DEVELOPMENT AND SUPPLY AGREEMENT





     AGREEMENT,    dated   April 17,    2001,   is   made   between   PAR

PHARMACEUTICALS,  INC., a _____________  corporation,  maintaining its principal

place of business at One Ram Ridge Road, Spring Valley,  New York 10977 ("PAR"),

DR.  REDDY'S  LABORATORIES  LIMITED,  an  Indian  corporation,  maintaining  its

principal  offices  at  7-1-27  Ameerpet,   Hyderabad  -  500  016,  India,  and

REDDY-CHEMINOR, INC., a New Jersey corporation, maintaining its principal office

at 66 S.  Maple  Avenue,  Ridgewood,  New  Jersey  07450,  U.S.A.  (collectively

"REDDY").



                                   WITNESSETH:



     WHEREAS,  REDDY has expertise in the development of generic  pharmaceutical

products; and



     WHEREAS,  PAR has expertise in the development,  marketing and sale of such

products in the United States; and



     WHEREAS, REDDY and PAR desire to collaborate in the development, marketing

and sale of certain generic pharmaceutical products; and



     WHEREAS,  REDDY desires to manufacture and supply to PAR and PAR desires to

purchase exclusively from REDDY for sale in the Territory,  as defined below, by

PAR all of PAR's requirements for the Reddy Finished Products, as defined below;



     NOW,  THEREFORE,  in consideration  of the mutual  promises,  covenants and

agreements hereinafter set forth, the parties agree as follows:



1.   Definitions.

     -----------



     (a)    "Affiliate"  means any corporation or business entity controlled by,

controlling,  or under common control with PAR or REDDY as the case may be. (For





                                       1

{PAGE}

              CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY

                     WITH SECURITIES AND EXCHANGE COMMISSION

                         ASTERISKS DENOTE SUCH OMISSION





the purpose of this  definition,  "control" means direct or indirect  beneficial

ownership  of greater  than  fifty  percent  (50%) of the  voting  stock of such

corporation  or other  business  entity,  or a greater than fifty  percent (50%)

interest in the income of such  corporation  or other  business  entity,  or the

power to direct or cause the  direction of the  management  and policies of such

corporation or other business entity whether by ownership of voting  securities,

by contract or otherwise,  or such other  relationship as, in fact,  constitutes

control.)



     (b)    "ANDA" means an Abbreviated New Drug Application  filed with the FDA

for a Reddy Finished Product or Par Finished Product in the United States.



     (c)    Applicable Percentage" means [*********************]



     (d)    "Bulk  Product" means either REDDY's or a third party's bulk actives

for Reddy  Finished  Product or PAR's or a third  party's  bulk  actives for Par

Finished Product.



     (e)    "cGMP" means current good manufacturing practices for the methods to

be used in, and the  facilities  and controls to be used for,  the  manufacture,

storage and handling of each Reddy  Finished  Product and Par Finished  Product,

all as set forth from  time-to-time  by the FDA pursuant to the FD&C Act and the

rules and regulations promulgated thereunder (including specifically,  Title 21,

part 211 of the Code of Federal Regulations of the United States).



     (f)    "Commercial  Expenses"  means PAR's or REDDY's,  as the case may be,

commercially   reasonable   costs  and  expenses  for  marketing,   advertising,

promoting,  and selling  (including  but not limited to costs and  expenses  for

launch,  sales force training and  materials,  samples,  conventions,  symposia,

marketing,  direct  mailing,  marketing  research,  public  relations,   printed

materials,  medical  information,  regulatory  activities and distribution) each

Reddy Finished  Product or Par Finished  Product,  determined in accordance with

PAR's or REDDY's  customary  accounting  policies and  practices and in a manner

consistent with U.S. generally accepted  accounting  principles.



     (g)    "Competing  Product"  means,  with  respect  to a  particular  Reddy

Finished Product or Par Finished Product, a generic pharmaceutical product which





                                       2

{PAGE}



is in the same dosage form,  has the same active  ingredient,  the same strength

and is for the same  indication  as the Reddy  Finished  Product or Par Finished

Product but which is manufactured and supplied by or purchased and acquired from

any Person other than REDDY or its Affiliates or PAR or its  Affiliates,  as the

case may be.



     (h)    "Development  Costs"  means the  commercially  reasonable  costs and

expenses of REDDY or PAR, as the case may be,  incurred in the  preparation  and

filing of a DMF for each Bulk Product and in  obtaining  the ANDA for each Reddy

Finished  Product  or Par  Finished  Product,  including  but  not  limited  to:

allocated costs for manufacturing,  personnel,  packaging,  stability,  testing,

analytical,   Bulk  Product   supplied  for  ANDA   submission   (calculated  at

Manufacturing Cost) and all costs relating to the development of finished dosage

including R&D, preformulation,  formulation,  bio-equivalence, ANDA preparation,

validation, issuance and submission.



