DEVELOPMENT, MANUFACTURING, MARKETING
                              AND LICENSE AGREEMENT


        THIS DEVELOPMENT, MANUFACTURING, MARKETING AND LICENSE AGREEMENT
("Agreement") is effective as of December 19, 1996, and is by and among KNOLL
AG, a corporation organized and existing under the laws of the Federal Republic
of Germany ("KNOLL"), INTERCARDIA, INC. ("INTERCARDIA"), a corporation organized
and existing under the laws of Delaware and its subsidiary CPEC, Inc. ("CPEC"),
a corporation organized and existing under the laws of Nevada. INTERCARDIA and
CPEC are hereinafter collectively referred to as "COMPANY".

                                   WITNESSETH:

        WHEREAS, COMPANY has licensed certain rights to COMPANY Know-How (as
hereinafter defined) and has licensed (the "BMS License") certain rights to
Patent Rights (as hereinafter defined) pursuant to the terms and conditions of
an agreement dated December 6, 1991, between CPEC and Bristol-Myers Squibb
Company ("BMS");

        WHEREAS, KNOLL, INTERCARDIA and CPEC entered into the Agreement Among
INTERCARDIA, INC., CPEC, and KNOLL AG dated December 19, 1996 (the "Initial
Agreement").

[ ] CONFIDENTIAL TREATMENT REQUESTED; CERTAIN INFORMATION OMITTED
    AND FILED SEPARATELY WITH THE SEC.


                                       1
<PAGE>

        WHEREAS, KNOLL and COMPANY desire to enter into a definitive
development, manufacturing and marketing agreement to develop, manufacture and
market Licensed Product (as hereinafter defined) upon terms and conditions which
are more specifically set forth herein;

        WHEREAS, KNOLL desires to obtain a license under the Patent Rights and
COMPANY Know-How, upon the terms and conditions set forth herein; and

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

                                    ARTICLE I

                                   DEFINITIONS
                                   -----------

        Unless specifically set forth to the contrary herein, the following
terms, whether used in the singular or plural, shall have the respective
meanings set forth below:

        1.1 "Affiliate" means (i) any corporation or business entity of which
fifty (50%) percent or more of the securities or other ownership interests
representing the equity, the voting stock or general partnership interest are
owned, controlled or


                                       2
<PAGE>

held, directly or indirectly, by KNOLL or COMPANY; (ii) any corporation or
business entity which, directly or indirectly, owns, controls or holds fifty
(50%) percent (or the maximum ownership interest permitted by law) or more of
the securities or other ownership interests representing the equity, the voting
stock or, if applicable, the general partnership interest, of KNOLL or COMPANY;
or (iii) any corporation or business entity which is under common control by
KNOLL and the COMPANY.

        1.2 "Calendar Quarter" means the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 and
December 31.

        1.3 "Calendar Year" means each successive period of twelve (12) months
commencing on January 1 and ending on December 31.

        1.4 "Collaboration Information and Inventions" means COMPANY Information
and Inventions, KNOLL Information and Inventions and Joint Information and
Inventions as such terms are defined in Section 2.6.

        1.5 "COMPANY Know-How" means any COMPANY information and materials,
including but not limited to, discoveries, Improvements, processes, formulas,
data, inventions, know-how and trade secrets, patentable or otherwise, which
during the term of

                                       3
<PAGE>

this Agreement (i) are in COMPANY's possession or control, (ii) are not
generally known and (iii) which arise out of the this Agreement or which relate
to the development, manufacture, marketing, use or sale of Licensed Product in
the Territory in the Field.

        1.6    "Compound" means the Compound Benzonitrile,
2-[2-hydroxy-3-[[2-(1H-indol-3-y1)-1,1-dimethylethyl]amino]propoxy]-,
monohydrochloride, also referred to in this Agreement as bucindolol, covered by
the patents listed on Exhibit A.

        1.7 "EC" means the European Community member states which include the
countries of Germany, Belgium, France, Italy, Luxembourg, The Netherlands, The
Republic of Ireland, United Kingdom, Greece, Portugal, Spain, Austria, Finland,
Sweden, Norway and Denmark.

        1.8 "Field" means the use of beta-blockers as therapy for congestive
heart failure and left ventricular dysfunction; provided, however, that if the
COMPANY negotiates a more comprehensive field under the BMS License, the
definition of Field shall be expanded to include additional areas.

        1.9 "First Commercial Sale" means, with respect to any Licensed Product,
the first sale for end use or consumption of

                                       4
<PAGE>

such Licensed Product in a country in the Territory after all Regulatory
Approvals, if any, have been granted by the applicable regulatory authority for
such country.

        1.10 "Improvement" means any enhancement in the manufacture,
formulation, ingredients, preparation, presentation, means of delivery, dosage
or packaging of Licensed Product and shall exclude Knoll's melt extrusion
technology.

        1.11 "KNOLL Know-How" means any KNOLL information and materials,
including but not limited to, discoveries, Improvements, processes, formulas,
data, inventions, know-how and trade secrets, patentable or otherwise, which
during the term of this Agreement (i) are in KNOLL's possession, (ii) are not
generally known and (iii) which arise out of this Agreement or which relate to
the development, manufacture, marketing, use or sale of Licensed Product in the
Territory in the Field.

        1.12 "Licensed Product(s)" means preparations which contain Compound in
final form for sale by prescription or over-the-counter for twice-a-day dosing
in the Field, and specifically excludes preparations which contain the Compound
designed as sustained release formulations in the Field for once-a-day dosing,
unless KNOLL has paid to the COMPANY the amounts reimbursable to the COMPANY
which are described in Section 4.6,


                                       5
<PAGE>

and continues to share in the development costs of such preparations, in which
case such preparations are included in this Agreement.

        1.13   "Major EC Member State" means Germany, France, Italy, United
Kingdom and Spain.

        1.14 "Net Sales" shall mean Net Sales as that term is defined in Section
6.1.

        1.15 "Patent Rights" means any and all patents and patent applications
(which for the purposes of this Agreement shall be deemed to include
certificates of invention and applications for certificates of invention) which
during the term of this Agreement are owned by COMPANY or to which COMPANY
through license or otherwise acquires rights, including, but not limited to,
those listed on Exhibit A, which: (i) relate to Licensed Product in the Field;
or (ii) relate to Collaboration Information and Inventions (as defined in
Section 2.6); or (iii) are divisions, continuations, continuations-in-part,
reissues, renewals, extensions, supplementary protection certificates or the
like of any such patents and patent applications provided that such patents have
not expired, been cancelled or become abandoned and have not been declared
invalid by an unreversed or

                                       6
<PAGE>

unappealable decision or judgment of a court of competent jurisdiction.

        1.16 "Project" means the activities to be conducted under the terms of
this Agreement.

        1.17 "Proprietary Information" means all Know-How, COMPANY Know-How,
KNOLL Know-How and within the Field, all other scientific, clinical, regulatory,
marketing, financial and commercial information or data, whether communicated in
writing or oral, electronically or by sensory detection, which is provided by
one party to the other party in connection with this Agreement.

        1.18 "Regulatory Approval" means with respect to any country in the
Territory, each approval issued by a regulatory authority necessary or
appropriate to authorize and commence the manufacture, use or sale, including
pricing approval, of the Compound or Licensed Product in such country.

        1.19 "Territory" means worldwide rights for all countries with the
exception of the United States of America, the District of Columbia, Puerto Rico
and Japan.


                                       7
<PAGE>

        1.20 "Valid Patent Claim" means a claim of an issued and unexpired
patent included within the Patent Rights, which 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 with the time allowed for
appeal, and which has not been disclaimed, denied or admitted to be invalid or
unenforceable through reissue or disclaimer or otherwise.

                                   ARTICLE II
               DEVELOPMENT, MANUFACTURING AND MARKETING AGREEMENT
               --------------------------------------------------

        2.1 General. COMPANY and KNOLL shall engage in this Agreement upon the
terms and conditions set forth in this Agreement. In the course of this
Agreement, each party shall (i) cooperate with the other party in good faith,
particularly with respect to unknowns or contingencies, in order to achieve the
objectives of this Agreement; (ii) furnish, maintain and preserve suitable and
sufficient facilities and personnel for the work to be accomplished by each
party hereunder; (iii) perform its obligations hereunder in good faith in a
commercially reasonable, diligent and workmanlike manner and in compliance in
all material respects with the standards, laws, rules and regulations of each
and every regulatory authority having jurisdiction over the material activities
of each party in the Territory; and (iv) work exclusively with one another in
the Field and will not compete in

                                       8
<PAGE>

the Field with one another except as provided in Section 4.6.

        2.2 Agreement Objectives. The parties desire to enter into this
Agreement which aligns technological innovation and organizational resources
including access to manufacturing, sales and marketing, distribution,
regulatory, service and support, management expertise, entrepreneurial acuteness
and capital for successful completion of development, manufacturing and
commercialization of Licensed Product, to maximize market penetration in the
Territory.

