EXHIBIT 10.41

                        DEVELOPMENT AND SUPPLY AGREEMENT


      AGREEMENT,  dated April 17,  2001,  is made  between PAR  PHARMACEUTICALS,
INC., a _____________  corporation,  maintaining its principal place of business
at One Ram Ridge  Road,  Spring  Valley,  New York 10977  ("PAR"),  DR.  REDDY'S
LABORATORIES  LIMITED, an Indian corporation,  maintaining its principal offices
at 7-1-27 Ameerpet, Hyderabad - 500 016, India, and REDDY-CHEMINOR,  INC., a New
Jersey  corporation,  maintaining  its  principal  office at 66 S. Maple Avenue,
Ridgewood, New Jersey 07450, U.S.A. (collectively "REDDY").

                                   WITNESSETH:

      WHEREAS,   REDDY  has   expertise   in  the   development   of   generic
pharmaceutical products; and

      WHEREAS,  PAR has  expertise in the  development,  marketing and sale of
such products in the United States; and

      WHEREAS, REDDY and PAR desire to collaborate in the development, marketing
and sale of certain generic pharmaceutical products; and

      WHEREAS, REDDY desires to manufacture and supply to PAR and PAR desires to
purchase exclusively from REDDY for sale in the Territory,  as defined below, by
PAR all of PAR's requirements for the Reddy Finished Products, as defined below;

      NOW, THEREFORE,  in consideration of the mutual promises,  covenants and
agreements hereinafter set forth, the parties agree as follows:

1.          DEFINITIONS.

      (a) "Affiliate"  means any  corporation or business entity  controlled by,
controlling,  or under common control with PAR or REDDY as the case may be. (For



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the purpose of this  definition,  "control" means direct or indirect  beneficial
ownership  of greater  than  fifty  percent  (50%) of the  voting  stock of such
corporation  or other  business  entity,  or a greater than fifty  percent (50%)
interest in the income of such  corporation  or other  business  entity,  or the
power to direct or cause the  direction of the  management  and policies of such
corporation or other business entity whether by ownership of voting  securities,
by contract or otherwise,  or such other  relationship as, in fact,  constitutes
control.)

      (b) "ANDA" means an Abbreviated  New Drug  Application  filed with the FDA
for a Reddy Finished Product or Par Finished Product in the United States.

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

      (d)   "Bulk  Product"  means  either  REDDY's  or a third  party's  bulk
actives for Reddy Finished  Product or PAR's or a third party's bulk actives for
Par Finished Product.

      (e) "cGMP" means current good  manufacturing  practices for the methods to
be used in, and the  facilities  and controls to be used for,  the  manufacture,
storage and handling of each Reddy  Finished  Product and Par Finished  Product,
all as set forth from  time-to-time  by the FDA pursuant to the FD&C Act and the
rules and regulations promulgated thereunder (including specifically,  Title 21,
part 211 of the Code of Federal Regulations of the United States).

      (f)  "Commercial  Expenses"  means PAR's or  REDDY's,  as the case may be,
commercially   reasonable   costs  and  expenses  for  marketing,   advertising,
promoting,  and selling  (including  but not limited to costs and  expenses  for
launch,  sales force training and  materials,  samples,  conventions,  symposia,
marketing,  direct  mailing,  marketing  research,  public  relations,   printed
materials,  medical  information,  regulatory  activities and distribution) each
Reddy Finished  Product or Par Finished  Product,  determined in accordance with
PAR's or REDDY's  customary  accounting  policies and  practices and in a manner
consistent with U.S. generally accepted accounting principles.

      (g) "Competing Product" means, with respect to a particular Reddy Finished
Product or Par Finished Product,  a generic  pharmaceutical  product which is in


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the same dosage form, has the same active  ingredient,  the same strength and is
for the same  indication as the Reddy Finished  Product or Par Finished  Product
but which is  manufactured  and supplied by or purchased  and acquired  from any
Person other than REDDY or its Affiliates or PAR or its Affiliates,  as the case
may be.

      (h)  "Development  Costs"  means  the  commercially  reasonable  costs and
expenses of REDDY or PAR, as the case may be,  incurred in the  preparation  and
filing of a DMF for each Bulk Product and in  obtaining  the ANDA for each Reddy
Finished  Product  or Par  Finished  Product,  including  but  not  limited  to:
allocated costs for manufacturing,  personnel,  packaging,  stability,  testing,
analytical,   Bulk  Product   supplied  for  ANDA   submission   (calculated  at
Manufacturing Cost) and all costs relating to the development of finished dosage
including R&D, preformulation,  formulation,  bio-equivalence, ANDA preparation,
validation, issuance and submission.

      (i) "DMF" means the drug master  file for each Bulk  Product,  as the same
may be amended or supplemented from time to time.

      (j) "Exclusivity Period" means, with respect to any Reddy Finished Product
(or any  strength or dosage form of a Reddy  Finished  Product) or Par  Finished
Product (or any strength or dosage form of a Par Finished Product), the granting
of up to six (6) months of marketing  exclusivity  in the United States from the
FDA for being  first to file an ANDA with a patent  certification  for the given
Reddy  Finished  Product or Par  Finished  Product  enabling  PAR to market such
product during such period in the U.S. with no other generic competitor.

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

      (l)   "FD&C Act" means the Federal Food,  Drug and Cosmetic Act of 1938,
as amended, and the regulations thereunder, including current good manufacturing
practice regulations, as the same may be amended or revised.



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      (m) "Form 483" means the  written  notice of  objectionable  practices  or
deviations from the regulations  that is prepared by the FDA investigator at the
end of an inspection.
1.

      (n)  "Group  2 Term"  means,  for each  Reddy  Group 2  Product,  the date
commencing upon the execution of this Agreement and ending on December 31, 2004.

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

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

      (q) "Intellectual  Property Costs" means REDDY's or PAR's, as the case may
be,  out-of-pocket  payments  to patent  counsel  (or other  experts,  including
outside  laboratories)  in connection with pre- or  post-marketing  patent work,
including patent litigation.

      (r) "Know-How" means all Reddy Finished  Product or Par Finished  Product,
as the case  may be,  related  technical  knowledge,  manufacturing  procedures,
expertise,  methods, protocols and current and accumulated experiences which any
party hereto acquires in connection with this Agreement and/or has acquired as a
result of scientific research,  practical experiences and otherwise which have a
demonstrated  usefulness in manufacturing,  obtaining and maintaining Regulatory
Approval,  including  but not  limited  to (i) plant  validation  protocols  and
specifications;  (ii)  process  validation  procedures;  (iii)  quality  control
procedures;  (iv) analytical methods and procedures; (v) bio-equivalence testing
protocols and  procedures;  (vi) cleaning  validation  protocols and procedures;
(vii) procedures for preparation of applications for Regulatory Approval; (viii)
ongoing regulatory compliance  procedures;  and (ix) galenical  formulations and
processes.

      (s) "Launch Date" means,  with respect to each Reddy  Finished  Product or
Par Finished  Product,  the date on which PAR makes its first commercial sale of
such Reddy  Finished  Product or Par  Finished  Product in the  Territory  to an
unrelated third party in an arm's length transaction but no later than the later
of:  thirty (30) days after the date on which all  regulatory  and  governmental
approvals for the manufacture,  delivery, sale and distribution in the Territory
have been  obtained  (including  Regulatory  Approval);  thirty  (30) days after


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applicable patent expiration  (including  General Agreement on Trade and Tariffs
extensions) or thirty (30) days after product exclusivity expiration.

      (t)  "Manufacturing  Cost" means the sum of (i) the  [*******************]
for either each Reddy Finished Product (other than Group 3 Products) incurred by
REDDY and its Affiliates,  or each Par Finished  Product incurred by PAR and its
Affiliates,  as the case may be,  calculated  separately for each Reddy Finished
Product or Par Finished  Product,  in each case  determined in  accordance  with
REDDY's or PAR's  customary  cost  accounting  policies and  practices  and in a
manner consistent with U.S. generally  acceptable  accounting  principles;  (ii)
[*******************]     of    such     [*******************]     (to     cover
[*******************]);  and  (iii)  all  transportation  and  related  costs to
deliver the Reddy Finished  Product or Par Finished  Product to its  destination
under Section 8 of this Agreement.  Manufacturing Cost for Reddy Group 3 Product
means  the   Manufacturing   Cost  as   described   above  plus  an   additional
[*******************] of such  Manufacturing  Cost.  If the manufacturing of any
Reddy  Finished  Product  or  Par  Finished  Product  or any  component  thereof
(including Bulk Product) is performed for REDDY or PAR, as the case may be, by a
third party (which is not an  Affiliate),  then amounts paid to such third party
in  connection  with the  manufacturing  of such Reddy  Finished  Product or Par
Finished Product or any component thereof (including Bulk Product) shall be
[*******************]  .

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

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

      (w) "Net Sales"  means that dollar  amount  determined  by  deducting  the
following items from the [*******************]  billed for that particular Reddy
Finished  Product or Par Finished  Product,  as the case may be, sold by PAR and
its Affiliates or REDDY and its Affiliates, as the case may be, in the Territory
to unaffiliated third parties in arms length transactions:

                  (i)   trade, quantity or cash discounts, service allowances;

                  (ii)  credits or allowances for the Reddy  Finished  Product
                        or Par  Finished  Product,  if  any,  given  or  made on
                        account  of  [*******************], returns,  bad debts,


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                        off-invoice promotional discounts, [******************],
                        [*******************], any and  all  federal,  state  or
                        local  government   rebates  or  discounts   whether  in
                        existence now or enacted at any time  hereafter,  volume
                        reimbursements,  and the gross  amount  billed  for that
                        rejected Reddy Finished  Product or Par Finished Product
                        or that Reddy Finished  Product or Par Finished  Product
                        recalled,  seized or  destroyed  (voluntarily  or at the
                        request  of  any  government   agency,   subdivision  or
                        department);

                  (iii) any tax,  excise  or  other  government  charge  upon or
                        measured  by  the  production,   sale,   transportation,
                        delivery  or use of that Reddy  Finished  Product or Par
                        Finished Product; and

                  (iv)  any surcharge,  levy, tax or assessment  mandated by any
                        federal,  state or local  government  or  administrative
                        agency to fund a  compensation  program or  reserve  for
                        persons  injured by that Reddy  Finished  Product or Par
                        Finished Product;

in each case determined in accordance  with PAR's,  REDDY's or any third party's
customary  accounting  policies and practices in a manner  consistent  with U.S.
generally accepted accounting principles.

