Exhibit 10.1

[pfisqu.jpg] PHARMACEUTICAL FORMULATIONS, INC.
460 Plainfield Avenue, Edison, NJ 08818
Tel 908-985-7100 Fax 908-819-3330

                 June 25, 2003

Mr. Michael A. Zeher
4 Bellinghamshire Place
New Hope, PA 18938

Dear Mr. Zeher:

This letter will confirm the terms and conditions under which we offer you the
position of President and Chief Operating Officer of Pharmaceutical
Formulations, Inc. (the "Company"), with a starting date of on or before August
1, 2003. The position also includes a seat on the Board of PFI.

You shall report to Dr. James C. Ingram, or to such other person(s) as may be
designated by the Board of Directors from time to time.

You shall devote all of your working time to the above position.

1.      Compensation and Benefits:

        You shall receive the following:

(a) A starting salary of $250,000 (two hundred and fifty thousand dollars) per
year, which shall be reviewed from time to time in accordance with the Company's
prevailing practice;

(b) You may be entitled to a performance bonus as the Board of Directors, in its
sole discretion, may elect to pay based upon the Company's results and its
qualitative assessment of your contribution to the Company. An outline of the
bonus program is attached;

(c) You shall receive a stock grant of 100,000 (one hundred thousand) shares of
restricted stock under the Company's 1997 Stock Incentive Plan. The sole
condition to this grant is that you are an employee in good standing of the
Company on January 1, 2004 and have not given notice of termination of your
employment.

(d) On your starting date, you shall receive a qualified stock option for
250,000 (two hundred and fifty thousand) shares of the Company's Common Stock in
accordance with the Company's qualified stock option plan currently in effect,
at the current market price of such Stock as of the date of the grant of the
option, exercisable in accordance with the terms of the Company's 1994 Qualified
Stock Option Plan.

(e) You may receive long-term incentives (e.g., stock options), as determined by
the Board of Directors upon recommendation of the Stock Option Committee. This
letter has been reviewed by the Board of Directors, and the Directors have
indicated their intention to recommend further grants of stock options and
restricted stock, to be issued effective July 1 of each subsequent year of your
employment.

(f) The Company has a non-contributory 401 (k) plan, which you may join when
eligible,

(g) Other benefits, including Company-paid medical and dental insurance,
Company-paid health exam upon starting employment and annually thereafter, life
insurance, short-term and long-term disability, and travel accident coverage,
are offered when you become eligible in accordance with the Company's normal
benefit programs:

(h) Three (3) weeks annual vacation.

(i) Auto allowance paid at the rate of $600.00 per month.

2.      Confidential Information:

           You agree that you will not, without specific written authorization
by the Board of Directors of the Company, at any time during or after the term
of your employment, use any confidential information, including technical
expertise or know-how of the Company or companies affiliated with the Company,
for your own benefit, and you will not, directly or indirectly, reveal, divulge,
disclose or communicate such information to any person, firm, corporation or
other entity not authorized by the Board of Directors of the Company to know
same, except as may be required by law, in which case, notice and sufficient
opportunity to obtain a protective order shall be given by you to the Company.
It is specifically understood that any breach or threatened breach of any
provision of this clause would cause the Company or its affiliates irreparable
harm for which the Company will have no adequate remedy at law, and therefore,
the Company shall be entitled to all legal remedies, including but not limited
to injunctive relief. Upon termination of your employment, you agree to deliver
to the Company or its affiliates all records, writings, papers or other data
relative to the Company's business of the Company or its affiliates, recognizing
that such materials are the property of the Company or its affiliates.

3.      Non-Compete and Solicitation of Employment of Other Company Employees:

           During the term of your employment you agree not to engage, directly
or indirectly, in any commercial activities that compete with the business of
the Company or companies affiliated with the Company, or have any business
association, business contact, investment or participation in any company that
competes with the business of the Company or companies affiliated with the
Company. For a period of three (3) months after leaving the employ of the
Company, you agree not to participate, directly or indirectly, in any
transaction involving the same products, the same suppliers or customers with
whom the Company and/or its affiliated companies has engaged in business as of
the date of this Agreement and/or during the term of your employment. Business
which you can provide evidence was developed by you prior to joining the Company
shall be excluded from the three (3) month non-compete restriction after leaving
the employ of the Company. However, the Company may at its sole option, choose
to continue your compensation for up to three (3) months after termination, in
which case, there shall during this period be no exceptions to the
non-competition restriction. You shall not during the period of your employment
be an officer, director, employee or shareholder of the capital stock or other
equity interest in any company which competes with the business conducted by the
Company, or receive any financial or other benefit from any such company.

           You also agree during the term of your employment and for a period of
one (1) year thereafter not to influence or seek to influence any employee of
the Company to terminate his or her employment with the Company.

           It is specifically understood that any breach or threatened breach of
any provision of this clause would cause the Company irreparable harm for which
the Company will have no adequate remedy at law, and therefore, the Company
shall be entitled to all legal remedies, including but not limited to injunctive
relief

4.      Termination:

           The Company may terminate this agreement upon six (6) months' notice
in writing to you. If the Company terminates the agreement, the Company may at
its sole option require you to cease your employment activities at any time
during the six (6) month period. You will, however, continue to receive
compensation for the six (6) month period. You may terminate this agreement upon
three (3) months' notice in writing to the Company. Upon receipt of your notice
of termination, the Company may cease your employment at any time. However, the
Company will continue to pay your compensation for the full three (3) month
period.

5.      Miscellaneous:

           This agreement supersedes any prior agreements or understandings
between the parties and may not be changed or terminated orally, and no change,
termination or attempted waiver of any of the provisions hereof is binding on
the parties unless in writing and signed by the party against whom the same is
sought to be enforced.

If the foregoing represents your understanding, please sign and return the
enclosed copy of this letter.

Very truly yours,

PHARMACEUTICAL FORMULATIONS, INC.

By: /s/ James C. Ingram

ACCEPTED AND AGREED TO:
/s/ Michael A. Zeher
MICHAEL A. ZEHER

PHARMACEUTICAL FORMULATIONS, INC. BONUS PROGRAM
Effective for the Year Ending December 31, 2003

• The Pharmaceutical Formulations, Inc. ("PFI") bonus pool will be calculated on
the basis of pre-tax income, excluding the bonus accrual.

• The pool will consist of 12% (twelve percent) of the consolidated pretax
income of PFI.

• The program will cover all non-union employees of PFI.

• Distribution of the pool shall be recommended by the President and Chairman of
the Board of PFI, and reviewed and approved by the Compensation Committee.

• The program will be valid for calendar years 2003 through 2005.