        2.3 Advisory Committee. The parties hereby establish an advisory
committee (the "Advisory Committee") to facilitate this Agreement as follows:

        2.3.1 Composition of the Advisory Committee. The Advisory Committee
shall be comprised of equal representation of not more than four (4) named
representatives of KNOLL and not more than four (4) named representatives of
COMPANY. The initial representatives for each party hereto shall be set forth on
Schedule 2.3.1. Each party shall appoint its respective representatives to the
Advisory Committee from time to time, and may substitute one or more of its
representatives, in its sole discretion, effective upon notice to the other
party of such change. It is anticipated that these representatives shall be


                                       9
<PAGE>

multi-disciplinary in their fields of expertise and shall have appropriate
technical credentials and knowledge together with an ongoing familiarity of the
objectives of this Agreement. Additional representatives or consultants may from
time to time, by mutual consent of the parties, be invited to attend Advisory
Committee meetings, subject to compliance with Section 5.1.

        2.3.2 Advisory Committee Authority. The Advisory Committee shall not
have responsibility or authority to manage the development, manufacturing or
marketing of the Licensed Products in the Territory.

        2.3.3 Meetings. The Advisory Committee shall meet at least twice each
Calendar Year, with the location for such meetings alternating between COMPANY
and KNOLL locations (or such other locations as is determined by the Advisory
Committee). Alternatively, the Advisory Committee may meet by means of
conference call or other similar communications equipment. Each party shall be
responsible for its own time and travel expenses incurred in conjunction with
the Advisory Committee.

        2.3.4 Advisory Committee Role. The Advisory Committee shall discuss,
review and advise the parties on this Agreement, including review of all budgets
and timetables for clinical trials and for the development and manufacturing of
the Licensed


                                       10
<PAGE>

Products. The first meeting of the Advisory Committee was held on February 4,
1997.

        2.3.5 Termination of Advisory Committee. The Advisory Committee shall be
dissolved upon the later to occur of the following: (i) one year after the
Licensed Product is approved in an EC member state, (ii) upon the approval of
the last product improvement in process; or (iii) upon discontinuance of all
product improvement efforts.

        2.3.6 Worldwide Committee. COMPANY will establish a worldwide
development and scientific marketing information exchange committee of which
COMPANY, Astra Merck, Inc. ("Astra Merck"), its U.S.
partner, and KNOLL will be members ("Worldwide Committee").

               The Worldwide Committee will exchange information regarding the
worldwide scientific coordination of bucindolol activities. The Worldwide
Committee shall not have any responsibility or authority to manage operations.
Each party shall be responsible for its own time and travel expenses incurred in
conjunction with the Worldwide Committee. The Worldwide Committee shall meet not
less than once a year.



                                       11
<PAGE>


        2.4 Exchange of Information. During the term of this Agreement, COMPANY
shall promptly disclose to KNOLL in English and in writing on an ongoing basis
all COMPANY Know-How and other useful information developed in connection with
this Agreement. During the term of this Agreement, KNOLL shall promptly disclose
to COMPANY in English and in writing all KNOLL Know-How and other useful
information developed in connection with this Agreement.

        2.5    Records and Reports.
               --------------------

        2.5.1 Records. COMPANY and KNOLL shall each maintain records, in
sufficient accounting detail and in good scientific manner appropriate for
patent and regulatory purposes, which shall be complete and accurate and shall
fully and properly reflect all work done and results achieved in the performance
of this Agreement.

        2.5.2 Copies and Inspection of Records. Each of KNOLL and COMPANY shall
have the right, during normal business hours and upon reasonable notice, to
inspect and copy all such records of the COMPANY or KNOLL referred to in Section
2.5.1. The COMPANY and KNOLL shall each maintain such records and the
information disclosed therein in confidence in accordance with Section 5.1. Each
party hereto shall have the right to arrange for its employees and outside
consultants involved in this


                                       12
<PAGE>

Agreement to visit COMPANY or KNOLL at its respective offices and laboratories
during normal business hours and upon reasonable notice not more frequently than
once a Calendar Quarter, and to discuss the work under this Agreement and its
results in detail with the technical personnel and consultants of COMPANY or
KNOLL, as the case may be.

        2.5.3 Quarterly Progress Reports. Within thirty (30) days following the
end of each Calendar Quarter during the term of this Agreement, KNOLL shall
provide to the COMPANY a brief written progress report which shall summarize the
work performed to date on this Agreement, the results of any clinical
development or other studies in progress, any regulatory submissions regarding
the Licensed Products, the status of any regulatory action and such other
information reasonably requested by the COMPANY relating to the progress of the
goals or performance of this Agreement.

        2.6 Information and Inventions. The entire right, title and interest in
all discoveries, Improvements, processes, formulas, data, inventions, know-how
and trade secrets, patentable or otherwise, in the Field, arising from this
Agreement (all being "Collaboration Information and Inventions") developed or
invented:



                                       13
<PAGE>

        (a) solely by employees of COMPANY shall be owned solely by COMPANY
("COMPANY Information and Inventions");

        (b) solely by employees of KNOLL shall be owned solely by KNOLL ("KNOLL
Information and Inventions"); and

        (c) jointly by employees of COMPANY and KNOLL shall be owned jointly by
COMPANY and KNOLL ("Joint Information and Inventions").

Each party shall promptly disclose to the other parties hereto the development,
making, conception or reduction to practice of Collaboration Information and
Inventions and thereafter each party hereto shall be entitled to a
non-exclusive, royalty free, perpetual license in the Territory with respect to
KNOLL and worldwide with respect to COMPANY, subject to Knoll's rights in the
Territory during the term of this License, relating to such Collaboration
Information and Inventions.

        2.7 Regulatory Matters. KNOLL shall own, control and shall retain
primary legal responsibility for the preparation, filing and prosecution of all
filings and applications required to obtain all Regulatory Approvals to
commercially sell and use Licensed Products in the Territory in the Field. KNOLL
shall supply the COMPANY with materials prepared in connection with the


                                       14
<PAGE>


promotion, packaging, manufacture, adverse event experience or other activities
related to Licensed Products in order to prosecute, complete or maintain any and
all Regulatory Approvals, filings or submissions required by any regulatory
authority.

        (a) Upon Regulatory Approval in the Territory by each country's
regulatory authority, KNOLL shall take all actions necessary to maintain each
such Regulatory Approval and shall bear primary legal and financial
responsibility for all aspects of on-going maintenance of each such Regulatory
Approval, including but not limited to any subsequent filings, submissions,
amendments or other related matters during the term hereof.

        (b) During the term hereof each party shall promptly furnish to the
other party all information concerning serious side effects, life threatening
effects or unexpected consequences attributable to bucindolol. Each party shall
report to the other party any other side effects on an annual basis at mutually
agreeable times.

        (c) Each party shall promptly provide to the other copies of all
correspondence with, and all documents and applications filed with or submitted
by any regulatory authority either within or outside of the Territory with
respect to the Licensed Products, including but not limited to copies of all
label


                                       15
<PAGE>

statements, expert summaries and any information not previously included in any
applications for Regulatory Approvals.

        (d) The COMPANY shall provide to KNOLL all data and documents to which
the COMPANY has access in order to support the compilation of registration
dossiers and subsequent Regulatory Approvals.

        2.8 Phase III(b) and Phase IV Clinical Trials. The overall clinical
program (Phase III(b) and Phase IV) in the Territory will be conducted and
controlled by KNOLL. As soon as possible after the first meeting of the Advisory
Committee, KNOLL will present a clinical trial plan to COMPANY, which shall be
updated and revised at least on an annual basis. KNOLL will diligently proceed
to conduct clinical trials in the Territory in accordance with this Agreement.
KNOLL shall report to the Advisory Committee on the progress of the clinical
studies not less than twice annually.

         All clinical study protocols shall be forwarded by KNOLL to COMPANY for
information at least thirty (30) days before the start of such studies. It is
agreed that COMPANY shall within three (3) weeks notify KNOLL if it has
substantial concerns regarding the study protocols. In such case the parties
shall discuss the concerns. It is acknowledged that COMPANY and KNOLL

                                       16
<PAGE>

must agree on all studies performed in the Territory which have an impact on
worldwide positioning of bucindolol, the safe use of bucindolol and the
achievement or maintenance of optimal worldwide labeling of bucindolol. Final
decision authority over clinical trials and other studies which could reasonably
be determined to affect international Regulatory Approvals shall be made by
COMPANY. COMPANY shall not, however, be entitled to block Regulatory Approval
studies which may be required by a regulatory authority in the Territory.

        2.9 Trademark. Licensed Products shall be sold by KNOLL in the Territory
and by the COMPANY outside the Territory under a trademark owned and maintained
by the COMPANY. KNOLL shall include a notation acknowledging the COMPANY's
rights and ownership of the Licensed Products in all packaging and documentation
for the Licensed Products as well as in all sales, marketing and promotional
materials and other literature prepared by KNOLL in connection with the
commercialization, sales and marketing of the Licensed Products.

