<PAGE>

                                                                   Exhibit 10.14

          Confidential Materials omitted and filed separately with the
         Securities and Exchange Commission. Asterisks denote omissions.

                                MANUFACTURING AND

                                SUPPLY AGREEMENT

                                 BY AND BETWEEN

                            DSM PHARMACEUTICALS, INC.

                                       AND

                                  AAIPHARMA LLC

<PAGE>

                       MANUFACTURING AND SUPPLY AGREEMENT
                    DSM PHARMACEUTICALS, INC./AAI PHARMA LLC

                                TABLE OF CONTENTS

<TABLE>
<S>           <C>                                                             <C>
ARTICLE 1:    DEFINITIONS.................................................     1
ARTICLE 2:    PRODUCT DEVELOPMENT.........................................     3
ARTICLE 3:    VALIDATION AND.TESTING......................................     3
ARTICLE 4:    MANUFACTURE.................................................     4
ARTICLE 5:    REPRESENTATIONS AND WARRANTIES..............................     6
ARTICLE 6:    QUALITY ASSURANCE...........................................     9
ARTICLE 7:    FORECASTS, ORDER AND SALES..................................    10
ARTICLE 8:    PRICES TERMS OF PAYMENT.....................................    12
ARTICLE 9:    SHIPPING DEFECTS, RETURNS...................................    13
ARTICLE 10:   INTELLECTUAL PROPERTY AND CONFIDENTIALITY...................    14
ARTICLE 11:   TERM AND TERMINATION........................................    15
ARTICLE 12:   INDEMNIFICATION AND INSURANCE...............................    18
ARTICLE 13:   REGULATORY MATTERS; RECORDS.................................    21
ARTICLE 14:   ARBITRATION OF DISPUTES.....................................    23
ARTICLE 15:   NOTICES.....................................................    23
ARTICLE 16:   EQUIPMENT PURCHASES.........................................    24
ARTICLE 17:   MISCELLANEOUS...............................................    25
</TABLE>

<PAGE>


                        MANUFACTURING AND SUPPLY AGREEMENT
                    DSM PHARMACEUTICALS, INC./AAI PHARMA LLC

THIS MANUFACTURING AND SUPPLY AGREEMENT (this "Supply Agreement") is made and
entered into as of JANUARY 26, 2004 (the "Effective Date"), by and between
AAIPHARMA LLC, a limited liability company with its principal place of business
at 2330 Scientific Park, Wilmington, North Carolina 28405 ("AAI"); and DSM
PHARMACEUTICALS, INC., a Delaware corporation with its principal place of
business at located at 5900 NW Greenville Blvd., Greenville, NC 27834 ("DSM")
(each individually referred to as a "Party" and collectively as the "Parties").

BACKGROUND:

AAI desires to engage DSM to become qualified to Manufacture, and to
Manufacture, certain Products (as each term is defined below) for subsequent
commercial distribution by AAI on the terms and conditions set forth herein and
in the related Product Schedules; and

DSM wishes to Manufacture the Produces for AAI on the terms and conditions set
forth herein;

NOW THEREFORE, for and in consideration of the premises and mutual covenants
contained herein, the Parties agree as follows:

                             ARTICLE 1: DEFINITIONS

The following words, terms and phrases, when used herein, shall have the
following respective meanings:

1.1  "AAI Intellectual Property" shall have the meaning set forth in Section
     10.1 hereinafter.

1.2  "API" shall mean the active pharmaceutical ingredient with respect to each
     Product, and shall be as identified in the applicable Product schedule.

1.3  "Affiliate" shall mean any entity that is directly or indirectly controlled
     by a Party; directly or indirectly controls a Party; or is under common
     control with a Party.

1.4  "Batch" shall mean a specific quantity of material produced in a contiguous
     process or series of processes that is expected to be homogenous within
     specified limits. The batch size will be defined as a fixed quantity and
     set forth in the applicable Product Schedule.

1.5  "Contract Year" shall mean a twelve (12) consecutive month period after the
     Effective Date and during the term of this Supply Agreement. The first
     Contract Year shall commence as of the Effective Date, and subsequent
     Contract Years shall commence on each anniversary of the Effective Date.

1.6  "CGMP requirements" means the requirements of the US CGMP.

<PAGE>

1.7  "Drug Application" shall mean the NDA or ANDA issued by the FDA with
     respect to each Product and any other governmental or regulatory consents,
     registrations, approvals or permits necessary to sell or Manufacture the
     Products in the Territory.

1.8  "DSM Intellectual Property" shall have the meaning set forth in Section
     10.1 hereinafter.

1.9  "FDA" shall mean the United States Food and Drug Administration or any
     successor agency thereof.

1.10 "FFDCA" means the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. Sections
     301 et seq., as amended.

1.11 "Law" means any federal, state or local law, statute or ordinance, or any
     rule, regulation, or published guidelines promulgated by any governmental
     or regulatory authority.

1.12 "Manufacture" and "Manufacturing" means the manufacturing, processing,
     formulating, packaging, labeling, holding and quality control and other
     testing of the Products to be performed prior to their delivery to AAI by
     DSM.

1.13 "Product" or "Products" means those pharmaceutical products identified in a
     Product Schedule executed by the Parties and attached hereto.

1.14 "Product Schedule" shall refer to each product schedule for each Product
     which DSM agrees to produce and AAI agrees to purchase hereunder, as
     attached hereto and incorporated herein as part of EXHIBIT A. Each Product
     Schedule shall contain (i) the Product Specifications; (ii) the APIs and
     specifications thereof; (iii) the Raw Materials and specifications thereof;
     (iv) the packaging specifications; (v) the Product price; (vi) API bulk
     yield requirements; (vii) percentage of guaranteed shelf life; (viii) any
     special equipment required to be purchased to manufacture the Product; (ix)
     unusual or special lead times or forecasting requirements; and (ix) any
     other provisions specific to the Product.

1.15 "Qualification Date" with respect to each Product, shall mean the date on
     which DSM satisfactorily completes its validation and testing of the
     Product pursuant to Article 3 of this Supply Agreement such that it becomes
     authorized to begin Manufacturing the Product under the Drug Application in
     accordance with the terms of this Supply Agreement.

1.16 "Quality Agreement" shall mean the quality agreement attached hereto as
     EXHIBIT C, or such other quality agreement as shall be referenced in the
     respective Product Schedule for each Product to be supplied and purchased
     hereunder.

1.17 "Raw Materials" means any excipients, component materials, and packaging
     used to Manufacture the Product, but excluding the API.

1.18 "Specifications" with respect to each Product shall be provided to DSM by
     AAI and shall include the standards to which the API, Raw Materials,
     components, work-in-process materials and finished products should conform
     to be considered acceptable for their

<PAGE>

     intended use as well as the tests, references to analytical procedures, and
     acceptance criteria that are used to measure achievement against the
     standards. Copies of Specifications will be generated by AAI and may be
     amended or supplemented by AAI to reflect the needs of the Product.

1.19 "Term" shall mean the Initial Term plus any Renewal Terms, as such terms
     are defined in Section 11.1 hereof.

1.20 "Territory" shall mean the United States of America and its territories and
     such other locations as may be agreed between the Parties hereof.

1.21 "US CGMP" means the FDA's current Good Manufacturing Practice requirements
     as promulgated under the FFDCA at 21 CFR (parts 210 and 211), and as
     further defined by FDA guidance documents and rules and regulations
     administered by the FDA, as such may be amended from time to time.

1.22 "Work Product" shall have the meaning set forth in Section 10.4.1
     hereinafter.

                         ARTICLE 2: PRODUCT DEVELOPMENT

2.1  Each Product which, the Parties agree to develop hereunder, they shall
     agree on appropriate project execution plans ("PEPs") and Milestone and
     Activity Based Project Planning System plans ("MAPPS"); and the Parties
     shall further agree on the costs of DSM's services (the "Development
     Services") to develop each Product hereunder. The agreed PEPs and MAAPS
     will be included as part of the Product Schedule included in EXHIBIT A.

2.2  AAI shall provide DSM with formulations and specifications for each
     Product, and the Parties shall agree, on the extent of testing and other
     support activities to be included in the Development Services.

2.3  DSM shall provide AAI with data generated by the Development Services as
     may be necessary for AAI to apply to the FDA for approval of DSM as
     manufacturer pursuant to the Drug Applications.

                        ARTICLE 3: VALIDATION AND TESTING

3.1  Validation and Quota. To the extent that DSM is not already authorized, it
     shall cooperate with AAI to become authorized to Manufacture the Products
     under the Drug Applications for the Products to be supplied hereunder. For
     certain controlled substances, DSM shall secure any required approvals from
     governmental authorities to register and to receive a quota for Schedule 2
     narcotic substances. For this purpose, DSM shall successfully conduct
     validation on three (3) Batches of the relevant Product; and thereafter AAI
     shall be obligated to purchase such Batches in accordance with the terms of
     this Supply Agreement. DSM will utilize its best efforts to become
     qualified to Manufacture each of the Products as soon as reasonably
     practicable after the applicable effective date of each Product Schedule.
     If due to DSM negligence or willful misconduct, DSM is denied authorization
     or approval from governmental authorities to

<PAGE>

     register and receive any necessary quota for Schedule 2 narcotic
     substances, then DSM shall be deemed in breach of this Agreement.

3.2  Drug Application. With respect to each Product and subject to the terms of
     this Supply Agreement, AAI shall maintain the Drug Application in full
     force and effect at all times from and after the applicable Qualification
     Date: provided, however, upon the reasonable request of AAI, DSM shall
     assist AAI in connection therewith. DBM hereby acknowledges and agrees that
     the Drug Applications are owned by, in the name of and for the benefit of
     AAI and that DSM has no rights in or to the Drug Applications.

3.3  Distribution outside the United States. In the event that AAI desires to
     market, distribute or sell Products manufactured by DSM in any location
     outside the U.S. and its territories, then AAI shall provide reasonable
     notice to DSM, the parties shall agree to the terms of such arrangement,
     and DSM shall, at AAI's request, cooperate in good faith with AAI to obtain
     any necessary or appropriate Drug Applications.

                             ARTICLE 4: MANUFACTURE

4.1  Manufacture. Subject to the terms and conditions contained herein, and from
     and after the applicable Qualification Date, DSM shall Manufacture, hold,
     handle and ship all Products (a) in accordance with their respective
     Specifications, the Quality Agreement attached hereto as EXHIBIT C and
     incorporated herein by reference, and this Supply Agreement; and (b) in
     material compliance with the CGMP Requirements and all other legal
     requirements applicable to the Manufacturing of Products to be marketed and
     sold in the Territory.

4.2  Non-Manufacturing Services. Notwithstanding the foregoing, there may be
     certain Products that have already been Manufactured by AAI or a third
     party and will be delivered in bulk by AAI to DSM solely for packaging or
     for other non-Manufacturing services. In such event the services to be
     provided will be described in the applicable Product Schedule; and the
     terms of this Agreement, as amended by the applicable Product Schedule,
     will apply solely to the extent related to the described services.

4.3  Exclusivity. DSM shall Manufacture, hold, handle, ship and sell the
     Products exclusively for and to AAI during the Term. Additional exclusivity
     commitments may be agreed to between the Parties in the Product Schedules.

4.4  Manufacturing Changes. DSM may not materially change the Manufacturing
     process of a Product or the source(s) of API or Raw Materials without the
     prior written consent of the AAI.

4.5  AAI Requested Changes. DSM shall make changes as promptly as practicable to
     the Manufacturing process, if requested in writing by AAI, including, but
     not limited to, changes to the existing Products, Specifications, API or
     Raw Materials related to the Products; provided, however, that such changes
     comply with applicable Law.

4.6  Notification and Cost of Changes. DSM shall identify for AAI, in writing
     prior to delivery, the first manufactured Batch of any Product for which
     changes have been

<PAGE>

     implemented and will expressly identify the changes. Unless otherwise
     agreed by the Parties, any and all costs associated with changes required
     or requested by DSM pursuant to Section 4.4 shall be borne by DSM, unless
     such changes are required in order to comply with a change in the CGMP
     Requirements or any applicable Law, in which case they will be borne by
     AAI. Unless otherwise agreed by the Parties, any and all costs associated
     with all other changes, including changes requested by AAI pursuant to
     Section 4.5, shall be borne by AAI.

4.7  Amendment of Specifications. If a change is made to the Specifications or
     Products, AAI shall be responsible for amending the Drug Application for
     such Products; if required, to reflect such change, and for obtaining
     required Government and Regulatory Authority approval of such amendment, if
     any. DSM shall use commercially reasonable efforts to assist AAI in
     obtaining any such approvals. AAI shall also promptly advise DSM in writing
     if AAI files any amendments to a Drug Application, which amendments could
     affect DSM's obligations hereunder.

4.8  Labeling. AAI shall specify all labeling to be used on each Product and the
     packaging thereof, including any changes or modifications to such labels.
     DSM agrees to use the specified labeling (and only such labeling) on the
     Products, and not to use such labeling on any other product. Any AAI
     directed change or modification to a Product label shall be implemented by
     DSM (i) as soon as possible if required by Law, or (ii) as soon is
     reasonably practicable, but no later than [**] weeks following DSM's
     receipt of notification from AAI of such label changes. Except where the
     labeling change results from a change acquired or requested by DSM, AAI
     shall reimburse DSM for costs incurred in connection with any such label
     change, including without limitation, the costs of obsolescence of
     goods-in-process, packaging materials and supplies, and finished goods not
     suitable for marketing in the Territory, but only to the extent that such
     items relate to or were acquired to satisfy any Firm Commitments or Firm
     Forecasts or special lead times agreed to between the parties in the
     applicable Product Schedule.

4.9  Raw Materials and API. DSM shall purchase at its own expense and for its
     own account all Raw Materials, API, packaging components and other items of
     any nature whatsoever that DSM may use to Manufacture the Products.

     4.9.1 Except as otherwise agreed to between the Parties, all right, title
          and interest in and to these items, and in and to all work-in-progress
          incorporating these items, shall remain the sole property of DSM;
          provided that AAI shall reimburse DSM for out-of-pocket-costs
          associated with write-offs, obsolescence and/or destruction of
          finished inventory resulting from any change or modification to any
          Product Manufacturing process, Specifications, Registration or
          labeling requested by AAI or required by a change in applicable Law,
          but only to the extent such Raw Materials, API and other items related
          to or were acquired to satisfy a Firm Commitment, Firm Forecast or
          special lead times agreed to between the parties in the applicable
          Product Schedule.