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

      (y)   "Par Change in Control"  means the  acquisition by any third party
individual  or entity  (other than by Merck KGaA (but not a successor or assign)
or an  Affiliate of Merck KGaA (but not a successor or assign)) of more than 50%
(in any one  transaction or in any series of  transactions)  of the  outstanding
shares of capital  stock of  Pharmaceutical  Resources,  Inc.  or PAR having the
right to vote or generally to participate, in a manner similar to equity shares,
in the profits and losses of Pharmaceutical Resources, Inc. or PAR.

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



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

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

         (cc)  "Person"  means  an  individual,   partnership,   joint  venture,
association,  corporation,  company and any other form of business organization,
government  regulatory  or  governmental  agency,   commission,   department  or
instrumentality.

         (dd) "Promotional Expenses" means promotional payments or fees directly
related to a Reddy Finished  Product or Par Finished  Product paid to REDDY's or
PAR's customers, as the case may be.

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

         (ff) "Reddy Change in Control" means the acquisition by any third party
individual or entity of more than 50% (in any one  transaction  or in any series
of transactions) of the outstanding  shares of capital stock of REDDY having the
right to vote or generally to participate, in a manner similar to equity shares,
in the profits and losses of REDDY.

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

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

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

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

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

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

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

         (nn)  "Regulatory   Approval"  means  any  ANDAs  or  other  approvals,
supplements, amendments, pre- and post-approvals, marketing authorizations based
upon such  approvals  (including  any  prerequisite  manufacturing  approvals or
authorizations related thereto) and labeling approval(s), technical, medical and
scientific licenses,  registrations or authorizations of any national, regional,
state or local regulatory agency,  department,  bureau,  commission,  council or


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other governmental  entity,  necessary for the manufacture,  distribution,  use,
import, or sale of Reddy Finished Products or Par Finished Products.

         (oo) "Specifications"  means the specifications  required to obtain the
ANDA of each Reddy  Finished  Product or Par Finished  Product  based on the NDA
specifications  of the  innovator  product and as  contained in the DMF for Bulk
Product   unless  changes  are  required  as  described  in  the  United  States
Pharmacopoeia,  as such  specifications may be amended at the request of the FDA
or by mutual agreement of the parties from time to time.

         (pp) "Technical  Information" means all information and expertise which
REDDY or PAR, as the case may be,  acquires in  connection  with this  Agreement
and/or has  acquired  which have a  demonstrated  usefulness  in  manufacturing,
packaging and labeling and/or obtaining and maintaining  Regulatory  Approval of
the Reddy  Finished  Products  or the Par  Finished  Products  pursuant  to this
Agreement,  including,  but not  limited  to, all  specifications,  manuals  and
computer  programs relating to manufacturing and similar materials and access to
the DMF of Bulk Product.

         (qq) "Term" means,  for each Reddy Finished Product (other than a Reddy
Group 2 Product)  or Par  Finished  Product,  the later to occur of (i) the date
commencing upon execution of this Agreement and ending seven (7) years after the
date of execution of this  Agreement or (ii) the date  commencing  on the Launch
Date of each Reddy Finished Product or Par Finished Product and ending three (3)
years after the Launch Date of such product.

         (rr) "Territory" means the United States, its territories,  possessions
and the Commonwealth of Puerto Rico.

         (ss) "Third Party Bulk Product" means a Bulk Product manufactured by an
entity other than REDDY or PAR, as the case may be.



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      2. DEVELOPMENT OF PRODUCTS.

         (a)  REDDY  shall  be  responsible  for the  development  of all  Reddy
Finished  Products to be supplied  by REDDY to PAR under this  Agreement.  REDDY
shall use commercially  reasonable efforts to develop each of the Reddy Finished
Products. All Development Costs and Intellectual Property Costs, including,  but
not limited to, initiation, preformulation development, formulation development,
scale-up and any legal costs and expenses  incurred in  connection  with a Reddy
Finished Product shall be the sole  responsibility  of REDDY.  Nothing contained
herein shall constitute a guarantee or warranty of REDDY that development of any
Reddy  Finished  Product will be commenced or continued,  that a submission  for
Regulatory  Approval  for such Reddy  Finished  Product will be filed within any
specific  time  period,  or that a Regulatory  Approval  for any Reddy  Finished
Product will be obtained.

         (b) REDDY shall prepare each  application  for Regulatory  Approval for
each Reddy Finished  Product and shall use  commercially  reasonable  efforts to
obtain  Regulatory  Approval.  REDDY shall hold all ANDAs for the Reddy Finished
Product in its own name,  provided that such  ownership  shall be subject to the
exclusive  licenses  granted to PAR hereunder.  Unless  expressly  agreed by the
parties,  in writing, it is the parties' intent that each Reddy Finished Product
to be marketed and sold in the Territory under this Agreement will be sold under
a REDDY label.  REDDY shall ensure that all ANDAs  provide for such labeling and
take all steps reasonably necessary to ensure that under the Regulatory Approval
for a Reddy Finished  Product PAR can market,  distribute,  sell and promote the
product in the  Territory in  packaging  which  includes  both the PAR and REDDY
names.  In the event that REDDY elects to have PAR repackage and relabel a Reddy
Finished  Product under Section 6 of this Agreement,  REDDY shall take all steps
reasonably necessary to enable PAR to repackage and relabel under the Regulatory
Approval for such Reddy Finished Product.

         (c)  Notwithstanding   Section  2(a)  hereof  or  any  other  provision
contained in this Agreement,  REDDY shall have the right, upon written notice to
PAR, to immediately  terminate its obligations  hereunder to develop and/or seek
Regulatory  Approval  for a Reddy  Finished  Product(s)  if,  in the  reasonable


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opinion  of REDDY,  it is not  commercially  reasonable  to  develop  such Reddy
Finished  Product  or to  seek to  obtain  or  maintain  a  Regulatory  Approval
therefor.  If REDDY  shall  terminate  its  obligations  to develop  and/or seek
Regulatory Approval for a Reddy Finished Product,  then (i) PAR may develop such
product or license a  Competing  Product  from any other third party for sale in
the Territory and (ii) REDDY or its Affiliate shall not manufacture such product
for sale in the Territory or license a Competing  Product from a third party for
sale in the Territory.

         (d) PAR shall be  responsible  for the  development of all Par Finished
Products.  PAR shall use commercially  reasonable efforts to develop each of the
Par Finished  Products.  All Development Costs and Intellectual  Property Costs,
including,   but  not  limited  to,  initiation,   preformulation   development,
formulation  development,  scale-up and any legal costs and expenses incurred in
connection with a Par Finished Product shall be the sole  responsibility of PAR.
Each Par Finished  Product to be marketed and sold in the  Territory  under this
Agreement  will be sold  under  a PAR  label.  Nothing  contained  herein  shall
constitute a guarantee or warranty of PAR that  development  of any Par Finished
Product  will be  commenced  or  continued,  that a  submission  for  Regulatory
Approval  for such Par Finished  Product will be filed within any specific  time
period,  or that a  Regulatory  Approval  for any Par  Finished  Product will be
obtained.  For all purposes under this Agreement,  PAR shall be deemed to be the
manufacturer  of the Par  Finished  Product  and PAR  shall  assume  any and all
responsibilities  and any  liabilities  associated  therewith,  arising from the
manufacture of the Par Finished Product.

         (e) PAR shall  prepare or cause to be  prepared  each  application  for
Regulatory  Approval  for each Par Finished  Product and shall use  commercially
reasonable  efforts to obtain Regulatory  Approval.  PAR shall have the right to
distribute  all Par Finished  Products and shall act as the United  States agent
for such Par Finished Products.

         (f)  Notwithstanding   Section  2(d)  hereof  or  any  other  provision
contained in this  Agreement,  PAR shall have the right,  upon written notice to
REDDY, to immediately terminate its obligations hereunder to develop and/or seek


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Regulatory  Approval for a Par Group 4 Product(s) if, in the reasonable  opinion
of PAR, it is not commercially reasonable to develop such Par Group 4 Product or
to seek to obtain or maintain a Regulatory Approval therefor.

If PAR shall  terminate  its  obligations  to  develop  and/or  seek  Regulatory
Approval  for a Par Group 4 Product,  then (i) REDDY may develop such product or
license a Competing Product from any other third party for sale in the Territory
and (ii) PAR or its Affiliates  shall not  manufacture  such product for sale in
the Territory or license a Competing  Product from a third party for sale in the
Territory.

            (g) REDDY shall prepare the Scale-Up Post Approval Change  ("SUPAC")
to enable REDDY to  manufacture  the Reddy Group 6 Products.  PAR shall  provide
REDDY with reasonable assistance in the preparation of the SUPAC. PAR shall file
the SUPAC with the FDA and shall  provide  REDDY with  reasonable  assistance to
develop the  manufacturing  capability for the Reddy Group 6 Products at REDDY's
current manufacturing facility..

      3.    SALES AND MARKETING.

            (a) PAR and REDDY shall  establish a sales and  marketing  committee
(the "Committee")  consisting of an equal number of  representatives  from REDDY
and PAR,  which  shall  remain in effect  through  December  31,  2004.  The PAR
representatives  and REDDY  representatives  shall meet,  at such times and such
places,  as either  party  reasonably  requests,  provided  that  each  group of
representatives  provides the other with reasonable advance notice of its desire
to  schedule a meeting of the  Committee.  The  Committee  shall  determine  the
pricing and  marketing  strategy  for the Reddy Group 2 Products,  Reddy Group 4
Products and Reddy Group 5 Products  and shall  approve all pricing of the Reddy
Group 2  Products,  Reddy  Group 4 Products  and Reddy Group 5 Products to PAR's
customers. In the event the PAR representatives and REDDY representatives cannot
agree  on any  marketing  decision,  including,  but not  limited  to,  pricing,
marketing budgets, marketing expenditures and marketing strategies, the decision


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of the REDDY  representatives  shall  control  and shall be binding  upon PAR in
connection  with the  marketing  and sale of the Reddy Group 2  Products,  Reddy
Group 4 Products  and Reddy  Group 5  Products.  Notwithstanding  the  foregoing
sentence, if PAR, in its commercially  reasonable business judgment,  determines
that the pricing of any of the  foregoing  products is  materially  inconsistent
with PAR's customary pricing methods, PAR shall notify REDDY, in writing, of the
basis for its  determination  and REDDY shall make such adjustments as REDDY, in
its commercially reasonable business judgment,  determines to the pricing of any
such product to eliminate the material inconsistency disclosed by PAR.