     (i)    "DMF" means the drug master file for each Bulk Product,  as the same

may be amended or supplemented from time to time.



     (j)    "Exclusivity  period"  means,  with  respect  to any reddy  finished

product  (or any  strength or dosage  form of a reddy  finished  product) or par

finished product (or any strength or dosage form of a par finished product), the

granting of up to six (6) months of marketing  exclusivity  in the united states

from the fda for being first to file an anda with a patent certification for the

given reddy finished product or par finished product enabling par to market such

product during such period in the u.S. With no other generic competitor.



     (k)    "FDA" means the United States Food and Drug Administration.



     (l)    "FD&C Act" means the Federal Food, Drug and Cosmetic Act of 1938, as

amended,  and the regulations  thereunder,  including current good manufacturing

practice regulations, as the same may be amended or revised.



     (m)    "Form 483" means the written  notice of  objectionable  practices or





                                       3

{PAGE}



deviations from the regulations  that is prepared by the FDA investigator at the

end of an inspection.



     (n)    "Group 2 Term"  means,  for each  Reddy  Group 2  Product,  the date

commencing upon the execution of this Agreement and ending on December 31, 2004.



     (o)    "Indemnified  Party"  has the  meaning  set forth in  Section  15(c)

hereof.



     (p)    "Indemnifying  Party" has the  meaning  set forth in  Section  15(c)

hereof.



     (q)    "Intellectual  Property  Costs" means REDDY's or PAR's,  as the case

may be,  out-of-pocket  payments to patent counsel (or other experts,  including

outside  laboratories)  in connection with pre- or  post-marketing  patent work,

including patent litigation.



     (r)    "Know-How" means all Reddy Finished Product or Par Finished Product,

as the case  may be,  related  technical  knowledge,  manufacturing  procedures,

expertise,  methods, protocols and current and accumulated experiences which any

party hereto acquires in connection with this Agreement and/or has acquired as a

result of scientific research,  practical experiences and otherwise which have a

demonstrated  usefulness in manufacturing,  obtaining and maintaining Regulatory

Approval,  including  but not  limited  to (i) plant  validation  protocols  and

specifications;  (ii)  process  validation  procedures;  (iii)  quality  control

procedures;  (iv) analytical methods and procedures; (v) bio-equivalence testing

protocols and  procedures;  (vi) cleaning  validation  protocols and procedures;

(vii) procedures for preparation of applications for Regulatory Approval; (viii)

ongoing regulatory compliance  procedures;  and (ix) galenical  formulations and

processes.



     (s)    "Launch Date" means,  with respect to each Reddy Finished Product or

Par Finished  Product,  the date on which PAR makes its first commercial sale of

such Reddy  Finished  Product or Par  Finished  Product in the  Territory  to an

unrelated third party in an arm's length transaction but no later than the later

of:  thirty (30) days after the date on which all  regulatory  and  governmental

approvals for the manufacture,  delivery, sale and distribution in the Territory

have been  obtained  (including  Regulatory  Approval);  thirty  (30) days after

applicable patent expiration  (including  General Agreement on Trade and Tariffs





                                       4

{PAGE}

              CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY

                     WITH SECURITIES AND EXCHANGE COMMISSION

                         ASTERISKS DENOTE SUCH OMISSION





extensions) or thirty (30) days after product exclusivity expiration.



     (t)    "Manufacturing Cost" means [*********************]



     (u)    "Net Margin" means [*********************]



     (v)    "Net Profit" means [*********************]



     (w)    "Net Sales" means [*********************]



     (x)    "Par Applicable Percentage" means [*********************]



     (y)    "Par Change in  Control"  means the  acquisition  by any third party

individual  or entity  (other than by Merck KGaA (but not a successor or assign)

or an  Affiliate of Merck KGaA (but not a successor or assign)) of more than 50%

(in any one  transaction or in any series of  transactions)  of the  outstanding

shares of capital  stock of  Pharmaceutical  Resources,  Inc.  or PAR having the

right to vote or generally to participate, in a manner similar to equity shares,

in the profits and losses of Pharmaceutical Resources, Inc. or PAR.



     (z)    "Par Finished Products" means [*********************]



            (aa)   "Par Group 1 Products" means [*********************]



            (bb)    "Par Group 4 Products" means [*********************]



            (cc)   "Person"  means an  individual,  partnership,  joint venture,

association,  corporation,  company and any other form of business organization,

government  regulatory  or  governmental  agency,   commission,   department  or

instrumentality.



