FIRST HORIZON PHARMACEUTICAL CORP
ASSET PURCHASE AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>fhorizon10q93001ex101.txt
<DESCRIPTION>ASSET PURCHASE AGREEMENT
<TEXT>
                                                                    EXHIBIT 10.1

                        CONFIDENTIAL TREATMENT REQUESTED

               Confidential Portions Of This Agreement Which Have
               Been Redacted Are Marked With Brackets [***]. The
                Omitted Material Has Been Filed Separately With
                    The Securities And Exchange Commission.


                            ASSET PURCHASE AGREEMENT

     ASSET  PURCHASE  AGREEMENT  dated  July 27,  2001,  between  FIRST  HORIZON
PHARMACEUTICAL  CORPORATION  ("Purchaser"),  a  Delaware  corporation  having an
office  at  660  Hembree  Parkway,  Suite  106,  Roswell,   Georgia  30076,  and
SANOFI-SYNTHELABO INC. ("Seller"), a Delaware corporation having an office at 90
Park Avenue, New York, New York 10016.

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS,  Seller (a) is or has been the  distributor  and seller of certain
prescription  prenatal  multivitamin and mineral products bearing the tradenames
"PRENATE ADVANCE",  "PRENATE 90", and "PRENATE ULTRA", and (b) has developed for
distribution   and  sale  a  certain  gelatin  enrobed   prescription   prenatal
multivitamin   and  mineral   product   bearing  the   tradename   "PRENATE  GT"
(collectively, the "PRENATE Products"); and

     WHEREAS,  Seller  desires to sell to Purchaser,  and  Purchaser  desires to
purchase from Seller,  Seller's right,  title and interest in and to the Prenate
Products  in the United  States  (the  "PRENATE  Business"),  upon the terms and
conditions hereinafter set forth;

     NOW, THEREFORE,  in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:

                                    ARTICLE I
                           SALE AND PURCHASE OF ASSETS
                          AND ASSUMPTION OF LIABILITIES

     Section 1.1 Acquired  Assets.  Upon the terms and subject to the conditions
set forth in this Agreement, Seller agrees to sell, transfer, assign, convey and
deliver to Purchaser, and Purchaser agrees to purchase,  acquire and accept from
Seller, at the Closing (as defined in Section 3.1), all of Seller's right, title
and  interest in and to the assets,  rights and  property  used  exclusively  or
primarily in or held for use by Seller exclusively or primarily in the operation
of the PRENATE Business including, without limitation, the following:

          (a) Seller's inventory,  including the Sample Inventory (as defined in
Section  2.2(b)) in existence at the Closing Date (as defined in Section 3.1) of
finished  goods  for  sale or use  primarily  in the  operation  of the  PRENATE
Business (the "Inventory", which term shall not include Sample Inventory);

          (b) Seller's inventory in existence at the Closing Date of promotional
materials, including Sample Inventory and medical education materials associated
with the PRENATE Business;

          (c) customer lists of the PRENATE Business;

          (d) all intellectual property rights owned or otherwise used by Seller
primarily in connection with the PRENATE Business  including:  (i) registered or


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<PAGE>

                                        [***] - Confidential Treatment Requested

unregistered  trademarks,  service marks,  logos,  trade dress,  trade names and
internet domain names (collectively, the "Trademarks") including those set forth
on Schedule 1.1(e) annexed hereto, (ii) all trade secrets, inventions, know-how,
processes,  product specifications,  designs,  copyrights and formulae,  whether
patentable or unpatentable, and (iii) all Trademark applications;

          (e) (A) all  right,  title and  interest  in and under all  contracts,
agreements, open sales orders, enforceable arrangements and other commitments of
Seller related to the PRENATE  Business,  including  those set forth on Schedule
1.1(e)-1  annexed hereto and (B) all rights  related to the PRENATE  Business in
and under the  Multiproduct  Contracts,  including  those set forth on  Schedule
1.1(e)-2 annexed hereto. All contracts referred to under A and B of this Section
1.1(e)  shall   hereinafter  be  collectively   referred  to  as  the  "Assigned
Contracts".   "Multiproduct  Contracts"  shall  mean  those  Assigned  Contracts
containing rights or obligations relating to both (i) products which form a part
of the PRENATE  Business and (ii)  products  which are not  associated  with the
PRENATE Business;

          (f) Seller's licenses,  consents, permits,  variances,  certifications
and approvals (including,  without limitation,  any Food and Drug Administration
("FDA")  clearances or approvals) of governmental  agencies used or held for use
primarily  in  connection   with  the  PRENATE   Business   (collectively,   the
"Licenses");

          (g) all prepaid expenses and deposits relating to the PRENATE Business
under the Assigned Contracts;

          (h) all  benefits,  rights or choses  in  action  including  rights of
recoveries  under,  warranties or guaranties  relating  primarily to the PRENATE
Business;

          (i) all of Seller's  books,  records  (including,  without  limitation
computer records),  files and other materials  (including,  without  limitation,
research and  development  data,  and marketing  research and reports)  relating
primarily to the PRENATE Business; and

          (j) all goodwill of the PRENATE Business.

     The assets,  rights and property of the PRENATE  Business to be acquired by
Purchaser pursuant to this Agreement are hereinafter collectively referred to as
the "Acquired Assets."

     Section 1.2 Excluded Assets.  Notwithstanding  the foregoing,  the Acquired
Assets shall not include any of the following:

          (a) all cash and cash  equivalents  relating to the PRENATE  Business,
including but not limited to, Patheon's  obligation to  rebate  to Seller $[***]
pursuant to the settlement letter agreement dated May 2, 2001;

          (b)  all  accounts  and  notes  receivable  relating  to  the  PRENATE
Business;

          (c) the rights to any of Seller's claims for any federal, state, local
or foreign tax refunds;



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<PAGE>

          (d)  all  insurance  policies  of  Seller  pertaining  to the  PRENATE
Business  and all  rights  of  Seller  under or  arising  out of such  insurance
policies; and

          (e) Seller's  componentry  inventory in existence at the Closing Date,
which is used at the St. Louis Facility, including, but not limited to, wrapping
and packaging  materials primarily used in the operation of the PRENATE Business
and Work in Process  ("WIP") which is in existence as of the Closing  Date.  WIP
shall mean all Prenate Product tablets which are not in finished, packaged form.

     Section 1.3  Assumption of  Liabilities.  Upon the terms and subject to the
conditions  of this  Agreement,  Purchaser  shall assume at the Closing and pay,
perform and discharge  promptly  when due, and hold Seller  harmless  from,  all
liabilities  and  obligations  of Seller  accruing  from and after the  Closing,
including the following:

          (a) the  contracts  (the "Assumed  Contracts")  identified in Schedule
1.3(a) in respect of any period after the Closing Date; and

          (b)  any  liabilities   (including,   but  not  limited  to,  any  tax
liabilities  relating to the PRENATE  Business) and obligations  relating to the
PRENATE Business from and after the Closing Date.

     The  liabilities  and  obligations  to be assumed by  Purchaser  under this
Section are hereinafter referred to as the "Assumed Liabilities." Except for the
Assumed Liabilities, Purchaser shall not assume, nor shall it be liable for, any
liability, debt, obligation,  claim against or contract of Seller of any kind or
nature  whatsoever,  whether  or  not  accrued,  whether  fixed,  contingent  or
otherwise,  whether known or unknown, whether related to PRENATE Business or the
Acquired Assets, and whether or not recorded on the books and records of Seller.
In  particular,  but without  limiting  the  foregoing,  Purchaser  shall not be
responsible  for the payment of (i) any  expenses or  liabilities  for or to any
employees of Seller including, without limitation, any compensation,  severance,
vacation or termination  pay, (ii) any liability or obligation of Seller for any
taxes, assessments,  charges, fees and impositions by any governmental authority
including,  without  limitation,  any  taxes,  assessments,   charges,  fees  or
impositions assessed as a result of the sale and purchase of the Acquired Assets
or any of the other transactions  contemplated by this Agreement for any taxable
period ending on or before the Closing  Date,  (iii) any liability or obligation
under  any  laws  relating  to  hazardous  substances  or  laws  regulating  the
environment  arising  on  or  before  the  Closing  Date,  and  (iv)  any  other
liabilities  or  obligations  with  respect  to any  claim or  cause of  action,
regardless of when made or asserted,  which arise out of or in  connection  with
the  business  and  operations  of Seller or the  Acquired  Assets  prior to the
Closing Date including,  without limitation,  payments due third parties for any
Acquired Assets,  open purchase orders for Inventory (except as may be otherwise
set forth in this agreement),  and any product liability or claims for injury to
person or property  relating  to the  manufacture  of Prenate  Products by or on
behalf of the  Seller  on or prior to the  Closing  Date.  The  liabilities  and
obligations  not to be assumed by Purchaser are herein after  referred to as the
"Retained Liabilities."



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<PAGE>

                                        [***] - Confidential Treatment Requested

                                   ARTICLE II
                           PURCHASE PRICE; ADJUSTMENTS

     Section 2.1 Purchase Price. (a) Subject to the terms and conditions of this
Agreement, the purchase price to be paid by Purchaser to Seller for the Acquired
Assets (other than the  Inventory)  (the  "Purchase  Price") shall be the sum of
$52,500,000.

          (b)(i) Purchaser shall be entitled to a post-closing adjustment to the
Purchase Price for the excess (the "Excess Inventory") above a half-month supply
of Inventory in the Trade.  As used herein,  the term  "Inventory  in the Trade"
means the difference  between (i) Inventory on hand at the end of the month (the
"Closing  Month") in which Closing occurs (the  "Month-End  Inventory") and (ii)
the amount of Inventory sold by Purchaser in the Closing Month. To calculate the
amount of the Excess  Inventory,  the parties agree to use the  withdrawal  rate
reported in the IMS  Pipeline  Report for the Closing  Month to  determine  what
represents a full month supply of Inventory,  and to use the amount of Inventory
reported in such Report as on-hand at wholesale for the end of the Closing Month
to determine the  Month-End  Inventory.  The dollar  amount of adjustment  shall
equal the product of the amount of the Excess  Inventory  multiplied  by  $[***]
per tablet.  Upon  receipt of the IMS  Pipeline  Report for the  Closing  Month,
Purchaser  shall  provide  to  Seller  a  copy  of  such  Report  together  with
Purchaser's calculation of the amount of the adjustment,  if any, due under this
subsection.  Any amounts  payable by Seller to Purchaser  under this  subsection
shall be payable  not later  than five (5)  business  days after the  receipt by
Seller of Purchaser's calculation of such amount, together with interest thereon
from the Closing  Date to the date of payment at the rate of five  percent  (5%)
per annum, payable in the manner provided in Section 2.5 below.