            (b)  REDDY  shall  have  the  right  to  have  one  or  more  of its
representatives  travel with PAR sales  representatives to PAR's accounts during
all preliminary,  pre-launch,  launch and post-launch visits; provided, however,
that REDDY  representatives  shall not participate in more than three (3) visits
to a PAR  account  during  any  calendar  year  unless  otherwise  agreed to, in
writing,  by PAR.  REDDY shall provide  reasonable  advance notice (but not less
than thirty (30) days' prior  notice) to PAR  management  of those PAR  accounts
where REDDY  representatives  shall  participate.  PAR shall provide  reasonable
notice of field visits where REDDY representatives have requested participation.
During any visit with a PAR account, REDDY  representative(s)  shall participate
in only the portion of the meeting  which  involves  the Reddy Group 2 Products,
Reddy Group 4 Products and/or Reddy Group 5 Products.  Prior to January 1, 2005,
REDDY  representatives  shall  not meet  with  any PAR  customer  without  a PAR
representative  being  present at such  meeting for purposes of  discussing  any
Reddy Finished Product, (other than a Reddy Group 6 Product).



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            (c) In connection  with the  marketing and sale of a Reddy  Finished
Product  or a Par  Finished  Product,  REDDY or PAR,  as the  manufacturer  of a
product,  shall be responsible to pay the "stocking  charge" to a customer which
purchases such Reddy Finished Product or Par Finished Product.  In the case of a
Reddy Finished  Product,  PAR shall  reimburse REDDY for such stocking charge in
two (2) installments of 50% each. The first  installment shall be paid by PAR to
REDDY  within  thirty  (30) days after  payment  by REDDY to a customer  and the
second  installment shall be paid by PAR to REDDY twelve (12) months thereafter.
PAR shall deduct such  reimbursement  to REDDY from Net Sales to  calculate  Net
Profit,  as and when such  reimbursements  are made by PAR. In the case of a Par
Finished Product, PAR shall amortize such stocking charge against Net Sales over
two-year period to calculate Net Profit.

            (d)   In    connection    with   the    marketing    and   sale   of
[*********************]  during the Exclusivity Period,  REDDY, at its sole cost
and  expense,  shall  provide  PAR with an  amount of  sample  product  that PAR
reasonably requires to market such product.

            (e) PAR and its Affiliates shall use commercially reasonable efforts
to develop,  market and sell each Reddy  Finished  Product  and to actively  and
continuously  promote the sale of each Reddy Finished  Product in the Territory.
Such  efforts  shall be not less than  those used by PAR and its  Affiliates  to
promote the sale of other products which they market in the Territory. PAR shall
not have any minimum purchase obligation under this Agreement.

            (f) PAR and its Affiliates shall commit commercially  reasonable but
no less than equivalent  promotional and sales efforts to the marketing and sale
of [*********************] manufactured by REDDY as PAR, and its Affiliates will
commit to the marketing and sale of [*********************].

            (g) At such  time as REDDY  shall be able to  manufacture  the Reddy
Group 6 Products,  PAR and REDDY shall  jointly  determine  which of the parties
shall market and sell the Reddy Group 6 Products.



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      4.    LICENSE AND SUPPLY - REDDY FINISHED PRODUCTS.

            (a) Subject to the provisions of Sections 3(g) and 4(e),  during the
Term, PAR shall have the exclusive  right to market each Reddy Finished  Product
(other  than a Reddy Group 2 Product) in the  Territory  and REDDY shall  supply
PAR's  forecasted  requirements of each Reddy Finished  Product.  Subject to the
provisions  of  Section  2(d),  during  the  Group 2 Term,  PAR  shall  have the
exclusive  right to market each Reddy Group 2 Product in the Territory and REDDY
shall supply PAR's  forecasted  requirements of each Reddy Group 2 Product.  PAR
shall commence  marketing each Reddy Finished  Product in the Territory no later
than thirty (30) days after the date on which final, unqualified FDA approval to
market the Reddy Finished  Product in the Territory is received,  provided REDDY
has supplied PAR with Reddy  Finished  Product in  accordance  with PAR's orders
therefor.

            (b) Except as provided in Section 3(g) and subject to the provisions
of  Section  4(e)  below,  upon  Regulatory  Approval  of an ANDA for each Reddy
Finished  Product and during the Term or Group 2 Term, as the case may be, REDDY
will grant PAR an exclusive  license to sell the Reddy  Finished  Product in the
Territory under the technology and Know-How included in the ANDA.

            (c) Except as set forth in  Section  4(d)  below,  PAR agrees to buy
each Reddy Finished Product  exclusively from REDDY. PAR shall not (and it shall
not  authorize,  permit  or  suffer  any  of its  Affiliates  to),  directly  or
indirectly, manufacture, purchase, sell or distribute a Competing Product in the
Territory at any time during the Term of this  Agreement  applicable  to a Reddy
Finished Product (including, for greater certainty, prior to receipt by REDDY or
any of its Affiliate of Regulatory Approval for such Reddy Finished Product).

            (d) Notwithstanding any other provision of this Agreement,  if REDDY
is unable  (or  anticipates  an  inability)  to  manufacture  or deliver a Reddy
Finished  Product  to PAR,  REDDY  shall  promptly  notify PAR in writing of the
period for which such inability (or anticipated  inability) to so manufacture or
deliver is expected.  If REDDY is unable to meet PAR's  forecasted  requirements
for a Reddy Finished  Product as a result of  circumstances or events beyond the


                                       14
<PAGE>

reasonable  control  of REDDY,  then PAR's  obligation  to  purchase  that Reddy
Finished Product  exclusively from REDDY shall be suspended and PAR may purchase
Competing  Product  for sale in the  Territory;  provided  that if REDDY  has an
inventory of that Reddy Finished  Product that it is ready,  willing and able to
deliver to PAR,  PAR shall  order such  remaining  inventory  prior to  ordering
Competing  Product from any other party. If at any time thereafter REDDY is able
to  manufacture  and  deliver  that  Reddy  Finished  Product  to PAR in amounts
sufficient  to meet  PAR's  requirements,  then,  subject  to PAR's  contractual
commitments  with third  parties  (which  shall only be made for the quantity of
that Reddy Finished  Product that REDDY and PAR reasonably  determine that REDDY
will be unable to supply to PAR),  PAR's above stated  obligation to exclusively
order that Reddy  Finished  Product  from  REDDY and not to  purchase  Competing
Product shall resume.

            (e) From and after January 1, 2005,  REDDY and its Affiliates  shall
have the  unrestricted  right to market and sell Reddy Group 1  Products,  Reddy
Group 3  Products,  Reddy  Group 4 Products  and Reddy  Group 5 Products  in the
Territory;  provided,  however,  such right to market and sell shall not include
the right to license such products to a Person who is a manufacturer  of generic
pharmaceutical products and seeks approvals through ANDA filings.

            (f) If, prior to the expiration of six (6) months from the execution
of this Agreement,  PAR's current supplier of  [*********************]  does not
consent  to  REDDY's  exclusive  supply  to  PAR  of  [*********************]  ,
[*********************]  under this Agreement,  the following  provisions  shall
apply:

                  (i)   REDDY  shall not supply  Reddy  Group 1 Products  (other
                        than [*********************]) into the Territory through
                        December 31, 2004; and

                  (ii)  PAR shall pay to REDDY, as additional consideration, the
                        amounts set forth in Sections 10(c) of this Agreement.

            (g) During the Term or Group 2 Term, as the case may be,  applicable
to a Reddy Finished Product, neither PAR nor any of its Affiliates will directly


                                       15
<PAGE>

or indirectly  sell such Reddy Finished  Product  outside of the Territory or to
any Person in the  Territory  where it knows or has reason to believe  that such
Reddy  Finished  Product will be resold by such Person outside of the Territory.
In the event the foregoing provision is or becomes  unenforceable or is unlawful
in the  Territory,  then it shall be  deemed  replaced  by the most  restrictive
provision  on  marketing or sale of the Reddy  Finished  Product  outside of the
Territory  as  shall  be  lawful  and  enforceable  in the  Territory.  If REDDY
establishes  that one of PAR's  customers or a customer of any of its Affiliates
is,  directly or indirectly,  exporting  such Reddy Finished  Product out of the
Territory,  PAR shall (and shall cause its Affiliates to) either cease to supply
such  customer or obtain an  undertaking  from such customer not to market Reddy
Finished Product outside of the Territory (unless Par [or its Affiliate,  as the
case may be] is precluded from taking such action under applicable law).

            (ih)  Except as  expressly  provided in Section  4(e)  above,  REDDY
agrees  that,  during the Term or Group 2 Term  applicable  to a Reddy  Finished
Product,  neither it nor any of its  Affiliates  shall,  directly or indirectly,
sell such Reddy  Finished  Product in the Territory or to any Person  outside of
the Territory  where it knows or has reason to believe that such Reddy  Finished
Product  will be  resold  by such  Person  in the  Territory.  In the  event the
foregoing provision is or becomes unenforceable or unlawful in the Territory, it
shall be deemed to be replaced by the most restrictive provision on marketing or
sale of the  Reddy  Finished  Product  in the  Territory  as shall be  lawful or
enforceable  in the  Territory.  If PAR notifies REDDY that one of its customers
(or a customer of its Affiliate) is, directly or indirectly, marketing the Reddy
Finished  Product in the Territory,  REDDY shall (and shall cause its Affiliates
to) either cease to supply such customer or obtain (and enforce if necessary) an
undertaking  from such customer not to market such Reddy Finished Product in the
Territory (unless REDDY [or its Affiliate, as the case may be] is precluded from
taking such action under applicable law).



                                       16
<PAGE>

            (i) If for any reason  during the Term PAR shall be unable to market
and sell Par Group 1 Products,  then PAR shall  purchase  Reddy Group 1 Products
exclusively from REDDY pursuant to the terms of this Agreement.