        KNOLL hereby grants to the COMPANY a paid-up, royalty-free perpetual,
non-exclusive license outside the Territory to use the trademarks and copyrights
developed by KNOLL relative to Licensed Product and used in connection with this
Agreement; provided, however, that subsequent to the expiration or other
termination


                                       17
<PAGE>

of this Agreement, the COMPANY shall have no rights to the use of the name
KNOLL.

        KNOLL shall bear one-third (1/3) of the trademark costs and related
expenses for activities which have worldwide benefit. For example, KNOLL shall
bear one-third (1/3) of the costs of generating and market testing trademark
candidates incurred by the COMPANY prior or subsequent to the execution of this
Agreement. KNOLL shall bear sixty (60%) percent and the COMPANY shall bear forty
(40%) percent of trademark costs and related expenses which are incurred solely
for the benefit of the Territory. For example, trademark registration and
maintenance costs and related expenses shall be paid sixty (60%) percent by
KNOLL and forty (40%) percent by the COMPANY in the Territory and one hundred
(100%) percent by the COMPANY outside the Territory. KNOLL shall reimburse the
COMPANY within thirty (30) days of receipt of invoices documenting any such
trademark costs or related expenses.

        In the event that the COMPANY begins marketing a sustained release
formulation pursuant to the provisions of Section 4.6, the COMPANY shall market
such formulation under a different trademark from that used by KNOLL in the
Territory or under a derivative trademark where the mark is sufficiently
distinct from KNOLL's mark so as to avoid confusion. KNOLL shall consent to

                                       18
<PAGE>

any such derivative mark, such consent not to be unreasonably withheld.

        2.10 Manufacturing. The Advisory Committee shall advise the parties as
to the recommended manufacturer of Compound and Licensed Product for the
Territory. KNOLL shall have the right to choose to manufacture the Compound and
the Licensed Product for sale in the Territory, or to choose a third party
outside manufacturer as long as the price, capability and other terms are
competitive with other third party manufacturers. Additionally, the COMPANY and
its U.S. partner intend to out-source manufacturing and would consider KNOLL as
a possible additional manufacturer for the U.S. market.

        If KNOLL elects to manufacture the Compound or the Licensed Product for
either the Territory or for the U.S. market, KNOLL shall be responsible and pay
for 100% of all costs incurred which are directly or indirectly related to the
manufacture of the Compound or Licensed Product by KNOLL ("KNOLL Manufacturing
Costs") and KNOLL shall reimburse the COMPANY for 100% of costs and time
incurred by the COMPANY in conjunction with KNOLL Manufacturing Costs. KNOLL
Manufacturing Costs shall include, but not be limited to, the galenical
development of the tablet or capsule; the development and testing of
manufacturing methods and processes; stability studies; scale-up of
manufacturing; capital


                                       19
<PAGE>

equipment and facilities used for manufacturing; administrative or overhead
costs; materials, supplies and labor used in manufacturing; and regulatory costs
or requirements associated with manufacturing. Bioavailability and
bioequivalence studies undertaken by the COMPANY or KNOLL in connection with the
tablet/capsule development activities are to be accounted for as development
costs and are not to be considered as part of KNOLL Manufacturing Costs, and
therefore, in accordance with Section 3.2, KNOLL shall reimburse the COMPANY for
60% of the cost incurred by the COMPANY for these studies and the COMPANY shall
reimburse KNOLL for 40% of the cost incurred by KNOLL for these studies.

        In accordance with Section 6.1 and Schedule 6.1, KNOLL shall include in
the quarterly royalty calculation a charge for bucindolol manufacturing costs
which shall be based on mutually agreed market prices for the Compound or
Licensed Products. The market price must be competitive with other third party
FDA approved manufacturers, or other manufacturers with approvals by appropriate
European regulatory agencies, of similar products. No other KNOLL Manufacturing
Costs shall be charged to or paid by the COMPANY.


                                       20
<PAGE>

                                   ARTICLE III
                                     FUNDING
                                     -------

        3.1 Funding Responsibility. KNOLL and the COMPANY shall be responsible
for the expenses incurred in development, manufacturing and commercialization of
the Licensed Products based upon the terms, conditions and agreements set forth
in this Agreement and the exhibits and schedules attached hereto.

        3.2    Certain Costs.
               --------------
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                                
        The parties have agreed to budgets relating to certain costs incurred by
the parties (i) prior to the First Commercial Sale of bucindolol in three Major
EC Member States (the "Launch") and (ii) for the period ending twelve full
calendar months subsequent to the Launch of bucindolol in three Major EC Member
States (the "Launch Year"). The parties agree that the budget for expenses
incurred through the end of the Launch Year in connection with development
activities (costs, other than manufacturing and marketing costs, incurred to
obtain regulatory approval of Licensed Product) and Phase III(b) and Phase IV
clinical studies, which are anticipated to begin in 1997 and to continue through
[ ], is estimated to be up to $25,000,000. KNOLL shall bear sixty (60%)                       *
percent of such actual expenses and CPEC shall bear forty (40%) percent of such
actual expenses (but CPEC's share of

[ ] CONFIDENTIAL TREATMENT REQUESTED; CERTAIN INFORMATION OMITTED AND FILED
    SEPARATELY WITH THE SEC.


                                       21
<PAGE>

expenses shall not exceed $10,000,000). In addition, the parties agree that the
budget for sales and marketing expenses incurred prior to Launch, which are
anticipated to be expended during [ ] and [ ], is estimated to be up to                       *
$10,000,000. KNOLL shall bear sixty (60%) percent of such actual expenses and                 
CPEC shall bear forty (40%) percent of such actual expenses (but CPEC's share of
expenses shall not exceed $4,000,000). Finally, the parties agree that the
budget for sales and marketing expenses incurred during the Launch Year,
anticipated to be the year [ ], is estimated to be up to $20,000,000. KNOLL                   *
shall bear sixty (60%) percent of such actual expenses and CPEC shall bear forty
(40%) percent of such actual expenses (but CPEC's share of expenses shall not
exceed $8,000,000). If actual expenses for any of the budgets exceeds the amount
stated in this paragraph, KNOLL shall bear one hundred (100%) percent of such
actual additional expenses.

        If additional minor clinical or preclinical trial expenses are required
in order to complete a Regulatory Approval in the Territory, such expenses shall
be borne under the development activities and Phase III(b) and Phase IV clinical
trial budget previously referenced. For all periods subsequent to the Launch
Year, all revenues and expenses shall be accounted for under the terms and
conditions set forth in Article VI Royalties and Reports.

[ ] CONFIDENTIAL TREATMENT REQUESTED; CERTAIN INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.


                                       22
<PAGE>



        Costs for development and clinical trial studies incurred prior to the
end of the Launch Year shall include actual external/outside and internal costs,
directly related to the conduct of such clinical trials, but excluding general
administrative, corporate and affiliate overhead or reserves, in accordance with
a jointly approved budget, which initial budget shall be prepared by KNOLL and
presented to the COMPANY as soon as practicable after the first meeting of the
Advisory Committee which was held February 4, 1997.

        It is expected that both parties will incur expenses approved in the
budget. At the end of each Calendar Quarter, each party will total all such
expenses incurred by it during the quarter and submit a detailed report to the
other party within twenty (20) calendar days after the end of the quarter
itemizing such expenses and providing such document support as is reasonably
requested. All amounts will be converted to U.S. dollars using the exchange rate
published in the WALL STREET JOURNAL for the last day of the Calendar Quarter.
The net amount owed will be paid to the other party in U.S. dollars within
thirty (30) calendar days after the end of the Calendar Quarter.



                                       23
<PAGE>

        3.3    Sales and Marketing.
               --------------------

        KNOLL shall be responsible for all sales and marketing activities and
expenses in the Territory. All sales and marketing charges will be based on
actual costs incurred and shall not include general administrative, corporate or
affiliate overhead or reserves.

        Subsequent to the Launch, KNOLL shall update COMPANY on the progress and
status of Licensed Product sales activities in the Territory, including an
analysis of sales and expenses, at meetings to be held not less than twice per
year. KNOLL shall submit an annual budget including the planned sales force
allocation and costs, to COMPANY for review and comment prior to the beginning
of each Calendar Year.

        3.4 Certain KNOLL Payments. In addition to the funding responsibilities
set forth in this Article and other funding contemplated by this Agreement,
KNOLL has paid or shall pay to CPEC the following amounts:

        (a) Two Million ($2,000,000) Dollars was paid to CPEC in December 1996
upon the execution of the Initial Agreement; and



                                       24
<PAGE>



        (b) One Million ($1,000,000) Dollars was paid to CPEC in January 1997;
and

        (c) Ten Million ($10,000,000) Dollars shall be paid within ten (10) days
of the date of the grant of approval by the applicable Regulatory Authority, for
Licensed Products, including pricing approval where required, in a Major EC
Member State; and

        (d) A one-time payment in the amount of Ten Million ($10,000,000)
Dollars shall be paid within ten (10) days of the issuance of a monthly sales
report demonstrating that annual Net Sales in the Territory for Licensed
Products exceeded at any time Two Hundred Million ($200,000,000) Dollars on a
rolling twelve (12) month basis.

