead, all of the other variances can
                  be identified by product and can be added (if unfavorable) or
                  subtracted (if favorable) to determine actual manufacturing
                  costs of a product.

         (b)      Non-standard costs: Cost of miscellaneous production related
                  operations for which standards are not established due to the
                  nature of the function, such as manufacturing start-up
                  operations, stock conversions and reclaiming (processing and
                  returning to finished goods inventory) of products returned by
                  customers. Also includes miscellaneous expenses incurred in
                  connection with the production of inventory which for various
                  reasons (e.g., cyclical, non-recurring) are not included in
                  standard costs. Examples include excess/idle capacity not
                  included in standards, abnormal waste or rework, experiments,
                  unallocated production costs, tooling and package design
                  costs.

                  Some of the above costs may be incurred for specific products,
                  e.g., rework, experiments, tooling, but the majority are
                  general to all products produced.

         (c)      Inventory adjustments: Consists of charges or credits due to
                  adjustments to inventory concerning revaluation to new
                  standards, stock conversions, capitalized/amortized production
                  variances, shortages or overages, and damage or obsolescence
                  of regular on-hand inventory or products returned by
                  customers.

Each of these charges or credits can be identified to a specific product.


                                       iv
<PAGE>   123


                                  Schedule 1.18

                                  PATENT RIGHTS

[*]


<PAGE>   124

                                 Schedule 2.1(e)

                             Third Party Agreements


License Agreement between Emory University and Atherogenics, Inc., dated January
11, 1995.

License to the United States Government dated March 27, 1995.

Patent Purchase Agreement between Sampath Parthasarathy, Ph.D. and Atherogenics,
Inc., dated April 26, 1995.




<PAGE>   125


                                 Schedule 2.6(h)

                  Development Work to be Performed by Licensor

Pre-clinical:

         [  *  ]



<PAGE>   126


                                 SCHEDULE 2.6(i)

                 ADVERSE EVENT REPORTING PROCEDURES FOR PRODUCTS


         The Parties understand and agree that these procedures are intended to
comply with 21 CFR 314.80(b) and 21 CFR 310.305(a) concerning standard written
procedures for adverse event reporting in the United States. These procedures
may be amended by the Parties at any time, at the request of either Party, to
ensure that they fully and accurately reflect the procedures in place for
surveillance, receipt, evaluation and reporting of adverse drug experiences by
the pharmacovigilance departments of the Parties and comply with applicable laws
and regulations in the countries in which the product(s) is marketed and/or is
under investigation. In that regard, upon the written request of either Party,
the Parties shall meet to renegotiate in good faith, all or some of these
procedures. Each Party may request such a meeting no more often than once in any
twelve (12) month period.


1.       Definitions:

         (a)      An Adverse Event ("AE") is defined as:

                  i)       any experience which is adverse, including what are
                           commonly described as adverse or undesirable
                           experiences, adverse events, adverse reactions, side
                           effects, or death due to any cause associated with,
                           or observed in conjunction with the use of a drug,
                           biological product, or device in humans, whether or
                           not considered related to the use of that product:

                           -        occurring in the course of the use of a
                                    drug, biological product or device,

                           -        associated with, or observed in conjunction
                                    with product overdose, whether accidental or
                                    intentional,

                           -        associated with, or observed in conjunction
                                    with product abuse,

                           -        associated with, or observed in conjunction
                                    with product withdrawal

                  ii)      Any significant failure of expected pharmacological
                           or biologic therapeutical action (with the exception
                           of in clinical trials).

         (b)      Associated with or related to the use of the drug is defined
as: A

<PAGE>   127

reasonable possibility exists that the AE was caused by the drug.