<PAGE>

     4.9.2 AAI-Approved and AAI-Designated Suppliers. DSM shall utilize only
          those suppliers of API, Raw Materials, or other items for the
          Manufacture of Product hereunder approved by AAI. Any Product price
          quotations shall be based upon the acquisition of materials only
          through such AAI-approved suppliers. In the event that AAI requires
          DSM's use of a supplier with which AAI (and not DSM) has a contractual
          relationship (an "AAI-Designated Supplier"), then, provided that DSM
          promptly notifies AAI of any delays or failures to deliver by such
          AAI-Designated Supplier, DSM shall not be held responsible for delays
          or failures.

                    ARTICLE 5: REPRESENTATIONS AND WARRANTIES

5.1  Representatives and Warranties of DSM. DSM hereby represents and warrants
     to AAI as follows:

     5.1.1 Authority. DSM has full power and authority to execute, deliver and
          perform this Supply Agreement and to consummate the transactions
          contemplated hereby; and this Agreement has been duly executed and
          delivered by DSM and constitutes the valid and binding obligation of
          DSM, enforceable against DSM in accordance with its terms, except as
          enforceability may be limited by bankruptcy, fraudulent conveyance,
          insolvency, reorganization, moratorium and other Laws relating to
          creditors' rights generally and by general equitable principles.

     5.1.2 Absence of Conflicts. The execution, delivery and performance of this
          Supply Agreement by DSM docs not conflict with or constitute a default
          under any agreement, instrument or understanding, oral or written to
          which it is a party or by which it may be bound, does not conflict
          with any provision of any organizational document of DSM, and does not
          conflict with or violate any applicable Law.

     5.1.3 Organization and Standing. DSM is duly organized, validly existing
          and in good standing under the Laws of the state of Delaware, and duly
          authorized to conduct business in the State of North Carolina.

     5.1.4 Actions. There are no pending or uncorrected citations or adverse
          conditions noted in any inspection of the production facilities to be
          employed for the Manufacture of the Products.

     5.1.5 Debarment. Neither DSM nor any of its directors, officers, employees
          or representatives (including subcontractors, if any) have been
          disqualified, suspended, debarred or proposed for debarment by the FDA
          or any other federal or state governmental or regulatory authority for
          any purpose or otherwise determined to be ineligible to participate in
          federal health care programs.

     5.1.6 Compliance With Laws. DSM shall comply with federal, state and local
          Laws and regulations applicable to its operations; and any and all
          hazardous and toxic waste, if any, will be manifested and discarded as
          required by state, federal and local Laws and regulations.

<PAGE>

     5.1.7 Charges. Neither DSM nor any of its directors, officers, employees or
          representatives (including subcontractors, if any) have been charged
          with or convicted for conduct relating to the development or approval,
          or otherwise relating to the regulation, of any drug product under the
          Generic Drug Enforcement Act of 1992 or any other relevant Law. In the
          event that DSM, or any of its principals, is debarred, suspended,
          proposed for debarment or otherwise determined to be ineligible to
          participate in federal health care programs or convicted of a criminal
          offense related to the provision of health care items or services, DSM
          shall notify AAI immediately.

     5.1.8 Products. All Products delivered by DSM (or any subcontractor
          thereof) to the F.O.B. point will, at the time of such delivery, (i)
          comply with this Supply Agreement, including any applicable Product
          Schedules, the Quality Agreement, the applicable Drug Application and
          the Specifications; (ii) comply with all applicable Laws and the CGMP
          Requirements; and (iii) not be adulterated within the meaning of the
          FFDCA or within the meaning of any other applicable Law.

     5.1.9 Equipment. During the term of this Supply Agreement, AAI may purchase
          certain Equipment for use by DSM for the production of the Products.
          Any such sale of Equipment by DSM to AAI shall be deemed subject to
          the representations, warranties and covenants more fully described in
          Article 16 of this Agreement.

     5.1.10 Suitability of API. Any Active Pharmaceutical Ingredient obtained by
          DSM from any party other than AAI will meet the required
          specifications, will be suitable for use in the further processing of
          the Product(s), and with respect to sterile products, will not contain
          any adventitious viruses or other active deleterious substances which
          could contaminate the production processes or other operations of DSM.

5.2  Warranties of AAI. AAI hereby warrants and represents to DSM as follows:

     5.2.1 Authorization. AAI has full company power and authority to execute,
          deliver and perform this Supply Agreement and to consummate the
          transactions contemplated hereby; and this Agreement has been duly
          executed and delivered by AAI and constitutes the valid and binding
          obligation of AAI, enforceable against AAI in accordance with its
          terms except as enforceability may be limited by bankruptcy,
          fraudulent conveyance, insolvency, reorganization, moratorium and
          other Laws relating to or affecting creditors' rights generally and by
          general equitable principles.

     5.2.2 Absence of Conflict. The execution, delivery and performance of this
          Supply Agreement by AAI does not conflict with or constitute a default
          under any agreement, instrument or understanding, oral or written, to
          which it is a party or by which it may be bound, does not conflict
          with any provision or any organizational document of AAI, and does not
          conflict with or violate any applicable Law.

<PAGE>

     5.2.3 Organization and Standing. AAI is a limited liability company, duly
          organized, validly existing and in good standing under the Laws of
          Delaware and duly authorized to conduct business in the State of North
          Carolina.

     5.2.4 Compliance with Laws. The formulation, composition, use,
          distribution, marketing, and/or sale of the Product by AAI shall
          comply with regulatory requirements and applicable Law; and AAI will
          maintain all obligations with respect thereto.

     5.2.5 Infringement. With respect to those Products for which the Drug
          Application is held by AAI and AAI is the creator of the
          Specifications, the manufacture of Product(s) in accordance with the
          Specifications will not infringe any patent or other intellectual
          property right of any third party.

     5.2.6 Suitability of API. Any Active Pharmaceutical Ingredient supplied to
          DSM by AAI will meet the required specifications, be suitable for use
          in the further processing of the Product(s), and with respect to
          sterile products, will not contain any adventitious viruses or other
          active deleterious substances which could contaminate the production
          processes or other operations of DSM.

5.3  Limitation of Liability. NEITHER DSM NOR AAI NOR THEIR RESPECTIVE
     AFFILIATES SHALL BE LIABLE TO THE OTHER UNDER ANY THEORY (INCLUDING
     NEGLIGENCE) FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE
     DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS AND/OR LOST BUSINESS
     OPPORTUNITY, ARISING OUT OF OR RELATING TO THIS SUPPLY AGREEMENT, WHETHER
     OR NOT ADVISED OF THE POSSIBLITY OF SUCH DAMAGES. OTHER THAN WITH RESPECT
     TO INDEMNIFICATION PURSUANT TO ARTICLE 12 FOR THIRD PARTY CLAIMS RELATING
     TO ILLNESS, INJURY OR DEATH RESULTING FROM USE OF A PRODUCT MANUFACTURED
     AND PURCHASED HEREUNDER, THE LIABILITY OF EACH PARTY SHALL BE LIMITED AS
     FOLLOWS: (I) WITH RESPECT TO LIABILITY INCURRED IN CONNECTION WITH THIS
     AGREEMENT DURING THE PERIOD ENDING TWELVE (12) MONTHS FOLLOWING THE
     START-UP OF COMMERCIAL PRODUCTION HEREUNDER (THE "INITIAL TWELVE-MONTH
     PERIOD"), THE LIABILITY OF EACH PARTY SHALL BE LIMITED TO FIVE MILLION
     DOLLARS ($5,000,000); (II) THE LIABILITY OF EACH PARTY WITH RESPECT TO
     LIABILITIES INCURRED IN CONNECTION WITH THIS AGREEMENT AFTER THE INITIAL
     TWELVE-MONTH PERIOD AND PRIOR TO THE TERMINATION OR EXPIRATION OF THIS
     AGREEMENT SHALL BE LIMITED TO TWO (2) TIMES THE AGGREGATE PURCHASE PRICE
     FOR PRODUCT SUPPLIED DURING THE PREVIOUS TWELVE (12) MONTHS; AND (III) THE
     LIABILITY OF EACH PARTY WITH RESPECT TO LIABILITIES INCURRED IN CONNECTION
     WITH THIS AGREEMENT AFTER THE EXPIRATION OR TERMINATION OF THIS AGREEMENT
     SHALL BE LIMITED TO TWO (2) TIMES THE AGGREGATE PURCHASE PRICE FOR PRODUCT
     SUPPLIED DURING THE LAST TWELVE (12) MONTHS OF THIS AGREEMENT.

<PAGE>

                          ARTICLE 6: QUALITY ASSURANCE

6.1  Quality Agreement. The respective quality assurance obligations of DSM and
     AAI are more fully set forth in the Quality Agreement.

6.2  DSM's Obligations. DSM hereby covenants that during the Term that it shall
     (and shall cause its subcontractors to):

     6.2.1 have and maintain the necessary expertise, personnel, facilities,
          permits and equipment to Manufacture the Products in accordance with,
          and to perform its other obligations arising under or out of, this
          Supply Agreement;

     6.2.2 operate and maintain its premises, plant and machinery, equipment and
          procedures related to the Products in compliance with applicable CGMP
          Requirements;

     6.2.3 perform its obligations arising under this Supply Agreement (i) in
          compliance with applicable Laws and CGMP Requirements; and (ii) in
          compliance with the Quality Agreement, the applicable Drug Application
          and the Specifications.

6.3  Testing Requirements, Retained Samples. With respect to each Product
     Schedule attached hereto, the Parties shall agree as to the extent of
     testing to be conducted by DSM in the Manufacture and release of such
     Product. Unless otherwise agreed, however, DSM shall provide no more than
     [**] stability test per sku per year. AAI shall perform bulk and finished
     product testing and will provide a certificate of analysis ("COA") to DSM
     within [**] days of AAI's receipt of Product samples from DSM. DSM shall
     not disposition Manufactured Product for further release by AAI until DSM
     receives AAI's COA. AAI shall be responsible for any increased costs
     resulting from delays in issuing the COA to DSM. DSM shall have the right
     to dispute any testing conducted by AAI in accordance with Section 9.3.2
     hereinafter.

     6.3.1 Following receipt of AAI's COA, DSM shall execute certificate of
          compliance ("COC"), confirming that each Batch delivered hereunder has
          been Manufactured in accordance with the Specifications, CGMP
          Requirements, and the provisions of this Supply Agreement and the
          Quality Agreement. The COC shall be supplied with the delivery of each
          Batch of Products.

     6.3.2 Notwithstanding any termination or expiration of this Supply
          Agreement, DSM shall keep manufacturing and quality control
          documentation as well as sufficient and representative retained
          samples of the relevant Product ("Retained Samples") in compliance
          with CGMP Requirements and other applicable law. DSM and AAI shall
          agree upon the amount of retained Samples to be maintained for this
          purpose. DSM's obligations under this Section 6.3.2 shall be in effect
          for a period of one (1) year following the expiry of the sampled
          Product, or such longer period as may be required by applicable Law
          (the "Retention Period"). DSM shall not destroy the manufacturing and
          quality control documentation nor any Retained Samples without first
          providing AAI sixty (60) days prior written notice. DSM shall follow
          AAI's reasonable instructions with respect to such

<PAGE>

          documentation and Retained Samples and will not destroy such items
          without prior approval from AAI. AAI shall reimburse DSM for its
          out-of-pocket costs in retaining any Samples beyond the Retention
          Period.

     6.3.3 DSM shall make available for review by AAI, at any reasonable time
          upon reasonable notice, all records relevant to DSM's performance
          hereunder, including written investigations of any deviations that may
          have occurred during the Manufacturing, inspection, or testing
          processes. DSM is solely responsible for the safety of its employees.

6.4  AAI Option. AAI shall have the option, in its sole discretion, to assume on
     behalf of DSM any of the testing, recording or other processes required to
     be undertaken by DSM under this Supply Agreement, the Quality Agreement,
     the CGMP Requirements or any applicable Law. To the extent reasonably
     practicable, DSM will assist AAI in assuming such obligations. To the
     extent the assumption of such obligation reduces the costs to DSM
     associated with the Manufacture of the Products, the Parties will
     reasonably agree to a reduction in the prices of the Products taking into
     account such assumption in obligations. To the extent AAI assumes any
     obligation of DSM herein, DSM shall be relieved of such obligation under
     this Supply Agreement and the Quality Agreement.

6.5  Non-Conforming Product. DSM shall not deliver to AAI any product which
     would constitute a breach of the covenant set forth in Section 4.1 of this
     Supply Agreement. In the event that any Product shall fail to pass the
     quality control testing conducted by DSM, if any, then DSM shall provide
     the test results of AAI and DSM shall not release the Product Batch.

                      ARTICLE 7: FORECASTS, ORDER AND SALES

7.1  Forecasting. Except as provided in this Article 7, AAI shall not make, and
     this Agreement does not impose upon AAI, any minimum purchase or volume
     requirements. Prior to the Qualification Date, AAI shall provide DSM with a
     written good faith forecast estimating AAI's quarterly requirements (broken
     out on a month-to-month basis) of each Product for each of the twelve (12)
     calendar quarters during the Initial Term. Thereafter, not later than
     ninety (90) days prior to the commencement of each subsequent calendar
     quarter during the Term, AAI shall provide DSM with rolling six (6) quarter
     forecasts (broken out on a month-to-month basis) that shall cover the
     succeeding six (6) quarter period beginning with such subsequent calendar
     quarter (or the period until the expiration of the Term, if shorter) (such
     forecast shall hereinafter be referred to as, the "Long-Term Forecast").
     Except as set forth in Sections 7.2, the Long-Term Forecast shall not be
     binding on either Party.

7.2  Firm Commitments and Firm Forecasts.

     7.2.1 The first (lst) quarter of each Long-Term Forecast shall constitute a
          firm purchase commitment (a "Firm Commitment") and the second (2nd)
          quarter of a Long-Term Forecast shall be a "Firm Forecast". The
          forecast for the remaining four (4)

<PAGE>

          calendar quarters of the Long-Term Forecast shall be for planning
          purposes only and shall not constitute a commitment to purchase or
          supply Product.