      4A.   SUPPLY - [*********************]

            PAR and REDDY  acknowledge  that  each of REDDY  and  PAR's  current
supplier may be required to commence manufacturing of [*********************] in
order to have sufficient  quantities of each product to meet PAR's  requirements
for the launch of such product.  In the event that PAR's  current  supplier does
not consent to REDDY's exclusive supply of [*********************],  REDDY shall
be reimbursed  within  thirty (30) days of the  submission of an invoice for the
Manufacturing Cost of the [*********************]  manufactured by REDDY and not
sold by PAR in the  Territory.  Said amount shall be deducted  from Net Sales to
calculate Net Profits of such product.  If PAR's  current  supplier  consents to
REDDY's  exclusive  supply of  [*********************],  PAR's current  supplier
shall be reimbursed  within thirty (30) days of the submission of an invoice for
the manufacturing cost of product manufactured by PAR's current supplier and not
sold by PAR in the  Territory.  Said amount shall be deducted  form Net Sales to
calculate Net Profit for such product.

      5.    FORECASTS,  ORDERING,  DELIVERY  AND  PURCHASE  OBLIGATIONS  - REDDY
            FINISHED PRODUCTS.

            (a)  Within a  reasonable  period of time  prior to the  anticipated
Launch Date of a Reddy Finished Product, PAR shall submit to REDDY a non-binding
forecast of the quantity of each Reddy  Finished  Product  that PAR  anticipates
ordering from REDDY for such Reddy Finished  Product launch and during the first
twelve (12) month period thereafter.  PAR shall update such forecast every three
(3) months thereafter with a rolling twelve (12) month forecast.

            (b) REDDY shall  deliver  Reddy  Finished  Product to PAR within one
hundred  twenty  (120) days after the date of PAR's order  therefor,  unless PAR
specifies a later date in such order.



                                       17
<PAGE>

            (c) REDDY shall provide PAR with each  shipment of a Reddy  Finished
Product a certificate  from REDDY's quality  assurance  department that includes
the results of quality control testing in accordance with the specifications and
which indicates that the Reddy Finished Product  contained in the shipment meets
the Specifications.

      6.    PAR'S REPACKAGING RESPONSIBILITIES.

            (a) At the  request  of  REDDY,  and  with  commercially  sufficient
notice,  PAR shall repackage and label any Reddy Finished  Product into finished
label units for sale in the territory in a cGMP  approved  facility and shall be
responsible, with REDDY review for the printing of the labels in accordance with
FDA  guidelines  for such.  PAR will rely on the  information  contained  on the
labels of the bulk dosage product supplied by REDDY to PAR.

            PAR will  rely,  when  pertinent,  on REDDY for  specifications  for
container  closure  systems and on stability data,  moisture  permeation data in
carrying out packaging.



                                       18
<PAGE>

            PAR will conduct ongoing  stability where required by cGMP's as well
as impurity  identification  where  required all at the cost of REDDY.  PAR will
provide data to REDDY arising out of the stability  program.  In repackaging and
labeling   the  Reddy   Finished   Product,   PAR  shall  comply  with  (i)  the
Specifications  for such Reddy Finished Product,  (ii) applicable cGMP and (iii)
all other  applicable  rules,  regulations  and  requirements of the FDA and any
other applicable  governmental or regulatory  bodies,  agencies and officials in
the Territory relative to repackaging and labeling of the Reddy Finished Product
for sale in the Territory.  All labels and all artwork concepts on all packaging
material  used by PAR in  connection  with  labeling  and  packaging  of a Reddy
Finished  Product  shall be subject to the prior  reasonable  approval of REDDY,
provided  that the approval by REDDY of any label or artwork  concept  shall not
relieve or otherwise affect PAR's obligations or  responsibilities  hereunder in
relation to labeling and packaging of the Reddy Finished  Product or arising out
of the use of such labels or  packaging  material or the sale of Reddy  Finished
Product in the  Territory  so labeled  and  packaged.  REDDY shall own all trade
dress created hereunder.

            (b) Upon PAR's  receipt of written  notice from REDDY that PAR shall
repackage and label any Reddy  Finished  Product,  PAR and REDDY shall  mutually
agree upon an acceptable  time schedule to transfer the repackaging and labeling
of such Reddy  Finished  Product to PAR.  All direct  costs  incurred  by PAR in
connection with repackaging and labeling of such Reddy Finished Product shall be
treated as a Manufacturing Cost for purposes of calculating New Profits from the
sale of such Reddy Finished Product.

            (c) REDDY shall supply to PAR all information and data relating to a
Reddy  Finished  Product which it is obligated to provide PAR and its Affiliates
as a  repackager  and  labeler  of  such  REDDY  Finished  Product  pursuant  to
applicable laws.



                                       19
<PAGE>

      It is not the intent that PAR shall be caused to make significant  capital
expenditures to satisfy the repackaging  requirements.  PAR and REDDY agree that
if this should be required the parties will reach agreement as to funding.

      7.    PRODUCT REJECTION, NON-CONFORMING GOODS.

            (a)  Within  thirty-five  (35) days from the date of receipt of each
delivery of any Reddy  Finished  Product,  PAR shall inspect such Reddy Finished
Product (PAR hereby  acknowledging that its failure to inspect shall not release
it from the  obligations it would  otherwise have had it conducted an inspection
as herein contemplated,  or provide it with additional rights). PAR shall advise
REDDY in writing (a "Rejection  Notice") if a shipment of Reddy Finished Product
is  not  in  conformity  with  REDDY's  obligations  hereunder  or is  otherwise
defective;  provided,  however,  that PAR's  failure to advise REDDY in a timely
manner  that a shipment of Reddy  Finished  Product  does not conform  shall not
prejudice  PAR's  right to reject or return  the Reddy  Finished  Product if the
defect or other  nonconforming  condition  which  justifies  rejection or return
could not have been detected by PAR's inspection in accordance with cGMP. If PAR
delivers a Rejection Notice in respect of all or any part of a shipment of Reddy
Finished  Product,  then REDDY and PAR shall have thirty (30) days from the date
of REDDY's receipt of such notice to resolve any dispute  regarding  whether all
or any part of such shipment of Reddy Finished Product fails to conform with the
Product  Specifications or is otherwise defective.  Disputes between the parties
as to  whether  all or any part of a  shipment  rejected  by PAR  conforms  with
Specifications  shall be resolved in accordance with the provisions of paragraph
(b) below.  Disputes  between  the  parties  as to whether  all or any part of a
shipment  rejected  by  PAR  is  otherwise   defective  shall  be  submitted  to
arbitration in accordance with Section 22 of this Agreement.

            (b) If REDDY and PAR disagree  concerning whether the Reddy Finished
Product delivered pursuant to Section 5 meets Specifications, then PAR and REDDY
shall   jointly   investigate   whether  the  Reddy   Finished   Product   meets
Specifications.  If the parties do not agree  after  their joint  investigation,


                                       20
<PAGE>

they shall agree on an independent lab which shall  determine  whether the Reddy
Finished Product meets Specifications.  Initially, each party shall bear its own
costs and expenses  associated with performing such joint  investigation and the
parties shall share third party costs equally.  If such joint  investigation  or
the  independent  lab  concludes  that the  Reddy  Finished  Product  meets  the
Specifications,  then PAR shall reimburse REDDY for REDDY's  out-of-pocket costs
and expenses  associated with such investigation and the independent lab, and if
such  joint  investigation  or the  independent  lab  concludes  that the  Reddy
Finished  Product does not meet the  Specifications,  then REDDY shall reimburse
PAR  for  PAR's   out-of-pocket   costs  and  expenses   associated   with  such
investigation  and the  independent  lab.

            (c) In  the  event  any  Reddy  Finished  Product  is  appropriately
rejected by PAR,  REDDY shall  replace,  at PAR  locations,  such Reddy Finished
Product with  conforming  goods within sixteen (16) weeks.  REDDY shall bear all
transportation costs, import duties, if any, taxes, insurance and handling costs
and any other costs or charges incurred in transporting  such replacement  Reddy
Finished Product to the PAR location at which such nonconforming  Reddy Finished
Product is located and shall reimburse PAR for all transportation  costs, import
duties,  if  any,  taxes,  insurance  and  handling  costs  incurred  by  PAR in
connection with such out of Specification nonconforming Reddy Finished Product.

      8.    TERMS AND CONDITIONS OF SALE.

            REDDY  will  retain  title  and risk of loss to all  Reddy  Finished
Products until delivered CIP (as such term is defined in the ICC Incoterms 2000)
on a duty paid  basis to PAR's  facility  in  Spring  Valley,  New  York,  or as
otherwise  directed  by  PAR  within  the  Territory.  Each  shipment  shall  be
segregated by lot and accompanied by an appropriate certification of analysis.



                                       21
<PAGE>

      9.    PRICE - REDDY FINISHED PRODUCT.

            (a) The price of a Reddy Finished Product delivered to PAR hereunder
shall be an amount equal to (i) REDDY's [********************] thereof plus (ii)
[********************]   for  each  Reddy   Finished   Product   multiplied   by
[********************], calculated separately for each Reddy Finished Product.

            (b) PAR  agrees  (i) that in  calculating  Net  Sales  it shall  not
include in the deductions from Net Sales any special discounts,  rebates, volume
reimbursements or other incentives for any Reddy Finished Product that are given
as an  inducement  for the  purchase  of  other  PAR  products;  (ii)  that  any
discounts,  rebates  or  volume  reimbursements  offered  by PAR on the basis of
multiple  product  purchases  which  include  Reddy  Finished  Product  shall be
allocated to the Reddy Finished Product on a [********************] based on the
respective [********************];  (iii) that PAR shall not sell Reddy Finished
Product as a  [********************]  or otherwise cause its sales of some other
product to benefit at the  expense of the Reddy  Finished  Product;  and (iv) in
calculating  Commercial  Expenses it shall not allocate  commercial expenses for
multiple products which include any Reddy Finished Product to the Reddy Finished
Product  in a manner  that  results  in a  disproportionate  allocation  of such
expenses to the Reddy Finished Product.



                                       22
<PAGE>

      10.   ADDITIONAL CONSIDERATION TO REDDY.

            In further  consideration  for REDDY  entering into this  Agreement,
during  the Term PAR shall pay to REDDY,  as  additional  consideration  for the
supply of the Reddy Finished Products hereunder, the following amounts:

            (a) [********************].