         (c)      Expected or unexpected are defined as:

                  i)       Expected ("labeled") AE - An AE which is included in
                           the Investigators' Brochure for clinical trials,
                           included in local labeling (e.g., summary of product
                           characteristics) for Marketed Drugs, or in countries
                           with no local labeling, in the Company Core Data
                           Sheet (CCDS).


                  ii)      Unexpected ("unlabeled") AE - An AE that does not
                           meet the criteria for an expected AE or an AE which
                           is listed but differs from that event in terms of
                           severity or specificity.

         (d)      IND Holder is defined as: A "Sponsor" as defined in 21 CFR
Part 312.2(b) of an investigational new drug in any regulatory jurisdiction,
including a holder of a foreign equivalent thereto.

         (e)      Life-threatening is defined as: any adverse drug experience
that places the patient, in the view of the initial reporter, at immediate risk
of death from the adverse drug experience as it occurred, i.e., it does not
include an AE that, had it occurred in more severe form, might have caused
death.

         (f)      NDA Holder is defined as: An "Applicant" as defined in 21 CFR
Part 314.3(b), for regulatory approval of a Licensed Product in any regulatory
jurisdiction, including a holder of a foreign equivalent thereto.

         (g)      Serious or Non-Serious are defined as:

                  i)       Any adverse drug experience occurring at any dose
                           that results in any of the following outcomes: Death,
                           a life-threatening adverse drug experience, inpatient
                           hospitalization or prolongation of existing
                           hospitalization, a persistent or significant
                           disability/incapacity, or a congenital anomaly/birth
                           defect. Important medical events that may not result
                           in death, be life-threatening, or require
                           hospitalization may be considered serious when, based
                           upon appropriate medical judgment, they may
                           jeopardize the patient or subject and may require
                           medical or surgical intervention to prevent one of
                           the outcomes listed in this definition. Examples of
                           such medical events include allergic bronchospasm
                           requiring intensive treatment in an emergency room or
                           at home, blood dyscrasias or convulsions that do not
                           result in inpatient hospitalization, or the
                           development of drug dependency or drug abuse.
<PAGE>   128

                  ii)      A Non-serious AE is any AE which does not meet the
                           criteria for a serious AE.

         (h)      Not associated or unrelated to the use of the drug means it
does not meet the definition of "associated."

2.       Capitalized terms not defined in this Appendix shall have the meaning
assigned thereto in the Agreement.

3.       With respect to all Licensed Products:

                  All initial reports (oral or written) for any and all serious
                  AEs as defined above which become known to either Party (other
                  than from disclosure by or on behalf of the other Party) must
                  be communicated by telephone, telefax or electronically
                  directly to the other Party, NDA Holder, and/or IND Holder
                  (individually and collectively referred to as "Holders")
                  within five (5) calendar days of receipt of the information.
                  Written confirmation of the Serious AE received by the Party
                  should be sent to the other Party and the Holders as soon as
                  it becomes available, but in any event within two (2) business
                  days of initial report of the Serious AE by such Party.

                  All Parties and Holders should exchange Medwatch and/or CIOMS
                  forms and other health authority reports within two (2)
                  business days of submission to any regulatory agency.

                  All initial reports and follow-up information received for all
                  non-serious AEs for marketed Licensed Products which become
                  known to a Party (other than from disclosure by or on behalf
                  of the other Party) must be communicated in writing, by
                  telefax or electronically to the other Party and all Holders
                  on a monthly basis, on Medwatch or CIOMs forms (where
                  possible). All follow-up on any AE reports forwarded to either
                  Party by FDA must be submitted to FDA.

                  Each Party shall coordinate and cooperate with the other
                  whenever practicable to prepare a single written report
                  regarding all Serious AEs, provided, however, that neither
                  Party shall be obligated to delay reporting or any AE in
                  violation of applicable law or regulations regarding the
                  reporting of adverse events.