     7.2.2 The Firm Commitment shall state in detail the quantities of
          Product(s) to be ordered and shall include specific delivery
          destinations and delivery dates (which delivery dates shall not be on
          Saturday, Sunday or holiday unless AAI's prior consent is obtained).
          The Firm Commitment shall be binding on the Parties regarding
          Product(s) to be purchased during the applicable calendar quarter, and
          the quantity of each Product specified in any Firm Commitment shall
          not be less than [**]% nor more than [**]% of the quantity previously
          forecasted for such quarter in the applicable Firm Forecast. If AAI
          requires quantities in excess of the Firm Commitment or in excess of
          the [**]% of the quantity forecasted for such quarter in the
          applicable Firm Forecast, it shall so notify DSM; and DSM shall use
          its commercially reasonable and good faith efforts to deliver
          quantities in excess of the Firm Commitment, but DSM shall not
          otherwise be obligated to supply such excess quantities.

     7.2.3 DSM shall deliver the quantity specified in any Firm Commitment
          within [**] days of the delivery date specified in the Firm
          Commitment. Quantities actually shipped pursuant to a given Firm
          Commitment may vary from the quantities reflected in such Firm
          Commitment by up to plus or minus [**] percent (+/-[**]%) and still be
          deemed to be in compliance with such purchase order provided that AAI
          shall only be obligated to pay for the conforming Product actually
          delivered.

     7.2.4 DSM shall be deemed to have accepted all forms of any Firm Commitment
          submitted in accordance with this Section 7.2, unless, with respect to
          quantities in excess of [**]% of the quantity forecasted by AAI in the
          applicable Firm Forecast, within thirty (30) days of receipt of such
          Firm Commitment, DSM notifies AAI of its objection thereto. The
          Parties shall negotiate in good faith to resolve any differences with
          respect to the Firm Commitment. DSM shall be obligated to Manufacture
          and deliver the specified quantity of Products in accordance with the
          delivery schedule set forth in any accepted Firm Commitment. In the
          event that DSM fails to deliver within the ten-day period described in
          Section 7.2.3, DSM shall pay to AAI (or AAI may set-off against
          amounts slue to DSM) a discount equal to [**] percent ([**]%) of the
          total purchase price of the related Firm Commitment.

7.3  Changes in Orders. DSM shall exercise its commercially reasonable efforts
     to comply with any proposed amendments to accepted Firm Commitments that
     AAI may request, but DSM shall not be liable in any way for its inability
     to do so. Firm Commitments may be amended only by mutual agreement of the
     Parties.

7.4  Notification. If any time during the term of this Supply Agreement DSM
     believes it will be unable to supply AAI on a timely basis with the full
     quantity of each Product forecasted to be or actually ordered by AAI, DSM
     shall promptly notify AAI; provided that such notification shall not
     relieve DSM of its obligations under a Firm Commitment.

<PAGE>

                       ARTICLE 8: PRICES, TERMS OF PAYMENT

8.1  Price. The purchase price to be paid to DSM for each Product supplied
     hereunder shall be as set forth in the applicable Product Schedule. With
     respect to each Product, such price shall remain firm through the remainder
     of the calendar year following the Qualification Date of the related
     Product Schedule and may be increased only upon written agreement between
     the parties or as provided by this Article 8.

8.2  Price Adjustments. DSM and AAI shall meet annually to discuss pricing.
     Subject to the limitations described in this Section 8.2, DSM may increase
     the Product price as of January 1 of each calendar year hereunder in order
     to reflect increases in DSM's costs to Manufacture such Product due to
     increases in labor, overhead, API and/or Raw Materials ("Costs of Goods
     Sold" or "COGS").

     8.2.1 Annual price increases shall be limited to a percentage increase
          which does not exceed the average of the percentage increases over the
          preceding year for the Producers Prices Index, Drugs and
          Pharmaceuticals, Preparations, ethical (prescription) (Code 0635), but
          in any event no more than [**] percent ([**]%). DSM shall notify AAI
          of price increases at least thirty (30) days prior to the beginning of
          each calendar year hereunder.

     8.2.2 The Product price may also increased at any time if an AAI-Designated
          Supplier increases DSM's cost of API or Raw Materials. In such event,
          DSM shall promptly notify AAI that its specified vendor has announced
          such cost increases; and the Parties shall cooperate to effect the
          cost increase in an equitable manner.

8.3  Cost Reductions. DSM and AAI shall cooperate to reduce the Cost of Goods
     Sold ("COGS") for the Products; and DSM shall decrease Product prices in
     the event that DSM experiences decreased costs as a result of increased
     purchase volume or as a result of any other factor. Such price reduction
     shall equal no less than [**] percent ([**]%) of any reduction in COGS
     achieved by DSM, after DSM has recovered its costs for the development of
     improvements or adjustments resulting in the COGS reduction, provided that
     AAI shall previously been advised of the cost of such development
     improvement and approved the developmental work and any process changes
     relating thereto for which reimbursement would apply hereunder.

8.4  Payment Terms. DSM shall invoice AAI for the price of the Products at the
     time of delivery, and AAI shall pay each such invoice within [**] days
     after its receipt of the invoice. If AAI rejects a shipment pursuant to
     Article 9 of this Supply Agreement, then payment shall be due within [**]
     days after receipt by AAI of notice from the laboratory pursuant to Section
     9.3 of this Supply Agreement that the invoiced Product is conforming, or
     the receipt by AAI of replacement Product, as the case may be.

8.5  Audit Right. AAI shall have the option, on an annual basis and at its
     expense, to utilize an independent certified public accountant, mutually
     agreeable to DSM, to inspect records of DSM including accounting and
     financial records related to production of the Products, to the extent
     reasonably necessary to verify compliance by DSM with its

<PAGE>

     financial obligations under this Agreement. DSM shall cooperate in good
     faith to enable such audit to be concluded as rapidly as possible. The
     auditor shall be placed under obligations of confidentiality as set forth
     in Section 10.5 and EXHIBIT D hereinafter; and shall only disclose to AAI
     whether or not DSM has complied with financial obligations; and the extent
     to which any amounts are owed to AAI or to DSM according to the audit. If
     amounts are owed to AAI, DSM shall promptly credit AAI's account the amount
     owed and will reimburse AAI any amounts paid by AAI to the third party
     auditor; and if amounts are owed to DSM, DSM shall invoice AAI. If the
     auditor's findings are in dispute by either Party, the Parties shall
     resolve such disputes in accordance with Article 14.

                      ARTICLE 9: SHIPPING DEFECTS, RETURNS

9.1  Shipping. DSM will ship all Products ordered hereunder to AAI F.O.B. DSM's
     Greenville NC facility, at which point the title and risk of loss for such
     Products will pass to AAI. DSM shall ship the Products to the destination
     within [**] days of the delivery date specified by AAI on the relevant
     Purchase Order. The Parties agree that the method and route of shipment are
     at AAI's discretion, except that with respect to the shipment of controlled
     substances, the carrier shall be subject to the mutual agreement of the
     Parties.

9.2  Notification of Defects. AAI shall notify DSM in writing as soon as
     reasonably practicable after delivery to AAI of any non-conforming Product
     containing obvious defects, discoverable without affecting the integrity of
     such Products' packaging (but in any event within [**] days after
     delivery), and within [**] days of the earlier of AAI's discovery or its
     notification by a third party of any latent defects. DSM shall be
     responsible for AAI's costs to inspect the Products if it is determined
     that the defect was caused by DSM. DSM agrees to provide reasonable support
     to assist AAI in pursuing any claims it may have against carriers for
     damaged or lost Product.

9.3  Returns.

     9.3.1 At AAI's direction, and subject to the requirements of this Section
          9.3, DSM shall accept for return and replacement or credit (at
          invoiced cost) any Product sold to AAI under this Supply Agreement
          that does not met applicable Specifications or the representations,
          warranties or covenants set forth herein (hereinafter the "Defective
          Products"). All returns of Defective Products shall be properly
          disposed of or, only if acceptable to AAI and permitted by applicable
          Law, reworked by DSM. Upon prior notification to DSM, AAI shall ship
          the Defective Products to DSM F.O.B. AAI, at which point the title and
          risk of loss for such Products will pass to DSM. DSM agrees to pay all
          costs of shipping and any costs of freight insurance obtained by AAI
          at the request of DSM. AAI agrees to provide reasonable support to
          assist DSM in pursuing any claims it may have against carriers for
          damaged or lost Product.

     9.3.2 DSM shall undertake appropriate investigation of any Defective
          Product samples provided by AAI and shall notify AAI, within [**] days
          after receipt of the Defective Product, whether it has confirmed such
          non-conformity. If DSM

<PAGE>

          notifies AAI that it has not confirmed such non-conformity, and AAI
          continues to insist such non-conformity exists, DSM shall submit the
          disputed shipment for testing to an independent testing laboratory of
          recognized standing in the industry and mutually agreeable to AAI and
          DSM. The findings of the laboratory shall be binding on the Parties.
          The expenses for such testing shall be borne by the Party whose
          analysis was not substantiated by the findings of the laboratory.

              ARTICLE 10: INTELLECTUAL PROPERTY AND CONFIDENTIALITY

10.1 Ownership of Intellectual Property. Except as set forth herein, AAI
     acknowledges that DSM shall remain the exclusive owner of all of the DSM's
     intellectual property, technology, know-how and processes (whether or not
     patented or patentable) developed by DSM prior to execution of this
     Agreement (the "DSM Intellectual Property"). DSM acknowledges that AAI
     shall remain the exclusive owner of all of AAI's intellectual property,
     technology, know-how and processes (whether or not patented or patentable)
     developed by it prior to execution of this Agreement or provided by AAI in
     connection with this Agreement (the "AAI Intellectual Property").

10.2 Grant of License to DSM. AAI hereby grants DSM a limited, non-exclusive,
     royalty-free license for the term of this Supply Agreement to use the AAI
     Intellectual Property, including the Product formulations, the Drug
     Applications, the Work Product (as hereafter defined) and the related
     documentation for the sole purpose of meeting DSM's obligations to AAI
     under this Supply Agreement. All other rights are reserved by AAI. This
     license does not include the right to copy, sublicense or create derivative
     works from the AAI Intellectual Property. The limited license granted
     hereby shall immediately terminate upon termination or expiration of this
     Supply Agreement.

10.3 Grant to License to AAI. Excluding only any DSM Intellectual Property
     expressly identified and agreed to in writing between the parties in an
     attachment to the applicable Product Schedule as being subject to royalty
     payments post-termination or post-expiration of the applicable Product
     Schedule, DSM grants to AAI a non-exclusive perpetual, royalty-free license
     to the DSM Intellectual Property to the extent necessary to enable AAI to
     exercise all rights in and to the Work Product (as hereinafter defined) as
     it relates to Manufacture of the related Product.

10.4 Intellectual Property.

     10.4.1 Developments. Except for the limited license granted in Section
          10.2, DSM will acquire no rights of any kind with respect to any AAI
          Intellectual Property or AAI Confidential Information (as defined in
          the Confidentiality Agreement attached hereto as SCHEDULE D). Subject
          to Section 10.4.2 hereinafter, AAI shall exclusively own all results,
          records, documents, drug product, formulas, materials, analytical
          methods, inventions (whether or not patentable), patent applications,
          patents, copyrights, trademarks, developments, trade secrets, or any
          other intellectual property made or created by DSM as a result or work
          performed pursuant to this Supply Agreement or related to any AAI
          Intellectual Property or any AAI Product hereunder (the "Work
          Product"); but in the event that ownership

<PAGE>

          of any Work Product by AAI is not permitted by applicable Law, DSM
          hereby grants a non-exclusive, irrevocable, perpetual, world-wide,
          royalty-free, fully paid license under the Work Product for any
          purpose.

     10.4.2 To the extent that the Work Product is derived from DSM Intellectual
          Property and is incorporated into the Specifications and/or the NDA
          and ANDA for any Product hereunder, AAI and DSM shall negotiate in
          good faith to reach agreement upon reasonable terms and conditions,
          including royalties, for licensing such DSM Intellectual Property for
          use in the production of any Product at an AAI-owned facility or a
          third party facility.

     10.4.3 DSM shall not use AAI's Confidential Information or any other AAI
          Intellectual Property for any purpose other than as set forth in this
          Supply Agreement. Likewise, AAI shall not use DSM's Confidential
          Information or any DSM Intellectual Property for any purpose other
          than as set forth in this Supply Agreement. DSM agrees to execute any
          assignment or other documentation reasonably requested by AAI to vest
          ownership of all results, records, documents, and intellectual
          property in AAI. The Parties further agree to provide reasonable
          assistance to each other, at the other's expense, in obtaining,
          enforcing, and defending intellectual property rights related to this
          Supply Agreement.

10.5 Confidentiality. THE PARTIES ACKNOWLEDGE AND AGREE THAT THE TERMS OF THIS
     AGREEMENT AND THE PRODUCTS COVERED HEREBY ARE HIGHLY CONFIDENTIAL. The
     Parties agree to the confidentiality provisions set forth in EXHIBIT D
     hereto.

10.6 Trademarks. Any and all trademarks of AAI and the Products, including but
     not limited to: aaiPharma, Inc., aaiPharma LLC, aaiPharma (hereinafter the
     "Trademarks") are owned by AAI. AAI may grant to DSM a royalty-free
     non-exclusive license to use and/or reproduce certain Trademarks in the
     Territory only where pre-approved in writing by AAI and solely in
     connection with meeting DSM's Manufacture and supply obligations hereunder.
     DSM agrees not to use the Trademarks except as specifically authorized by
     AAI under this Supply Agreement in connection with the Manufacture and
     supply of the Products to AAI.

                        ARTICLE 11: TERM AND TERMINATION

11.1 Term. Unless earlier terminated in accordance with the provisions hereof,
     the term of this Supply Agreement shall commence on the Effective Date and
     shall thereafter continue in effect with respect to each Product for a
     minimum term of five (5) years following the date of first commercial
     production of the Product, and from year-to-year thereafter until
     terminated. Either Party may terminate a Product Schedule and this Supply
     Agreement (to the extent related to such Product Schedule) upon written
     notice to the other Party given at least two (2) years prior to the
     conclusion of the initial five-year term of any one-year extension
     thereafter.

11.2 Termination for Breach, Bankruptcy, Force Majeure or Failure to Qualify.

<PAGE>

     11.2.1 Either Party may terminate this Supply Agreement on written notice
          to the other Party, effective immediately:

          (i)  If the other Party commits a material breach of any of its
               obligations hereunder which is not cured within ninety (90) days
               of written notice from the other party specifying the breach,
               except that breach by AAI for failure to pay an uncontested
               invoice shall be cured within thirty (30) days following written
               notice by DSM:

          (ii) If the other Party is dissolved or liquidated, files or has filed
               against it a petition under any bankruptcy or insolvency Law,
               makes an assignment to the benefit of its creditors, has a
               receiver appointed for all or substantially all of its property,
               or has a petition under any bankruptcy or insolvency Law filed
               against it which is not dismissed within ninety (90) days;

          (iii) As permitted by Section 11.4.3 hereof;

          (iv) On a Product Schedule-by-Product Schedule basis, if any required
               material license, permit or certificate required of the other
               Party to perform its obligations hereunder is not approved and/or
               issued, or is revoked, by the FDA or any applicable Governmental
               Authority.