        (e) No payment made by KNOLL under this Section 3.4 shall be considered
an expense of this Agreement for purposes of calculating royalties due to CPEC,
but shall be borne exclusively by KNOLL.



                                       25
<PAGE>

                                   ARTICLE IV
                 LICENSE; EXCHANGE OF INFORMATION; DEVELOPMENT,
                 ----------------------------------------------
                       MANUFACTURING AND COMMERCIALIZATION
                       -----------------------------------

        4.1    License Grant.
               --------------

        (a) Upon the terms and subject to the conditions and limitations set
forth herein, COMPANY hereby grants to KNOLL an exclusive license in the
Territory, (i) to practice under Patent Rights and (ii) to use COMPANY Know-How
to develop, make, have made, use and sell Licensed Product(s) in the Field. The
COMPANY shall use its best efforts to [ ].                                                  *

        (b) KNOLL shall have the right to sublicense Licensed Products in the
Territory, provided however, all sublicensing arrangements shall be arms-length
transactions (arms-length transactions being defined as an agreement entered
into by parties having equal bargaining power with no compulsion either to buy
or to sell where the agreement contains terms reflective of the fair value of
the contributions of each party) and shall reflect the fair market value of such
Licensed Products in the respective country of the Territory. In case KNOLL
intends to 

[ ] CONFIDENTIAL TREATMENT REQUESTED; CERTAIN INFORMATION OMITTED AND
    FILED SEPARATELY WITH THE SEC.


                                       26
<PAGE>

grant a sublicense which includes a provision contemplating a quid pro quo, the
parties will meet to determine equitable compensation in favor of CPEC. In
addition, royalties, down payments and other remuneration paid in connection
with any sublicense shall be taken into account in the calculation of CPEC
royalties hereunder. Any sublicense arrangement will terminate simultaneously
with any early termination of the License Agreement.

        (c) COMPANY shall retain all rights to the Patent Rights and COMPANY
Know-How in connection with this Agreement and in connection with its business
and sales outside of the Territory, and COMPANY shall have the right to make,
have made and use the Patent Rights and COMPANY Know-How in the Territory in
connection with its development, commercialization and sale of the Licensed
Product outside the Territory.

        4.2 Non-Exclusive License Grant. In the event the development, making,
having made, use or sale by KNOLL of Licensed Product(s) would infringe during
the term of this Agreement a claim of issued letters patent which COMPANY owns
or has the rights to license and which patents are not covered by the grant in
Section 4.1, COMPANY hereby grants to KNOLL, to the extent COMPANY is legally
able to do so, a non-exclusive, royalty-free license in the Territory under such
issued letters



                                       27
<PAGE>

patent solely for KNOLL to develop, make, have made use and sell Licensed
Product(s) in the Territory.



        4.3 Reversion of Rights. If KNOLL elects not to, or fails to actively
pursue, (e.g. terminates substantially all of its activities with regard to) the
development or marketing or sub-licensing of bucindolol in major markets of the
Territory, unless to avoid commercial damages, the license granted under this
Agreement and all rights to bucindolol in any such major market shall terminate
and shall revert to COMPANY. The parties agree that major markets of the
Territory are the European Community, Canada, Australia, New Zealand, South
Africa, Mexico, Columbia, Brazil and Argentina.

        4.4 Exchange of Information. In addition to the obligations set forth in
Section 2.4, during the term of this Agreement, COMPANY and KNOLL shall promptly
disclose to the other party in English and in writing on an ongoing basis all
COMPANY Know-How or KNOLL Know-How and other useful information not previously
disclosed.

        4.5 Development and Commercialization. KNOLL and the COMPANY shall each
use its best efforts to pursue the commercialization and marketing of Licensed
Products.


                                       28
<PAGE>

        4.6 Product Improvements. COMPANY grants KNOLL, the exclusive right for
sales in the Territory of Licensed Product Improvements (e.g., sustained release
formulation, improved or new indications not included in the Field, formulations
and strengths), contingent upon KNOLL reimbursing COMPANY for sixty (60%)
percent of costs relating to clinical trials and other tests conducted primarily
for benefit of the Territory and 1/3 of all other development costs which have a
worldwide benefit, including any previous Licensed Product Improvement
development costs incurred by COMPANY. For example, with respect to costs
relating to clinical trials and other tests conducted and incurred primarily for
the benefit of the Territory, KNOLL would reimburse COMPANY for sixty (60%)
percent of such costs incurred by COMPANY, and COMPANY would reimburse KNOLL for
forty (40%) percent of costs incurred by KNOLL. Where the benefits of the trials
and costs are worldwide, KNOLL would pay 1/3 of such trials and costs incurred
by COMPANY and COMPANY would reimburse KNOLL for 2/3 of costs incurred by KNOLL.
However, KNOLL would not reimburse COMPANY for any costs where the trials and
costs were conducted and incurred exclusively for the benefit of the United
States, Puerto Rico or Japan. The overall development of Licensed Product
Improvements will be conducted and controlled by COMPANY. In December 1996,
KNOLL reimbursed CPEC $143,136.67 for one third of previous sustained release
development costs (which totaled $429,500.00) and KNOLL will pay its share of
future costs



                                       29
<PAGE>


on a quarterly basis. In case KNOLL has no interest in a Licensed Product
Improvement, COMPANY shall have no right to market such improved product in the
Territory during the term of this Agreement unless hereinafter provided
otherwise

        In case COMPANY has no interest in utilizing a Licensed Product
Improvement outside of the Territory, KNOLL shall bear 60% of such development
costs and COMPANY shall bear 40% of such development costs and COMPANY shall
have no right to market such improved product outside the Territory during the
term of this Agreement.

        COMPANY and KNOLL agree that a sustained release formulation is a
Licensed Product Improvement which should be pursued. COMPANY has contracted
with Jago Pharma AG, a Swiss corporation ("Jago") for the development of a
sustained release formulation utilizing Jago's proprietary Geomatrix technology.
COMPANY will grant KNOLL the opportunity to present a proposal regarding the
feasibility of utilizing KNOLL's melt extrusion technology for the development
of a sustained release formulation of bucindolol ("Melt/Bucindolol"). As soon as
practicable after the COMPANY receives sustained release feasibility information
from Jago, the COMPANY and KNOLL shall determine whether to pursue Jago's or
KNOLL's sustained release formulation technology. If KNOLL's technology is
selected, the parties shall agree upon a binding



                                       30
<PAGE>


development plan for the KNOLL technology which shall include an agreement as to
reimbursement of certain development costs incurred by KNOLL which are directly
related to Melt/Bucindolol. If Melt/Bucindolol is selected, KNOLL shall grant
COMPANY a license relating to such KNOLL technology in order to permit COMPANY
to use, sell, sublicense and otherwise market bucindolol using the KNOLL
technology outside the Territory, provided, however, KNOLL shall retain the
right to manufacture Melt/Bucindolol for COMPANY and its licensees under a
separate supply contract, which shall be on such price and terms as are
reasonable and customary for similar supply contracts. All costs and penalties
related to [ ] of the [ ] contract and all costs not previously reimbursed by                 *
KNOLL to COMPANY shall be allocated and paid by KNOLL and by COMPANY in
accordance with the provisions of this Section 4.6.

        If KNOLL decides not to participate in further development of the Jago
technology (beyond the preceding paragraph), and COMPANY decides not to
participate in the development of Melt/Bucindolol, KNOLL shall have the right to
pursue development of Melt/Bucindolol at its own expense. KNOLL shall accumulate
the costs directly associated with the development of Melt/Bucindolol and such
development costs shall become a deductible item in calculating the royalties
due to COMPANY for sales resulting from Melt/Bucindolol. Such deductions shall
be 

[ ] CONFIDENTIAL TREATMENT REQUESTED; CERTAIN INFORMATION OMITTED AND FILED
    SEPARATELY WITH THE SEC.



                                       31
<PAGE>


limited to [ ] ([ ]%) percent of the cumulative development costs of                          *
Melt/Bucindolol and shall not exceed [ ] ([ ]%) percent of the royalty due to                 *
COMPANY for Melt/Bucindolol sales, prior to such deduction for any royalty                    
period. For example, if the total development cost of Melt/Bucindolol is $[ ]                 *
million, KNOLL will be entitled to recover $[ ] million ([ ]% of $[ ] million)                *
of this cost from future royalties due on sales of Melt/Bucindolol. The maximum
which shall be recoverable by KNOLL in any period (e.g. a quarter) will be
limited to [ ] ([ ]%) percent of the royalty which would have been payable to                 *
COMPANY prior to this deduction. For example, if COMPANY's royalty for the first
period of Melt/Bucindolol sales is $[ ] million prior to this deduction, KNOLL                *
will recover $[ ] million of  Melt/Bucindolol development costs ([ ]% of $[ ]                 *
million) and  $[ ] million ($[ ] million less $[ ] million) will be  paid to                  *
COMPANY, leaving $[ ] million of the $[ ] million  due to KNOLL. If COMPANY's                 *
royalty for the second period of Melt/Bucindolol sales is $[ ] million prior to               *
this deduction, KNOLL will recover $[ ] million ($[ ] million less the $[ ]                   *
million already paid) and COMPANY's royalty will be $[ ] million ($[ ] million                *
less $[ ] million). No deduction for Melt/Bucindolol costs will be made from                  *
any royalty from any sales that are not derived from Melt/Bucindolol technology.