          (ii) If Seller  launches  the  Prenate  GT,  Purchaser  shall  also be
entitled  to a  post-closing  adjustment  to the  Purchase  Price which shall be
calculated  as the  product  of (i) [***]of the  Prenate  GT in the trade at the
Closing Date (which shall be agreed by the Purchaser and Seller) times (ii)[***]
of the Wholesale  Acquisition Cost ("WAC") of Prenate GT. Any amounts payable by
Seller to Purchaser under this  subsection  shall be payable not later than five
(5) business days after the receipt by Seller of Purchaser's calculation of such
amount,  together  with  interest  thereon  from the Closing Date to the date of
payment  at the rate of five  percent  (5%) per  annum,  payable  in the  manner
provided in Section 2.5 below.

          (c) As an increase to the Purchase  Price,  Purchaser  shall reimburse
Seller for the lesser of (i) $100,000.00 or (ii) half of Seller's actual cost of
trades dress  componentry  printed with  Seller's NDC number at the later of (A)
such time that  Purchaser  has  received  both  PRENATE  Advance  and PRENATE GT
containing Purchaser's NDC number at its designated warehouse or (B) in no event
later than nine (9) months after Closing Date.

     Upon the first of  subsection  (A) or (B) above to occur,  Purchaser  shall
notify Seller of such event.  Seller shall  provide,  within 10 business days of
the receipt of this notice, a calculation of 50% of the actual cost of the trade
dress  componentry with Seller's NDC number.  Purchaser  shall,  within five (5)
business  days after the receipt by  Purchaser of Seller's  calculation  of such
amount,  reimburse  Seller for the lesser of the  amount of the  calculation  or
$100,000.00, together with interest thereon from the Closing Date to the date of
the  payment at the rate of five  percent  (5%) per annum  payable in the manner
provided in 2.5 below.



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<PAGE>

     Section 2.2 Inventory  Purchase Price. (a) The purchase price to be paid by
Purchaser to Seller for the Inventory (the "Inventory  Purchase Price") shall be
for each  category of Inventory  the per unit price as set forth in Schedule 2.2
and as defined therein,  subject to adjustment as provided in Section 2.3 below.
Not less than three (3) business  days prior to the Closing  Date,  Seller shall
deliver to Purchaser a certificate  ("Seller's  Certificate")  setting forth the
estimated  Inventory  Purchase  Price,  together with the  calculations  made by
Seller in determining  the estimated  Inventory  Purchase Price. At the Closing,
Purchaser shall deliver to Seller,  in the manner provided in Section 2.5 below,
the estimated Inventory Purchase Price set forth in Seller's Certificate.

          (b) In addition to the Inventory  Purchase Price,  Purchaser shall pay
to Seller an amount equal to the Unit  Inventory  Price as set forth in Schedule
2.2 for each  unit of Sample  Inventory  (as  defined  below)  requested  by and
transferred  to Purchaser.  As used herein,  the term "Sample  Inventory"  means
finished PRENATE Advance and Prenate GT which has been fully paid for by Seller,
is delivered to Purchaser as soon as practicable (and in any event within ninety
(90) days)  after the  Closing  Date,  is of a quality  useable in the  ordinary
course of business,  has an expiration  date of not less than twelve (12) months
after the date of delivery to Purchaser, meets the Specifications (as defined in
Section 6.6 below) and is packaged in compliance  with all  applicable  laws for
the distribution  and use of sample products.  Purchaser shall pay to Seller the
applicable  Purchase  Price for the Sample  Inventory  no later than thirty (30)
business days after delivery of the Sample  Inventory to Purchaser in the manner
set forth in Section 2.5 below.

     Section 2.3 Other Post-Closing Adjustments.

          (a) As soon as  practicable  after  delivery by Seller to Purchaser of
the  Inventory,  but in no event  later  than two (2)  business  days  after the
Closing Date,  Seller shall deliver to Purchaser a statement of actual Inventory
Purchase  Price  which is the product of the volume of units  multiplied  by the
applicable  Unit  Inventory  Price  (the  "Actual  Inventory  Purchase  Price"),
together  with an  officer's  certificate  stating  that  the  Actual  Inventory
Purchase  Price was  calculated in  accordance  with this  Agreement  based on a
physical  count.  In the event that  Purchaser  disputes the  calculation of the
Actual Inventory Purchase Price, Purchaser shall deliver to Seller, within seven
(7) business days of Purchaser's receipt of the Inventory at Purchaser's office,
a certificate  ("Purchaser's  Certificate")  setting forth its calculation as to
the amount by which the Inventory  Purchase  Price should be adjusted,  together
with appropriate supporting information and calculations.

          (b) Upon  receipt of  Purchaser's  Certificate,  Seller and  Purchaser
shall use their  respective  best  efforts  to agree on the  calculation  of the
Inventory  Purchase Price. In the event that Seller and Purchaser shall agree on
such  calculation,  the  Inventory  Purchase  Price shall be adjusted  upward or
downward, as the case may be, and the party owing any amount as a result of such
adjustment  shall promptly remit the same, in the manner provided in Section 2.5
below, to the other party. If within thirty (30) days after receipt by Seller of
Purchaser's  Certificate,   the  parties  have  been  unable  to  agree  on  the
calculation  of the Inventory  Purchase Price the dispute shall be submitted for
final  settlement  to a  mutually  acceptable  independent  accounting  firm  of
international  reputation  (the  "Independent  Accounting  Firm"),  which shall,
within 20 business  days after such  submission,  determine and report to Seller
and  Purchaser  upon such  remaining  disputed  items,  and such report shall be
final,   binding  and  conclusive  on  Seller  and   Purchaser.   The  fees  and
disbursements of the Independent Accounting Firm shall be allocated to Purchaser


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<PAGE>

in the same proportion as the aggregate dollar amount of such remaining disputed
items so submitted to the Independent  Accounting  Firm that are  unsuccessfully
disputed by Purchaser (as finally determined by the Independent Accounting Firm)
bears to the  total  dollar  amount  of all  such  remaining  disputed  items so
submitted,  and the  balance  shall be paid by  Seller.  In  acting  under  this
Agreement,  the Independent  Accounting Firm shall be entitled to the privileges
and immunities of arbitrators.

          (c)  The  Actual  Inventory  Purchase  Price  set  forth  in  Seller's
statement  delivered to  Purchaser  under  Section  2.3(a) above shall be deemed
final upon the earlier of (i) the  failure of  Purchaser  to notify  Seller of a
dispute  within seven (7) business days after the later of Seller's  delivery to
Purchaser of the statement  containing  the Actual  Inventory  Purchase Price or
Purchaser's  receipt  of the  Inventory  at  Purchaser's  office,  or  (ii)  the
resolution of all disputes pursuant to Section 2.3(b) above.

          (d) Any  amounts  payable  by Seller or  Purchaser  to the other as an
adjustment  to the  Inventory  Purchase  Price or in respect  of costs  shall be
payable,  in the manner  provided in Section  2.5 below,  no later than five (5)
business days after the finalization of the Actual Inventory Purchase Price. All
payments  made as  adjustments  to the  Inventory  Purchase  Price shall be made
together with  interest  thereon from the Closing Date to the date of payment at
the rate of five percent (5%) per annum.

          (e)  Purchaser  shall  provide   Seller,   and  Seller  shall  provide
Purchaser,  with full access to the books,  records,  facilities  and  employees
relating to the  Inventory,  and the parties shall  cooperate with each other to
the  extent  necessary  in order for Seller to  prepare,  and for  Purchaser  to
review, the statement containing the Actual Inventory Purchase Price.

     Section 2.4  Allocation  of Price.  The  Purchase  Price and the  Inventory
Purchase  Price shall be allocated  for federal  income tax  purposes  among the
Acquired  Assets,  in a manner prepared by Seller and consented to by Purchaser,
which  consent  shall  not be  unreasonably  withheld.  As soon  as  practicable
following the final  determination of the Inventory  Purchase Price,  Seller and
Purchaser  will  cooperate in filing with the  Internal  Revenue  Service  their
respective  Forms 8594 as provided for in Section  1060 of the Internal  Revenue
Code of 1986, as amended.

     Section  2.5  Payment.  The  Purchase  Price  and the  estimated  Inventory
Purchase  Price shall be paid at the Closing by the  delivery  by  Purchaser  to
Seller of a certified or bank  cashier's  check  payable to Seller,  or the wire
transfer  pursuant to Seller's  instructions  (delivered  to Purchaser not later
than two (2)  business  days prior to the Closing  Date) of funds,  in an amount
equal to the Purchase  Price and the Inventory  Purchase  Price.  Any additional
payment  required by virtue of any  adjustment  pursuant to Sections  2.1 or 2.3
above  shall  be made  by  certified  or bank  cashier's  check  payable  to the
appropriate   party  or  by  wire  transfer  in  accordance   with  the  payee's
instructions.

                                   ARTICLE III
                                     CLOSING

     Section 3.1 Closing Date. The closing of the  transactions  contemplated by
this Agreement (the "Closing")  shall take place at the offices of Seller in New
York,  New York at 10:00 a.m.,  local time, on or before the third  business day


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<PAGE>

following  satisfaction  or  waiver  of all of the  conditions  to each  party's
obligations  under this Agreement  other than such conditions to be satisfied at
Closing  (such  date,  or the date to which  the  Closing  may be  postponed  as
provided in this Agreement, being referred to herein as the "Closing Date").

     Section 3.2 Actions of Seller at the Closing. At the Closing,  Seller shall
deliver to Purchaser  each of the  following  items:  (a) such bills of sale and
assignment  instruments,  including  a  Bill  of  Sale  and  an  Assignment  and
Assumption  Agreement  in the forms  respectively  set forth in Exhibits A and B
annexed  hereto,  as  shall  be  appropriate  to carry  out the  intent  of this
Agreement  and  sufficient  to sell,  convey,  transfer,  assign and  deliver to
Purchaser all right, title and interest of Seller in and to the Acquired Assets,
free and clear of all liens,  charges and encumbrances;  (b) such  certificates,
instruments,  opinions  and  documents as are required to be delivered by Seller
pursuant  to the terms of this  Agreement,  including  the St.  Louis  Packaging
Agreement (as defined in Section 8.4 below) and the Noncompetition  Agreement in
the form set forth in Exhibit C annexed  hereto  and (c) such other  instruments
and documents (including,  but not limited to, purchase price allocation and the
Consents to the assignments of the Patheon Agreement and the Banner Agreement as
defined below,  if consent is required by the terms of these two  agreements) as
are  contemplated  by this  Agreement or as counsel for Purchaser may reasonably
require  as  necessary  or  desirable  in  connection   with  the   transactions
contemplated by this Agreement.  Seller will deliver or cause to be delivered to
Purchaser at Closing all of the Acquired  Assets except (i)  Inventory  shall be
shipped by Seller to Purchaser's  office F.O.B.  Seller's  warehouse  within one
business day after the Closing Date (ii) Sample  Inventory shall be delivered to
Seller as set forth in Section 2.2(b) above,  (iii) managed care  agreements and
related managed care and Medicaid  information shall be delivered as provided in
the Memorandum of  Understanding  Regarding  Transition  Services (as defined in
Section 3.4 below),  and (iv) the Acquired Assets  described in subsections (b),
(c),  (f) and (i) of Section 1.1 shall be  delivered  within  seven (7) calendar
days after the Closing Date.