     11.2.2 Any right of termination specified in this Section 11.2 shall be in
          addition to any other remedy a non-defaulting Party may have at Law or
          in equity due to the other Party's breach of its obligations
          hereunder.

11.3 Effect of Termination. Upon termination or expiration of a Product Schedule
     and this Supply Agreement (to the extent related to such Product Schedule)
     the following shall occur:

     11.3.1 Cessation of Activities. Except as provided in Section 11.3.6, DSM
          shall stop the Manufacturing of the terminated Products; shall cease
          to use the Intellectual Property and other documents, instructions and
          information (in whatever format, including but not limited to
          electronically stored data) to the extent that such information
          relates to such Products and/or their Manufacture, quality control
          testing, handling and/or storage; shall return all such Confidential
          Information to AAI, at AAI's expense; and shall surrender all
          authorizations, licenses and permits specifically allowing the
          Manufacture of such Products to the appropriate authorities for
          cancellation.

     11.3.2 Reimbursement of Cost. AAI shall reimburse DSM for its full variable
          and fixed costs that DSM has incurred in connection with the
          preparation for Manufacturing of the terminated Products, including
          Raw Materials and API purchased by DSM before the effective date of
          termination, that were reasonably required by DSM in order to meet
          AAI's requirements of such Products as set out in any Firm Commitment
          or Firm Forecast delivered prior to such termination or expiration and
          that have not yet been Manufactured into finished Product.

<PAGE>

     11.3.3 Payment for Firm Commitment. Except in the event of termination by
          AAI for breach by DSM, AAI shall complete payment to DSM for any Firm
          Commitments as provided in Section 7.2 above, net of any
          reimbursements in respect of such Firm Commitments which are already
          covered in by Section 11.3.2.

     11.3.4 AAI to Take Product. At AAI's option, AAI shall be entitled to take
          delivery upon prior payment to DSM (pursuant to Section 11.3.2 above)
          for any Raw materials, API, work-in-process not Manufactured into
          finished Product in accordance with Sections 11.3.3 or 11.3.6 herein
          (at DSM's material costs) or finished Product (at prices then in
          effect under this Supply Agreement).

     11.3.5 AAI Equipment. Unless otherwise agreed between the Parties, DSM
          shall deliver to AAI, at the location designated by AAI, any Equipment
          purchased by AAI and related to the terminated Products.

     11.3.6 Outstanding Firm Commitments. In the event termination by AAI as a
          result of breach by DSM, then at AAI's option, Firm Commitments for
          terminated Product not yet started may be cancelled without penalty to
          either Party. If requested by AAI, DSM shall complete or shall cause
          the completion of the Manufacturing of any work-in-process that is
          subject to a valid and effective Firm Commitment on the date on which
          the termination is effective. Once such work-in-process is completed,
          the resulting Product shall be shipped in accordance with AAI's Firm
          Commitment.

     11.3.7 Termination or expiration of this Supply Agreement and any Product
          Schedule shall not relieve the Parties of any obligation accruing
          prior to such termination. The rights and obligations of the Parties
          under Sections 6.3, 8.4, 8.5 (for one year after termination), 9.2,
          9.3, 11.3, 13.1 and 13.2 and Articles 1, 5, 10 (except Section 10.2),
          12, 14, 15, 16 and 17 of this Supply Agreement shall survive the
          expiration or termination of this Supply Agreement.

11.4 Force Majeure.

     11.4.1 The failure of either of the Parties hereto to perform any
          obligation under this Supply Agreement, including any Product
          Schedule, solely by reason of any cause beyond its control (and due to
          no fault of its own), including, by way of example and not limitation,
          fire, flood, explosion, storm, hurricane, acts of God, acts of
          government, riots, wars, strikes and accidents in transportation,
          shall not be deemed to be a breach of this Supply Agreement; provided,
          however, that the Party so prevented from complying herewith shall
          continue to take all actions within its power, including payment of
          outstanding invoices, to comply as fully as possible herewith. A Party
          affected by an event of force majeure shall use commercially
          reasonable efforts to remedy, remove or mitigate such event and the
          effects thereof with all reasonable dispatch.

<PAGE>

     11.4.2 The Party affected by any event of force majeure shall promptly
          notify the other Party, explaining the nature, details and expected
          duration thereof. Such Party shall also notify the other Party from
          time to time as to when the affected Party reasonably expects to
          resume performance in whole or in part of its obligations hereunder,
          and notify the other Party of the cessation of any such event. If a
          Party anticipates that an event of force majeure may occur, such Party
          shall notify the other Party of the nature, details and expected
          duration thereof.

     11.4.3 If, due to force majeure, DSM is prevented or expected to be
          prevented from supplying AAI with a Product for a period exceeding one
          hundred twenty (120) days, then AAI shall have the right to terminate
          the related Product Schedule and this Supply Agreement to the extent
          related to such Schedule with immediate effect.

                    ARTICLE 12: INDEMNIFICATION AND INSURANCE

12.1 By DSM. Subject to Section 12.3 and the limitations set forth in Section
     5.3, from and after the Effective Date, DSM shall indemnify defend and hold
     harmless AAI, its Affiliates, and their respective officers, directors,
     employees, successors and assigns (the "AAI Indemnified parties") from and
     against any and all costs, losses, liabilities, damages, Lawsuits,
     deficiencies, claims and expenses, including reasonable fees and
     disbursements of attorneys, (collectively, the "Damages") incurred by such
     entities and arising out of third party claims resulting from (a) any
     material breach of this Supply Agreement by Manufacture, including any
     breach by DSM of its representations or warranties or a failure by DSM to
     comply with or perform any covenants hereunder; (b) the gross negligence or
     willful misconduct of DSM or any subcontractor of DSM; and (c) any
     allegation that DSM's processes or Intellectual Property breaches,
     infringes upon or otherwise misappropriates the intellectual property
     rights of any third party; provided that DSM shall not be responsible to
     indemnify the AAI Indemnified Parties to the extent that Damages were
     caused by the negligence or willful misconduct of AAI, its Affiliates, or
     its or their employees or agents.

12.2 By AAI. Subject to Section 12.3 and the limitations set forth in Section
     5.3, from and after the Effective Date, AAI shall indemnify, defend and
     hold harmless DSM, its Affiliates and their respective officers, directors,
     employees, successors and assigns (the "DSM Indemnified Parties") from and
     against any and all Damages incurred by such entities in connection with or
     arising out of third party claims resulting from (a) any material breach by
     AAI of its obligations hereunder and/or its representations or warranties
     in Section 5.2 herein; (b) the gross negligence or willful misconduct by
     AAI; (c) any allegation that Intellectual Property provided by AAI to DSM
     breaches, infringes upon or otherwise misappropriates the intellectual
     property rights of any third party, and (d) any final judicial
     determination that AAI failed to provide adequate and proper instructions
     or warnings regarding the use of the Products to any user thereof; provided
     that AAI shall not be responsible to indemnify DSM Indemnified Parties to
     the extent that any Damages were caused by the negligence or willful
     misconduct of DSM, its Affiliates, or is or their employees, agents or
     subcontractors.

<PAGE>

12.3 Procedures.

     12.3.1 The Indemnified Party (as defined below) shall give the indemnifying
          Party written notice (an "Indemnification Claim Notice") within seven
          (7) days (or such other additional reasonable period that the
          Indemnified Party can establish is reasonably necessary to permit it
          to determine whether to make a request for indemnification) of the
          occurrence of any Damages or discovery of fact upon which such
          Indemnified Party intends to base a request for indemnification under
          Section 12.1 or Section 12.2, but in no event shall the indemnifying
          Party be liable for any Damages that result from failure to provide
          such notice within such period. Each Indemnification Claim Notice must
          contain a description of the claim and the nature and amount of such
          Damages (to the extent that the nature and amount of such Damages are
          known at such time). The Indemnified Party shall furnish promptly to
          the indemnifying Party copies of all papers and official documents
          received in respect of any Damages. All indemnification claims in
          respect of a Party, its Affiliates or their respective directors,
          officers, employees and agents (collectively, the "Indemnitees" and
          each an "Indemnitee") shall be made solely by such Party to this
          Supply Agreement (the "Indemnified Party").

     12.3.2 At its option, the indemnifying Party may assume the defense of any
          third party claim by giving written notice to the Indemnified Party at
          any time after the indemnifying Party's receipt of an Indemnification
          Claim Notice with respect to such third party claim. Upon assuming the
          defense of a third party claim, the indemnifying Party may appoint as
          lead counsel any legal counsel selected by the indemnifying Party. In
          the event the indemnifying Party assumes the defense of a third party
          claim, the Indemnified Party shall immediately deliver to the
          indemnifying Party all original notices and documents (including court
          papers) received by any Indemnitee in connection with the third party
          claim. Should the indemnifying Party assume the defense of a third
          party claim, the indemnifying Party shall not be liable to the
          Indemnified Party or any other Indemnitee for any legal expenses
          subsequently incurred by such Indemnified Party or other Indemnitee in
          connection with the analysis, defense or settlement of the third party
          claim. In the event that it is later determined that the negligence or
          willful misconduct of the Indemnified Party caused, or was a
          contributing cause to, the third party claim or the Damages relating
          thereto, the Indemnified Party shall reimburse the indemnifying Party
          for the legal costs and all costs and expenses (including attorneys'
          fees and costs of suit) and any Damages, or its equitable proportion,
          as the case may be, incurred by the indemnifying Party in its defense
          of the third party claim with respect to such Indemnitee.

     12.3.3 Without limiting Section 12.3.1, any Indemnitee shall be entitled to
          participate in, but not control, the defense of such third party claim
          and to employ counsel of its choice for such purpose; provided,
          however, that such employment shall be at the Indemnitee's own expense
          unless (i) the employment thereof has been specifically authorized by
          the indemnifying Party in writing, or (ii) the indemnifying Party has
          failed to assume the defense and employ counsel in accordance with
          Section 12.3(b) (in which case the Indemnified Party shall control the
          defense).

<PAGE>

     12.3.4 With respect to any Damages relating solely to the payment of money
          damages in connection with a third party claim and that will not
          result in the Indemnitee's becoming subject to injunctive or other
          relief or otherwise adversely affect the business of the Indemnitee in
          any manner, and as to which the indemnifying Party shall have
          acknowledged in writing the obligation to indemnify the Indemnitee
          hereunder, the indemnifying Party shall have the sole right to consent
          to the entry of any judgment, enter into any settlement or otherwise
          dispose of such Damages, on such terms as the indemnifying Party, in
          its sole discretion, shall deem appropriate. With respect to all other
          Damages in connection with third party claims, where the indemnifying
          Party has assumed the defense of the third party claim in accordance
          with Section 12.3.2 of this Supply Agreement, the indemnifying Party
          shall have authority to consent to the entry of any judgment, enter
          into any settlement or otherwise voluntarily dispose of such Damages;
          provided that it obtains the prior written consent of the Indemnified
          Party (which consent shall not be unreasonably withheld or delayed).
          The indemnifying Party shall not be liable for any settlement or other
          voluntary disposition of Damages by an Indemnitee that is reached
          without the written consent of the indemnifying Party. Regardless of
          whether the indemnifying Party chooses to defend or prosecute any
          third party claim, no Indemnitee shall admit any liability with
          respect to, or settle, compromise or discharge, any third party claim
          without the prior written consent of the indemnifying Party.

     12.3.5 Regardless of whether the indemnifying Party chooses to defend or
          prosecute any third party claim, the Indemnified Party shall, and
          shall cause each other Indemnitee to, cooperate in the defense or
          prosecution thereof and shall furnish such records, information and
          testimony, provide such witnesses and attend such conferences,
          discovery proceedings, hearings, trials and appeals as may be
          reasonably requested in connection therewith. Such cooperation shall
          include access during normal business hours afforded to the
          indemnifying Party to, and reasonable retention by the Indemnified
          Party of, records and information that are reasonably relevant to such
          third party claim, and making Indemnitees and other employees and
          agents available on a mutually convenient basis to provide additional
          information and explanation of any material provided hereunder, and
          the indemnifying Party shall reimburse the Indemnified Party for all
          its reasonable out-of-pocket expenses in connection therewith. To the
          extent the records of the Indemnitee referenced in this Section 12.3.5
          are privileged, the Parties shall cooperate in a manner as to preserve
          such privilege but to afford the indemnifying Party with all
          information relevant to such third party claim.

12.4 Insurance. Each Party hereto shall maintain, with a financially sound and
     reputable insurer and throughout the term of this Supply Agreement,
     comprehensive general liability insurance, including, without limitation,
     product liability insurance and intellectual property infringement with
     liability limits of at least $3,000,000 per occurrence and in the
     aggregate. Each Party hereto shall also provide the other Party with such
     evidence thereof as is reasonably requested by the other Party from time to
     time. Additionally, DSM shall obtain insurance on Equipment, as more fully
     described in Article 16 hereof.

<PAGE>

                     ARTICLE 13: REGULATORY MATTERS; RECORDS

13.1 Notification of Inspections; Communications. DSM shall notify AAI in
     writing as soon as practicable upon receipt of notice of any proposed visit
     or inspection by the FDA, or after any unannounced visit or inspection (to
     the extent that such report or communication relates to a Product or the
     Manufacture thereof), within 72 hours of such notice or visit. DSM shall
     provide to the AAI a copy of any report and other written communications
     received from the FDA, to the extent that such report or communication
     relates to a Product, or the Manufacture thereof, within five (5) business
     days after receipt thereof. DSM shall be entitled to redact any FDA reports
     to remove the third party confidential information that does not relate to
     the Products to be supplied and purchased hereunder.