            (dd)   "Promotional  Expenses"  means  promotional  payments or fees

directly  related to a Reddy  Finished  Product or Par Finished  Product paid to

REDDY's or PAR's customers, as the case may be.



            (ee)   "Reddy Applicable Percentage" means [*********************]



            (ff)   "Reddy Change in Control" means the  acquisition by any third

party  individual or entity of more than 50% (in any one  transaction  or in any

series of  transactions)  of the  outstanding  shares of capital  stock of REDDY

having the right to vote or generally  to  participate,  in a manner  similar to





                                       5

{PAGE}

              CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY

                     WITH SECURITIES AND EXCHANGE COMMISSION

                         ASTERISKS DENOTE SUCH OMISSION





equity shares, in the profits and losses of REDDY.



            (gg)   "Reddy Finished Product" means [*********************]



            (hh)   "Reddy Group 1 Products" means [*********************]



            (ii)   "Reddy Group 2 Products" means [*********************]



            (jj)   "Reddy Group 3 Products" means [*********************]



            (kk)   Reddy Group 4 Products means [*********************]



            (ll)   "Reddy Group 5 Products" means [*********************]



            (mm)   "Reddy Group 6 Products" means [*********************]



            (nn)   "Regulatory  Approval"  means any  ANDAs or other  approvals,

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 manufacture,  distribution,  use,

import, or sale of Reddy Finished Products or Par Finished Products.



            (oo)   "Specifications" means the specifications  required to obtain

the ANDA of each Reddy Finished Product or Par Finished Product based on the NDA

specifications  of the  innovator  product and as  contained in the DMF for Bulk

Product   unless  changes  are  required  as  described  in  the  United  States

Pharmacopoeia,  as such  specifications may be amended at the request of the FDA

or by mutual agreement of the parties from time to time.



            (pp)   "Technical  Information"  means all information and expertise

which  REDDY or PAR,  as the case  may be,  acquires  in  connection  with  this

Agreement   and/or  has  acquired  which  have  a  demonstrated   usefulness  in

manufacturing,   packaging  and  labeling   and/or   obtaining  and  maintaining

Regulatory  Approval of the Reddy Finished Products or the Par Finished Products





                                       6

{PAGE}



pursuant to this Agreement,  including,  but not limited to, all specifications,

manuals and computer  programs  relating to manufacturing  and similar materials

and access to the DMF of Bulk Product.



            (qq)   "Term" means,  for each Reddy Finished  Product (other than a

Reddy Group 2 Product) or Par  Finished  Product,  the later to occur of (i) the

date  commencing  upon  execution of this  Agreement  and ending seven (7) years

after the date of execution of this Agreement or (ii) the date commencing on the

Launch Date of each Reddy  Finished  Product or Par Finished  Product and ending

three (3) years after the Launch Date of such product.



            (rr)   "Territory"   means  the  United  States,   its  territories,

possessions and the Commonwealth of Puerto Rico.



            (ss)   "Third Party Bulk Product" means a Bulk Product  manufactured

by an entity other than REDDY or PAR, as the case may be.



     2.     Development of Products.

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



            (a)    REDDY shall be responsible  for the  development of all Reddy

Finished  Products to be supplied  by REDDY to PAR under this  Agreement.  REDDY

shall use commercially  reasonable efforts to develop each of the Reddy Finished

Products. All Development Costs and Intellectual Property Costs, including,  but

not limited to, initiation, preformulation development, formulation development,

scale-up and any legal costs and expenses  incurred in  connection  with a Reddy

Finished Product shall be the sole  responsibility  of REDDY.  Nothing contained

herein shall constitute a guarantee or warranty of REDDY that development of any

Reddy  Finished  Product will be commenced or continued,  that a submission  for

Regulatory  Approval  for such Reddy  Finished  Product will be filed within any

specific  time  period,  or that a Regulatory  Approval  for any Reddy  Finished

Product will be obtained.



            (b)    REDDY shall prepare each application for Regulatory  Approval

for each Reddy Finished Product and shall use commercially reasonable efforts to

obtain  Regulatory  Approval.  REDDY shall hold all ANDAs for the Reddy Finished

Product in its own name,  provided that such  ownership  shall be subject to the

exclusive  licenses  granted to PAR hereunder.  Unless  expressly  agreed by the

parties,  in writing, it is the parties' intent that each Reddy Finished Product





                                       7

{PAGE}

Home        Intelligence        Services        Subscriptions        News        About Us

Contact Us       Terms of Use       Resend Documents       Shopping Cart

Copyright © 2008 The Consus Group LLC