            (b) [********************].

            (c) If,  pursuant  to Section  4(f),  REDDY does not supply PAR with
Reddy  Group  1  Products  (other  than   [*********************])   under  this
Agreement,  [*********************]  on sales of Par Group 1 Products  by PAR in
the Territory.

      11.   ADDITIONAL CONSIDERATION TO PAR.

            In further consideration for PAR entering into this Agreement, REDDY
shall pay to PAR the following amounts:

            (a) From and after January 1, 2005, and through the end of the Term,
[*********************], Reddy Group 3 Products, Group 4 Products, Reddy Group 4
Products and Group 5 Products by REDDY in the Territory.

            (b) From and after January 1, 2005, [*********************] on sales
by REDDY of (i) [*********************] (manufactured by REDDY) in the Territory
through the later of December 31,  2005,  or the  expiration  of three (3) years
from    the    Launch    Date    of     [*********************],     and    (ii)
[*********************]  (manufactured  by REDDY) in the  Territory  through the
later of December 31, 2006, or the expiration of three (3) years form the Launch
Date of  [*********************].  For  purposes of  clarification,  the parties
agree that PAR will receive its percentage of  [*********************],  whether
sold by PAR or REDDY,  for a period of three (3) years from the  Launch  Date of
each respective product.

            (c) If PAR and REDDY  determine that REDDY shall market and sell the
Reddy Group 6 Products,  the  [*********************]  on sales of Reddy Group 6
Products by REDDY in the Territory.



                                       23
<PAGE>

      12.   PAYMENT BY PAR.

            (a) REDDY shall invoice PAR for REDDY's  Manufacturing  Cost of each
Reddy Finished Product estimated in good faith,  delivered pursuant to Section 5
hereof and PAR shall pay such invoice within thirty (30) days after the later of
(i) the  receipt of such  invoice  from  REDDY or (ii) the  receipt of the Reddy
Finished  Product from REDDY.  Within sixty (60) days  following the end of each
calendar  year,  REDDY shall  calculate its actual  Manufacturing  Cost for each
Reddy  Finished  Product  delivered  pursuant  to Section 5 hereof  during  such
calendar  year and notify PAR of the amount by which REDDY has been  overpaid or
underpaid  during such  calendar  year.  Such notice shall be  accompanied  by a
statement  setting  forth in detail by product the amounts used to calculate its
Manufacturing Cost for each Reddy Finished Product for such calendar year. REDDY
shall return to PAR any overpayment and PAR shall pay to REDDY any underpayment,
as the case may be, with respect to each Reddy  Finished  Product  within thirty
(30) days thereafter.

            (b) (i) Within  thirty (30) days  following the end of each calendar
quarter,  PAR shall pay to REDDY the amounts  due to REDDY  pursuant to Sections
9(a)(ii) and 10(a),  (b), (c) and (dc) for such calendar  quarter.  Each payment
shall be accompanied by the following in respect of each Reddy Finished  Product
supplied hereunder:

                        A.    a  sales  summary  reasonably   satisfactory  to
                              REDDY  showing all sales of such Reddy  Finished
                              Product  and  Par  Finished   Product  by  Units
                              (SKUs);

                        B.    a  detailed   statement   showing  all  returns,
                              adjustments,  credits,  rebates and other debits
                              and credits  relevant to the  calculation of Net


                                       24
<PAGE>

                              Sales of such  Reddy  Finished  Product  and Par
                              Finished  Product for the  quarter in  question,
                              together  with  copies of all  documentation  to
                              support  allowable  deductions used in computing
                              Net Sales during such quarter;

                        C.    a detailed  statement showing Cost of Goods Sold
                              for  such  Reddy   Finished   Product   and  Par
                                Finished Product;

                        D.    a  certificate  signed  by the  Chief  Financial
                              Officer of PAR  certifying  that, to the best of
                              his  knowledge,  information  and belief,  after
                              reasonable    investigation,    the    foregoing
                              statements  contemplated in A, B and C above are
                              true and  correct  and do not omit any  material
                              information  required to be provided pursuant to
                              this Section; and

                        E.    a summary of the  calculation of the Net Profits
                              payable to REDDY on such date.

For purposes of this Agreement,  a sale shall be considered to have been made at
the time the Product is shipped by PAR or its Affiliates to its customer.

                  (ii) PAR shall provide to REDDY and shall cause its Affiliates
to provide to REDDY,  promptly  following a request  therefor,  such  additional
information   concerning  any  sales  of  a  specific  Reddy  Finished   Product
(including,  without  limitation,  in  respect  of any  sale,  the  date  of the
shipment,  the name of the customer,  the number of Units of the Reddy  Finished
Product (by SKU,  if  requested)  sold to such  customer  and the invoice  price
charged by PAR or its Affiliates),  chargebacks,  credits, returns,  adjustments
and other credits and debits  relevant to the  calculation  of Net Sales and Net
Profits in respect of a Reddy Finished Product as REDDY may reasonably request.

            (c) REDDY maintains a standard set of cost  accounting  policies and
practices in accordance with U.S. generally accepted accounting principles which


                                       25
<PAGE>

are  applicable  to all  products  manufactured  by REDDY.  The cost  accounting
policies and practices implemented by REDDY for this Agreement shall not deviate
in any material  respect  from REDDY's  standard  cost  accounting  policies and
practices.  REDDY shall notify PAR, in writing,  of any  material  change in its
standard cost accounting policies and practices which would adversely impact PAR
under  this  Agreement.  The  cost  accounting  policies  and  practices  to  be
implemented  by  REDDY  for this  Agreement  shall be in  accordance  with  U.S.
generally accepted  accounting  principles and shall not deviate in any material
respect  from  the  standard  cost  accounting   policies  and  practices  being
implemented  by REDDY  generally.  REDDY shall  notify  PAR, in writing,  of any
significant  change in these  standard  cost  accounting  policies and practices
which would adversely impact PAR under this Agreement.

            (d) PAR shall keep and maintain complete and accurate records of the
Net Sales and Net Profit for each  calendar  year and shall  retain such records
for a period  of three (3)  years  thereafter.  REDDY  shall  keep and  maintain
complete and accurate records of  Manufacturing  Cost for each calendar year and
shall retain such records for a period of three (3) years thereafter. Each party
shall  have  the  right  to  nominate  a firm of  independent  certified  public
accountants  reasonably  acceptable  to the  other  party to have  access to the
records of such other party during reasonable  business hours for the purpose of
verifying, at the auditing party's expense, Net Sales and Net Profit in the case
of an audit  of PAR and  Manufacturing  Cost in the  case of an audit of  REDDY;
provided  that this right may not be  exercised  more than once in any  calendar
year (except as set forth below) or for any period for which such other party is
not obligated to keep records  hereunder.  The results of the accountant's audit
shall be final and binding on both  parties.  A party  required to reimburse the
other party for an  underpayment  (in any amount) shall do so within thirty (30)
days of its  receipt  of  notice  from the  other  party of the  results  of the
accountant's  audit.  In the event that the  auditing  accountant  finds that an
underpayment  of five percent (5%) or more has been made, the party who made the
underpayment shall also: (a) pay the cost of that audit (within thirty (30) days


                                       26
<PAGE>

of its  receipt  of notice of the  results  of the  audit) and (b) be subject to
semi-annual  audits  for the  following  two (2)  years.  In the event  that the
auditing accountant finds that an overpayment was made, the party which received
the  overpayment  shall reimburse the other party within thirty (30) days of its
receipt of notice of the results of the audit.

            (e)   All amounts payable hereunder shall be paid in U.S. dollars.

      13.   PAYMENTS BY REDDY.

            (a) (i) Within  thirty (30) days  following the end of each calendar
quarter,  REDDY  shall pay to PAR the  amounts  due to PAR  pursuant to Sections
11(a) and 11(b) for such calendar quarter.  Each payment shall be accompanied by
the following:

                        A.    a sales summary  reasonably  satisfactory to PAR
                              showing   all  sales  by  REDDY  of  such  Reddy
                              Finished Product by Units (SKUs);

                        B.    a  detailed   statement   showing  all  returns,
                              adjustments,  credits,  rebates and other debits
                              and credits  relevant to the  calculation of Net
                              Sales of such  Reddy  Finished  Product  for the
                              quarter in  question,  together  with  copies of
                              all    documentation   to   support    allowable
                              deductions  used in  computing  Net Sales during
                              such quarter;

                        C.    a detailed statement showing  Manufacturing Cost
                              for such Reddy Finished Product;



                                       27
<PAGE>

                        D.    a  certificate  signed  by the  Chief  Financial
                              Officer of REDDY  certifying  that,  to the best
                              of his knowledge,  information and belief, after
                              reasonable    investigation,    the    foregoing
                              statements  contemplated in A, B and C above are
                              true and  correct  and do not omit any  material
                              information  required to be provided pursuant to
                              this Section; and

                        E.    a summary of the  calculation of the Net Profits
                              payable to PAR on such date.

For purposes of this Agreement,  a sale shall be considered to have been made at
the time the Product is shipped by REDDY or its Affiliates to its customer.

                  (ii) REDDY shall provide to PAR and shall cause its Affiliates
to  provide to PAR,  promptly  following  a request  therefor,  such  additional
information   concerning  any  sales  of  a  specific  Reddy  Finished   Product
(including,  without  limitation,  in  respect  of any  sale,  the  date  of the
shipment,  the name of the customer,  the number of Units of the Reddy  Finished
Product (by SKU,  if  requested)  sold to such  customer  and the invoice  price
charged by REDDY or its Affiliates),  chargebacks, credits, returns, adjustments
and other credits and debits  relevant to the  calculation  of Net Sales and Net
Profits in respect of a Reddy Finished Product as PAR may reasonably request.