13.2 Recalls; Market Withdrawals.

     13.2.1 Recall Procedures. DSM and AAI shall each maintain such records as
          required by applicable Laws and codes of practice to permit effective
          recall, field correction or market withdrawal of any Product delivered
          to AAI or customers of AAI, whether such recall, field correction or
          withdrawal is effected voluntarily or under a directive of any
          government and regulatory authority. Each Party agrees that in
          connection with a recall, field correction or market withdrawal, it
          shall provide copies of its relevant records to the other Party upon
          request, excluding confidential AAI customer information or
          information subject to attorney-client or other privilege. Each Party
          shall give immediate notice by telephone (to be confirmed in writing)
          to the other Party upon discovery that any Product should be recalled,
          corrected or withdrawn from the market, or may be required to be
          recalled, corrected or withdrawn from the market. The decision to
          initiate a recall or market withdrawal to take any other corrective
          action shall be made by AAI. While DSM shall reasonably cooperate with
          AAI in developing any necessary recall, market withdrawal or
          correction plan, the manner and extent of such plan shall be
          reasonably decided by AAI. DSM shall cooperate as reasonably required
          by AAI in the implementation of such plan; and both Parties shall
          reasonably cooperate with each other to comply with all applicable
          regulatory obligations.

     13.2.2 Cost of Recall. DSM shall bear the cost of a recall, market
          withdrawal or corrective action in the event and to the extent that
          the recall, market withdrawal or corrective action is as a result of
          (i) any failure of DSM or the Product to comply with CGMP
          Requirements, the Specifications or any warranty or other requirement
          under this Supply Agreement or (ii) any failure of DSM to comply in
          all material respects with applicable Law; otherwise AAI shall bear
          the costs of a recall, market withdrawal or corrective action.

     13.2.3 Regulatory Assistance. DSM agrees to provide to AAI such information
          and assistance as AAI may reasonably require for purposes of (a)
          applying for and maintaining all Drug Applications for the Products in
          the Territory, or (b) enabling AAI to comply with CGMP Requirements
          and other applicable Laws. Such information or assistance (the
          "Regulatory Services") shall include without

<PAGE>

          limitation, providing AAI with all reasonable reports, authorizations,
          certificates, methodologies, and other documentation in the possession
          or under the control of DSM relating to the Manufacture of the
          Products (or any Raw Materials or API thereof). Upon request by AAI
          and at reasonable rates to be mutually agreed upon between the
          parties, DSM may perform services for AAI in addition to the
          Regulatory Services.

     13.2.4 Inspections. Upon reasonable notice to DSM, and in a manner
          calculated not to excessively interfere with DSM's conduct of
          business, DSM shall allow:

          (i)  Routine Manufacturing Audit. Access to one or more AAI quality
               assurance employees, consultants or agents, or one or more
               representatives of AAI's third party contract manufacturers to
               observe the entire process of Manufacture of each Batch, or
               selected Batches of Raw Materials, API and Products; and in
               connection therewith DSM agrees to give AAI twenty (20) business
               days prior written notice of all production runs of the Products
               at its facilities; and AAI shall be entitled to have one or more
               representatives observe, review and inspect all aspects of such
               production; and

          (ii) Annual Audit. One (1) time during each calendar year,
               representatives from the quality assurance department of AAI to
               have access to DSM's manufacturing, warehousing and laboratory
               premises and associated records related to the Products for audit
               purposes. Where significant quality issues are reasonably
               suspected by AAI, including as a result of any manufacturing
               audit, Product quality problems or the results of the annual
               quality audit, AAI shall be permitted to perform additional
               audits in order to attempt to resolve these issues (or confirm
               correction thereof) and may require DSM to retain an independent
               expert to certify that such issues have been resolved. AAI
               commits during any audit to follow reasonable DSM safety and
               security procedures.

          (iii) General. AAI shall ensure that all employees, representatives,
               consults, or other agents conducting inspections pursuant to this
               Section 13.2.4 shall be subject to the requirements of the
               Confidentiality Agreement set forth in Schedule D. All such
               inspections shall be organized so as to reasonably minimize
               disruption to DSM's on-going production processes and other
               business operations. The Parties shall cooperate in scheduling
               and arranging all such inspections.

13.3 Corrective Actions. DSM shall promptly correct any defects identified
     during AAI audits. DSM will implement corrective action in accordance with
     the time schedule imposed by AAI quality assurance, where such defects
     threaten to impact Product quality.

13.4 Complaints. Adverse event reports and Product complaints shall be handled
     as provided in the Quality Agreement agreed to between the Parties.

<PAGE>

                       ARTICLE 14: ARBITRATION OF DISPUTES

14.1 Except as provided below, the Parties agree to submit all dispute between
     them relating to this Agreement and its formation, breach, performance,
     interpretation and application to arbitration in accordance with this
     Article 14.

14.2 In the event that the Parties are in dispute with respect to any matter
     related to this Agreement, the Parties shall first attempt in good faith to
     resolve such dispute. If any dispute has not been resolved within sixty
     (60) days after delivery of written notice thereof by the aggrieved Party
     to the other Party, then such dispute will be referred by the Parties for
     final resolution to a single arbitrator mutually agreed upon by the
     Parties. If the Parties are unable to agree on a single arbitrator within
     thirty (30) days following expiration of such sixty (60) day period, the
     Parties will promptly refer the dispute to three (3) arbitrators, of whom
     one will be selected by DSM, one by AAI, and one selected by the two
     arbitrators selected by DSM and AAI. Such arbitration, if it occurs, shall
     be conducted in a location of substantially equal distance between the
     principal offices of the Parties set forth in Section 15.1 below and
     pursuant to the rules of the American Arbitration Association, as modified
     herein. The decision of the arbitrators, which my include interest, shall
     be final and binding on the Parties hereto and may be enforced in any court
     of competent jurisdiction by any Party. The arbitration shall be pursued
     and brought to conclusion as rapidly as possible. Unless the arbitrator(s)
     find that exceptional circumstances require otherwise, the arbitrator(s)
     will grant the prevailing Party in arbitration its costs of arbitration and
     reasonable attorneys' fees as part of the arbitration award.

14.3 Neither Party will be required to arbitrate any dispute relating to actual
     or threatened unauthorized disclosure of Confidential Information, but
     shall be entitled to seek in any court of competent jurisdiction
     injunctive, preliminary or other equitable relief, in addition to damages,
     including court costs and reasonable attorneys fees.

                               ARTICLE 15: NOTICES

15.1 Delivery. All notices, consents, requests and other communications
     hereunder shall be in writing and shall be sent by hand delivery, by
     certified or registered mail (return-receipt requested), or by a recognized
     national overnight courier service as set forth below:

          If to DSM:

          DSM Pharmaceuticals, Inc.
          5900 NW Greenville Blvd.
          Greenville, NC 27834
          Attn: Terence S. Novak, Sr. V.P. Commercial Operations

          If to AAI:

          aaiPharma LLC
          2320 Scientific Park Drive

<PAGE>

          Wilmington, North Carolina  28405
          Attention: J. Fred Pruden, V.P. Manufacturing Operations

          With a copy to:

          aaiPharma Inc.
          2320 Scientific Park Drive
          Wilmington, North Carolina  28405
          Attention: Office of General Counsel

15.2 Effective Time. Notices delivered pursuant hereto shall be deemed given:
     (a) at the time delivered, if personally delivered; (b) at the time
     received, if mailed; and (c) one (1) business day after timely delivery to
     the courier, if by overnight courier service.

15.3 Changes. Either Party hereto may change the address to which notice is to
     be sent by written notice to the other Party in accordance with the
     provisions of this Article 15.

                         ARTICLE 16: EQUIPMENT PURCHASES

16.1 Equipment Purchases. AAI will reimburse DSM for the cost of Equipment
     purchased by DSM upon AAI's request and approval, including all related,
     reasonable and necessary out-of-pocket expenses associated with the
     purchase, installation and validation of such items, together with a
     purchasing services fee equal to [**] dollars ($[**]) or [**] percent
     ([**]%) of the purchase price of all Equipment procured by DSM, whichever
     is less, provided that DSM provides AAI receipts and/or third party
     invoices evidencing the amounts of such expenses. Any such sale of
     Equipment by DSM to AAI shall be deemed subject to the terms and conditions
     of this Article 16. Unless otherwise agreed, DSM shall only be acting as
     AAI's agent for the procurement of the Equipment; and DSM shall not be held
     to have warranted, in any manner, the fitness of the Equipment for the
     purposes hereunder. Subject only to Section 16.5 hereof, SUCH EQUIPMENT
     SHALL BE TRANSFERRED BY DSM TO AAI "AS IS", "WHERE IS" AND "WITH ALL
     FAULTS"; AND DSM HEREBY DISCLAIMS ANY WARRANTIES IN CONNECTION THEREWITH.

16.2 Title, Use. Title to the Equipment shall pass to AAI upon payment to DSM or
     the original vendor for the purchase price therefore. Unless otherwise
     requested by AAI, DSM shall retain and use such Equipment at DSM's facility
     until expiration or termination of the Product Schedule related to such
     Equipment. DSM shall be responsible for any such Equipment until delivery
     to AAI and shall bear all risk of loss to the Equipment prior to that date.
     DSM shall conduct routine maintenance of the Equipment; however major
     capital repairs or improvements caused through no fault of DSM or its
     representatives shall be for the account of AAI.

16.3 Insurance. So long as AAI retains rights to any Equipment sold and assigned
     hereunder, DSM shall keep in force liability insurance, in form, substance
     and amount satisfactory to AAI, naming AAI as an additional insured under a
     Broad Form Vendor's endorsement, covering property damage and personal
     injury arising from or to the Equipment. Each insurer shall agree by
     endorsement upon the policy or policies issued by it or by

<PAGE>

     independent instrument furnished to AAI that it will give AAI thirty (30)
     days' written notice before the policy in question shall be materially
     altered or canceled.

16.4 The purchase of Equipment hereunder and closing with respect thereto shall
     be deemed to have occurred at DSM's offices in Greenville, North Carolina.

16.5 DSM representations, warranties and covenants as of the date hereof and
     again upon the date the Equipment is purchased, that:

     16.5.1 DSM will have the absolute right to sell and assign the Equipment
          and upon such sale, AAI will acquire good and marketable title to the
          Equipment, free and clear of all liens, claims, interests and
          encumbrances.

     16.5.2 With respect to all Equipment purchased hereunder (including related
          Software), DSM transfers and assigns AAI, to the full extent
          permitted, all warranties and indemnities of the manufacturer,
          licensor and other suppliers of the Equipment. To the extent any
          warranties or indemnities concerning the Equipment may not be
          assignable, DSM agrees to enforce them for the benefit of AAI or at
          AAI's request to assign to AAI the rights to enforce them in DSM's
          name for the benefit of AAI.

     16.5.3 Except for Equipment identified by DSM in writing as "used
          Equipment", all Equipment purchased hereunder shall be new.

16.6 DSM shall ensure that so long as it remains in possession of AAI's
     equipment, it shall not permit the attachment of liens or other
     encumbrances to the title of such equipment.

16.7 DSM shall comply with the purposes and applicable standards of the
     Occupational Safety and Health Act of 1970 (OSHA) as amended and other
     applicable federal, state and local regulations in the operation of the
     Equipment.

                            ARTICLE 17: MISCELLANEOUS

17.1 Severability. If any provision of this Supply Agreement is held to be
     invalid, illegal or unenforceable, the validity, legality and
     enforceability of the remaining provisions shall not in any way be affected
     or impaired, and the Parties shall use their best efforts to substitute a
     valid, legal and enforceable provision, which insofar as practical,
     implements the purpose of this Supply Agreement.

17.2 Counterparts. This Supply Agreement may be executed in one or more
     counterparts, each of which shall be deemed an original, but all which
     together shall be deemed one and the same instrument.

17.3 Governing Law. This Supply Agreement shall be subject to, governed by, and
     any matter or dispute arising out of this Supply Agreement shall be
     determined by, the Laws of the State of North Carolina, without reference
     to its conflict of Laws principles that might apply to the Laws of another
     jurisdiction.

<PAGE>

17.4 Headings; Gender. "Article," "Section" and other headings combined in this
     Supply Agreement are for reference purposes only and shall not affect in
     any way the meaning or interpretation of this Supply Agreement. All
     personal pronouns used in this Supply Agreement shall include the other
     genders, whether used in the masculine, feminine or neuter gender, and the
     singular shall include the plural and vice versa, whenever and as often as
     may be appropriate.

17.5 Entire Agreement. This Supply Agreement and the related Product Schedules
     represents the entire agreement of the Parties with respect to its subject
     matter. Any and all prior discussions or agreements with respect hereto are
     merged into and superseded by the terms of this Supply Agreement. This
     Supply Agreement may be modified or amended only in writing signed by both
     Parties which expressly refers to this Supply Agreement and states an
     intention to modify or amend it. No such amendment or modification shall be
     effected by use of any purchase order, acknowledgment, invoice or other
     form of either Party and in the event of conflict between the terms of this
     Supply Agreement and any such form, the terms of this Supply Agreement
     shall control.

17.6 No Assignment. Neither Party hereto may assign this Supply Agreement, in
     whole or in part, without the prior written consent of the other Party
     (which consent shall not be unreasonably withheld or delayed); and any
     attempted assignment not in accordance herewith shall be null and void and
     of no force or effect, except that no prior written consent shall be
     required if AAI assigns any or all of its rights hereunder to one of its
     Affiliates. No assignment of this Supply Agreement or any portion of any
     rights hereunder shall relieve the assigning Party of any of its
     obligations or liability hereunder.

17.7 Binding Effect. This Supply Agreement shall be binding upon and shall inure
     to the benefit of the Parties hereto and their respective successors, and
     permitted assigns.

17.8 Interpretation. This Supply Agreement was fully negotiated by both Parties
     hereto and shall not be construed more strongly against either Party hereto
     regardless of which Party is responsible for its preparation.

17.9 Further Assurances. Upon the reasonable request of the other Party, each
     Party hereto agrees to take any and all actions necessary or appropriate to
     give effect to the terms set forth in this Supply Agreement.

17.10 Subcontracting. DSM may not subcontract with any Affiliate or
     non-Affiliated third party to perform any of its obligations hereunder
     except with the prior written consent of the AAI, which shall not be
     unreasonably withheld or delayed. In no event shall any such subcontract
     release DSM from any of its obligations under this Supply Agreement except
     to the extent they are performed by such subcontractor. Any subcontract
     shall be in writing and shall include a provision that grants AAI
     commercially reasonable rights to monitor the subcontractor, conduct
     inspections and audits of the subcontractor's facilities and to receive
     notice of regulatory actions and communications, and in each case such
     benefit shall be on terms no less favorable than AAI has with respect to
     DSM under this Supply Agreement (as amended from time to time). AAI will be
     provided a copy of any such subcontract.