     Section 3.3 Actions of Purchaser at the Closing. At the Closing,  Purchaser
shall deliver to Seller each of the following  items: (a) the Purchase Price and
the Inventory Purchase Price, in the manner and form provided for in Article II,
(b)  such  assumption  instruments,   including  an  Assignment  and  Assumption
Agreement  in the form of  Exhibit B, as shall be  appropriate  to carry out the
intent of this Agreement and sufficient to effect the assumption by Purchaser of
the  Assumed  Liabilities;  (c) such  certificates,  instruments,  opinions  and
documents as are required to be delivered by Purchaser  pursuant to the terms of
this Agreement,  including the St. Louis Packaging  Agreement and the Memorandum
of Understanding  Regarding Transition Services as defined in Section 3.4 below;
and (d)  such  other  instruments  and  documents  as are  contemplated  by this
Agreement  or as counsel  for  Seller may  reasonably  require as  necessary  or
desirable in connection with the transactions contemplated by this Agreement.

     Section  3.4  Post-Closing  Cooperation.  At any time and from time to time
from and after the Closing,  each of the parties  hereto will, at the request of
the  other  party  hereto,  execute,  acknowledge  and  deliver,  or cause to be
executed,  acknowledged and delivered, such instruments and other documents, and
perform or cause to be performed  such acts,  as may  reasonably  be required to
evidence or effectuate the sale, conveyance,  transfer,  assignment and delivery
to  Purchaser  of the  Acquired  Assets  or for the  performance  by  Seller  or
Purchaser of any of their other respective obligations under this Agreement. The


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<PAGE>

parties  agree to  comply  with the  terms  and  provisions  of  Exhibit  D (the
"Memorandum of Understanding  Regarding Transition  Services") to facilitate the
transition of the PRENATE Business from Seller to Purchaser.

                                   ARTICLE IV
                    REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller hereby represents and warrants to Purchaser as follows:

     Section 4.1 Organization,  Good Standing, Corporate Power and Authority and
Foreign  Qualification  of Seller.  As of Closing,  Seller is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to transact business as a foreign corporation and is
in good standing,  in each jurisdiction  where the properties  owned,  leased or
operated,  or the business conducted by it makes such  qualification  necessary,
except where the failure to be so qualified or to be in good standing would not,
individually  or in  the  aggregate,  have  a  material  adverse  effect  on its
financial condition,  results of operations,  assets,  property,  liabilities or
business.  Seller  has the  corporate  power and  authority  to enter  into this
Agreement and all other  agreements or instruments  executed and delivered by it
pursuant to this Agreement and to perform the  obligations  required of it under
this Agreement and any such other agreements or instruments.

     Section 4.2 Effective Agreement of Seller; No Conflicts.  The execution and
delivery by Seller of this  Agreement and all other  agreements  or  instruments
executed and delivered by Seller at the Closing and the  consummation  by Seller
of the transactions contemplated hereby and thereby have been duly authorized by
all  necessary  corporate  action of Seller,  and this  Agreement  and any other
agreements or instruments executed and delivered by Seller at the Closing,  when
executed  and  delivered by Seller,  will  constitute  legal,  valid and binding
obligations  of Seller  enforceable  against  Seller in  accordance  with  their
respective  terms.  Neither the execution and delivery of this Agreement nor the
consummation  of the  transactions  contemplated  hereby  will (a)  violate  any
provision of the Certificate of Incorporation  or By-Laws of Seller,  as amended
to date,  (b) with or without  the giving of notice  and/or the passage of time,
violate,  conflict with,  result in the breach or termination  of,  constitute a
default  under or  result  in the  creation  of any  material  lien,  charge  or
encumbrance  upon any of the  assets or  property  of Seller  pursuant  to,  any
contract,  agreement, lease or commitment to which Seller is a party or by which
Seller  or any of its  assets  or  property  may be bound,  or (c)  violate  any
judgment,  decree, order, statute, rule or governmental regulation applicable to
Seller or any of its assets, property or business.

     Section 4.3 Title to  Acquired  Assets.  Seller  has,  and will have at the
Closing, and Purchaser will acquire at the Closing, good and marketable title to
all the Acquired  Assets,  which title will,  as of the Closing  (subject to the
receipt of the consents  referred to below in Section 4.4), be free and clear of
all liens, charges or encumbrances (other than the Assumed Liabilities).

     Section 4.4  Consents.  Except as set forth in Schedule  4.4 and except for
the notification  requirements of the Hart-Scott-Rodino  Antitrust  Improvements
Act of 1976, as amended,  and the rules and regulations  promulgated  thereunder
(the "HSR Act"), no consent, approval qualification,  order or authorization of,
or filing with any governmental  authority,  including any court, or other third
party is required in  connection  with  Seller's  valid  execution,  delivery or
performance  of  this  Agreement  or  the   consummation   of  any   transaction
contemplated hereby.



                                       8
<PAGE>

     Section 4.5  Litigation;  Judgments.  Except as set forth on Schedule  4.5,
there  is no  action,  proceeding  or  investigation  pending  or,  to  Seller's
knowledge,  threatened  against or  involving  Seller  relating to the  Acquired
Assets or the PRENATE  Business,  nor is there any action or proceeding  pending
or,  to the  knowledge  of Seller  threatened  before  any  court,  tribunal  or
governmental  body seeking to restrain or prohibit or to obtain damages or other
relief in connection with the consummation of the  transactions  contemplated by
this  Agreement,  or which might  adversely  affect the PRENATE  Business or the
Acquired Assets, or Seller's ability to consummate the transactions contemplated
by this Agreement.  Seller is not subject to any judgment,  order or decree,  or
entered  in or become  subject  to any  lawsuit or  proceeding  relating  to the
Acquired Assets or the operation of the PRENATE Business, except as set forth in
Schedule 4.5.

     Section 4.6 Trademarks.  Schedule 1.1(e) lists all of the Trademarks  owned
or used in connection with the PRENATE Business,  other than the corporate names
of Seller. There are no trademark registrations,  trademark applications, common
law trademark rights, service marks, logos, trade dress, tradenames and internet
domain names which are material to the conduct of the PRENATE Business which are
not set forth on Schedule 1.1(e) other than corporate names of Seller.

     In addition, Seller represents and warrants, as of the date hereof, that:

          (a)  it  is  the  owner  of  the  trademark  registrations,  trademark
applications  and common law  trademarks set forth on Schedule  1.1(e)  together
with the goodwill of the PRENATE Business symbolized thereby;

          (b) the trademark  registrations  and  applications  set forth on such
Schedule 1.1(e) are in good standing; and

          (c) no other firm, corporation,  association, or person has a right to
use any of the trademarks (to Seller's  knowledge as to PRENATE GT) reflected on
Schedule 1.1(e).

     Section 4.7  Intellectual  Property and  Indemnification.  All of the trade
secrets,  inventions,  know-how,  processes,  product  specifications,  designs,
copyrights,  formulae and patents  (collectively,  the "Intellectual  Property")
which are used by Seller in the operation of the acquired  PRENATE  Business are
(i) owned by Seller (except with respect to the  Softlet(TM)  technology used by
Banner  Pharmacaps  Inc.  ("Banner") to gelatin enrobe tablets of PRENATE GT for
Seller,  which  technology  is owned by  Banner),  or (ii) to the  knowledge  of
Seller, are part of the public domain. Seller has taken commercially  reasonably
efforts to protect the  confidential  nature of its trade  secrets,  inventions,
know-how,  processes, product specifications and designs to the extent necessary
or appropriate in the context to protect its competitive position in the PRENATE
Business,  and  any  employees,  agents  or  independent  contractors  who  have
contributed  to or  participated  in  the  creation  of  any  such  intellectual
properties are a party to  "Work-For-Hire"  agreements under which Seller or its
transferee would be deemed to be the owner of such proprietary rights. A list of
all copyright or patent  issuances or applications  included in the Intellectual
Property  is set forth on  Schedule  4.7(a).  Except  as set  forth in  Schedule
4.7(b), to Seller's knowledge  Seller's use of the Intellectual  Property in the
United States, and the Purchaser's continued use of the Intellectual Property in


                                       9
<PAGE>

the United States following the Closing in the same manner as heretofore used by
Seller, does not infringe on the rights of any person or entity.

     Seller  hereby  agrees to  indemnify,  defend and hold  harmless  Purchaser
Indemnified  Parties  from,  against and in respect of any Losses (as defined in
Section 12.3 below) arising out of or relating to any claim of  infringement  of
the matter disclosed on Schedule 4.7(b) as item 1.

     Section 4.8 Inventory.  All Inventory  complies with the Specifications and
is, in the case of finished goods, of a quality  saleable in the ordinary course
of business and, in the case of Sample  Inventory,  is of a quality and quantity
useable in the ordinary  course of business.  No purchase  commitments of Seller
are in excess of the normal, ordinary and usual requirements of its business, or
made at any price in excess of the then current  market price,  or contain terms
and conditions more onerous than those usual and customary in the conduct of the
Seller's business.

     Section 4.9 Financial  Statements.  Schedule 4.9 contains the statements of
income as of and for each of the three (3) years ending December 31, 2000 and as
of and for the six (6) months ending June 30, 2001 (collectively, the "Financial
Statements")  for the PRENATE  Business,  which are derived  from the  financial
statements  of the Seller,  which  financial  statements  have been  prepared in
accordance with United States generally accepted accounting  principles ("GAAP")
consistently  applied  during the periods  presented.  The Financial  Statements
fairly present the financial condition of the PRENATE Business at the respective
dates thereof and the results of operations for the periods.

     Section 4.10  Compliance  with Laws.  Except as disclosed on Schedule  4.10
attached hereto,  Seller, to the best of its knowledge,  is not in violation of,
and has not violated,  any applicable Federal,  state,  local,  foreign or other
law,  regulation  or  order  or  any  other  requirement  of  any  governmental,
regulatory  or  administrative  agency or authority  or court or other  tribunal
(collectively, "Governmental Authority") relating to the PRENATE Business or the
Acquired  Assets,  and Seller is not now charged  with,  and to the knowledge of
Seller,  Seller is not now under  investigation  with  respect  to any  possible
violation of any applicable law,  regulation,  order or requirement  relating to
any of the  foregoing in  connection  with the PRENATE  Business or the Acquired
Assets,  and  Seller  has  filed  all  reports  required  to be  filed  with any
Governmental Authority.