4.       The Parties further agree that:

         (a) a written report for AEs for animal studies which suggest a
potential significant risk for humans shall be forwarded to the other Party
within two (2) business days of receipt by the Party making the report,
<PAGE>   129

         (b) each Party will give the other Party a print-out or computer disk
of all AEs reported to it relating to Products within the preceding 365
days/calendar year, within thirty (30) days of receipt of a request from the
other Party;

         (c) upon request of a Party, the other Party shall make available its
AE records relating to Licensed Products (including computer disks) for viewing
and copying by the other Party,

         (d) disclosure of information hereunder by a Party to the other Party
shall continue as long as either Party continues to clinically test or market
product(s) containing Licensed Products or holds an open IND, NDA or foreign
equivalent thereto.

         (e) all written regulatory reports, including periodic NDA, annual IND,
safety updates, or foreign equivalents thereto, etc. should be sent by a Party
to the other Party within 2 business days of submission to the appropriate
regulatory agency. The Parties shall agree on a procedure for preparing these
reports (e.g. electronic mail, facsimile transmission, overnight service, etc.).

5.       Each Party shall diligently undertake the following further obligations
where both Parties are or will be commercializing products hereunder and/or
performing clinical trials with respect to Licensed Product:

         (a) to immediately consult with the other Party, with respect to the
investigation and handling of any serious AE disclosed to it by the other Party
or by a third Party, including government agencies, and to allow the other Party
to review the serious AE and to participate in the follow-up investigation;

         (b) to immediately advise the other Party of any Product safety
communication received from a health authority and consult with the other Party
with respect to any proposed change to product warnings, labeling or an
Investigator's Brochure involving safety issues, including, but not limited to,
safety issues agreed to by the Parties;

         (c) to diligently handle in a timely manner the investigation and
resolution of each AE reported to it; and

         (d) to provide the other Party reasonable annual audit rights of its AE
reporting system and documentation, upon prior notice, during normal business
hours, at the expense of the auditing Party and under customary confidentiality
obligations.

         (e) to meet in a timely fashion from time to time as may be reasonably
required to implement the adverse event reporting and consultation procedures
described in this Appendix, including identification of those individuals in
each Party's pharmacovigilance group who will be responsible for reporting to
and receiving AE information from the other Party, and the development of a
written standard operating

<PAGE>   130

procedure with respect to adverse event reporting responsibilities, including
reporting responsibilities to investigators;

         (f) where possible, to transmit all data electronically;

         (g) to report to each other any addenda, revisions or changes to this
Agreement (e.g., change in territories, local regulations, addition of new
licensors/licensees to the agreement, etc.) which might alter the adverse event
reporting responsibilities hereunder;

         (h) to utilize English as the language of communication and data
exchange between the Parties;

         (i) to develop a system of exchange of documents and information in the
event that the Agreement involves more than two Holders.

<PAGE>   131

                                  Schedule 3.2

                       DEFINITION OF SUCCESSFUL COMPLETION

CART STUDY:

         Schering recognizes that Licensor's Phase II Study 027, commonly
referred to as the CART Study, is pivotal to the determination of
proof-of-activity in man. Determination by the JMC of "successful completion" of
this study will be based upon the study achieving all of the following three
points, as reflected in the final study report:

         [  *  ]




<PAGE>   132



                                 Schedule 6.2(d)

                                GOVERNMENT RIGHTS


         Pursuant to that certain Assignment agreement between Licensor and
Sampath Parthasarathy dated May 2, 1995, U.S. Patent No. 5,262,439 is subject to
a license of rights to the United States Government, as specifically set forth
in the License to the United States Government attached hereto as Exhibit A.



<PAGE>   133



                                 Schedule 6.2(k)

                             Other VCAM-1 Inhibitors


         [  *  ]







<PAGE>   134


                                  Schedule 9.2

                             ARBITRATION PROVISIONS

         (a) Scope. Subject to and in accordance with the terms of this
Agreement and this Schedule 9.2, all differences, disputes, claims or
controversies arising out of or in any way connected or related to this
Agreement, whether arising before or after the expiration of the Term of this
Agreement, and including, without limitation, its negotiation, execution,
delivery, enforceability, performance, breach, discharge, interpretation and
construction, existence, validity and any damages resulting therefrom or the
rights, privileges, duties and obligations of the Parties under or in relation
to this Agreement (including any dispute as to whether an issue is arbitrable)
shall be referred to binding arbitration in accordance with the rules of the
American Arbitration Association, as in effect at the time of the arbitration.