      14.   REPRESENTATIONS, WARRANTIES AND COVENANTS.

            (a)   REDDY makes the following  representations,  warranties  and
covenants:

                  (i)   REDDY shall submit to the FDA, and shall maintain, a DMF
                        for each Bulk Product that REDDY shall manufacture;

                  (ii)  REDDY shall  submit to the FDA,  and,  if issued,  shall
                        maintain, an ANDA for each Reddy Finished Product;



                                       28
<PAGE>

                  (iii) REDDY   shall   permit  the  FDA  to   inspect   REDDY's
                        manufacturing  facilities for each Bulk Product and each
                        Reddy Finished Product in connection with the review and
                        approval of REDDY's  applications  for  registration  of
                        each Reddy Finished Product;

                  (iv)  each Reddy Finished Product (1) shall be manufactured in
                        conformance with the ANDA for the Reddy Finished Product
                        and  with  all  applicable   statutes,   ordinances  and
                        regulations  (including without limitation the FD&C Act)
                        as the same may be amended or revised from time to time,
                        (2)  shall  be  manufactured  in  conformance  with  the
                        Specifications,   (3)  shall  not  be   adulterated   or
                        misbranded  within the meaning of the FD&C Act,  and (4)
                        shall not be a product  which would  violate any section
                        of the FD&C Act if introduced into interstate  commerce;
                        and



                                       29
<PAGE>

                  (v)   each Bulk Product  manufactured  by REDDY (1) shall be
                        manufactured in conformance  with the DMF therefor and
                        with   all   applicable   statutes,   ordinances   and
                        regulations (including,  without limitation,  the FD&C
                        Act) as the same may be amended  or revised  from time
                        to time,  (2)  shall be  manufactured  in  conformance
                        with the Specifications,  (3) shall not be adulterated
                        or misbranded  within the meaning of the FD&C Act, and
                        (4) shall not be a product  which  would  violate  any
                        section of the FD&C Act if introduced  into interstate
                        commerce.

            (b)   PAR  makes the  following  representations,  warranties  and
covenants:

                  (i)   PAR shall  permit  the FDA to inspect  PAR's  facilities
                        used  for  the  packaging  and  storing  of  each  Reddy
                        Finished  Product  in  connection  with the  review  and
                        approval of REDDY's applications for registration of the
                        Reddy Finished Product;

                  (ii)  each Reddy Finished Product packaged at PAR's facilities
                        (1) shall be packaged  and labeled in  conformance  with
                        all applicable requirements of the FDA, the ANDA for the
                        Reddy Finished Product and with all applicable statutes,
                        ordinances   and   regulations    (including,    without
                        limitation, the FD&C Act), as the same may be amended or
                        revised  from time to time,  (2) shall be  packaged  and
                        labeled  in  conformance  with the  Specifications,  (3)
                        shall  not  be  adulterated  or  misbranded  within  the
                        meaning of the FD&C Act,  and (4) shall not be a product
                        which  would  violate  any  section  of the  FD&C Act if
                        introduced into interstate commence.

                  (iii) each Par Finished  Product (1) shall be  manufactured in
                        conformance  with the ANDA for the Par Finished  Product


                                       30
<PAGE>

                        and  with  all  applicable   statutes,   ordinances  and
                        regulations  (including without limitation the FD&C Act)
                        as the same may be amended or revised from time to time,
                        (2)  shall  be  manufactured  in  conformance  with  the
                        Specifications,   (3)  shall  not  be   adulterated   or
                        misbranded  within the meaning of the FD&C Act,  and (4)
                        shall not be a product  which would  violate any section
                        of the FD&C Act if introduced into interstate commerce;

                  (iv)  each Bulk Product  manufactured for Par Finished Product
                        (1) shall be  manufactured  in conformance  with the DMF
                        therefor and with all  applicable  statutes,  ordinances
                        and regulations (including, without limitation, the FD&C
                        Act) as the same may be amended or revised  from time to
                        time, (2) shall be manufactured in conformance  with the
                        Specifications,   (3)  shall  not  be   adulterated   or
                        misbranded  within the meaning of the FD&C Act,  and (4)
                        shall not be a product  which would  violate any section
                        of the FD&C Act if introduced into interstate  commerce;
                        and

                  (v)   PAR and its Affiliates shall use commercially reasonable
                        promotional  and sales  efforts  to market  and sell the
                        Reddy Finished Products and Par Finished  Products,  and
                        such efforts  shall be not less than efforts used by PAR
                        and its Affiliates to promote the sale of other products
                        marketed in the Territory.

            (c)   Each party  represents,  warrants and covenants to the other
that:

                  (i)   such  party is not  debarred  under the  Generic  Drug
                        Enforcement  Act of 1992 and that it does not and will
                        not use in any  capacity  the  services  of any person


                                       31
<PAGE>

                        debarred  under the Generic  Drug  Enforcement  Act of
                        1992;  neither  such  party,  nor,  to the best of its
                        knowledge,   any   of   its   employees,   agents   or
                        contractors,  has engaged in any activity  which could
                        lead to it becoming  debarred  under the Generic  Drug
                        Enforcement Act of 1992;

                  (ii)  such party is duly  authorized  to execute and deliver
                        this  Agreement  and   consummate   the   transactions
                        contemplated hereby; and

                  (iii) neither the  execution,  delivery or performance of this
                        Agreement,  nor  the  consummation  of the  transactions
                        contemplated  hereby,  (a) will violate or conflict with
                        such party's articles of  incorporation or by-laws,  (b)
                        will  result  in any  breach  of or  default  under  any
                        provision  of any  contract or  agreement  to which such
                        party is bound,  or to which such party's  properties or
                        assets are subject,  (c) is  prohibited  by, or requires
                        such   party   to   obtain   authorization,    approval,
                        registration or to make any filing under, any law, rule,
                        regulation,  order or  judgment,  or of any other person
                        (except as contemplated  herein),  or (d) will result in
                        the creation or imposition of any lien,  claim,  charge,
                        restriction,   equity   or   encumbrance   of  any  kind
                        whatsoever upon or give to any other person any interest
                        or  right   (including   the  right  of  termination  or
                        cancellation)   in  or  with   respect  to  any  of  the
                        properties,  assets,  contracts  or  agreements  of such
                        party.



                                       32
<PAGE>

      15.   INDEMNIFICATION.

            (a) REDDY agrees to indemnify,  defend and hold harmless, and to pay
and reimburse,  PAR, its  Affiliates,  and its and their  respective  employees,
agents and representatives,  from and against any and all third party claims and
losses, damages and liabilities,  including reasonable attorney's fees, relating
thereto,  incurred by any of them arising out of,  relating to or occurring as a
result of REDDY's  negligence  or the breach of any  representation  or warranty
made by REDDY in this Agreement.

            (b) PAR agrees to indemnify,  defend and hold  harmless,  and to pay
and reimburse,  REDDY, its Affiliates,  and its and their respective  employees,
agents and representatives,  from and against any and all third party claims and
losses, damages and liabilities,  including reasonable attorney's fees, relating
thereto,  incurred by any of them arising out of,  relating to or occurring as a
result of PAR's negligence or the breach of any  representation or warranty made
by PAR in this Agreement.

            (c) If PAR,  REDDY or an  Affiliate  (in each  case an  "Indemnified
Party") receives any written claim which it believes is the subject of indemnity
hereunder,  the Indemnified Party shall, as soon as reasonably practicable after
forming  such  belief,  give  notice  thereof  to the other  (the  "Indemnifying
Party"),  including  all  particulars  of such claim to the extent  known to the
Indemnified  Party;  provided  that the  failure  to give  timely  notice to the
Indemnifying  Party as  contemplated  hereby shall not release the  Indemnifying
Party  from any  liability  to the  Indemnified  Party  except to the extent the
Indemnifying  Party is  materially  prejudiced  in  defending  any claim by such
failure.  The  Indemnifying  Party shall have the right, by prompt notice to the
Indemnified  Party,  to assume the  defense  of such  claim with  counsel of its
choice reasonably  satisfactory to the Indemnified Party, and at the cost of the
Indemnifying  Party.  If  the  Indemnifying  Party  assumes  such  defense,  the
Indemnified  Party may  participate in the action through counsel of its choice,
but the cost of such counsel shall be at the expense of the  Indemnified  Party.
If the  Indemnifying  Party does not so assume the  defense of such  claim,  or,
having  assumed such defense fails to  vigorously  prosecute  such defense,  the


                                       33
<PAGE>

Indemnified  Party may assume such  defense,  with counsel of its choice,  to be
paid or reimbursed by the Indemnifying Party.

            (d) The party not  assuming  the  defense  of any such  claim  shall
render all  reasonable  assistance to the party  assuming such defense,  and all
reasonable  out-of-pocket  costs of such  assistance  shall be promptly  paid or
reimbursed by the Indemnifying Party.

            (e) No such claim  shall be  settled  and no  admission  may be made
other than by the party  defending  the same,  and then only with the consent of
the other party,  which shall not be  unreasonably  withheld;  provided that the
Indemnified  Party shall have no obligation to consent to any  settlement of any
such claim which  imposes on the  Indemnified  Party any liability or obligation
which will not be assumed and performed in full by the Indemnifying Party.

      16.   RECALL OR SEIZURE - REDDY FINISHED PRODUCT.

            (a) In the event PAR believes that a Recall may be necessary  and/or
appropriate,  prior to taking any action PAR shall immediately notify REDDY, and
PAR and REDDY shall cooperate and cause their respective Affiliates to cooperate
with each  other in  determining  the  necessity  and nature of the action to be
taken.

            (b) With respect to any recall,  REDDY shall make all contacts  with
the FDA and shall be responsible for coordinating all of the activities required
in connection with such recall.  PAR and REDDY and their  respective  Affiliates
shall  cooperate  with each  other in  recalling  the  affected  Reddy  Finished
Product.

            (c) In the event of any  recall  or  seizure  of any Reddy  Finished
Product  arising out of,  relating  to, or  occurring as a result of, any act or
omission by REDDY, REDDY shall, at the election of PAR, either:

                  (i)   replace the amount of Reddy Finished  Product recalled
                        or seized; or

                  (ii)  give credit to PAR against  outstanding  receivables due
                        from PAR in an amount  equal to the  amount  paid by PAR


                                       34
<PAGE>

                        for the Reddy Finished  Product so recalled or seized or
                        otherwise owing by PAR hereunder;

plus  reimburse  (or at the  election  of PAR,  credit)  PAR for the  Commercial
Expenses  allocated thereto (in the same proportion as such quantity of recalled
or seized  product  bears to the total  quantity  of product  sold  during  such
calendar year), and all transportation  costs,  export or import duties, if any,
taxes,  insurance and handling costs incurred by PAR in respect of such recalled
or seized product.