     Section 4.11 Licenses and Permits.  Seller holds and is in compliance  with
all materially  important  licenses.  Schedule 4.11 includes all of the licenses
necessary or required  for the use or  ownership of the Acquired  Assets and the
operation of the PRENATE  Business.  Seller has not received  written notice of,
nor does it have  any  knowledge  of,  any  violations  in  respect  of any such
licenses.  No  proceeding  is  pending  or,  to  the  knowledge  of  Seller,  is
threatened,  which seeks revocation or limitation of any such licenses. Schedule
4.11 includes the expiration or renewal date, as applicable, of such licenses.

     Section 4.12 Sufficiency of Assets.  The Acquired Assets  constitute all of
the assets and rights  primarily  used by Seller in connection  with the PRENATE
Business for the twelve-month  period prior to the Closing Date, subject only to
additions  and  deletions  in the  ordinary  course of  business  except for the
Seller's personnel and working capital.



                                       10
<PAGE>
                                        [***] - Confidential Treatment Requested

     Section 4.13 Contracts and Leases.  Schedules 1.1(e)-1,  1.1(e)-2,  1.3(a),
4.4 and  4.13  sets  forth a true and  complete  lists  of all  written  or oral
contracts,  customer contracts, vendor and other agreements to which Seller is a
party relating to the PRENATE Business  (collectively,  the "Contracts")  except
any  contract,   agreement  or  understanding   involving  an  aggregate  annual
expenditure of less than $[***].  Prior to execution of this  Agreement,  Seller
has provided to Purchaser  true,  correct and complete  copies of the Contracts,
including any and all  amendments  and waivers  thereto.  Except as disclosed on
Schedule  4.13-a,  such  Contracts are valid,  legally  binding and  enforceable
against the parties  thereto  subject to laws of general  application  in effect
affecting  creditors' rights and subject to the exercise of judicial  discretion
in accordance  with general  equitable  principles.  Neither  Seller nor, to the
knowledge of Seller,  any other party to any of the Contracts,  is in breach of,
or in default under, any of the Contracts, and no event has occurred which, with
the giving of notice or lapse of time,  or both,  would  constitute a default by
Seller or, to the knowledge of Seller,  any other party to any of the Contracts.
Except as specifically set forth on Schedule 4.4 attached hereto, the assignment
of any of the Contracts to the Purchaser in accordance  with this Agreement will
not constitute a breach or violation of such Contract.

     Except as set forth in Schedule 4.13(b), no Contracts scheduled as required
by this Section  4.13  contain  obligations  for  expenditures  in excess of the
amounts  set forth in said  Contracts  or,  if not set  forth in the  Contracts,
obligations in excess of $[***] per Contract.

     Section  4.14  Broker's  Fees.  Seller has not  retained  or  utilized  the
services of any broker, finder or intermediary, or paid or agreed to pay any fee
or  commission  to  any  other  person  or  entity  for  or on  account  of  the
transactions  contemplated  hereby, or had any communications with any person or
entity with respect thereto,  which would obligate the Purchaser to pay any such
fees or commissions.

     Section 4.15 Absence of Material  Changes.  Since December 31, 2000, except
as set forth on Schedule 4.15, there has not been any material adverse change in
the  financial  condition of the PRENATE  Business or the  liabilities,  assets,
operations and results of operations of the PRENATE Business.

     Section 4.16 Principal Place of Business;  Trade Names. The principal place
of business for Seller is, and has been for the last five years, as set forth on
Schedule  4.16.  Seller  has not done  business  under any names  other than its
corporate  name  during such period  except as set forth on Schedule  4.16.  The
locations at which Seller maintains Inventory are set forth on Schedule 4.16.

     Section 4.17 Discounts and Rebates.  Schedule 4.17 sets forth all discounts
and rebates granted to wholesalers and chain customers  provided with respect to
the PRENATE Business for the twelve-month period ending on the date hereof.




                                       11
<PAGE>

                                    ARTICLE V
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

     Purchaser hereby represents and warrants to Seller as follows:

     Section 5.1 Organization,  Good Standing,  Corporate Power and Authority of
Purchaser.  Purchaser is a corporation  duly organized,  validly existing and in
good standing under the laws of its jurisdiction of  incorporation  and has full
power and  authority to enter into this  Agreement  and all other  agreements or
instruments  executed  and  delivered  by it pursuant to this  Agreement  and to
perform the  obligations  required of it under this Agreement and any such other
agreements or instruments.

     Section 5.2 Effective Agreement of Purchaser. The execution and delivery by
Purchaser of this Agreement and all other agreements or instruments executed and
delivered by Purchaser at the Closing and the  consummation  by Purchaser of the
transactions  contemplated  hereby and thereby have been duly  authorized by all
necessary  corporate  action  of  Purchaser,  and this  Agreement  and any other
agreements  or  instruments  executed and delivered by Purchaser at the Closing,
when executed and  delivered by  Purchaser,  will  constitute  legal,  valid and
binding  obligations of Purchaser  enforceable  against  Purchaser in accordance
with  their  respective  terms.  Neither  the  execution  and  delivery  of this
Agreement nor the consummation of the transactions  contemplated hereby will (a)
violate  any  provision  of the  Certificate  of  Incorporation  or  By-Laws  of
Purchaser,  as amended to date,  (b) with or without the giving of notice and/or
the passage of time, violate, conflict with, result in the breach or termination
of,  constitute a default under or result in the creation of any material  lien,
charge or encumbrance  upon any of the assets or property of Purchaser  pursuant
to, any contract,  agreement,  lease or commitment to which Purchaser is a party
or by which  Purchaser  or any of its  assets  or  property  may be bound or (c)
violate any judgment,  decree, order,  statute, rule or governmental  regulation
applicable to Purchaser or any of its assets, property or business.

     Section 5.3 Consents.  Except for the notification  requirements of the HSR
Act, no consent, approval,  qualification,  order or authorization of, or filing
with, any governmental  authority,  including any court, or other third party is
required in connection with Purchaser's valid execution, delivery or performance
of this Agreement or the consummation of any transaction contemplated hereby.

     Section 5.4 Litigation.  There are no actions, suits, proceedings or claims
pending or, to the  knowledge  of  Purchaser,  threatened  against or  affecting
Purchaser or its business which could prevent or interfere with the consummation
of the transactions contemplated hereby.

     Section 5.5 Financing Commitment. Purchaser has or will have at the Closing
sufficient funds to fulfill its obligations hereunder.

     Section 5.6 Brokers.  Purchaser  has not employed  any  investment  banker,
broker, finder or intermediary in connection with the transactions  contemplated
hereby who might be entitled to a fee or  commission  upon the execution of this
Agreement or the consummation of such transactions.



                                       12
<PAGE>

                                   ARTICLE VI
                               COVENANTS OF SELLER

     Seller hereby covenants and agrees with Purchaser as follows:

     Section 6.1 Interim  Operation of Business.  From and after the date hereof
until the Closing, Seller will operate the PRENATE Business only in the ordinary
course and in substantially  the same manner as it has heretofore  operated such
business  (except as otherwise  contemplated by this  Agreement),  and,  without
limiting  the  generality  of the  foregoing,  Seller shall not (except with the
prior written consent of Purchaser):

          (a)  institute  any price  change with  respect to the sale of PRENATE
Products or accept a price increase from any manufacturer or supplier;

          (b) authorize  Seller's sales  representatives  to promote the PRENATE
Products in any manner other than the ordinary course;

          (c)  launch  PRENATE  GT;  provided,  if the  Closing  shall  not have
occurred by October 31, 2001  (through no fault or delay by Seller),  Seller may
launch the PRENATE GT line after October 31, 2001;

          (d)  materially  amend,  modify,  or terminate  any material  contract
relating to the PRENATE Business;

          (e) make any  material  changes in its methods or business  operations
related to the PRENATE Business; or

          (f) enter any  discussions  or  negotiations,  directly or indirectly,
with any third  parties  for the sale of the PRENATE  Business  or the  Acquired
Assets (except for sales of Inventory in the ordinary course).

     Section 6.2 Consents.  Between the date hereof and the Closing, Seller will
use its reasonable commercial efforts (exclusive of the Patheon Inc. ("Patheon")
Manufacturing  and Supply  Agreement  (the "Patheon  Agreement")  and the Banner
Pharmacaps  Inc.  ("Banner  Agreement")  (defined in Section  9.6) to obtain the
consents of third  parties (the  "Consents")  indicated in Schedule 4.4 as being
required to permit the  consummation of the  transactions  contemplated  hereby.
Nothing  contained in this Agreement  shall be construed as an attempt to assign
any  Contract  which is in law  non-assignable  without the consent of the other
party or parties thereto unless such consent shall have been obtained.  If, with
respect to any Contracts to be assigned to Purchaser hereunder,  such consent is
not obtained,  Seller and Purchaser will  cooperate in any  reasonable  mutually
agreeable  arrangement,  such as subleases or  management,  license or operating
agreements,  designed to enable  Purchaser  to realize the  benefits  under such
Contracts and to place Seller's  obligations  thereunder upon Purchaser from and
after the Closing.

     Section  6.3 NDC  Numbers.  Seller  shall not  discontinue  any NDC  number
related to the PRENATE  Business  for a period of nine months  after the Closing
Date.



                                       13
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                                        [***] - Confidential Treatment Requested

     Section  6.4  Purchaser  Access.  Prior  to  the  Closing,  (i)  authorized
representatives  of Purchaser  shall have  reasonable  access to the properties,
books, records, and documents of Seller pertaining to the PRENATE Business, (ii)
Seller will furnish to Purchaser all information  with respect to the affairs of
the PRENATE Business that Purchaser may reasonably request,  and (iii) Purchaser
shall have the right,  with  Seller's  prior  consent and  participation,  which
consent shall not be unreasonably withheld, to contact Patheon and Banner.