<PAGE>

17.11 Independent Contractors. It is expressly agreed that DSM, on the one hand,
     and AAI, on the other hand, shall be independent contractors and that the
     relationship between the two Parties shall not constitute a partnership,
     joint venture or agency. Neither DSM, on the one hand, nor the AAI, on the
     other hand, shall have the authority to make any statements,
     representations or commitments of any kind, or to take any action, which
     shall be binding on the other, without the prior consent of the other Party
     to do so. All persons employed by a Party shall be employees of such Party
     and not of the other Party and all costs and obligations incurred by reason
     of any such employment shall be for the account and expense of such Party.

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

17.13 Counterparts. This Supply Agreement may be executed in one or more
     counterparts, each of which shall be deemed an original, but all of which
     together shall constitute one and the same instrument.

                         [Signatures on following page]

<PAGE>

IN WITNESS WHEREOF, the Parties hereto have caused their duly authorized
representatives to execute this Supply Agreement as of the day and year first
above written.

DSM PHARMACEUTICALS, INC. ("DSM")


By: /s/ Terence S. Novak
    ---------------------------------
    Terence S. Novak, Sr. V.P.
    Commercial Operations


AAIPHARMA LLC ("AAI")


By: /s/ David M. Hurley
    ---------------------------------
    David M. Hurley, Chief Operating
    Officer of aaiPharma Inc.

<PAGE>

                                   EXHIBIT A:

                       MANUFACTURING AND SUPPLY AGREEMENT
                                PRODUCT SCHEDULE

PRODUCT SCHEDULE NO. _____ TO MANUFACTURING AND SUPPLY AGREEMENT (the "Supply
Agreement") DATED ___________ 2003, AND ORIGINALLY EXECUTED BY DSM
PHARMACEUTICALS, INC. ("DSM") AND AAIPHARMA LLC ("AAI")

This Product Schedule, effective as of ___________, supplements the Supply
Agreement by, among other things, identifying a particular Product, the purchase
and sale of which shall be governed by the terms of the Supply Agreement as well
as this Schedule. Except as modified by this Schedule, the Parties agree that
all terms and conditions of the Supply Agreement shall apply.

1.   Product: [insert name of the Product. Note that the Parties are currently
     considering the following products. A separate schedule, in the form hereof
     should be completed and executed for each Product.]

2.   Product dosage form(s) and stages of completion (e.g. bulk or finished
     package form): [__]

3.   Product Specifications: [reference and attach specifications]

4.   Active Pharmaceutical Ingredient: [__]

5.   Raw Materials:

6.   Packaging Specifications:

7.   Product Price: [__]

8.   Bulk Yield Requirements:

9.   Percentage of Guaranteed Shelf-Life

10.  Special Equipment

11.  Lead-Times

12.  Other Requirements, including any additional exclusivity commitments of
     DSM: [insert additional agreements related to Product, or if not
     applicable, so state].

This Schedule is subject to and incorporates all terms and conditions of the
Supply Agreement, and, except as modified herein, all terms and conditions of
the Supply Agreement shall remain in full force and effect.

<PAGE>

Each Party represents that neither this Schedule nor any of its obligations
hereunder or under the Supply Agreement incorporated herein by reference will
conflict with, or result in a breach of, any arrangement or agreement between
such Party and any third party.

In WITNESS WHEREOF, each of the undersigned Parties hereby accepts and agrees to
the terms and conditions of this Schedule, including their respective
obligations set forth in the Supply Agreement and incorporated herein by
reference.

DSM PHARMACEUTICALS, INC.


By:
    ---------------------------------
Name/Title:
            -------------------------
Date:
      -------------------------------


AAIPHARMA LLC


By:
    ---------------------------------
Name/Title:
            -------------------------
Date:
      -------------------------------

<PAGE>

                                   EXHIBIT B:
                                   [RESERVED]

<PAGE>

                                   EXHIBIT C:
                                QUALITY AGREEMENT

  (TO BE AGREED UPON BY THE PARTIES AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
  DATE. THE PARTIES WILL WORK IN GOOD FAITH TO FINALIZE THE QUALITY AGREEMENT.)
<PAGE>

                                QUALITY AGREEMENT

                           Date Effective: 21 Feb 2007

                                 By and Between

                         XANODYNE PHARMACEUTICALS, INC.
                              One Riverfront Place
                                Newport, KY 41071
                          (Hereafter called "XANODYNE")

Approved by:

XANODYNE


/s/ G. Kevin Arvin
-------------------------------------
G. Keith Arvin
Director of Quality Assurance
Date: Feb 14 2007

                                       AND

                            DSM PHARMACEUTICALS, INC.
                            5900 NW Greenville Blvd.
                        Greenville, North Carolina 27834
                            (Hereafter called "DSM")

Approved by:

DSM PHARMACEUTICALS, INC.


/s/ (Illegible)
-------------------------------------
For Warren A. Horton
Vice President Quality Assurance
DATE: 21 FEB 2007

THE PRODUCTS LISTED IN APPENDIX III (HEREAFTER CALLED THE "PRODUCT" OR
"PRODUCTS") ARE SUBJECT TO THE FOLLOWING CONDITIONS:


                           QUALITY AGREEMENT - PAGE 1

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
1  PURPOSE                                                                     3
2  RELATIONSHIP TO SUPPLY AGREEMENT                                            3
3  SCOPE                                                                       3
4  RESPONSIBILITY                                                              3
5  GMP STANDARDS                                                               4
6  PREMISES                                                                    4
7  AUDITS                                                                      5
8  REGULATORY AGENCY INSPECTIONS                                               6
9  DOCUMENTATION/CHANGE MANAGEMENT                                             7
10 RAW MATERIAL/PACKAGING COMPONENTS                                           8
11 LABORATORY ANALYSIS/DOCUMENTATION                                           8
12 STABILITY                                                                   9
13 RETENTION OF SAMPLES                                                       10
14 VALIDATION                                                                 10
15 COMPUTER SYSTEMS                                                           11
16 CALIBRATION/PREVENTATIVE MAINTENANCE                                       11
17 SUBCONTRACTING                                                             12
18 TRAINING/QUALIFICATION                                                     12
19 INVESTIGATIONS                                                             12
20 DOCUMENTATION REVIEW                                                       13
21 PRODUCT DISPOSITION                                                        14
22 STORAGE AND SHIPMENT                                                       15
23 DOCUMENT RETENTION                                                         15
24 REGULATORY                                                                 16
25 COMPLAINTS                                                                 17
26 RECALLS                                                                    17
27 DISPUTE RESOLUTION                                                         18
</TABLE>


                           QUALITY AGREEMENT - PAGE 2

<PAGE>

1    PURPOSE

     This Agreement defines the roles and responsibilities for DSM when
     providing services and/or Products for XANODYNE. This Agreement also
     defines how the quality departments of DSM and XANODYNE will interact with
     each other. Unless otherwise specified, XANODYNE refers to XANODYNE
     PHARMACEUTICALS, INC. and DSM refers to DSM PHARMACEUTICALS, INC.

2    RELATIONSHIP TO SUPPLY AGREEMENT

     This Agreement supplements and is hereby incorporated by reference into the
     Pharmaceutical Product Supply Agreement ("Supply Agreement") between the
     Parties for each of the Products as to which this Quality Agreement
     relates. If such Manufacturing Agreement has not been finalized, the roles
     and responsibilities in this Agreement remain in force and effect as a
     stand-alone agreement. In the event of a quality conflict between any of
     the provisions in the Supply Agreement and this Quality Agreement, this
     Quality Agreement shall control.

3    SCOPE

     This Quality Agreement covers the quality-related services to be provided
     by DSM for each Product supplied pursuant to the related Supply
     Agreement(s), including such additional Products as may be agreed between
     the parties and added in writing to such Supply Agreement(s).

4    RESPONSIBILITY

     4.1  Communication and Implementation. Responsibility for communication and
          implementation of this Quality Agreement for XANODYNE and for DSM
          rests with the management of each party's respective Quality
          departments. This Agreement is effective upon signature approval of
          ail parties. The operations for the services and/or Products to be
          performed by DSM are defined in the Supply Agreement; and
          quality-related responsibilities are outlined in APPENDIX I of this
          Quality Agreement. No changes to the terms


                           QUALITY AGREEMENT - PAGE 3

<PAGE>

          of this Agreement may be made without the express written consent of
          both parties.

     4.2  Amendments. This Quality Agreement may be amended as new services
          and/or Products are added, or as Products are deleted, all as mutually
          agreed upon by the parties. DSM and XANODYNE contact information may
          be updated as required by notification to either party.

     4.3  Duration of this Agreement. This Agreement shall commence on execution
          by both Parties and, subject to the following provisions of this
          section, shall expire or terminate on the expiry or termination of the
          Supply Agreement. Any section of this Agreement which has a predefined
          retention, survival or maintenance period (for example raw data
          storage, product complaints and sample retention) shall survive the
          termination of this Agreement for the period defined in the
          appropriate section. This Agreement cannot be modified except with the
          written approval of both Parties. Specifications and Master Batch
          Records may be modified with written authorization from designated
          Quality Assurance representatives of both companies.

5    GMP STANDARDS

     The services contracted from DSM will comply with applicable domestic and
     international good manufacturing practices standards (cGMP) as mutually
     agreed upon in writing, prior to the submission of the application in the
     foreign country. XANODYNE agrees to comply with policies and procedures
     adopted by DSM to establish and maintain cGMP, including investigative
     methodology that governs how DSM interprets and dispositions data in
     support of final batch disposition.

6    PREMISES

     6.1  Operations. DSM will perform required operations for manufacturing
          activities at its Greenville, North Carolina site. The premises and
          equipment used to manufacture the Products will be maintained
          according to current


                           QUALITY AGREEMENT - PAGE 4

<PAGE>

          regulatory requirements and in accordance with the controlled
          documentation approved by XANODYNE. The manufacture of the Products
          will be conducted in a suitably controlled environment; and such
          facilities will be regularly monitored for parameters critical to the
          process in order to demonstrate and maintain compliance with (i)
          applicable GMP guidelines and (ii) mutually agreed upon
          specifications.

     6.2  Controlled Access. DSM will maintain controlled access to the
          premises. All visitors shall comply with applicable access policies,
          dress code, cell phone usage, security, and safety requirements.

     6.3  DSM will manufacture the Products at the Plant and will not use or
          transfer at a later date any of the Manufacturing operations for the
          Product(s) to Third Parties or other sites without the prior written
          agreement of Xanodyne Corporate Quality Assurance.

7    AUDITS

     7.1  Annual Audits. DSM will permit XANODYNE's Quality Department to
          perform a minimum of [**] standard cGMP compliance audit per year for
          the services contracted, upon reasonable notification from XANODYNE,
          with actual audit dates subject to mutual agreement with DSM based
          upon the availability of DSM's personnel and prior audit commitments.
          Such audit shall not exceed two (2) business days and shall have no
          more than four (4) auditors. XANODYNE representatives will be escorted
          by DSM personnel at all times and will only have access to the
          facility and records relating to the services and Products under
          contract with XANODYNE.

     7.2  Supplementary Audits. Notwithstanding the foregoing, DSM will permit
          XANODYNE's Quality Assurance department to conduct additional audits
          on a date mutually agreed upon by both parties to the extent necessary
          prior to pre-approval inspections (PAI) or to address significant
          product


                           QUALITY AGREEMENT - PAGE 5

<PAGE>

          quality or compliance problems. Such audits shall be scheduled
          promptly after notice from XANODYNE following a quality or safety
          occurrence.

     7.3  Report of Findings. XANODYNE will report audit findings verbally at
          the close of the audit and will provide a written report within [**]
          business days of the audit. DSM shall formally respond to observations
          made by XANODYNE's representatives on areas requiring corrective
          action. DSM's response will include root cause evaluation, corrective
          actions, preventative actions, and remedial actions, where
          appropriate, and shall include a timeline for completion of each
          action. The response will be sent to the XANODYNE auditor within [**]
          business days of the receipt of the audit report.

REGULATORY AGENCY INSPECTIONS

     8.1  Regulatory Actions. DSM will promptly inform XANODYNE of any
          regulatory agency action that specifically affects the contracted
          services and/or Products to be supplied pursuant to the Supply
          Agreement. XANODYNE will promptly inform DSM of any regulatory agency
          action that specifically affects the contracted services for all
          marketed products produced by DSM.

     8.2  Regulatory Inspections. DSM shall notify XANODYNE of any regulatory
          agency inspection specifically impacting the products covered by this
          Agreement within two (2) business days of the initiation of the audit
          by the regulatory agency. XANODYNE reserves the right to be available
          on site during an agency inspection when the inspection pertains to a
          XANODYNE product, DSM shall respond to the regulatory agency on any
          XANODYNE product-specific citations after consultation with XANODYNE.
          Upon request, DSM will forward all appropriately redacted regulatory
          agency documentation (e.g., EIR, FDA-483) and responses that pertain
          to XANODYNE products to XANODYNE's Quality Department within [**]
          business days of request or completion of submission. XANODYNE shall
          notify DSM of any regulatory agency inspection specifically impacting
          the


                           QUALITY AGREEMENT - PAGE 6

<PAGE>

          products covered by this Agreement within [**] business days of the
          initiation of the audit by the regulatory agency. DSM reserves the
          right to present site data and/or procedures upon specific requests
          regarding DSM responsibilities. Copies of formal response letters from
          DSM including the 483 observations to the FDA that relate to the
          Product will also be forwarded to Xanodyne Quality Assurance. DSM will
          consider Xanodyne's comments and suggestions regarding any citations
          or observations that specifically relate to the manufacture of
          Xanodyne's products.

9    DOCUMENTATION/CHANGE MANAGEMENT

     9.1  XANODYNE shall not make any changes to DSM-owned or DSM-controlled
          cGMP documentation without the consent of DSM, in order to ensure that
          all cGMP documentation, which is maintained at DSM and subject to
          regulatory review, matches or is consistent with information filed
          with regulatory authorities. XANODYNE shall be responsible for all
          costs and penalties incurred if it makes any changes to GMP
          documentation without DSM's consent.

     9.2  All changes to the Product and related documents shall proceed through
          a technical and cGMP impact assessment by DSM's quality and change
          management personnel. The documents which (a) contain changes that may
          affect XANODYNE's regulatory submissions or the support system and
          which (b) have a direct impact on the quality systems affecting
          XANODYNE's Product, will also be reviewed and assessed by XANODYNE's
          quality and change management personnel for regulatory advice and
          implementation requirements, as per the agreements between XANODYNE
          and DSM.