[ ] CONFIDENTIAL TREATMENT REQUESTED; CERTAIN INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SEC.



                                       32
<PAGE>


        If KNOLL decides not to participate in further development of the Jago
technology, and COMPANY develops a sustained release formulation with Jago,
COMPANY shall be entitled to sell directly or through a third party its
sustained release formulation in KNOLL's Territory at such time as the first
generic sustained release formulation is approved in an EC member state subject
to compliance with Section 2.9. At such time after KNOLL has met its obligations
under this Section 4.6, and after KNOLL notifies COMPANY in writing that it does
not intend to sell directly or through a third party or to develop a sustained
release formulation, KNOLL's right to sustained release formulations shall
terminate and KNOLL's obligation to reimburse COMPANY for additional sustained
release development costs shall terminate.

        COMPANY and KNOLL shall mutually agree to any other line extensions to
be included under the License Agreement, if any.

                                    ARTICLE V
                         CONFIDENTIALITY AND PUBLICATION

        5.1 Nondisclosure Obligation. All Proprietary Information shall be
maintained in confidence and shall not be disclosed to any other person, or any
corporation or other business entity, or any government or any agency or
political subdivision thereof without the prior written consent of the other
party, except to


                                       33
<PAGE>

the extent that such Proprietary Information:

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

        (b)    is properly in the public domain;

        (c) is subsequently disclosed to a receiving party by a third party who
may lawfully do so and is not under an obligation of confidentiality to the
disclosing party;

        (d) is developed by the receiving party independently of Proprietary
Information received from the other party;

        (e) is disclosed to governmental or other regulatory agencies in order
to obtain patents or to gain approval to conduct clinical trials or to market
Licensed Product, but such disclosure may be only to the extent reasonably
necessary to obtain patents or authorizations;

        (f) is necessary to be disclosed to sublicensees, agents, consultants,
Affiliates and/or other third parties for the research and development,
manufacturing and/or marketing of the Compound or the Licensed Product (or for
such parties to


                                       34
<PAGE>

determine their interest in performing such activities including but not limited
to any activities of the COMPANY outside the Territory) in accordance with this
Agreement on the condition that such third parties agree to be bound by the
confidentiality obligations contained in this Agreement; provided, however, the
term of confidentiality for such third parties shall be no less than five (5)
years; or

        (g) is required to be disclosed by law or court order, provided that
notice is promptly delivered to the other party in order to provide an
opportunity to challenge or limit the disclosure obligations; provided, however,
without limiting any of the foregoing provisions of Section 5.1, it is
understood that (i) either party hereto, including any Affiliate, may make
reasonable disclosure of this Agreement, at its own discretion, and the
financial and other terms hereof in any filings required by the Securities and
Exchange Commission (the "SEC"), in connection with and subsequent to any
offering of either party's securities to the public, on Form S-1 (or other
applicable initial registration form), Form 10-K, Form 10-Q, Form 8-K or other
applicable SEC form, and in the footnotes to any financial statements; (ii)
either party may file this Agreement as an exhibit to any Form S-1, Form 10-K,
Form 10-Q, Form 8-K or other applicable SEC form; (iii) either party may
describe this Agreement including the expense sharing and royalty provisions in

                                       35
<PAGE>


the "Management's Discussions and Analysis of Financial Conditions and Results
of Operations" section of any filings with the SEC; and (iv) either party may
distribute any such filing made to the SEC (other than matters for which
Confidential Treatment have been requested) in the ordinary course of its
business (e.g. to financial analysts and to stockholders). Any press release
regarding the other party proposed by KNOLL or the COMPANY shall be submitted to
the other party as designated from time to time by each party for review and
comment prior to release thereof, except as permitted in this Section 5.1(g).
        5.2 Use of Proprietary Information. Each of COMPANY and KNOLL agrees
that the Proprietary Information shall only be used in connection with its
obligations under this Agreement, or by COMPANY in connection with its business,
licensing, manufacturing and sale of the Compound under the provisions of
Section 4.1(c), and further agrees to keep all COMPANY Know-How and/or KNOLL
Know-How confidential subject to exceptions (b), (e), (f) or (g) in Section 5.1
above.

        5.3. Publication. During the term of this Agreement, KNOLL and COMPANY
each acknowledge the other party's interest in publishing its results related to
the Licensed Product 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


                                       36
<PAGE>

protecting business interests and trade secret information. Consequently, either
party, its 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 thirty (30) days prior to submission for publication
or presentation. The non-publishing party shall have the right (a) to propose
modifications to the publication for scientific reason, patent reasons, trade
secret reasons or business reasons or (b) to request a reasonable delay in
publication or presentation in order to protect patentable information. If the
non-publishing party requests a delay, the publishing party shall delay
submission or presentation for a period of thirty (30) days to enable patent
applications protecting each party's rights in such information to be filed in
accordance with Article VII below. Upon expiration of such thirty (30) days, the
publishing party shall be free to proceed with the publication or presentation.
If the non-publishing party requests modifications to the publication, the
publishing party shall edit such publication to prevent disclosure of trade
secret or proprietary business information prior to submission of the
publication or presentation. Notwithstanding anything to the contrary contained
in this Section 5.3, Knoll shall not be responsible for compliance with this
section to the extent that any person desiring to make a publication is not
under the control of Knoll.



                                       37
<PAGE>

                                   ARTICLE VI
                              ROYALTIES AND REPORTS
                              ---------------------

        6.1 Royalties. KNOLL shall pay to CPEC a royalty for the use of the
license and trademarks of bucindolol in the Territory. The royalty for all
periods subsequent to the end of the Launch Year shall be equal to forty (40%)
percent of the net result of (1) Net Sales and other collaborative revenue
(e.g., a payment by a sublicensee or royalties received from agents or from
third parties ("Other Collaborative Revenue")) less (2) cost of goods sold,
sales and marketing expenses (including costs for samples not previously
deducted as an expense, mutually agreed upon sales force allocation, and other
bucindolol related promotional and educational expenditures), post-launch
clinical trials, third party royalties (including any royalty payable to BMS or
Jago Pharma AG) and distribution costs (including freight, insurance and
packaging material for shipment of bucindolol). If the royalty calculation, as
set forth in the preceding sentence, results in a negative amount for any
period, then CPEC shall pay to KNOLL such amount within 30 days after the end of
the Calendar Quarter, and KNOLL shall not owe CPEC a royalty payment for such
period.



                                       38
<PAGE>

        The royalty payable by KNOLL to CPEC during the Launch Year shall be
equal to forty (40%) percent of the net result of (1) Net Sales and Other
Collaborative Revenue less (2) cost of goods sold, third party royalties and
distribution costs.

        Net Sales shall mean the total amount invoiced by KNOLL or its
affiliates or sublicensees, for sales of Licensed Product less commission,
discounts, returns and return allowances, sales, use or value-added taxes,
duties and other credits or allowances shown on the invoices; provided, however,
Net Sales shall with respect to unaffiliated third parties include the sales
amount to such unaffiliated third parties or agents (and not the value of
resales by such third parties or agents) and royalties payable to third parties
in connection with sales by unaffiliated third parties or agents shall be a
deductible expense. Expenses shall be based on actual costs incurred and shall
not include general administrative, corporate or affiliate overhead or reserves.
Each party shall be responsible for its own taxes on income. The royalty payable
to CPEC for the Net Sales of each Calendar Quarter will be converted to U.S.
dollars using the exchange rate published in the WALL STREET JOURNAL for the
last day of such Calendar Quarter and shall be paid in U.S. dollars within
thirty (30) days after the end of the Calendar Quarter. Taxes and other duties
which are mandatorily payable by CPEC in the Federal Republic of Germany and
which must be remitted by KNOLL


                                       39
<PAGE>

for CPEC's account and for which KNOLL is legally liable shall be withheld and
remitted by KNOLL on behalf of CPEC. In such cases, KNOLL shall send CPEC the
receipts for such payments. All payments to CPEC shall be net of withholding
taxes, if applicable. As long as legally permitted, value added tax shall not be
invoiced as a separate item.

        Schedule 6.1 illustrates the calculation of royalties payable to CPEC
under this Agreement.

        6.2 Reports. During the term of this Agreement, KNOLL will maintain
accounting systems which will report Net Sales and Project expenses and which
are capable of accurately calculating the royalties due to CPEC pursuant to this
Agreement on a country-by-country basis. KNOLL represents that its Executive
Information System ("EIS") currently collects all information necessary to
accurately calculate the royalty. KNOLL shall keep the Chief Financial Officers
of INTERCARDIA and CPEC informed of any significant changes to the EIS or other
accounting system used to track the royalty information.