     Section 6.5 Intentionally omitted

     Section 6.6  Recalls.  From and after the Closing  Date,  all  liabilities,
obligations  and  responsibilities  relating to the  voluntary  and  involuntary
recalls of PRENATE  Product  sold by  Purchaser  after the Closing Date shall be
assumed by Purchaser,  except to the extent that such recall is for a failure of
the Inventory,  the Sample  Inventory or the PRENATE Product to meet the product
specifications  set forth in that certain  agreement  between Patheon and Seller
dated  October 1, 1999 and as set forth on the label of the  respective  PRENATE
Product (the "Specifications"),  where such failure is due solely to the actions
or omissions of Seller (or its  manufacturer)  ("Defective  Inventory").  Seller
shall reimburse Purchaser for all liabilities,  obligations and responsibilities
relating to voluntary and involuntary recalls of the PRENATE Product which occur
after the  Closing  Date to the extent  that such  PRENATE  Product  was sold by
Seller  prior  to  the  Closing  Date  or to the  extent  such  PRENATE  Product
constitutes   Defective   Inventory.   NOTWITHSTANDING   THE   FOREGOING,   SUCH
REIMBURSEMENT SHALL NOT INCLUDE INCIDENTAL,  INDIRECT,  CONSEQUENTIAL OR SPECIAL
DAMAGES.

     Section 6.7 Use of Seller Name.

          (a)  Purchaser  shall not use the  corporate  or  divisional  names of
Seller (collectively, the "Seller Names") in any manner whatsoever in connection
with the manufacture,  use, sale, promotion,  advertising or distribution of the
PRENATE Products after the Closing Date, provided,  however,  Purchaser may use,
distribute, and sell the Inventory and Sample Inventory purchased from Seller by
Purchaser  hereunder  bearing the Seller Names for [***] months following the
Closing Date or until such Inventory is depleted, whichever occurs first ("Final
Inventory Sell Off Date").

          (b)  Purchaser  may  use  and  distribute  the  promotional  materials
purchased  by  Purchaser  from  Seller and the  PRENATE  Product  Internet  site
transferred  pursuant to this Agreement bearing the Seller Names until the Final
Inventory Sell Off Date.  Purchaser  agrees that after the Final  Inventory Sell
Off  Date  all  promotional  materials  containing  the  Seller  Names  shall be
destroyed at Purchaser's sole cost and expense.

     Section 6.8 Adverse Event  Reporting.  On and after the Closing Date,  each
party  shall  have a  continuing  obligation  to notify  the other  party of any
adverse experience, whether expected or not, reported to such party arising from
or in connection with the use of the PRENATE Product.  This  notification  shall
occur  within  72 hours  for an  unexpected  fatal or life  threatening  serious
adverse drug experience associated with the PRENATE Products. For post-marketing
adverse drug  experience  reports,  Seller shall report to Purchaser all serious
adverse drug experience  reports for the PRENATE  Products within 72 hours after
the time such report becomes known to any employee, agent or affiliate of Seller
and all other  adverse  drug  experience  reports  for the  product on a rolling


                                       14
<PAGE>

10-day basis.  Seller shall notify  Purchaser within 48 hours of any information
on any  incident  that  causes any of the  PRENATE  Products  or  labeling to be
mistaken for or applied to another article,  any bacteriological  contamination,
any  significant  chemical,  physical,  or other  change in a  distributed  drug
product,  or any  failure  of a  distributed  batch  of a drug  product  to meet
Specifications.  All notifications pursuant to this paragraph shall be by fax or
email  at  such  numbers  (or  email  addresses)  agreed  upon  by the  parties'
respective  safety  divisions.  Except  as  otherwise  stated  above,  the terms
"adverse drug experience," "life threatening," "serious adverse drug experience"
and  "unexpected"  used in this paragraph shall have the meaning set forth in 21
CFR 314.80.

                                   ARTICLE VII
                             COVENANTS OF PURCHASER

     Section 7.1 Confidentiality of Information.  From and after the date hereof
until the  Closing  and in the event that the  Closing  shall not occur and this
Agreement shall terminate,  from and after such  termination,  neither Purchaser
nor any officer, attorney,  accountant or other representative of Purchaser will
use,  disclose or cause to be disclosed,  to any  corporation  or other business
organization  or any other  person  for any reason or  purpose  whatsoever,  any
confidential  information relating to the financial,  business and other affairs
of Seller,  or any customer  list or other trade  secret of Seller,  obtained by
Purchaser in connection with the transactions contemplated by this Agreement. If
for any reason  whatsoever the  transactions  contemplated by this Agreement are
not consummated,  Purchaser shall promptly return to Seller all books,  records,
documents  and any other  materials  furnished  to Purchaser by Seller or any of
Seller's  affiliates,  agents,  employees,  or  representatives  (including  all
copies, if any, thereof) in connection herewith.

                                  ARTICLE VIII
                                MUTUAL COVENANTS

     Section  8.1 Best  Efforts.  Subject  to the terms and  conditions  of this
Agreement,  each of the  parties  hereto will use its best  efforts to take,  or
cause to be  taken,  all  actions,  and to do, or cause to be done,  all  things
necessary,  proper  or  advisable  under  applicable  laws  and  regulations  to
consummate and make effective the  transactions  contemplated by this Agreement.
Without  limiting the  foregoing,  Seller agrees to exercise its best efforts to
satisfy  the  conditions  set forth in Section  9.6 by not later than  August 9,
2001.

     Section 8.2 Public  Announcements.  Seller and Purchaser  will consult with
each other  before  issuing any press  releases or  otherwise  making any public
statements  or  statements  to the trade with respect to this  Agreement and the
transactions  contemplated hereby and neither of them shall issue any such press
release or make any such public or trade statement prior to such  consultations,
except as may be  required  by law or by  obligations  pursuant  to any  listing
agreement with any securities exchange.

     Section 8.3  Cooperation.  Purchaser and Seller shall  cooperate  with each
other  and  shall  cause  their  respective  officers,   employees,  agents  and
representatives  to  cooperate  with each other for a period of thirty (30) days
after the Closing to ensure the orderly  transition of the PRENATE Business from
Seller to Purchaser and to minimize the disruption to the respective  businesses
of Seller and Purchaser  resulting from the  transactions  contemplated  hereby.
Neither  party  hereto shall be required by this Section to take any action that
would unreasonably interfere with the conduct of its business.



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<PAGE>

                                        [***] - Confidential Treatment Requested

     Section 8.4 St. Louis  Packaging  Agreement.  At the  Closing,  the parties
shall  enter  into a  packaging  services  agreement  in the form of  Exhibit  E
attached hereto with respect to the provision of packaging services to Purchaser
by Seller's St. Louis facility (the "St. Louis Packaging Agreement").

     Section 8.5 Records.

          (a)  Purchaser  agrees  that it shall  preserve  and  keep all  books,
records,  returns,  schedules and work papers and all material  records or other
documents transferred by Seller relating to the PRENATE Business for a period of
six (6) years from the  Closing  Date or, if  longer,  the  period  required  by
applicable  governmental  statute or  regulation.  Until such  expiration,  duly
authorized  representatives of Seller shall, upon reasonable notice, have access
thereto during normal business hours to examine, inspect and copy such books and
records.  Purchaser shall not,  subject to the retention period described above,
destroy  or cause to be  destroyed  any such  books  or  records  without  first
obtaining the written consent of Seller. In the event Seller desires any of such
books and records to be retained for any longer  period,  such books and records
shall,  at the option of  Purchaser,  either be retained by Purchaser or shipped
promptly to Seller at Seller's expense.

          (b) Seller and Purchaser will provide each other with  cooperation and
information as either of them may reasonably  request of the other in filing any
tax return,  amended  return or claim for refund,  determining  a liability  for
taxes  or a right  to a  refund  of  taxes,  in  conducting  any  audit or other
proceeding  in respect  of taxes,  in  connection  with the  enforcement  of any
indemnity  right of Seller or  Purchaser  under any  agreement  relating  to the
PRENATE  Business.  Such  cooperation  and information  shall include  providing
copies of all relevant tax returns,  documents and records, or portions thereof,
relating  exclusively to the PRENATE Business.  Each party hereto shall make its
employees available on a mutually convenient basis to provide explanation of any
documents or information provided hereunder.

     Section 8.6 PRENATE GT. For  purposes of this  Section  8.6,  this  Section
shall not include PRENATE GT if launched by Purchaser.

     Section 8.6(a) Returns.  For the period from the Closing Date through [***]
thereafter  ("Reimbursement  Period"),  Seller shall reimburse Purchaser for all
returns of finished goods Inventory that are returned to Purchaser. With respect
to finished goods Inventory returned to Seller during the Reimbursement  Period,
Seller  shall bear the cost of (and  reimburse  the  customer  for) the returned
merchandise.  Notwithstanding the foregoing, with regard to lot numbers RF10 and
RF11, the Reimbursement  Period shall be [***]. From and after the expiration of
the  Reimbursement  Period,  Purchaser  shall be responsible  for all returns of
finished goods  Inventory  regardless of the date of sale,  and Purchaser  shall



                                       16
<PAGE>

                                        [***] - Confidential Treatment Requested

reimburse  Seller for any  finished  goods  Inventory  returned  to Seller  with
respect  to which  Seller  has  reimbursed  the  customer.  Neither  Seller  nor
Purchaser shall take any action to encourage or delay the return of any finished
goods  Inventory,  and, in connection  therewith,  Purchaser agrees that it will
continue to make the PRENATE  ADVANCE line  available  during the  Reimbursement
Period.  Notwithstanding  the  foregoing,  Purchaser  shall be solely liable for
returns with respect to any finished goods  Inventory  bearing  Purchaser's  NDC
number.  Reimbursements  due under this  Section to either  Purchaser  or Seller
shall be paid within 30 days after receipt of the applicable invoice.

     Section 8.6(b) Medicaid Rebates.  The dates and time periods  referenced in
this Section  8.6(b) are based on the Closing  Date being in the third  calendar
quarter of 2001.  If the Closing  Date is in a  subsequent  quarter,  such dates
shall be changed accordingly.  "Medicaid Rebates" shall mean all liabilities and
obligations  arising  from all  rebates to state  Medicaid  and other  state and
governmental programs (collectively, the "Medicaid Groups") relating the PRENATE
Products,  excluding  PRENATE Products having  Purchaser's NDC number.  Medicaid
Rebates  shall be deemed to have  occurred in the calendar  quarter in which the
pharmacy  or  other  applicable  entity  is  reimbursed  by  Medicaid  or  other
applicable entity. Seller shall continue to pay Medicaid Rebates directly to the
entities  entitled to such  payments.  Purchaser  shall  reimburse  Seller for a
portion of Medicaid Rebates  occurring in the first quarter of 2002 (the "Rebate
Credit Amount") as follows.  The Rebate Credit Amount shall mean an amount equal
to the product of (i) the Medicaid  Rebates  occurring in the [***],  and (ii) a
fraction, the numerator of which is the number of days that elapsed in the [***]
after the Closing Date and the denominator of which is the number of days in the
[***].  Purchaser shall reimburse  Seller for any Medicaid Rebates arising after
the [***]  which were paid by Seller.  Purchaser  shall pay to Seller the Rebate
Credit Amount and such other  reimbursement as required  hereunder within thirty
(30) days of receipt of an invoice and adequate  supporting  documentation  from
Seller regarding the same.