                           QUALITY AGREEMENT - PAGE 7

<PAGE>

10   RAW MATERIAL/PACKAGING COMPONENTS

     10.1 DSM shall be responsible for using raw material / packaging components
          from approved vendors agreed upon by both parties. Prior to use, all
          raw material / packaging components must be found to be acceptable
          against pre-established standards. Changes to test methods, or
          deviations from existing raw materials, packaging components,
          packaging component specifications or vendors must be documented and
          approved by XANODYNE and DSM in accordance with the requirements of
          Section 9, above.

     10.2 For vendors designated or utilized by XANODYNE, which are not DSM-
          approved vendors, XANODYNE shall be responsible for qualifying such
          vendors and will provide DSM with a Certificate of Compliance
          statement for such vendors upon request. XANODYNE shall be responsible
          for ensuring that ail materials and components supplied by XANODYNE or
          by its designated vendors for use in manufacture of the Products are
          in full compliance with the specifications registered. XANODYNE shall
          also forward to DSM a Certificate of Analysis for materials supplied
          directly by XANODYNE or by its designated vendors.

11   LABORATORY ANALYSIS/DOCUMENTATION

     11.1 Methods Validation. For those analytical methods to be provided by
          XANODYNE, XANODYNE shall be responsible for providing to DSM approved
          copies of the current and complete regulatory filed analytical methods
          and supporting validation documentation relating to the Products, for
          application by DSM in the production process, including receipt of API
          and raw materials, in-process product testing, product batch release,
          drug and product stability, and cleaning validation.

     11.2 In-Process and Finished Product Testing: Transfer of Methods. A method
          transfer of any test method developed by XANODYNE will be completed
          prior to DSM's disposition of Products, utilizing the transferred
          method(s),


                           QUALITY AGREEMENT - PAGE 8

<PAGE>

          for release by XANODYNE. XANODYNE will work collaboratively with DSM
          to transfer any methods required by DSM.

     11.3 Reference Standards. XANODYNE is responsible for supplying any
          required reference standards that are not readily available through a
          commonly recognized source. Such reference standards must be
          accompanied by a Certificate of Analysis listing the expiration date
          and any correction factors that need to be applied.

     11.4 Confirmation of DSM Data. XANODYNE may perform testing to confirm the
          DSM data. XANODYNE may perform confirmatory testing during the initial
          term of this Agreement to validate the DSM data. Periodically
          thereafter, XANODYNE may test material to confirm the DSM data.
          Dispute resolutions in conflicting test data will be handled according
          to the provisions of Section 27.

     11.5 Release Testing. In the event that XANODYNE completes any release
          testing required for the Products, XANODYNE will supply DSM with a
          Certificate of Analysis and any release testing data and test
          specifications from approved suppliers required for release by DSM.
          DSM shall evaluate all testing data supplied by XANODYNE in order to
          assign final disposition of Product For any testing which XANODYNE
          completes, the results shall be made available to DSM in a timely
          manner so as not to delay release procedures.

12   STABILITY

     DSM is responsible for maintaining a routine stability program for the
     Products. The stability activities (contract storage, contract testing)
     will be defined in a mutually agreed upon protocol, which will identify the
     storage requirements, testing responsibilities, testing specifications and
     methods, testing intervals, and bracketing, if applicable. DSM will provide
     a stability report upon completion of the time point testing. The stability
     program will generally follow ICH guidelines, The


                           QUALITY AGREEMENT - PAGE 9

<PAGE>

     stability protocol and/or any subsequent changes shall be approved by
     XANODYNE via the Change Control System.

     12.1 Out-of Specification Occurrences. Any Out-of-Specifications ("OOS")
          occurrences that are identified and confirmed according to the
          stability program will be promptly communicated by DSM to XANODYNE;
          and DSM shall provide such assistance to XANODYNE as is required for
          regulatory reporting purposes with respect thereto.

13   RETENTION OF SAMPLES

     13.1 API Samples. DSM will retain samples/of the active ingredients for/we
          (5) years beyond the ingredient date manufactured. DSM will retain
          samples of excipients for a minimum of [**] years beyond the Date of
          Manufacture. The amount of sample retained will be at least [**] the
          quantity required to carry out all of the tests required to determine
          if the material meets its specifications, with the exception of
          sterility and pyrogen testing.

     13.2 Product Samples. DSM will retain samples of the Products for [**] year
          beyond the expiry period. The amount of sample retained will be at
          least [**] the quantity required to carry out all of the tests
          required to determine if the material meets its specifications, with
          the exception of sterility and pyrogen testing.

     13.3 Destruction. DSM will notify XANODYNE prior to destruction of any
          product at the completion of the retention period.

14   VALIDATION

     14.1 Process Validation. DSM is responsible for ensuring that the
          manufacturing process is validated. The validation should ensure, with
          a high degree of certainty, that the process is capable of
          consistently achieving the Product's acceptance criteria.

     14.2 Cleaning Validation. DSM is responsible for ensuring that adequate
          cleaning is completed to prevent contamination. Data should be
          available to support the campaign of batches of the same product and
          the type of


                           QUALITY AGREEMENT - PAGE 10

<PAGE>

          cleaning that will be performed in between manufacturing of the same
          product, XANODYNE will provide information (i.e. LD50, toxicity,
          solubility, batch size, fill volume, product min dose/70Kg patient) to
          establish cleaning limits. DSM shall not use the Product run equipment
          to manufacture, package, or store a product concerning any of the
          following compounds without XANODYNE written prior consent: cytoxins,
          penicillins, steroids or other hormone products.

     14.3 Equipment, Computer, Facility, and Utilities Qualification. DSM is
          responsible for all equipment, computer, facility, and utility
          qualification activities associated with the Products.

     14.4 Laboratory Qualification. DSM is responsible for ensuring that all
          laboratories are in compliance with applicable cGMP guidelines. If
          analytical work is performed at DSM, then XANODYNE will also provide
          any existing analytical documentation to assist in methods transfer or
          methods validation. In addition, if analytical work is not performed
          at the Greenville site, DSM may elect to perform an audit on vendors
          to be used for analytical testing. DSM will be responsible for
          insuring that any vendor selected by DSM fully complies with cGMP
          requirements. Vendors selected by XANODYNE must be certified by
          XANODYNE and acceptable per cGMP.

15   COMPUTER SYSTEMS

     Computer Systems used in the manufacturing, packaging, analytical testing,
     storage, release and stability of XANODYNE Products shall be validated.
     Where compliance with 21 CFR Part 11, "Electronic Records and Electronic
     Signatures", is required, DSM will comply with those regulations or have a
     master plan to achieve compliance.

16   CALIBRATION/PREVENTAT1VE MAINTENANCE

     DSM will maintain a calibration and preventative maintenance program to
     support the manufacturing, testing, packaging and storage of XANODYNE
     Products. DSM


                           QUALITY AGREEMENT - PAGE 11

<PAGE>

     shall also follow a procedure that documents the actions to be taken in the
     event of a calibration failure.

17   SUBCONTRACTING

     Any subcontracted laboratory or manufacturing facility must be approved by
     XANODYNE (this may include an audit) prior to being used by DSM. DSM shall
     ensure that the subcontracted laboratory or manufacturing facility follows
     the applicable agreements with XANODYNE. DSM will obtain approval from
     XANODYNE prior to subcontracting any laboratory for XANODYNE's Product. DSM
     will audit such subcontractors to determine compliance with cGMP according
     to DSM's criteria, which may differ from the criteria in the contractor
     quality agreement with XANODYNE. Any discrepancies will be discussed with
     XANODYNE.

18   TRAINING/QUALIFICATION

     DSM shall provide a program to assure that all personnel engaged in the
     manufacturing, packaging, analytical testing, storage, release and
     stability testing of XANODYNE Products have the education, training and
     experience to properly perform their assigned functions in compliance with
     cGMP. Training shall be in the particular operations that the employee
     performs and in current applicable manufacturing regulations, as they
     relate to the employee's functions. Training records for all personnel
     shall be maintained and made available upon request by XANODYNE or pursuant
     to any regulatory review.

19   INVESTIGATIONS

     19.1 Out of Specification Results (OOS). DSM is responsible for
          investigating any testing performed by DSM that is confirmed as a
          failure to meet Product specifications. Each investigation will be
          reviewed by DSM's Quality Assurance designee, and will follow internal
          procedures that are in accordance with regulatory guidelines.
          Confirmed product OOS results will be communicated to XANODYNE as
          defined within Section 19.2 hereinafter.


                           QUALITY AGREEMENT - PAGE 12

<PAGE>

     19.2 Manufacturing Deviations. Any deviation from the process during
          manufacture, and any OOS result shall be documented by DSM and
          approved by DSM Quality Assurance and appropriate area management. DSM
          will notify XANODYNE on a timely basis if any problems are discovered
          that may impact Product batches previously shipped in order to assure
          that regulatory reporting guidelines may be met. A list of all
          investigations will be provided to XANODYNE with the Release
          Documentation package provided to XANODYNE. A copy of any final
          investigation report will be reviewed with XANODYNE and included in
          the Release Documentation package provided to XANODYNE. DSM will
          notify XANODYNE in the event that a Product or customer provided
          material will be rejected. This communication will be accompanied by a
          completed investigation with regard to the failure and include an
          evaluation of effect of the failure on other batches.

     19.3 Some deviations/OOSs may require that additional testing, stability,
          or validation be conducted. This work will be performed by DSM as
          agreed by both Parties.

20   DOCUMENTATION REVIEW

     DSM will provide a standard Certificate of Analysis indicating the test
     results as well as a signed Certificate of Compliance confirming that the
     Products have been manufactured, tested, and stored according to the
     requirements of the Master Production Record and cGMP criteria and include
     a statement that any deviations identified during the manufacturing process
     have been satisfactorily closed. These documents will also include the lot
     numbers, reference to any associated deviations, associated batch expiry
     dates, and quantities in each shipment DSM will, upon request, provide
     complete copies to XANODYNE of the batch documentation (Manufacturing Work
     Order and Packaging Work Order), subject to the mutual agreement of DSM and
     XANODYNE. DSM, if requested by XANODYNE, shall furnish additional copies,
     upon reimbursement of DSM's reasonable copying costs.


                           QUALITY AGREEMENT - PAGE 13

<PAGE>

21   PRODUCT DISPOSITION

     Release to commerce, shipment, and further distribution of the Products,
     once dispositioned by DSM for release, is the responsibility of XANODYNE's
     quality department. DSM will release the product for shipment if all
     pre-defined release criteria are met. In the event that an intermediate
     product is to be shipped to XANODYNE for further processing, DSM will
     release coded product for shipment if all pre-defined intermediate release
     criteria are met. In such cases, further release to commerce of the
     finished product shall be the responsibility of XANODYNE. XANODYNE's
     release to commerce shall be based on regulatory product approval,
     XANODYNE's internal procedures, the full document package provided by DSM,
     and completion of any release testing required by XANODYNE Quality Control
     for its internal release criteria. XANODYNE may, at its own discretion,
     reject a batch, which DSM has dispositioned as satisfactory. However, the
     decision to reject shall not be based on a discrepancy between XANODYNE and
     DSM's methodologies. Any problem discovered by XANODYNE likely to cause
     rejection of the approved Products will be communicated to DSM within
     thirty (30) days from receipt of the full release documentation package. If
     XANODYNE rejects Product, then XANODYNE assumes full financial
     responsibility for such rejection unless the rejected Product is determined
     to be non-conforming; and such non-conformity is determined to be the fault
     of DSM. Any disputes between the parties with respect to rejection of
     Product shall be resolved in accordance with Section 27 hereinafter.


                           QUALITY AGREEMENT - PAGE 14

<PAGE>

22   STORAGE AND SHIPMENT

     22.1 Storage. DSM will store the Products under conditions specified by
          product label requirements as supplied by XANODYNE. DSM will ensure
          that during storage before shipping of the Products, appropriate
          controls are in place to ensure that there is no interference, theft,
          product contamination, or mixture with any other products or
          materials. XANODYNE will provide details of any labeling requirements,
          container sealing and integrity, and storage and shipping conditions
          for the Products.

     22.2 Packaging and Labeling for Transit. The Products will be labeled and
          packaged for transit pursuant to instructions timely provided to DSM
          in writing by XANODYNE and complying with cGMP and other applicable
          regulations (e.g., OSHA, DEA, DOT).

     22.3 Shipment of Product to XANODYNE. DSM will ship to the designated
          locations. DSM will not ship any product that is under quarantine
          unless according to controlled procedures which fully comply with
          regulatory requirements and which are mutually agreeable between DSM
          and XANODYNE. In the event that XANODYNE requests DSM to ship product
          in quarantine, then XANODYNE shall supply DSM with a written
          certification stating, "Product will not be released to commerce until
          fully released." XANODYNE may request shipment in quarantine for
          further processing, or pending adverse weather events.

23   DOCUMENT RETENTION

     DSM will retain, at a minimum, batch production records for the Products
     and materials for [**] years from manufacture of each batch. Validation
     records may need to be held for longer than [**] years, considering the
     Product life cycle. DSM will retain batch records for the expiry date of
     the Clinical Trial Materials for a maximum of [**] years unless notified of
     a shorter retention period by XANODYNE, but at a maximum of [**] past the
     stop use date.


                           QUALITY AGREEMENT - PAGE 15

<PAGE>

     DSM will notify XANODYNE prior to destruction of any records at the
     completion of the retention period.

24   REGULATORY

     24.1 Regulatory filings. XANODYNE is responsible for ensuring all
          appropriate regulatory filings and import/export documentation are
          filed with regulatory agencies prior to shipment/human administration.
          XANODYNE will provide a copy of the applicable product registration as
          applicable to support regulatory inspection activities.

     24.2 Registration/Drug Listing. DSM is responsible for registering the
          facilities with the FDA and to maintain the registration form such
          that it is readily available for FDA inspection. DSM is responsible
          for drug listing as the manufacturer of the Products for XANODYNE,
          while XANODYNE is responsible for drug listing as the distributor of
          the Products. XANODYNE will provide DSM with all required information
          needed to register the Products with FDA. XANODYNE will notify DSM of
          changes in the countries of market and scheduled Product launch, where
          applicable.

     24.3 Annual Product Review. DSM, as required by cGMP's and applicable
          regulations, will prepare Annual Product Reviews. The Annual Product
          Review (APR) shall include, at a minimum, a summary of the following
          from the APR time frame: the batches processed, closed process
          deviations and investigations, closed complaints, active stability
          studies (for products tested at DSM), production work orders,
          analytical standards, and change controls with process validation
          impact. Statistical trending of finished product test results will be
          summarized and charted. A summary report of the product retain review
          will also be provided. The report shall be completed in writing and
          sent to XANODYNE no later than [**] days after the scheduled APR start
          date.