         (b) Parties to Arbitration. For the purposes of each arbitration under
this Agreement, Schering shall constitute one party to the arbitration and
Licensor shall constitute the other party to the arbitration.

         (c) Notice of Arbitration. A Party requesting arbitration hereunder
shall give a notice of arbitration to the other Party containing a concise
description of the matter submitted for arbitration, including references to the
relevant provisions of the Agreement and a proposed solution (a "Notice of
Arbitration"). Notice of Arbitration shall be delivered to the other Party in
accordance with Section 9.7 of the Agreement.

         (d) Response. The non-requesting Party must respond in writing within
forty-five (45) days of receiving a Notice of Arbitration with an explanation,
including references to the relevant provisions of the Agreement and a response
to the proposed solution and suggested time frame for action. The non-requesting
Party may add additional issues to be resolved.

         (e) Meeting. Within fifteen (15) days of receipt of the response from
the non-requesting Party pursuant to Paragraph (d), the Parties shall meet and
discuss in good faith options for resolving the dispute. The requesting Party
must initiate the scheduling of this resolution meeting. Each Party shall make
available appropriate personnel to meet and confer with the other Party during
such fifteen-(15) day period.

         (f) Selection of Arbitrator. Any and all disputes that cannot be
resolved pursuant to Paragraphs (c), (d) and (e) shall be submitted to an
arbitrator (the "Arbitrator") to be selected by mutual agreement of the Parties.
The Arbitrator shall be a retired judge of a state or federal court, to be
chosen from a list of such retired judges to be prepared jointly by the Parties,
with each Party entitled to submit the names of three such retired judges for
inclusion in the list. No Arbitrator appointed or selected hereunder shall be an
employee, director or shareholder of, or otherwise have any current or previous
relationship with, any Party or its respective Affiliates. If the Parties fail
to

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agree on the selection of the Arbitrator, the Arbitrator shall be designated by
a judge of the Federal District Court in New York upon application by either
Party.

         (g) Powers of Arbitrator. The Arbitrator may determine all questions of
law and jurisdiction (including questions as to whether a dispute is arbitrable)
and all matters of procedure relating to the arbitration. The Arbitrator shall
have the right to grant legal and equitable relief (including injunctive relief)
and to award costs (including reasonable legal fees and costs of arbitration)
and interest. Nothing contained herein shall be construed to permit the
Arbitrator to award punitive, exemplary or any similar damages.

         (h) Arbitration Procedure. In the event that Schering is the Party
requesting arbitration, the arbitration shall take place in the State of
Georgia, unless otherwise agreed by the Parties, at such place and time as the
Arbitrator may fix for the purpose of hearing the evidence and representations
that the Parties may present. In the event that Licensor is the Party requesting
arbitration, the arbitration shall take place in the State of New Jersey, unless
otherwise agreed by the Parties, at such place and time as the Arbitrator may
fix for the purpose of hearing the evidence and representations that the Parties
may present. The arbitration proceedings shall be conducted in the English
language. The law applicable to the arbitration shall be the law of the State of
New Jersey. No later than twenty (20) business days after hearing the
representations and evidence of the Parties, the Arbitrator shall make its
determination in writing and deliver one copy to each of the Parties.