     Section  8.6(c) Other  Rebates and  Chargebacks.  During the  Reimbursement
Period,  Seller shall reimburse  Purchaser for (i) all rebates ("Trade Rebates")
to pharmacy benefit management  companies,  health plans,  insurance  companies,
mail service  pharmacies and other healthcare  providers  (collectively,  "Trade
Groups") and (ii) all credits, chargebacks, reimbursements,  administrative fees
and other  payments to  wholesalers  and other  distributors,  group  purchasing
organizations,  insurers and other  institutions  (collectively,  "Chargebacks")
relating to the PRENATE Products.  Trade Rebates and Chargebacks shall be deemed
to have  occurred on the date that the  pharmacy or other entity  purchased  the
PRENATE  Product  giving  rise  to the  Trade  Rebate  or  Chargeback  from  the
wholesaler.  Notwithstanding the foregoing, Purchaser shall be solely liable for
Trade  Rebates and  Chargebacks  with  respect to any PRENATE  Products  bearing
Purchaser's  NDC  number.  Trade  Rebates  and  Chargebacks  owed by  Seller  to
Purchaser  shall be payable  within 30 days after receipt by Seller of a written
invoice from  Purchaser  for same.  In the event a Trade Rebate or Chargeback is
submitted directly to Seller during the Reimbursement  Period,  Seller shall pay
the Trade Rebate or Chargeback amount to the party entitled to such Trade Rebate
or  Chargeback.  Purchaser  shall  be  responsible  for all  Trade  Rebates  and
Chargebacks  related to the sale of the  PRENATE  Product  that occur  after the
Reimbursement Period.  Notwithstanding the foregoing with respect to rebates and
discounts  granted by either  party  directly to  wholesalers  and other  direct
customers,  Seller  shall be  financially  responsible  for all such rebates and
discounts  granted on or before the Closing and Purchaser  shall be  responsible
for all such rebates and discounts granted after the Closing.  In the event that
it cannot be  ascertained  which party  granted the rebate or  discount,  Seller
shall be financially  responsible  for any rebates and discounts  granted in the
Reimbursement  Period.  Seller shall not be responsible  for any  Chargebacks or
Trade  Rebates  with regard to the Prenate  Business to Trade Groups who are not
customers of Seller.



                                       17
<PAGE>

     During the Reimbursement Period,  Purchaser shall not enter into any rebate
agreement,  except  in the  ordinary  course of  business  and  consistent  with
Seller's past practices.

     Section 8.6(d)  Notification.  Upon Closing, (i) Purchaser and Seller shall
jointly  notify  wholesalers  that  returns  are to be  sent  to  Purchaser  and
Chargebacks are to be paid by Purchaser, (ii) Seller and Purchaser shall jointly
notify all Medicaid  Groups of the change of ownership of the PRENATE  Products,
and (iii) Seller and Purchaser shall jointly notify  wholesalers that orders are
to be placed with Purchaser.

     Section 8.7 Adverse Experience Reports. Seller shall provide to Purchaser a
true,  correct and  complete  description  the  investigation  and  reporting of
serious  adverse  experiences  regarding the PRENATE  Business  since five years
prior to the Closing Date. After the Closing Date,  Seller shall promptly submit
to Purchaser  all adverse drug  experience  information  or customer  complaints
brought to the  attention of Seller in respect of such Prenate  Products as well
as any  material  events  and  matters  concerning  or  affecting  the safety or
efficacy thereof. Further, prior to Closing, Seller shall provide Purchaser with
information  regarding  expected and  unexpected  adverse  events since five (5)
years prior to Closing.

     Section 8.8  Further  Actions,  Consents  and  Filings.  Upon the terms and
subject to the  conditions  hereof,  each of the  parties  hereto  shall use its
reasonable  commercial  efforts to (i) take,  or cause to be taken,  all actions
necessary,  proper or advisable under  applicable law or otherwise to consummate
and make effective the transactions  contemplated by this Agreement, (ii) obtain
from the  requisite  governmental  authorities  and third  parties any consents,
licenses,  permits,  waivers,  approvals,  authorizations (including Purchaser's
obtaining an NDC number) or orders required to be obtained or made in connection
with  the  authorization,  execution  and  delivery  of this  Agreement  and the
consummation of the  transactions  contemplated by this Agreement and (iii) make
all necessary filings, and thereafter make any other advisable submissions, with
respect to this Agreement and the  transactions  contemplated  by this Agreement
required  under the HSR Act and any other  applicable  law.  The parties  hereto
shall  cooperate  with  each  other in  connection  with the  making of all such
filings.  The parties  hereto  shall  furnish all  information  required for any
application or other filing to be made pursuant to the rules and  regulations of
any  applicable law in connection  with the  transactions  contemplated  by this
Agreement.

     Section  8.9  HSR  Filing.  Seller  and  Purchaser  shall  file  as soon as
practicable after the date of this Agreement notifications under the HSR Act and
any similar law that requires such notification and shall respond as promptly as
practicable  to all  inquiries  or  requests  received  from the  Federal  Trade
Commission or the Antitrust Division of the Department of Justice,  or any other
competent  authority  for  additional  information  or  documentation  and shall
respond as promptly as practicable  to all inquiries and requests  received from
any such  authority in  connection  with  antitrust  matters.  The parties shall
cooperate  with each other in connection  with the making of all such filings or
responses,  including  providing copies of all such documents to the other party
and its  advisors  prior to filing  or  responding.  At  Closing,  Seller  shall
reimburse  Purchaser  for 50% of the filing  costs  incurred by  Purchaser  with
respect to the notifications required under the HSR Act.

     Section 8.10 Response to Medical  Inquiries and Product  Complaints.  Until
the Closing and for the three-month period thereafter,  Seller shall continue to
be  responsible  for  responding to all adverse  events,  complaints and medical
inquiries relating to the Products.  Seller shall document all responses made by


                                       18
<PAGE>

                                        [***] - Confidential Treatment Requested

Seller hereunder and shall provide reports thereof on a thirty (30) calendar day
basis to Purchaser. These inquiries may arise from many sources such as (but not
limited to) direct  telephone calls or written  correspondence  to either party.
During the period  prior to Closing,  Purchaser  shall  promptly  refer all such
medical  inquiries  that it receives to Seller for response in  accordance  with
Seller's  internal  procedures for reporting  product  complaints.  In addition,
until the Closing,  Purchaser  shall refer any complaints that it receives about
the Products to Seller for  response.  After the  three-month  period  following
Closing, Purchaser shall assume all responsibility for responding to any medical
inquiries  or  complaints  about  the  Products,  provided  Purchaser  shall use
commercially  reasonable efforts to assume responsibility for these responses as
soon as possible after Closing.

     Section 8.11 Managed Care  Agreements.  To the extent that Seller is unable
to assign any  agreement  of Seller for the payment of Medicaid  Rebates,  Trade
Rebates or Chargebacks  ("Managed Care Agreements") to Purchaser with respect to
the PRENATE  Products,  Purchaser  agrees to reimburse  Seller for the amount of
such  Medicaid  Rebates,  Trade  Rebates or  Chargebacks  under the Managed Care
Agreements to the extent  Purchaser is  responsible  for same under Section 8.6.
Payments due Seller by Purchaser  pursuant to the  foregoing  sentence  shall be
paid within 30 days after receipt by Purchaser of a written  invoice from Seller
for same. The foregoing  shall be for the greater of the following:  (a) one (1)
year  from  the  date  of  this  Agreement;  or (2) the  expiration  or  earlier
termination of the Managed Care Agreements.

     Section 8.12 Between the date of this Agreement and Closing,  Purchaser and
Seller  shall use their best  efforts to enable  Purchaser,  at its  option,  to
launch,  upon Closing,  the initial lots of PRENATE GT (the "Launch  Materials")
under  the  name  and NDC  number  of the  Purchaser.  Such  effort  shall be at
Purchaser's  sole expense and may include,  but not be limited to, the following
activities: (i) stickering of packaging of the Launch Materials with Purchaser's
trade  dress,  logo and NDC  number  and (ii)  packaging  of bulk  PRENATE GT in
packaging printed with Purchaser's trade dress logo and NDC number.

     Section 8.13 No Solicitation of Employees. For a period of [***] years from
and after the Closing Date,  the parties  covenant and agree that they will not,
directly  or  indirectly,  on their own behalf or in the service or on behalf of
others, hire or attempt to hire any then current employee of the other party, or
to cause any such employee to leave his or her  employment.  The foregoing shall
not prohibit general solicitations by the party not specifically directed toward
employees of the other party.

     Section 8.14  Conversion of WIP. Seller shall,  after the Closing,  convert
all WIP in existence at the Closing Date to Useable Inventory and shall sell the
Useable  Inventory to Purchaser,  and Purchaser shall purchase at the Unit Price
set forth in Schedule 2.2.




                                       19
<PAGE>

                                   ARTICLE IX
                     CONDITIONS TO OBLIGATIONS OF PURCHASER

     The  obligations  of  Purchaser  to  consummate  the   transactions  to  be
consummated by it at the Closing are subject to the  satisfaction at or prior to
the Closing of each of the following  conditions  (any of which may be waived by
Purchaser in its sole discretion):

     Section 9.1 Correctness of Representations and Warranties;  Compliance with
Provisions.  All of the  representations  and warranties of Seller  contained in
this  Agreement or otherwise made in writing  pursuant to this  Agreement  shall
have  been true and  correct  when  made and  shall be true and  correct  in all
material  respects at the Closing as though  restated and made at such time; all
of the terms, covenants and conditions of this Agreement required to be complied
with and  performed  by Seller at or prior to the  Closing  Date shall have been
duly complied with and performed; and Seller shall have delivered to purchaser a
certificate  signed by an officer  of Seller,  dated the  Closing  Date,  to the
foregoing effect.

     Section  9.2  Absence  of   Litigation.   No   litigation,   proceeding  or
governmental  investigation  or inquiry  shall be pending or  threatened  at the
Closing Date in which it is sought or threatened to restrain,  enjoin, restrict,
limit  or  prohibit  (or to  obtain  substantial  damages  as a  result  of) the
consummation of the transactions contemplated by this Agreement.

     Section 9.3 Consents.  Seller shall have received the Consents contemplated
by Schedule  4.4, in form  reasonably  satisfactory  to  Purchaser  or alternate
arrangements  reasonably  satisfactory  to  Purchaser  shall  have been made and
entered into as contemplated by Section 6.2.