        Within fifteen (15) working days after the end of each month, KNOLL
shall report to the COMPANY monthly Net Sales amounts and units on a
country-by-country basis.



                                       40
<PAGE>

        Within thirty (30) calendar days after the end of each Calendar Quarter,
KNOLL shall send the COMPANY a report detailing the results of such Calendar
Quarter. This report shall detail the calculation of the royalty payment, with
an analysis of Net Sales and deductible expenses on a country-by-country basis.
This quarterly report shall be certified as true and correct by KNOLL's Chief
Financial Officer.

        Within sixty (60) working days after the end of each Calendar Year,
KNOLL shall issue a full report to the COMPANY detailing the calculation of the
royalty payments for the past year, including an analysis for the calculation on
a country-by-country basis. Any changes from the previously submitted quarterly
reports shall be explained in detail. This annual report shall be certified as
true and correct by KNOLL's Chief Financial Officer.

        Upon reasonable advance notice, the COMPANY shall be entitled to audit
KNOLL's accounting systems, Project expenses and components of KNOLL's royalty
calculation on an aggregated Territory or on a country-by-country basis. KNOLL
will cooperate and assist in such audits as appropriate. If the results of such
audit indicate that KNOLL has underpaid its royalty obligation by five (5%)
percent or more for any twelve (12) month period examined, KNOLL shall bear the
expenses of such audit. Upon


                                       41
<PAGE>

completion of the audit, if the audit reveals an underpayment or overpayment of
royalties, such underpayment or overpayment shall be paid to the party owed such
amount within thirty (30) days of such audit. Any such underpayments or
overpayments shall accrue interest as of the date due, calculated at the prime
interest rate quoted in the Wall Street Journal for such period plus three (3%)
percent.

        6.3 Payments. All payments to be made (i) by KNOLL to COMPANY or CPEC or
(ii) by COMPANY or CPEC to KNOLL under this Agreement shall be made in United
States Dollars and shall be paid by bank wire transfer or by automated
clearinghouse (electronic funds transfer) in immediately available funds to such
bank account designated in writing by COMPANY or KNOLL from time to time.

        6.4 Late Payments. Each party shall pay interest to the other party on
the aggregate amount of undisputed payments due that are not paid on or before
the date such payments are due under this Agreement at a rate per annum equal to
the Prime Rate as reported from time to time in the Wall Street Journal plus
three (3%) percent.



                                       42
<PAGE>

                                   ARTICLE VII
                     REPRESENTATIONS AND WARRANTIES; PATENTS
                     ---------------------------------------

        7.1 Representation and Warranty of the COMPANY. COMPANY represents and
warrants to KNOLL that as of the date of this Agreement it has the full right,
power and authority to enter into this Agreement, to perform this Agreement;
that it is a duly organized and validly existing corporation under the laws of
its jurisdiction of incorporation, and has taken all required corporate action
to authorize the execution, delivery and performance of this Agreement; it has
the full right, power and authority to enter into this Agreement and perform all
of its obligations hereunder; the execution and delivery of this Agreement and
the consummation of the transactions contemplated herein do not violate,
conflict with, or constitute a default under its charter or similar organization
document, its by-laws or the terms or provisions of any material agreement or
other instrument to which it is a party or by which it is bound, or any order,
award, judgment or decree to which it is a party or by which it is bound; and
upon execution and delivery, this Agreement will constitute the legal, valid and
binding obligation of it.



                                       43
<PAGE>

        7.2 Representation and Warranty of KNOLL. KNOLL represents and warrants
that it is a duly organized and validly existing corporation under the laws of
its jurisdiction of incorporation, and has taken all required corporate action
to authorize the execution, delivery and performance of this Agreement; it has
the full right, power and authority to enter into this Agreement and perform all
of its obligations hereunder; the execution and delivery of this Agreement and
the consummation of the transactions contemplated herein do not violate,
conflict with, or constitute a default under its charter or similar organization
document, its by-laws or the terms or provisions of any material agreement or
other instrument to which it is a party or by which it is bound, or any order,
award, judgment or decree to which it is a party or by which it is bound; and
upon execution and delivery, this Agreement will constitute the legal, valid and
binding obligation of it.

        7.3 Limitation of Liability. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN
THIS AGREEMENT, THE COMPANY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES
OF ANY KIND, EITHER EXPRESS OR IMPLIED INCLUDING BUT NOT LIMITED TO WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT
RIGHTS OR PATENT CLAIMS, ISSUED OR PENDING OR AS TO THE COMMERCIAL VIABILITY OF
THE COMPOUND OR THE LICENSED PRODUCTS. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
IN THIS AGREEMENT THE COMPANY SHALL 


                                       44
<PAGE>

HOME NO LIABILITY FOR SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES, LOST
PROFITS, LOSS OF GOODWILL, OR OTHER ECONOMIC LOSS (WHETHER IN TORT, CONTRACT OR
OTHERWISE) IN CONNECTION WITH THIS AGREEMENT OR WITH RESPECT TO THE PATENT
RIGHTS OR COMPANY KNOW-HOW OR AS TO THE COMMERCIAL VIABILITY OF THE COMPOUND OR
THE LICENSED PRODUCTS.

        7.4 Filing, Prosecution and Maintenance of Patents. COMPANY agrees to
file, prosecute and maintain in the Territory, or cause such actions to be
taken, upon appropriate consultation with KNOLL, the Patent Rights and COMPANY
Know-How licensed in whole or in part by COMPANY and sublicensed to KNOLL under
this Agreement. The COMPANY shall have the first right to file the patent
application for all Joint Information and Inventions. COMPANY may elect not to
file and if so KNOLL shall have the right to file the patent application for
Joint Information and Investigations. In each case, the filing party shall give
the non-filing party an opportunity to review the text of the application before
filing, shall consult with the non-filing party with respect thereto, and shall
supply the non-filing party with a copy of the application as filed, together
with notice of its filing date and serial number. COMPANY shall keep KNOLL
advised of the status of the actual and prospective patent filings and upon the
request of KNOLL, provide advance copies of

                                       45
<PAGE>

any papers related to the filing, prosecution and maintenance of such patent
filings.

        7.5 Option of KNOLL to Prosecute and Maintain Patents. COMPANY shall
give notice to KNOLL of any desire to cease prosecution and/or maintenance of
Patent Rights and, in such case, shall permit KNOLL, at its sole discretion, to
continue prosecution or maintenance at its own expense. If KNOLL elects to
continue prosecution or maintenance, COMPANY shall execute such documents and
perform such acts at COMPANY's expense as may be reasonably necessary for KNOLL
to perform such prosecution or maintenance.

        7.6 Enforcement. COMPANY shall enforce and/or protect, where it
reasonably determines that it is commercially advisable to do so after
consultation with KNOLL, the Patent Rights and COMPANY Know-How licensed to
KNOLL under this Agreement against any third party who infringes the COMPANY
Patent Rights or wrongfully uses the COMPANY Know-How. The COMPANY shall have
the first right to initiate litigation in the event of a third party claim of
patent infringement pertaining to a Licensed Product.

        7.7 Infringement Action. In the event COMPANY institutes an action at
its expense against third party infringers with respect to Licensed Product or
takes appropriate action to defend


                                       46
<PAGE>

the Patent Rights or COMPANY Know-How, KNOLL hereby agrees to reasonably
cooperate with COMPANY and to fund, at its option, up to sixty (60%) percent of
the expenses incurred in connection with any such action. Any recovery obtained
by COMPANY as a result of such proceeding or other actions, whether obtained by
settlement or otherwise, shall be retained by the COMPANY and KNOLL in
proportion to the respective percentage of costs borne by each party in any such
suit or action.

        7.8 Option to Prosecute Infringement. If within sixty (60) days of
becoming aware of the infringement of the Patent Rights for which KNOLL retains
a license under this Agreement or unauthorized use of the COMPANY Know-How,
COMPANY decides not to institute an infringement suit or take other reasonable
action to protect the Patent Rights and COMPANY Know-How, KNOLL shall have the
right to institute such suit or take other appropriate action at its own expense
in the name of COMPANY or KNOLL or both. COMPANY shall cooperate fully with
KNOLL and shall fund, at its option, up to forty (40%) percent of the expenses
incurred in connection with any such actions, in its efforts to protect the
Patent Rights, COMPANY Know-How and License Product. Any recovery obtained by
KNOLL as a result of such proceeding, by settlement or otherwise, shall be
retained by KNOLL and the COMPANY in proportion to the respective percentage of
costs borne by each party in any such suit or action.


                                       47
<PAGE>

        7.9 Abandonment. COMPANY shall promptly give notice to KNOLL of the
grant, lapse, revocation, surrender, invalidation or abandonment of any Patent
Rights licensed to KNOLL for which COMPANY is responsible for the filing,
prosecution and maintenance.

        7.10 Patent Term Restoration. The parties hereto shall cooperate with
each other in obtaining patent term restoration or supplemental protection
certificates or their equivalents 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, the COMPANY shall have the right to make the
election and KNOLL agrees to abide by such election.

        7.11 Notices. All notices, inquiries and communications in connection
with this Article VII shall be sent in accordance with Section 10.4.