            (d) In the event of any  recall  or  seizure  of any Reddy  Finished
Product  arising  out of,  relating to or  occurring  as a result of, any act or
omission  of PAR,  PAR shall be solely  responsible  for and shall  exclude  for
purposes of calculating Net Profit REDDY's  Manufacturing Cost allocated thereto
(in the same  proportion as such quantity of recalled or seized product bears to
the total quantity of product sold in such calendar year) and all transportation
costs,  import duties,  if any, taxes,  insurance and handling costs incurred by
PAR in respect of such recalled or seized product.

            (e) For purposes of this Section 16,  "recall"  means (i) any action
by REDDY,  PAR or any  Affiliate of either to recover  title to or possession of
any Reddy  Finished  Product sold or shipped and/or (ii) any decision by PAR not
to sell or ship product to third parties which would have been subject to recall
if it had been sold or shipped, in each case taken in the good faith belief that
such  action was  appropriate  under the  circumstances.  For  purposes  of this
Section 16,  "seizure"  means any action by any  government  agency to detain or
destroy product.

            (f) Any and all disputes or controversies arising under this Section
16 regarding the respective  fault of the parties for recalls shall be submitted
to arbitration in accordance  with Section 23 of this Agreement and the award of
the arbitrator or arbitrators  designated  thereunder shall,  subject to law, be
final and binding upon the parties hereto.



                                       35
<PAGE>

      17.   TERMINATION.

            (a)  Notwithstanding  any other provision of this Agreement,  either
party may  terminate  this  Agreement,  or any  Reddy  Finished  Product  or Par
Finished Product under this Agreement, by notice in writing to the other upon or
at any time after the occurrence of any of the following events:

                  (i)   if  the  other  commits  a  material  breach  of  this
                        Agreement  which  (a) in the case of a breach  capable
                        of a  remedy,  shall  not have  been  remedied  within
                        sixty  (60)  days of the  receipt  by the  other  of a
                        notice  identifying  the  breach  and  requesting  its
                        remedy and (b)  continues  to exist at the time notice
                        of  termination   is  given;   provided  that  if  the
                        breaching  party is diligently  pursuing in good faith
                        the  remedy of any  breach,  then such  sixty (60) day
                        cure period  shall be extended  for such period as may
                        be reasonably required to effectuate such cure; or

                  (ii)  if the  other  is  unable  to  pay  its  debts,  becomes
                        bankrupt  or  insolvent,   or  enters  into  liquidation
                        whether  compulsorily  or  voluntarily,  or  convenes  a
                        meeting of its  creditors,  or has a receiver  appointed
                        over all or part of its assets,  or takes or suffers any
                        similar  action in  consequence of a debt, or ceases for
                        any reason to carry on business.

            (b) Notwithstanding any other provision of this Agreement, if during
any rolling twelve (12) month period after the Launch Date of any Reddy Finished
Product or Par Finished Product,  the Net Profit for such Reddy Finished Product
or Par Finished Product shall be less than ten percent (10%) of Net Sales,  then
either party may  terminate  this  Agreement,  solely with respect to such Reddy
Finished  Product or Par  Finished  Product,  by notice in writing to the other,
given no later than one hundred  twenty (120) days after the end of such rolling
twelve (12) month  period;  provided,  however,  a party may not  terminate  the
Agreement  as to a Product  under this  Section  17(b) if its own breach of this


                                       36
<PAGE>

Agreement has caused the Net Profit for such twelve (12) month period to be less
than ten percent (10%) of Net Sales.

            (c) Notwithstanding  any other provision of this Agreement,  PAR may
terminate any Reddy Finished Product under this Agreement,  by notice in writing
to REDDY  given with sixty  (60) days  after PAR  receives  notice of any of the
following events:

                  (i)   Prior to June 30,  2004,  a Reddy  Change  in  Control
                        shall have occurred;

                  (ii)  REDDY has  received a Form 483 report with  respect to a
                        Reddy  Finished  Product or the  manufacturing  facility
                        therefor  and it has not  complied  with  such  Form 483
                        within  a  reasonable   time   thereafter   and  is  not
                        diligently   pursuing   corrective  action  in  response
                        thereto;

                  (iii) REDDY has violated the fraud  provisions of the FD&C Act
                        in  connection  with a  Reddy  Finished  Product  or the
                        manufacturing facility therefor; or

                  (iv)  REDDY has entered into a consent agreement with the FDA,
                        or a similar  event has  occurred,  which  significantly
                        impairs  REDDY's  ability to manufacture or sell a Reddy
                        Finished Product.

            (d) Notwithstanding any other provision of this Agreement, REDDY may
terminate  any  Reddy  Finished  Product  or Par  Finished  Product  under  this
Agreement,  by notice in writing to PAR given within sixty (60) days after REDDY
receives notice or otherwise becomes aware of any of the following events:

                  (i)   Prior to June 30, 2004, a Par Change in Control  shall
                        have occurred;

                  (ii)  There has occurred a material  negative  diminishment in
                        the sales/marketing  capability of PAR,  including,  but
                        not   limited   to,   a   significant   change   in  the
                        sales/marketing personnel of PAR and, after notice and a
                        reasonable  opportunity to cure,  such personnel are not


                                       37
<PAGE>

                        replaced  with   individuals   as  a  group   possessing
                        comparable experience;

                  (iii) PAR has  received  Form 483 with respect to packaging or
                        labeling or the  packaging  or labeling  facility  for a
                        Reddy Finished Product and it has not complied with such
                        Form 483 within a reasonable  time  thereafter and it is
                        not diligently  pursuing  corrective  action in response
                        thereto;

                  (iv)  PAR (or its current  supplier of Par Finished Product or
                        its manufacturer of Bulk Product used to manufacture any
                        Par  Finished  Product)  has  received a Form 483 report
                        with   respect  to  a  Par   Finished   Product  or  the
                        manufacturing  facility therefor and it has not complied
                        with such Form 483 within a reasonable  time  thereafter
                        and is not  diligently  pursuing  corrective  action  in
                        response thereto;

                  (v)   PAR (or its current  supplier of Par Finished Product or
                        its manufacturer of Bulk Product used to manufacture any
                        Par Finished  Product) has violated the fraud provisions
                        of the  FD&C  Act in  connection  with a Reddy  Finished
                        Product or Par Finished Product;

                  (vi)  PAR has entered into a consent  agreement  with the FDA,
                        or a similar  event has  occurred,  which  significantly
                        impairs PAR's ability to sell a Reddy Finished  Product;
                        or

                  (vii) PAR (or its current  supplier of Par Finished Product or
                        its manufacturer of Bulk Product used to manufacture any
                        Par  Finished   Product)  has  entered  into  a  consent
                        agreement  with the FDA, or a similar event has occurred
                        which  significantly  impairs  REDDY's ability to sell a
                        Par Finished Product.

            (e) Expiration or  termination  of this  Agreement  shall be without
prejudice to the right of any party to receive all  payments  accrued and unpaid


                                       38
<PAGE>

at the effective date of such  expiration or termination,  without  prejudice to
the  remedy  of  either  party  in  respect  to  any  previous   breach  of  the
representations,  warranties or covenants herein contained, without prejudice to
any rights to  indemnification  set forth  herein and without  prejudice  to any
other  provision  hereof which  expressly or necessarily  calls for  performance
after such  expiration or  termination.  Without  limiting the generality of the
foregoing,  Sections  3(c),  7, 12, 13, 14, 15, 16, 19, 20 and 21 shall  survive
expiration or termination of this Agreement.

            (f)  Notwithstanding  any other provision of this Agreement,  either
party may terminate this  Agreement as to any specific  Reddy  Finished  Product
which does not receive  Regulatory  Approval  within one year after the later of
the patent expiration date or the product exclusivity expiration date; provided,
however,  that in the event of a termination by one party, the other party shall
have  the  right to use all  information  and data  generated  pursuant  to this
Agreement  that is or would be contained in the ANDA  relating to that  specific
Reddy Finished Product.

            (g) If PAR  terminates  the  Agreement  with respect to a particular
Reddy Finished  Product  pursuant to Section 17(b), PAR shall not (and shall not
authorize,  cause or permit any of its Affiliates  to),  directly or indirectly,
manufacture, purchase, sell or distribute in the Territory any Competing Product
to any Reddy Finished  Product as to which this Agreement has been so terminated
for the balance of the Term of such Reddy Finished Product.

            (h) If REDDY  terminates this Agreement with respect to a particular
Reddy Finished Product pursuant to Section 17(b), REDDY shall not (and shall not
authorize,  cause or permit any of its Affiliates  to),  directly or indirectly,
sell or distribute such Reddy Finished  Product in the Territory for the balance
of the Term of such Reddy Finished Product.



                                       39
<PAGE>

      18.   RIGHT TO INSPECT.

            REDDY and PAR shall have  access to and the right,  upon  reasonable
notice and at reasonable  times,  to inspect the  manufacturing  and warehousing
facilities,  supporting  systems,  documents  and  records  (including,  without
limitation,  adverse drug reactions,  annual product reviews,  stability reports
and complaints) of the other that are associated  with a Reddy Finished  Product
or Par Finished Product. After an inspection, the inspecting party shall provide
the inspected party with a copy of its inspection report and the inspected party
shall  promptly  provide the other with a written  response to such  report.  If
needed  the   parties   will   arrange  to  meet  to  discuss  the  results  and
recommendations contained in such inspection report.

      19.   ADVERSE DRUG REACTIONS.

            REDDY  and PAR  shall  keep  the  other  fully  informed  of (i) any
notification  or other  information,  whether  received  directly or indirectly,
which  might  affect the  marketability,  safety or  effectiveness  of any Reddy
Finished  Product or Par  Finished  Product,  or which might result in liability
issues or otherwise  necessitate  action on the part of either  party,  or which
might result in recall or seizure of any Reddy Finished  Product or Par Finished
Product and (ii) nonclinical  reports with respect to any Reddy Finished Product
or Par Finished Product.