     Section 9.4 HSR Act. All filings under the HSR Act shall have been made and
any required  waiting  period under the HSR Act  applicable to the  transactions
contemplated hereby shall have expired or been earlier terminated.

     Section  9.5  Proceedings  and  Documentation.   All  corporate  and  other
proceedings  required  to  carry  out  the  transactions  contemplated  by  this
Agreement and all instruments and other documents  relating to such transactions
shall be reasonably  satisfactory in form and substance to Purchaser's  Counsel,
and Purchaser  shall have been furnished with (a) copies of resolutions  adopted
by the Board of Directors of Seller,  authorizing  the execution and delivery by
Seller of this Agreement and all other  agreements or  instruments  executed and
delivered by Seller pursuant to this Agreement and the consummation by Seller of
the transactions contemplated hereby and thereby,  certified by the Secretary or
an  Assistant  Secretary of Seller,  (b) a  certificate  of the  Secretary or an
Assistant  Secretary of Seller with respect to the incumbency of all officers of
Seller  executing  instruments  and  other  documents  in  connection  with  the
transactions  contemplated by this Agreement and (c) such other  instruments and
documents as such counsel shall have reasonably requested.

     Section  9.6  Manufacturing  Agreements.  A  manufacturing  agreement  (the
"Banner  Agreement")  with Banner shall have been  executed by Seller and Banner
having the financial terms as stated in the draft,  attached hereto as Exhibit F
and otherwise  substantially similar to Exhibit F and which shall be assigned to
Purchaser  from Seller at Closing.  The Patheon  Agreement  shall be assigned to
Purchaser at Closing.



                                       20
<PAGE>

                                        [***] - Confidenital Treatment Requested

     Section 9.7 Closing  Deliveries.  Seller shall have  delivered to Purchaser
all items described in Section 3.2.

     Section 9.8 Material  Adverse Effect.  No circumstance  shall have occurred
that  would  have a  material  adverse  effect on the  PRENATE  Business  or the
Acquired  Assets  since  the  date  of  this  Agreement.  For  purposes  of this
Agreement,  "Material  Adverse  Effect"  means any material  and adverse  effect
(excluding external market forces) in the aggregate,  upon the assets, business,
operations,  properties  or condition,  financial or  otherwise,  of the PRENATE
Business or the Acquired  Assets.  In any event,  the dollar value of a Material
Adverse Effect shall exceed $[***].


                                    ARTICLE X
                       CONDITIONS TO OBLIGATIONS OF SELLER

     The obligations of Seller to consummate the  transactions to be consummated
by it at the Closing are subject to the  satisfaction at or prior to the Closing
of each of the following conditions (any of which may be waived by Seller in its
sole discretion):

     Section 10.1 Corrections of Representations and Warranties; Compliance with
Provisions.  All of the representations and warranties of Purchaser contained in
this  Agreement or otherwise made in writing  pursuant to this  Agreement  shall
have  been true and  correct  when  made and  shall be true and  correct  in all
material  respects at the Closing as though  restated and made at such time; all
of the terms, covenants and conditions of this Agreement required to be complied
with and  performed by Purchaser at or prior to the Closing Date shall have been
duly complied with and performed; and Purchaser shall have delivered to Seller a
certificate  signed by an officer of  Purchaser,  dated the Closing Date, to the
foregoing effect.

     Section  10.2  Absence  of  Litigation.   No   litigation,   proceeding  or
governmental  investigation  or inquiry  shall be pending or  threatened  at the
Closing Date in which it is sought or threatened to restrain,  enjoin, restrict,
limit  or  prohibit  (or to  obtain  substantial  damages  as a  result  of) the
consummation of the transactions contemplated by this Agreement.

     Section 10.3 Consents. Seller shall have received the Consents contemplated
by  Schedule  4.4,  in form  reasonably  satisfactory  to  Seller  or  alternate
arrangements  reasonably satisfactory to Seller shall have been made and entered
into as contemplated by Section 6.2.

     Section  10.4 HSR Act.  All filings  under the HSR Act shall have been made
and any required waiting period under the HSR Act applicable to the transactions
contemplated hereby shall have expired or been earlier terminated.

     Section  10.5  Proceedings  and  Documentation.  All  corporate  and  other
proceedings  required  to  carry  out  the  transactions  contemplated  by  this
Agreement and all instruments and other documents  relating to such transactions
shall be reasonably  satisfactory in form and substance to Seller's counsel, and
Seller shall have been furnished  with (a) copies of resolutions  adopted by the
Board of Directors  of  Purchaser,  authorizing  the  execution  and delivery by
Purchaser  of this  Agreement  and all  other  agreements  or other  instruments


                                       21
<PAGE>

executed  and  delivered  by  Purchaser  pursuant  to  this  Agreement  and  the
consummation by Purchaser of the transactions  contemplated  hereby and thereby,
certified  by the  Secretary  or an  Assistant  Secretary  of  Purchaser,  (b) a
certificate of the Secretary or an Assistant Secretary of Purchaser with respect
to the incumbency of all officers of Purchaser  executing  instruments and other
documents in connection with the transactions contemplated by this Agreement and
(c) such other  instruments  and documents as such counsel shall have reasonably
requested.

                                   ARTICLE XI
                                   TERMINATION

     Section 11.1  Termination.  This  Agreement  may be  terminated at any time
prior to the Closing:

          (a) by  either  Seller  or  Purchaser  if the  closing  shall not have
occurred by December 31, 2001;  provided,  however,  that the right to terminate
this  Agreement  under this  Paragraph  (a) shall not be  available to any party
whose failure to fulfill any obligation under this Agreement shall have been the
cause of, or shall have  resulted  in, the failure of the Closing to occur on or
prior to such date;

          (b) by either  Seller or  Purchaser  in the event  that any  competent
government  authority shall have issued an order,  decree or ruling or taken any
other action  restraining,  enjoining or otherwise  prohibiting the transactions
contemplated  by this Agreement and such order,  decree,  ruling or other action
shall have become final and nonappealable; or

          (c) by the mutual written consent of Seller and Purchaser.

     Section 11.2 Effect of  Termination.  In the event of  termination  of this
Agreement as provided in Section 11.1,  this Agreement  shall  forthwith  become
void and there shall be no liability  on the part of either party hereto  except
(a) as set forth in  Sections  7.1 and 13.1 and (b) that  nothing  herein  shall
relieve  either party from any liability or obligation for the willful breach of
this Agreement.

                                   ARTICLE XII
                         SURVIVAL OF REPRESENTATIONS AND
                           WARRANTIES; INDEMNIFICATION

     Section   12.1   Survival   of   Representations   and   Warranties.    All
representations  and  warranties  made by Seller or Purchaser in this  Agreement
shall  survive the  Closing for 18 months;  provided,  the  representations  and
warranties  set forth in Sections  4.1, 4.2 and 4.3 shall  survive  indefinitely
(subject to applicable  statutes of  limitation).  It is understood  that in the
event notice of any claim for indemnification under Section 12.2 or Section 12.3
hereof  shall  have been  given  within  the  applicable  survival  period,  the
representations  and  warranties  that are the  subject of such  indemnification
claim shall survive until such time as such claim is finally resolved.

     Section 12.2 Indemnification by Purchaser.  Purchaser hereby agrees that it
shall  indemnify,  defend and hold  harmless  Seller,  its  affiliates,  and, if
applicable,  their  respective  directors,  officers,  shareholders,   partners,


                                       22
<PAGE>

                                        [***] - Confidential Treatment Requested

attorneys,  accountants,  agents and employees and their heirs,  successors  and
assigns (the "Seller  Indemnified  Parties") from, against and in respect of any
damages,  claims, losses, charges,  actions, suits,  proceedings,  deficiencies,
taxes, interest, penalties, and reasonable costs and expenses (including without
limitation reasonable attorneys' fees, removal costs,  remediation costs, fines,
penalties and expenses of investigation and ongoing  monitoring)  (collectively,
the "Losses") imposed on, sustained, incurred or suffered by or asserted against
any of the Seller  Indemnified  Parties,  directly or indirectly  relating to or
arising  out of (i)  any  breach  of any  representation  or  warranty  made  by
Purchaser  contained in this  Agreement or the other  documents and  instruments
delivered  pursuant  to this  Agreement  for the period such  representation  or
warranty  survives,  (ii) any failure of Purchaser  to perform or discharge  the
Assumed  Liabilities,  and (iii) the  breach of any  covenant  or  agreement  of
Purchaser  contained in this  Agreement or the other  documents and  instruments
delivered  pursuant  to this  Agreement  and (iv)  the  conduct  of the  PRENATE
Business post Closing.

     Section 12.3 Indemnification by Seller.

          (a) Seller  hereby  agrees  that it shall  indemnify,  defend and hold
harmless  Purchaser,  its  affiliates  and,  if  applicable,   their  respective
directors, officers, shareholders,  partners, attorneys, accountants, agents and
employees and their heirs,  successors and assigns (the  "Purchaser  Indemnified
Parties",  collectively with the Seller  Indemnified  Parties,  the "Indemnified
Parties")  from,  against and in respect of any Losses  imposed  on,  sustained,
incurred or suffered by or  asserted  against any of the  Purchaser  Indemnified
Parties,  directly or indirectly relating to or arising out of (i) any breach of
any representation or warranty made by Seller contained in this Agreement or the
other  documents and  instruments  delivered  pursuant to this Agreement for the
period such  representation  or warranty  survives,  (ii) the assertion  against
Purchaser  after  the  Closing  of  any  claim  based  upon  the  nonpayment  or
nonperformance  by Seller of any liability or obligation of Seller which was not
included in the Assumed  Liabilities  or which  constitute  one of the  Retained
Liabilities,  (iii) the breach of any covenant or agreement of Seller  contained
in this Agreement or the other documents and instruments  delivered  pursuant to
this Agreement, and (iv) the conduct of the PRENATE Business prior to Closing.

          (b) Seller  shall not be liable to Purchaser  Indemnified  Parties for
any Losses with respect to the matters  contained in this Section 12.3 except to
the extent the losses  therefrom  exceed  $[***] per claim.