                                  ARTICLE VIII

                              TERM AND TERMINATION
                              --------------------

        8.1 Term and Expiration. The term of this Agreement will be from
December 19, 1996 until fifteen (15) years after the First Commercial Sale with
respect to each country in the

                                       48
<PAGE>

Territory, subject to two additional five (5) year renewals at KNOLL's option.
If KNOLL elects to renew this Agreement, Knoll shall provide written notice to
the COMPANY twelve (12) months prior to the expirations of the initial term and
the first renewal term. At the termination of the second five year renewal
period with respect to each country in the Territory, KNOLL shall retain the
rights to Regulatory Approvals and KNOLL Know How. The COMPANY shall retain
ownership of all trademarks. At the termination of the second five (5) year
renewal term, the COMPANY shall license to KNOLL the COMPANY trademarks which                 *
are the subject of this Agreement for a [ ] ([ ]%) percent royalty on Net                     
Sales.

        If KNOLL declines to license the COMPANY trademarks which are the
subject of this Agreement, KNOLL shall transfer to the COMPANY ownership of all
the exclusive rights to its Regulatory Approvals, trade secrets and KNOLL
Know-How relating to bucindolol, and the COMPANY shall pay to KNOLL a [ ]%                    *
royalty on Net Sales. During the term of this Agreement, which shall include                 
the renewal option periods, whether or not exercised, KNOLL shall not sell
bucindolol except under the terms of this Agreement.
</TABLE>


[ ] CONFIDENTIAL TREATMENT REQUESTED; CERTAIN INFORMATION OMITTED AND FILED
    SEPARATELY WITH THE SEC.


                                       49
<PAGE>


        8.2    Termination.
               ------------
        8.2.1 Termination for Cause. This Agreement may be terminated by notice
delivered to either party at any time during the term of this Agreement:

        (a) by either party, if the other party is in breach of its material
obligations hereunder, including but not limited to the maintenance by KNOLL of
the Licensed Product Regulatory Approvals, other than a breach for failure to
pay royalties or advance funds covered in Section 8.2.1(b) below, by causes and
reasons within its control and has not cured such breach within ninety (90) days
after written notice requesting cure of the breach; provided, however, that if
the breach is not capable of being cured within ninety (90) days of such written
notice, this Agreement may not be terminated so long as the breaching party
commences and diligently prosecutes all commercially reasonable actions to cure
such breach as promptly as practicable; or

        (b) by COMPANY if KNOLL fails to pay COMPANY any amounts due and payable
to COMPANY, including the failure to advance any amounts due pursuant to any
KNOLL funding obligation under this Agreement, COMPANY shall give KNOLL written
notice of such overdue payment. If such overdue payments are not made by KNOLL

                                       50
<PAGE>


within thirty (30) days after receipt of such notice, COMPANY shall have the
right (i) to terminate this Agreement immediately and institute an action to
collect such overdue amounts and to pursue any other rights or remedies COMPANY
may have at law or in equity; or (ii) institute an action to collect such
amounts or to specifically enforce the funding obligation of KNOLL without in
either case terminating this Agreement; provided, however, that if KNOLL in good
faith disputes any portion of the overdue payment, KNOLL shall pay the
non-disputed amounts to the COMPANY and shall submit the disputed amounts in
question to the dispute resolution officers for settlement of the payment
obligation related to any such amounts; or

        (c) by either party, if the other party files or institutes bankruptcy,
reorganization, liquidation or receivership proceedings, or if the other party
assigns a substantial portion of its assets for the benefit of creditors;
provided, however, in the case of any involuntary bankruptcy proceeding such
right to terminate shall only become effective if the party consents to the
involuntary bankruptcy or such proceeding is not dismissed within ninety (90)
days after the filing thereof.

        8.2.2 Effect of Termination for Cause on License. In the event KNOLL
terminates this Agreement under Section 8.2.1(c), all rights and licenses
granted under or pursuant to this

                                       51
<PAGE>

Agreement by COMPANY to KNOLL are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to
"intellectual property" as defined under Section 101(52) of the Bankruptcy Code.
The parties agree that KNOLL, as a licensee of such rights under this Agreement,
shall retain and may fully exercise all of its rights and elections under the
Bankruptcy Code. The parties further agree that, in the event of the
commencement of a bankruptcy proceeding by or against COMPANY under the
Bankruptcy Code, KNOLL shall be entitled to a complete duplicate of (or complete
access to, as appropriate) any such intellectual property and all embodiments of
such intellectual property upon written request therefore by KNOLL. Such
intellectual property and all embodiments thereof shall be promptly delivered to
KNOLL (i) upon any such commencement of a bankruptcy proceeding upon written
request therefore by KNOLL, unless COMPANY elects to continue to perform all of
its obligations under this Agreement or (ii) if not delivered under (i) above,
upon the rejection of this Agreement by or on behalf of COMPANY upon written
request therefore by KNOLL.

        8.3 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 Article V shall survive the
expiration or

                                       52
<PAGE>

termination of the Agreement. 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 Products sold prior to such
termination.

        8.4 Certain Covenants at Expiration or Early Termination. Upon the
expiration of this Agreement, or upon early termination of this Agreement where
such termination is without fault on the part of the COMPANY, KNOLL shall (i)
promptly return to COMPANY all written confidential information and all copies
thereof except such records as may be required by federal or state regulatory
agency, (ii) assign to the COMPANY any Regulatory Approvals and transfer to the
COMPANY all materials necessary or helpful to the maintenance of such Regulatory
Approvals, and (iii) notify the applicable regulatory authorities of any such
assignment.

        8.5 Early Termination. KNOLL shall have the right to terminate this
Agreement at any time prior to the termination of the Beta-blocker Evaluation of
Survival Trial (the "BEST Study") and within sixty (60) days after the BEST
Study's primary end-point results are reported in writing to KNOLL. KNOLL shall
not receive any refund of milestone or development payments


                                       53
<PAGE>

previously made to the COMPANY. KNOLL will cooperate in transferring all
on-going clinical trials, ownership of any materials and applications filed with
any regulatory authorities and other information to the COMPANY, and the COMPANY
will assume ownership of all such information and materials relating to
bucindolol.

                                   ARTICLE IX

                                    INDEMNITY
                                    ---------

        9.1 General. For purposes of this Article IX "Indemnified Parties"
refers to KNOLL, its Affiliates and the officers, directors, employees, and
agents of KNOLL and its Affiliates when the COMPANY is the indemnitor, and
"Indemnified Parties" refers to the COMPANY, its Affiliates and officers,
directors, employees, and agents of the COMPANY and its Affiliates when KNOLL is
the indemnitor.

        9.1.1 COMPANY Indemnity. The COMPANY, as indemnitor on behalf of itself
and its officers, directors, employees, agents and representatives shall
indemnify and hold harmless the KNOLL Indemnified Parties and each of them from
any and all liability arising out of any suit, action, legal proceeding, claim
or demand of whatever kind or character based upon:



                                       54
<PAGE>

        (a) a claim or occurrence arising from any acts, whether of omission or
commission, by said officers, directors, employees, agents or representatives in
connection with any aspect of this Agreement undertaken by the COMPANY; or

        (b) any breach of any representation, warranty or agreement made by the
COMPANY hereunder; or

        (c) the failure by the COMPANY in performing its obligations under this
Agreement; or

        (d) a claim or occurrence arising out of or relating to the Licensed
Product.

        9.1.2 KNOLL Indemnity. KNOLL, as indemnitor on behalf of itself and its
officers, directors, employees, agents and representatives shall indemnify and
hold harmless the COMPANY Indemnified Parties and each of them from any and all
liability arising out of any suit, action, legal proceeding, claim or demand of
whatever kind or character based upon

        (a) a claim or occurrence arising from any acts, whether of omission or
commission, by said officers, directors, employees, agents or representatives in
connection with any aspect of this Agreement undertaken by KNOLL; or


                                       55
<PAGE>

        (b) any breach of any representation, warranty or agreement made by
KNOLL hereunder; or

        (c) the failure by KNOLL in performing its obligations under this
Agreement; or

        (d) a claim or occurrence arising out of or relating to the Licensed
Product.

        9.1.3 Negligence or Willful Misconduct. Anything to the contrary in this
Article IX notwithstanding, neither party shall be obligated to indemnify an
Indemnified Party for such Indemnified Party's own acts of negligence or willful
misconduct or for any violation of any warranty, representation or agreement
made by such Indemnified Party hereunder.

        9.2    Scope of Indemnification.

        9.2.1 Nature of Damages. The agreement to indemnify and hold harmless
from liability set forth herein shall include, subject to the limitation of
liability contained in Section 7.3, all damages of every kind, reasonable
attorney fees, all costs and expenses which may be levied against and out of
pocket costs

                                       56
<PAGE>

incurred by the Indemnified Parties in connection with any suit, action, legal
proceeding, claim or demand.

        9.2.2 Survival. Each party acknowledges and hereby agrees that the
obligations set forth in this Article IX shall survive the termination or
expiration of this Agreement until the expiration of any applicable statute of
limitations.