         (i) Discovery and Hearing. During the meeting referred to in Paragraph
(e), the Parties shall negotiate in good faith the scope and schedule of
discovery, relating to depositions, document production and other discovery
devices, taking into account the nature of the dispute submitted for resolution.
If the Parties are unable to reach agreement as to the scope and schedule of
discovery, the Arbitrator may order such discovery as it deems necessary. To the
extent practicable taking into account the nature of the dispute submitted for
resolution, such discovery shall be completed within [*] days from the date of
the selection of the Arbitrator. At the hearing, which shall commence within [*]
days after completion of discovery unless the Arbitrator otherwise orders, the
Parties may present testimony (either live witness or deposition), subject to
cross-examination, and documentary evidence. To the extent practicable taking
into account the nature of the dispute submitted for resolution and the
availability of the Arbitrator, the hearing shall be conducted over a period not
to exceed [*] consecutive business days, with each Party entitled to
approximately half of the allotted time unless otherwise ordered by the
Arbitrator. Each Party shall have sole discretion with regard to the
admissibility of any evidence and all other matters relating to the conduct of
the hearing.

         (j) Witness Lists. At least [*] business days prior to the date
set for the hearing, each Party shall submit to the other Party and the
Arbitrator a list of all documents on which such Party intends to rely in any
oral or written presentation to the Arbitrator and a list of all witnesses, if
any, such Party intends to call at such hearing and

<PAGE>   136

a brief summary of each witness' testimony. At least five (5) business days
prior to the hearing, each Party must submit to the Arbitrator and serve on each
other Party a proposed findings of fact and conclusions of law on each issue to
be resolved. Following the close of hearings, the Parties shall each submit such
post-hearing briefs to the Arbitrator addressing the evidence and issues to be
resolved as may be required or permitted by the Arbitrator.

         (k) Confidentiality. The arbitration proceedings shall be confidential
and, except as required by law, no Party shall make, or instruct the Arbitrator
to make, any public announcement with respect to the proceedings or decision of
the Arbitrator without the prior written consent of the other Party. The
existence of any dispute submitted to arbitration and the award of the
Arbitrator shall be kept in confidence by the Parties and the Arbitrator, except
as required in connection with the enforcement of such award or as otherwise
required by law.

         (l) Awards and Appeal. Subject to the provisions of this Schedule 9.2,
the decision of the Arbitrator shall be final and binding upon the Parties in
respect of all matters relating to the arbitration, the conduct of the Parties
during the proceedings, and the final determination of the issues in the
arbitration. There shall be no appeal from the final determination of the
Arbitrator to any court, except in the case of fraud or bad faith on the part of
the Arbitrator or any Party to the arbitration proceeding in connection with the
conduct of such proceedings. Judgment upon any award rendered by the Arbitrator
may be entered in any court having jurisdiction thereof.

         (m) Costs of Arbitration. The costs of any arbitration hereunder shall
be borne by the Parties in the manner specified by the Arbitrator in its
determination.

         (n) Performance of the Agreement. During the pendency of the
arbitration proceedings, the matter which is the subject of such arbitration
proceedings shall be performed by the Parties (A) in the manner determined by
Schering in its sole discretion if it is a matter relating to Schering's
development of Licensed Product, and (B) in the manner determined by Licensor in
its sole discretion if it is a matter involving payment of License Fees under
Section 3.1 and royalty payments under Sections 3.2 or 3.3. Notwithstanding the
foregoing, in the event that Schering makes payments pursuant to Sections 3.1,
3.2 or 3.3 and it is subsequently determined by the Arbitrator that Schering was
not required to make such payment(s) then Licensor shall promptly repay to
Schering all such payments. Further notwithstanding the foregoing, the time
periods set forth in Section 2.6(b) of the Agreement shall be suspended during
the pendency of the arbitration proceedings. For purposes of this Paragraph (n)
the term "pendency of the arbitration proceeding" shall mean the period starting
on the date on which arbitration proceedings are commenced by a Party in
accordance with Paragraph (c) of this Schedule 9.2 and ending on the date on
which the Arbitrator delivers its final determination in writing to the Parties.