      20.   CONFIDENTIALITY AND NON-USE.

            (a) Except as otherwise  expressly  provided in Section 2(e) of this
Agreement,  during the Term of this Agreement and any renewal thereof, and for a
period of five (5) years  thereafter,  each party shall hold in confidence,  not
disclose and not use for the benefit of any party,  except the disclosing party,
any and all confidential  information  provided by the disclosing party,  except
with the express prior written  consent of the disclosing  party,  provided that
non-disclosing party shall not be prevented from disclosing information which:

                  (i)   at, prior or subsequent  to the time of such  disclosure
                        is  independently  known to the receiving  party without
                        obligation of secrecy or non-use to a third party;



                                       40
<PAGE>

                  (ii)  at,  prior  or  subsequent  to the  time of  disclosure,
                        becomes part of the public  knowledge  through no breach
                        hereof by the receiving party;

                  (iii) subsequent to the time of such disclosure is the subject
                        of another  agreement  between the parties  hereto which
                        explicitly permits use or disclosure; or

                  (iv)  is  required   by  law  or  judicial   process  to  be
                        disclosed.

Specific  information  received by either party hereunder shall not be deemed to
fall within any of the  foregoing  exceptions  merely  because it is embraced by
general information within any such exceptions.  In addition, any combination of
features  received as  confidential  information by either party hereunder shall
not be deemed to fall  within any of the  foregoing  exceptions  merely  because
individual  features are separately  within any such exception,  but only if the
combination itself, and its principles of operation, are within such exception.


            (b) In the event that  either  party shall be legally  compelled  or
required by a court of competent jurisdiction to disclose all or any part of the
Confidential  Information  of the other (or its  Affiliates),  it shall  provide
prompt  notice to the other so that such  other  party (or its  Affiliates)  may
determine  whether or not to seek a  protective  order or any other  appropriate
remedy. If a protective order or other appropriate remedy is not obtained before
such disclosure is required, the party required to make disclosure will disclose
only those  portions of the  Confidential  Information  in question  which it is
advised by written  opinion of counsel (which opinion shall be addressed to such
party and to the other  party),  it is legally  required  to  disclose  and will
exercise  its best  efforts  to obtain  reliable  assurances  that  confidential
treatment will be accorded such Confidential Information.

            (c) Without  limiting the  generality of the  foregoing,  each party
shall limit disclosure of the confidential information to its employees who need


                                       41
<PAGE>

to receive  the  confidential  information  in order to further  the  activities
contemplated in this Agreement.  Each party shall take sufficient precautions to
safeguard  the  confidential   information,   including  obtaining   appropriate
commitments and enforceable  confidentiality  agreements. Each party understands
and agrees that the wrongful disclosure of confidential  information will result
in serious and irreparable damage to the other party, that the remedy at law for
any  breach of this  covenant  may be  inadequate,  and that the  party  seeking
redress hereunder shall be entitled to injunctive  relief,  without prejudice to
any other rights and remedies to which such party may be entitled.

            (d)  It  is  acknowledged  that  confidential   information  may  be
disclosed  not  only in  writing  or  other  tangible  form,  but  also  through
discussions  between each party's  respective  representatives,  demonstrations,
observations and other intangible methods.

            (e) The above notwithstanding, each party shall have the right, with
the   exercise  of   discretion,   and  insofar  as  practical   under   written
confidentiality  agreements  having  provisions  no less  stringent  than  those
contained   herein,  to  make  disclosures  of  such  portions  of  confidential
information  to  third  party  consultants,  attorneys,  contractors,  advisors,
Affiliates  and  governmental  agencies where in the  recipient's  judgment such
disclosure  is  essential  to  development,  approval  or  marketing  of a Reddy
Finished Product pursuant to this Agreement.

            (f)  Except  as  otherwise  set  forth  in  this   Agreement,   upon
termination  of this  Agreement  and at the  written  request of the  disclosing
party, the receiving party shall return all the confidential  information of the
disclosing  party  (including all copies  thereof) or destroy such  confidential
information at the option of the disclosing party.



                                       42
<PAGE>

      21.   INSURANCE.

            Each of PAR and  REDDY  shall  (and  shall  cause  their  respective
Affiliates  to),  during the Term or Group 2 Term, as the case may be, and for a
period of not less than  thirty-six  (36) months  following  termination of this
Agreement,  maintain product liability insurance  (including blanket contractual
liability) in a minimum amount of $10,000,000  U.S.,  combined  single limit, to
cover product  liability claims of PAR and REDDY relating to each Reddy Finished
Product or Par Finished Product with the manufacturer's insurance coverage being
primary with respect to any claim  thereunder.  Each of Par and REDDY shall,  at
the  request  of the  other,  provide  evidence  to  such  requesting  party  of
compliance with its insurance  obligation  (and those of its  Affiliates)  under
this Section 21 and evidence of renewals of any such policy from time to time.

      22.   ARBITRATION.

            Any  controversy  or claim  pursuant to Sections 7 and 16(f) of this
Agreement or the breach  thereof  shall be referred for decision  forthwith to a
senior  executive of each party not involved in the dispute.  If no agreement is
reached  within  thirty  (30) days of the  request  by one party to the other to
refer the same to such senior executive, then such controversy or claim shall be
settled by arbitration in accordance  with the Commercial  Arbitration  Rules of
the American Arbitration Association; such arbitration to be held in Newark, New
Jersey  on  an  expedited  basis.  Judgment  upon  the  award  rendered  by  the
Arbitrator(s) may be entered in any court having jurisdiction thereof.

      23.   MISCELLANEOUS.

            (a) This Agreement does not constitute or create (and the parties do
not intend to create hereby) a joint venture, pooling arrangement,  partnership,
or  formal  business  organization  of any kind  between  and  among  any of the
parties,  and the  rights and  obligations  of the  parties  shall be only those
expressly set forth herein. The relationship  hereby established between PAR and
REDDY is solely  that of buyer and  seller,  each is an  independent  contractor
engaged in the operation of its own respective business.  Neither party shall be


                                       43
<PAGE>

considered  to be an agent of the other for any purpose  whatsoever.  Each party
shall be responsible for providing its own personnel and workers'  compensation,
medical  coverage or similar  benefits and shall be solely  responsible  for the
payment of social security benefits,  unemployment insurance,  pension benefits,
withholding any required amounts for income and other  employment-related  taxes
and  benefits  of its own  employees,  and shall make its own  arrangements  for
injury,  illness or other insurance  coverage to protect itself, its Affiliates,
its subcontractors and personnel from any damages, loss and/or liability arising
out of the  performance  of this  Agreement.  Neither  party  has the  power  or
authority  to act for,  represent or bind the other (or its  Affiliates)  in any
manner.

            (b) Any  notice  provided  for  under  this  Agreement  shall  be in
writing,  shall be given either by hand or by mail, telegram,  facsimile message
or other  written  means,  and  shall be deemed  sufficiently  given if and when
received  by the party to be  notified  at its  address  first set forth  below.
Either party may, by notice to the other,  change its address for receiving such
notices.

            If to REDDY:

            DR. REDDY'S LABORATORIES LIMITED
            7-1-27 Ameerpet
            Hyderabad - 500 016
            India
            Attention: CEO
            Telefax:  0119140291955

            -and-

            REDDY-CHEMINOR, INC.
            66 South Maple Avenue
            Ridgewood, New Jersey  07450
            U.S.A.
            Attention: Strategic Business Unit Head
            Telefax:  12014441456

            If to PAR:

            PAR PHARMACEUTICALS, INC.
            One Ram Ridge Road
            Spring Valley, New York 10977
            Attention:  _________
            Telefax:  ___________



                                       44
<PAGE>

            (c) This Agreement shall be deemed to have been made in the State of
New Jersey,  and shall be construed in accordance  with and governed by such law
without regard to the choice of law principles  thereof.  Any action between PAR
and REDDY  which  relates  in any way to this  Agreement  or any Reddy  Finished
Product shall also be governed by New Jersey law without regard to choice of law
principles.  Except with respect to disputes  regarding the respective  fault of
the parties in the event of a recall or seizure as  controlled by Sections 7 and
16(f),  the parties agree to submit all disputes which relate in any way to this
Agreement or any Reddy Finished  Product,  to the  jurisdiction  of the Superior
Court of New Jersey.

            (d)   This  Agreement  may not be assigned by either party without
consent of the other party.

            (e) If the manufacture,  transportation, delivery, receipt or use by
either party of any material or services covered hereby is prevented, restricted
or  interfered  with by  reason  of any  event or cause  whatsoever  beyond  the
reasonable  control of the party so affected,  such party, upon prompt notice to
the other party, shall be excused from making or taking deliveries  hereunder to
the extent of such prevention, restriction or interference.

            (f) This  Agreement  constitutes  the entire  agreement  between the
parties  with  reference  to the subject  matter  hereof,  supersedes  any prior
agreements  with  respect  to such  subject  matter,  and may not be  changed or
modified  orally,  but only by an instrument in writing,  signed by the parties,
which states that it is an amendment to this Agreement. The terms and conditions
of sale contained in either PAR's or REDDY's purchase order and PAR's or REDDY's
invoice  shall  not  modify,  alter or add any term or  condition  of or to this
Agreement.

            (g)  Neither  party  shall be  liable  to the  other  party for lost
profits or special,  consequential,  punitive or indirect  damages in connection


                                       45
<PAGE>

with any  claim or cause of action  arising  out of the  subject  matter of this
Agreement.

            (h) The Parties agree that costs or expenses which are inadvertently
omitted from a party's  calculation of Manufacturing  Costs, Net Sales or Profit
may be  included  by that party in its  calculation  of same in a later  period.
Similarly,  should a change  occur  resulting  in a cost or expense  increase or
decrease (after a calculation and the related payment is made),  the increase or
decrease shall be included in the calculation in the next period.

            (i) This Agreement may be executed in one or more  counterparts each
of which shall for all  purposes  be deemed to be an  original  and all of which
shall constitute one and the same instrument.

      IN WITNESS WHEREOF,  this Agreement has been executed as of the date first
above written.

                              PAR PHARMACEUTICALS, INC.

                              By: /s/ Kenneth I. Sawyer
                                  ---------------------------------------
                                  Name:
                                  Title:

                              DR. REDDY'S LABORATORIES LIMITED

                              By: /s/ Cameron Reid
                                  ---------------------------------------
                                  Name:
                                  Title:

                              REDDY-CHEMINOR, INC.

                              By: /s/ Cameron Reid
                                  ---------------------------------------
                                  Name:
                                  Title:







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