        9.2.3 Cooperation of the Parties. The Indemnified Parties will cooperate
with the indemnitor at the indemnitor's expense in the defense of any suit.
Neither party shall be liable for any costs resulting from any settlement made
by a party prior to using its reasonable efforts to obtain the consent of the
other party to such settlement.

        9.2.4 Certain Exclusions. Neither party shall be liable to the other for
any claim arising from or based upon (i) the combination or use of the Compound
or the Licensed Products with other items or products in a manner not agreed to
by both parties or (ii) any alteration or modification by the other party of the
Compound or the Licensed Products.

        9.3 Insurance. KNOLL and the COMPANY each shall maintain, through
self-insurance or otherwise, product liability insurance with respect to
development, manufacture and sales of Licensed

                                       57
<PAGE>

Products in such amount as KNOLL or the COMPANY, respectively, customarily
maintains with respect to sales of its other products. If KNOLL or the COMPANY
obtain product liability insurance from a third party insurance company, the
other party shall if possible, under its insurance policy be named as an
additional insured on any such external policy. Each party shall provide the
other party coverage against product liability claims arising in connection with
the sale of the Licensed Product as if the other party were an additional
insured under the self-insurance program assuming no retention of liability for
costs, expenses, claims or damages by KNOLL or the COMPANY. Each party shall
upon request, provide the other party with a certificate of insurance to the
extent that it obtains product liability coverage from any external insurance
company.

                                    ARTICLE X

                                  MISCELLANEOUS
                                  -------------

        10.1 Force Majeure. Neither party shall be held liable or responsible to
the other party nor be deemed to have defaulted under or breached the Agreement
for failure or delay in fulfilling or performing any term of the Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected party including, but not limited to, fire, floods,
embargoes, war, acts of war (whether

                                       58
<PAGE>

war be declared or not), insurrections, riots, civil commotions, strikes,
lockouts or other labor disturbances, acts of God or acts, omissions or delays
in acting by any governmental authority or the other party. The affected party
shall notify the other party of such force majeure circumstances as soon as
reasonably practical.

        10.2 Assignment. The Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred, by either party without the
consent of the other party; provided, however, that 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 Licensed Product or the business, or in the event
of its merger or consolidation or change in control or similar transaction. Any
permitted assignee shall assume all obligations of its assignor under the
Agreement, and such assignor shall remain responsible for compliance with all of
its obligations under this Agreement for the term hereof.

        10.3 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality


                                       59
<PAGE>

and enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby, unless the absence of the invalidated
provision(s) adversely affect the substantive rights of the parties. The parties
shall in such an instance use their best efforts to replace the invalid, illegal
or unenforceable provision(s) with valid, legal and enforceable provision(s)
which, insofar as practical, implement the purposes of this Agreement.

        10.4 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
sent by telecopier (and promptly confirmed by personal delivery, registered or
certified mail or overnight courier), sent by nationally-recognized overnight
courier or sent by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:

               if to COMPANY, to:      Intercardia, Inc.
                                       3200 Chapel Hill/Nelson Highway
                                       Cape Fear Building, Suite 300
                                       P.O. Box 14287
                                       Research Triangle Park,
                                       North Carolina 27709-4287
                                       Telecopier No.:  919-558-8686
                                       ATTN: President

               with a non-             Wyrick, Robbins, Yates & Ponton
               mandatory copy           L.L.P.
               to:                     Suite 300
                                       4101 Lake Boone Trail
                                       Raleigh, North Carolina 27607
                                       ATTN: Larry E. Robbins
                                       Telecopier No.: (919) 781-4865



                                       60
<PAGE>


               if to KNOLL, to:        KNOLL AG
                                       P. O. Box 210805
                                       67008 Ludwigshafen
                                       KNOLLstraBe
                                       67061 Ludwigshafen
                                       Germany
                                       ATTN: President



or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
communication shall be deemed to have been given when delivered if personally
delivered or sent by telecopier on a business day, on the business day after
dispatch if sent by nationally-recognized overnight courier and on the third
business day following the date of mailing if sent by mail.

        10.5 Applicable Law. The Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without reference to any
rules of conflict of laws.

        10.6 Arbitration. Any disputes other than the failure to make a payment
required under this Agreement of an undisputed amount arising between the
parties relating to, arising out of or in any way connected with this Agreement
or any term or condition hereof, or the performance by either party of its
obligations hereunder, whether before or after termination of the Agreement, may
be resolved by binding arbitration upon mutual agreement of the parties.
Whenever a party shall decide to institute


                                       61
<PAGE>

arbitration proceedings, it shall give written notice to that effect to the
other party. The party giving such notice shall refrain from instituting the
arbitration proceedings for a period of sixty (60) days following such notice.
During such period, the parties shall make good faith efforts to amicably
resolve the dispute without arbitration. Any arbitration hereunder shall be
conducted under the rules of the American Arbitration Association. Each such
arbitration shall be conducted by a panel of three arbitrators: one arbitrator
shall be appointed by each of KNOLL and the COMPANY and the third shall be
appointed by the two arbitrators; provided, however, if no mutually acceptable
arbitrator can be agreed to by the parties, a third shall be appointed by the
American Arbitration Association. Any such arbitration initiated by KNOLL shall
be held in the United States. Any such arbitration initiated by COMPANY shall be
held in the Federal Republic of Germany. The arbitrators shall have the
authority to direct the parties as to the manner in which the parties shall
resolve the disputed issues, to render a final decision with respect to such
disputed issues, or to grant specific performance with respect to any such
disputed issue. Judgment upon the award so rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. Nothing
in this Section shall be construed to preclude either party from seeking
provisional remedies,


                                       62
<PAGE>

including but not limited to, temporary restraining orders and preliminary
injunctions, from any court of competent jurisdiction, in order to protect its
rights pending arbitration, but such preliminary relief shall not be sought as a
means of avoiding arbitration. In no event shall a demand for arbitration be
made after the date when institution of a legal or equitable proceeding based on
such claim, dispute or other matter in question would be barred by the
applicable statute of limitations. The prevailing party in any legal or
arbitration action shall be entitled, in addition to any other rights and
remedies it may have, to reimbursement for its expenses incurred thereby,
including but not limited to court costs and reasonable attorney's fees.

        10.7 Entire Agreement. The Agreement contains the entire understanding
of the parties with respect to the subject matter hereof. This Agreement
replaces and supersedes in its entirety the Initial Agreement. All express or
implied agreements and understandings, either oral or written, heretofore made
are expressly merged in and made a part of the Agreement. The Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by both parties hereto.

        10.8 Headings. The captions to the several Articles and Sections hereof
are not a part of the Agreement, but are merely

                                       63
<PAGE>

guides or labels to assist in locating and reading the several Articles and
Sections hereof.

        10.9 Independent Contractors. It is expressly agreed that COMPANY and
KNOLL shall be independent contractors and that the relationship between the
parties shall not constitute a partnership, joint venture or agency. Neither
COMPANY nor KNOLL shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the party to do so.

        10.10 Waiver. The waiver by either party hereto of any right hereunder
or of the failure to perform or of a breach by the other party shall not be
deemed a waiver of any other right hereunder or of any other breach or failure
by said other party whether of a similar nature or otherwise.

        10.11 Expenses. COMPANY and KNOLL shall bear their respective legal,
accounting, and other expenses associated with this Agreement.

        10.12 Counterparts. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an



                                       64
<PAGE>



original, but all of which together shall constitute one and the same
instrument.


                                       65
<PAGE>

        IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of December 19, 1996.

     INTERCARDIA, INC.                        KNOLL AG


By: ______________________          By: __________________________
        Clayton I. Duncan           Printed Name: ________________
        President     and           Title: _______________________
        Chief Executive Officer


CPEC, INC.



By: ______________________
        Clayton I. Duncan
        President and
        Chief Executive Officer





                                       66
<PAGE>

                                  EXHIBIT 11.1

                                INTERCARDIA, INC.

                 STATEMENT RE COMPUTATION OF NET LOSS PER SHARE
                      (In thousands, except per share data)


<TABLE>
<CAPTION>





                                                   Three Months Ended            Six Months Ended
                                                        March 31,                   March 31,
                                                --------------------------  ----------------------------
                                                   1999          1998          1999             1998
                                                ------------  ------------  ------------     -----------
<S>                                               <C>           <C>          <C>             <C>
Net loss per Unaudited Consolidated
   Statements of Operations                        $ (6,176)     $ (4,166)     $(12,297)       $ (7,152)
                                                ============  ============  ============     ===========
Weighted average of common shares
   and common share equivalents outstanding
   - basic and diluted                                7,306         7,004         7,301           7,001
                                                ============  ============  ============     ===========
Net loss per common share:
  - basic                                           $ (0.85)      $ (0.59)      $ (1.68)        $ (1.02)
                                                ============  ============  ============     ===========
  - diluted                                         $ (0.85)      $ (0.59)      $ (1.68)        $ (1.02)
                                                ============  ============  ============     ===========

</TABLE>