     Section  12.4  Indemnification  Procedures.  With  respect  to third  party
claims, all claims for  indemnification by any Indemnified Party hereunder shall
be asserted  and  resolved as set forth in this  Section.  In the event that any
written claim or demand for which an indemnifying  party, Seller or Purchaser as
the case may be (an  "Indemnifying  Party")  would be liable to any  Indemnified
Party  hereunder  is  asserted  against  or  sought  to be  collected  from  any
Indemnified Party by a third party,  such Indemnified Party shall promptly,  but
in no event more than  fifteen  (15) days  following  such  Indemnified  Party's
receipt of such claim or demand,  notify the Indemnifying Party of such claim or
demand  and the  amount or the  estimated  amount  thereof  to the  extent  then
feasible  (which  estimate  shall not be  conclusive of the final amount of such
claim and demand) (the "Claim Notice"), provided, the failure of the Indemnified
Party to notify the Indemnifying  Party as provided herein shall not relieve the
Indemnifying  Party from its  indemnification  obligations  with respect thereto
except to the extent that the Indemnifying Party suffers actual loss or material
prejudice as a result of such failure. The Indemnifying Party shall have fifteen


                                       23
<PAGE>

(15) days from the personal delivery or mailing of the Claim Notice (the "Notice
Period") to notify the Indemnified  Party (a)  whether-or-not  the  Indemnifying
Party disputes the liability of the Indemnifying  Party to the Indemnified Party
hereunder with respect to such claim or demand and (b) whether or not it desires
to defend the  Indemnified  Party  against  such claim or demand.  All costs and
expenses  incurred by the  Indemnifying  Party in defending such claim or demand
shall be a liability of, and shall be paid by, the Indemnifying Party. Except as
hereinafter  provided,  in the event that the  Indemnifying  Party  notifies the
Indemnified  Party  within  the  Notice  Period  that it  desires  to defend the
Indemnified  Party against such claim or demand,  the  Indemnifying  Party shall
have the right to defend the  Indemnified  Party by appropriate  proceedings and
shall have the sole power to direct and control such defense. If any Indemnified
Party desires to  participate  in any such defense it may do so at its sole cost
and expense.  The  Indemnified  Party shall not settle a claim or demand without
the consent of the Indemnifying Party. The Indemnifying Party shall not, without
the prior written consent of the Indemnified Party, settle,  compromise or offer
to settle or  compromise  any such claim or demand on a basis which would result
in the imposition of a consent order,  injunction or decree which would restrict
the  future  activity  or  conduct  of the  Indemnified  Party or any  affiliate
thereof.  If the Indemnifying  Party elects not to defend the Indemnified  Party
against  such claim or demand as  required by this  Section  12,  whether by not
giving the Indemnified Party timely notice as provided above or otherwise,  then
the  amount of any such  claim or demand,  or, if the same be  contested  by the
Indemnified  Party,  then that  portion  thereof  as to which  such  defense  is
unsuccessful (and the reasonable costs and expenses  pertaining to such defense)
shall be the liability of the Indemnifying  Party  hereunder.  To the extent the
Indemnifying  Party  shall  direct,  control or  participate  in the  defense or
settlement of any third party claim or demand,  the Indemnified  Party will give
the Indemnifying  Party and its counsel access to, during normal business hours,
the  relevant  business  records and other  documents,  and shall permit them to
consult with the employees and counsel of the Indemnified Party. The Indemnified
Party shall use its commercially  reasonable  efforts in the defense of all such
claims.

     Section 12.5 Losses Net of  Insurance.  The amount of any loss,  liability,
claim,  damage or  expense  for which  indemnification  is  provided  under this
Article  shall be net of any amounts  recovered by the  Indemnified  Party under
insurance policies of the Indemnified Party.

                                  ARTICLE XIII
                                  MISCELLANEOUS

     Section 13.1 Expenses. Whether or not the transactions contemplated by this
Agreement  shall be consummated  and except as otherwise  expressly  provided in
this  Agreement,  each of the parties  hereto shall pay the fees and expenses of
its own counsel,  accountants and other experts and all other expenses  incurred
by it in connection with the preparation for,  entering into and consummation of
the  transactions  contemplated by this Agreement and all other matters incident
thereto.  Purchaser shall be responsible  for the payment of all income,  sales,
transfer, use and recording taxes imposed by state or federal taxing authorities
with respect to the sale, conveyance,  transfer,  assignment and delivery of the
Acquired  Assets to  Purchaser  (other  than  taxes  based on the net  income of
Seller).



                                       24
<PAGE>

     Section 13.2  Disclosure  Supplements.  From time to time prior to Closing,
Seller  shall  have the  right to  supplement  or amend  the  Schedules  to this
Agreement relating to the  representations and warranties of Seller with respect
to any matter and which,  without  such  disclosure,  make a  representation  as
warranty  contained herein untrue (a "New  Disclosure").  If such New Disclosure
constitutes or would  constitute a Material Adverse Effect as defined in Section
9.8  (except  that  the  dollar  value  set  forth in that  definition  shall be
$1,000,000  (one  million  dollars)  for  purposes  of this  Section  13.2 only)
Purchaser may elect not to close and may elect to terminate this Agreement.

     Section 13.3 Assignment. Neither party may assign its rights or obligations
under this  Agreement  without  the prior  written  consent of the other  party;
provided, however, that either party may assign its rights and obligations under
this  Agreement,  without the prior  written  consent of the other party,  to an
affiliate  or to a  successor  of the  assigning  party's  business by reason of
merger,  sale of all or  substantially  all of its  assets or any other  similar
transaction,  provided that such successor agrees in writing to be bound by this
Agreement.  Such  consent  shall not be  unreasonably  withheld or delayed.  Any
permitted  assignee  shall assume all  obligations  of its  assignor  under this
Agreement.  No assignment shall relieve either party of its  responsibility  for
the performance of any obligation.

     Section   13.4   Notices.   All  notices,   requests,   demands  and  other
communications  which are required or permitted to be given under this Agreement
shall be in  writing  and  shall be deemed  to have  been  duly  given  upon the
delivery or mailing thereof,  as the case may be, if delivered  personally or by
facsimile  transmission or sent by registered or certified mail,  return receipt
requested, postage prepaid, as follows:

                  (i)      if to Seller to:

                           Sanofi-Synthelabo Inc.
                           90 Park Avenue
                           New York, New York 10016
                           Attention:  Vice President, Finance and
                                       Chief Financial Officer
                           Facsimile:  212-551-4905

                           with a copy (which shall not constitute notice) to:

                           Sanofi-Synthelabo Inc.
                           90 Park Avenue
                           New York, New York 10016
                           Attention:  Senior Vice President and General Counsel
                           Facsimile:  212-551-4921


                  (ii)     if to Purchaser to:

                           First Horizon Pharmaceutical Corporation
                           660 Hembree Parkway
                           Suite 106


                                       25
<PAGE>

                           Roswell, Georgia 30076
                           Attention:  Bala Venkataraman
                           Facsimile:  (770) 442-9594

or to such other person or address as either party hereto shall have specified
by notice in writing to the other party hereto.

     Section 13.5 Entire Agreement.  Except with respect to the  Confidentiality
Agreement dated June 14, 2001 between  Sanofi-Synthelabo  Inc. and First Horizon
Pharmaceutical Corporation (by which each of the parties acknowledges and agrees
it is bound and which shall  remain in full force and effect),  this  Agreement,
together with the exhibits and schedules attached hereto (which are incorporated
herein  by  this  reference  thereto),  sets  forth  the  entire  agreement  and
understanding   of  the  parties   hereto  with  respect  to  the   transactions
contemplated   hereby  and   supersedes   any  and  all  prior   agreements  and
understandings relating to the subject matter hereof. No representation, promise
or  statement  of  intention  has been  made by any  party  hereto  which is not
embodied in this Agreement or the written statements,  certificates, exhibits or
other documents delivered pursuant hereto or in connection with the transactions
contemplated  hereby,  and no party  hereto  shall be bound by or liable for any
alleged  representation,  promise or statement of intention not set forth herein
or therein.

     Section 13.6  Amendment;  Waiver.  Except as otherwise  expressly  provided
herein, this Agreement may be amended,  modified,  superseded or cancelled,  and
any of the terms,  representations,  warranties,  covenants or conditions hereto
may be waived,  only by a written instrument  executed by the parties hereto or,
in the case of a waiver, by the party hereto waiving compliance.

     Section  13.7  Parties  in  Interest.  All of the  terms,  representations,
warranties,  covenants  and  conditions  contained  in this  Agreement  shall be
binding  upon,  and shall  inure to the  benefit of and be  enforceable  by, the
parties hereto and their respective successors and assigns.

     Section  13.8  Governing  Law.  This  Agreement  shall be governed  by, and
construed  and enforced in accordance  with,  the laws of the State of New York,
without  regard  to  principles  of  conflicts  or  choice  of law (or any other
provision  of law that  would make the laws of any  jurisdiction  other than the
State of New York applicable hereto).

     Section 13.9 Captions.  The article and section headings  contained in this
Agreement  are for  reference  purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.

     Section  13.10  Severability.  The  invalidity or  unenforceability  of any
provision  hereof  shall  affect the  validity  or  enforceability  of any other
provision contained herein.

     Section 13.11 Counterparts. This Agreement may be executed in any number of
counterparts  and by  facsimile  copy,  each of which  shall be  deemed to be an
original  instrument and all of which taken  together shall  constitute a single
agreement.



                                       26
<PAGE>

     Section 13.12 Effective Date. This Agreement shall become  effective on the
date first written above.




                                       27
<PAGE>



     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.

First Horizon Pharmaceutical              Sanofi-Synthelabo Inc.
 Corporation


By:  /s/ Mahendra G. Shah, Ph.D.          By:  /s/ John M. Spinnato
     -------------------------------           ---------------------------------
     Title:  Chairman & CEO                    Title: Sr. V.P. & General Counsel


                                          By:  /s/ Gregory Irace
                                               ---------------------------------
                                               Title: V.P. & CFO



                                       28

1412479
<PAGE>

                      List of Schedules and Agreements


Schedule 1.1(e)              Trademarks/Service Marks
Schedule 1.1(e)-1            Assigned Contracts-Prenate Business Agreements
Schedule 1.1(e)-2            Assigned Contracts-Multiproduct Contracts
Schedule 1.3(a.)             Assumed Contracts
Schedule 2.2                 Inventory Purchase Price
Schedule 4.4                 Consents
Schedule 4.5                 Litigation
Schedule 4.7                 Intellectual Property
Schedule 4.9                 Financial Statements
Schedule 4.10                Compliance with Laws
Schedule 4.11                Licenses and Permits
Schedule 4.13                Contracts and Leases
Schedule 4.15                Absence of Material Change
Schedule 4.16                Principal Place of Business
Schedule 4.17                Discounts and Rebates
Exhibit A                    Bill of Sale
Exhibit B                    Assignment and Assumption Agreement
Exhibit C                    Non Competition Agreement
Exhibit D                    Memorandum of Understanding Regarding
                             Transition Services
Exhibit E                    Packaging Services Agreement
Exhibit F                    Manufacturing Agreement


The  Company has omitted the above  attachments  pursuant to Item  601(b)(2)  of
Regulation S-K and agrees to furnish to the Commission  supplementally a copy of
any of such omitted attachments.




1413488

</TEXT>
</DOCUMENT>