     24.4 Annual Report. XANODYNE is responsible for preparing any Annual Report
          as required by applicable regulations, including 21 CFR 314.70,
          314.81, and/or 601.12. XANODYNE will notify DSM as to the approval
          date of the


                           QUALITY AGREEMENT - PAGE 16

<PAGE>

          regulatory license. At least [**] calendar days before the Annual
          Report due date, XANODYNE shall request in writing from DSM the
          chemistry, manufacturing, and controls data required for submission of
          the Annual Report. DSM will provide the requested information to
          XANODYNE within [**] days.

25   COMPLAINTS

     XANODYNE is responsible for receiving and initially investigating any
     Product complaints. XANODYNE will notify DSM of any problems thought to be
     due to manufacture, which are found during the distribution of the product.
     Upon receipt of the notice of complaints, DSM will promptly perform
     investigations for these problems. Investigation reports will be forwarded
     to XANODYNE within [**] calendar days following the date of receipt by DSM.
     XANODYNE is responsible for reporting any complaint to the appropriate
     regulatory authority including adverse drug events reports. Any complaint
     received by DSM will be immediately forwarded to XANODYNE.

26   RECALLS

     XANODYNE, with data and assistance provided by DSM, is responsible for
     filing Field Alerts and initiating product recalls due to any defect
     considered sufficiently serious. XANODYNE will provide DSM with a copy of
     any regulatory correspondence related to field alerts or recalls, in the
     event that DSM has reason to believe that any Products should be recalled
     or withdrawn from distribution, DSM shall promptly inform XANODYNE in
     writing prior to taking any such action. XANODYNE shall notify the FDA,
     DEA, and any foreign regulatory agencies of any recall, and shall be
     responsible for coordinating all necessary activities regarding the action
     taken. XANODYNE acknowledges and understands that DSM, as manufacturer of
     the Product, has significant regulatory obligations if there are any
     indications that recall or withdrawal would be necessary. Accordingly, DSM
     and XANODYNE agree to cooperate fully regarding any proposed recall,
     product withdrawal, or field correction; and the Parties agree to keep each
     other advised,


                           QUALITY AGREEMENT - PAGE 17

<PAGE>

     and to exchange copies of such documentation as may be required, to assure
     regulatory compliance. With prior notification to the other party, either
     party may, in exigent circumstances, make a unilateral, final decision to
     notify appropriate regulatory agencies,

27   DISPUTE RESOLUTION

     In the event that a dispute arises between DSM and XANODYNE regarding the
     nonconformity of a batch of the Products or regarding other matters, the
     senior management of the quality departments from both companies shall in
     good faith promptly attempt to resolve disputed issues. If the parties
     cannot reach agreement, the matter shall be resolved in accordance with
     dispute resolution provisions of the Supply Agreement. XANODYNE may only
     dispute a batch of Product, which has been dispositioned by DSM for
     release. Xanodyne Corporate Quality Assurance retains at all times the
     right to determine Product release status for commercial distribution.
     Financial liability shall be determined according to the Supply Agreement.


                           QUALITY AGREEMENT - PAGE 18

<PAGE>

                     APPENDIX I: OUTLINE OF RESPONSIBILITIES

<TABLE>
<CAPTION>
FUNCTION                                                       DSM    XANODYNE
--------                                                       ----   --------
<S>                                                            <C>    <C>
MANUFACTURING                                                  [**]   [**]
In-Process TESTING (Physical, Chemical Microbial)              [**]   [**]
FP TESTING - Physical, Chemical                                [**]   [**]
FP TESTING - Sterility                                         [**]   [**]
FP RELEASE                                                     [**]   [**]
DISTRIBUTION                                                   [**]   [**]
FP RETAINS                                                     [**]   [**]
FP STABILITY                                                   [**]   [**]
C OF A                                                         [**]   [**]
BATCH RECORD REVIEW/SIGNOFF                                    [**]   [**]
INVESTIGATIONS INTO DEVIATIONS AND NON-CONFORMANCES            [**]   [**]
COMPLAINT RECEIPTS                                             [**]   [**]
COMPLAINT INVESTIGATIONS                                       [**]   [**]
ADVERSE EVENT REPORTS                                          [**]   [**]
FIELD ALERT REPORTS                                            [**]   [**]
RECALLS                                                        [**]   [**]
CUSTOMER RETURNS                                               [**]   [**]
RAW MATERIAL (Active) ORDERS                                   [**]   [**]
RAW MATERIAL (Active) TESTING AND Release                      [**]   [**]
RAW MATERIAL (Inactives/Printed Packaging Materials) ORDERS    [**]   [**]
RAW MATERIALS (Inactives/Printed Packaging Materials) TESTS    [**]   [**]
RAW MATERIAL (Inactives/Printed Packaging Materials) RELEASE   [**]   [**]
SUPPLIER AUDITS (Active)                                       [**]   [**]
SUPPLIER AUDITS (Inactives/Printed Packaging Materials)        [**]   [**]
MAINTENANCE OF VENDOR LISTS                                    [**]   [**]
NOTICE OF PROPOSED CHANGES                                     [**]   [**]
DOCUMENT CHANGE CONTROL                                        [**]   [**]
ANNUAL Product REVIEW                                          [**]   [**]
</TABLE>


                           QUALITY AGREEMENT - PAGE 19

<PAGE>

                        APPENDIX II: CONTACT INFORMATION

                              XANODYNE KEY CONTACTS

<TABLE>
<CAPTION>
                                                           PRODUCT
NAME                  TITLE       CONTACT NUMBERS          RESPONSIBILITY
----                  ---------   ----------------------   --------------
<S>                  <C>          <C>                      <C>
G. Keith Arvin        Director,   859-547-   859-814-      General Quality
karvin@xanodyne.com   Quality     3880       6338 (cell)
                      Assurance

Thomas L. Bader       Manager,    859-547-   859-992-      General Quality
tbader@xanodyne.com   Quality     38834      1756 (cell)
                      Assurance
</TABLE>

                                OSM Key CONTACTS

<TABLE>
<CAPTION>
                                                                  PRODUCT
NAME               TITLE               CONTACT NUMBERS            RESPONSIBILITY
----               -----------------   ------------------------   --------------
<S>                <C>                 <C>                        <C>
Warren             VP, Quality         Ph: 252-707-7710           General Quality
Norton             Assurance           warren.horton@dsm.com

Rob Koger          Director, Quality   Ph: 252-707-2425 rob.      Manufacturing
                   Assurance           koger@dsm. com             Oversight

Peter Amanatides   Director, Quality   Ph: 252-707-2517           Lab Oversight
                   Assurance           peter.amanatides@dsm.com

Will Mitten        Director, Lab       Ph: 252-707-2193           Lab Services
                   Services            will.mitten@dsm.com

Lora Landreth      Manager,            Ph: 252-707-2138 lora.     Stability
                   Stability           landreth @dsm. com

Lisa               Manager, Quality    Ph: 252-707-2083           APRs, Complaints,
Hackett            Assurance           lisa.hackett@dsm.com       Audits,
</TABLE>


                           QUALITY AGREEMENT - PAGE 20

<PAGE>

APPENDIX III: PRODUCTS

DARVOCETN-100


                           QUALITY AGREEMENT - PAGE 21

<PAGE>

QUALITY AGREEMENT

HISTORY OF CHANGES

<TABLE>
<CAPTION>
VERSION   DATE   NAME   REVISIONS/COMMENTS
-------   ----   ----   ------------------
<S>       <C>    <C>    <C>

</TABLE>

                           QUALITY AGREEMENT - PAGE 22


Page 1 of 63

<PAGE>

                                   EXHIBIT D:

                            CONFIDENTIALITY AGREEMENT

1.   During the term of this Agreement, the undersigned Parties may disclose
     certain confidential and proprietary information and data to each other
     relating to their respective products, including active pharmaceutical
     ingredients and the finished dosage forms of such active pharmaceutical
     ingredients (collectively "Products") and businesses, including, but not
     limited to, financial and other business information, Product samples,
     formulas, manufacturing processes, specifications, drawings, schematics and
     other technical, customer and Product development plans, forecasts,
     strategies and other data. Except as otherwise specifically provided
     herein, all information disclosed by one Party (in such capacity, the
     "Disclosing Party") to the other Party (in such capacity, the "Receiving
     Party") relating to the Disclosing Party's Products and/or its business
     operations and the results, reports, etc., of testing and evaluation of any
     such information shall constitute "Proprietary Information."

2.   The Disclosing Party shall disclose and supply its Proprietary Information
     to the Receiving Party solely to assist the Receiving Party in performing
     its obligations under this Agreement, any related API Schedules, and AAI
     purchase orders.

3.   In consideration of the Disclosing Party's disclosure and supply of
     Proprietary Information, each Party, as a potential Receiving Party, agrees
     that, for a period of seven (7) years from the date of such disclosure, it:
     (a) shall use The Disclosing Party's Proprietary Information exclusively
     for the limited purposes set forth in the first numbered paragraph hereof;
     and (b) shall not disclose, without the express written consent of the
     Disclosing Party, any Proprietary Information, including this Agreement or
     the interest of the Disclosing Party in exploring the possibility of
     entering into a business relationship with the Receiving Party, to any
     person other than to those employees of the Receiving Party
     ("Representatives") who will be directly involved in fulfilling the
     Receiving Party's obligations hereunder, provided that such Representatives
     have assumed like obligations of confidentiality to the Disclosing Party.

4.   Each Party, as a potential Receiving Party, agrees to advise those of its
     Representatives who receive Proprietary Information that such information
     (a) is proprietary and confidential to the Disclosing Party and (b) shall
     not be disclosed to anyone except as authorized herein. Each Party further
     agrees to take the precautions it normally takes with its own confidential
     and proprietary information to prevent unauthorized disclose or use of such
     Proprietary Information, but no less than reasonable precautions.

5.   In the event that the Receiving Party becomes compelled to disclose any
     Proprietary Information, it will provide the Disclosing Party with prompt
     advance notice in writing so that the Disclosing Party may, at its
     discretion, intervene prior to disclosure. The Receiving Party will
     exercise its commercially reasonable best efforts to obtain reliable
     assurance that confidential treatment will be accorded such Proprietary
     Information.


Page 2 of 63

<PAGE>

6.   Notwithstanding any of the foregoing, the term "Proprietary Information"
     and the obligation of confidentiality associated therewith shall not apply
     to the following information: (a) information which, at the time of the
     Disclosing Party's disclosure to the Receiving Party, is in the public
     domain; (b) information which, after the Disclosing Party's disclosure to
     the Receiving Party, enters the public domain, except where such entry is
     the result of the Receiving Party's breach of this Agreement or otherwise
     is the result of any unauthorized disclosure by any of its employees; (c)
     information which, prior to the Disclosing Party's disclosure to the
     Receiving Party, was already in the Receiving Party's possession; (d)
     information which, subsequent to the Disclosing Party's disclosure to the
     Receiving Party, is obtained by the Receiving Party from a third Party
     which is Lawfully in possession of such information and not subject to a
     contractual or fiduciary relationship to the Disclosing Party with respect
     thereto or (e) information which is developed independently by the
     Receiving Party without reference to the Proprietary Information.

7.   Upon the termination of this Agreement and upon receipt of a written
     request from the Disclosing Party, the Receiving Party shall promptly
     return to the Disclosing Party the originals and all copies of any
     Proprietary Information then in the Receiving Party's possession.
     Notwithstanding the foregoing, Receiving Party may retain one copy of such
     Proprietary Information for archival purposes.

8.   Each Party understands and acknowledges that, due to the unique nature of
     each Party's Proprietary Information, any unauthorized disclosure of any
     portion of Proprietary Information may cause irreparable injury to the
     Disclosing Party and that no adequate or complete remedy may be available
     to the Disclosing Party to compensate for such injury. Accordingly, each
     Party hereby acknowledges that the Disclosing Party may be entitled to
     injunctive relief in the event of such unauthorized disclosure by the
     Receiving Party or any of its employees in addition to whatever remedies it
     might have at Law. In addition, the Receiving Party shall indemnify the
     Disclosing Party from any loss or harm, including, without limitation,
     reasonable attorney's fees, resulting from any breach or enforcement of the
     Receiving Party's obligations hereunder or the unauthorized use or release
     of any such Proprietary Information. The Receiving Party will notify the
     Disclosing Party in writing promptly upon the occurrence of any such
     unauthorized release or other breach of which it becomes aware.


Page 3 of 63

<PAGE>

                       MANUFACTURING AND SUPPLY AGREEMENT
                                PRODUCT SCHEDULE

PRODUCT SCHEDULE TO MANUFACTURING AND SUPPLY AGREEMENT (the "Supply Agreement")
DATED JANUARY 26, 2004 AND ORIGINALLY EXECUTED BY DSM PHARMACEUTICALS
("Manufacturer") AND AAIPHARMA LLC ("AAI")

This Product Schedule, effective as of January 26, 2004, supplements the Supply
Agreement by, among other things, identifying a particular Product, the purchase
and sale of which shall be governed by the terms of the Supply Agreement as well
as this Schedule.

1.   PRODUCT: Darvocet-N 100 in the following dosage forms.

2.   PRODUCT DOSAGE FORM(S) AND STAGES OF COMPLETION (E.G. BULK OR FINISHED
     PACKAGE FORM): finished packaged form - 500-count and 100-count tablets in
     bottles.

3.   PRODUCT SPECIFICATIONS: To be provided by AAI.

4.   ACTIVE PHARMACEUTICAL INGREDIENT: propoxyphene napsylate and acetaminophen.

5.   PURCHASE PRICE FOR PRODUCT AND CERTAIN RELATED SERVICES: See Attachment 1
     to this Schedule, Pricing shall remain firm for the reminder of the
     calendar year following the Qualification Date and may be increased only
     upon written agreement between the parties or as provided by Article 8 of
     the Supply Agreement.

6.   OTHER ARRANGEMENTS, IF ANY:

     (a)  The parties agree to negotiate in good faith toward the execution of
          Product Schedules for additional propoxyphene dosage forms and
          strengths requested by AAI. DSM agrees to provide AAI all other dosage
          forms and strengths of propoxyphene at a profit margin no greater than
          the margin from the Darvocet-N 100 pricing set forth in this Product
          Schedule.

     (b)  AAI shall purchase at least [**] percent ([**]%) of its requirements
          for the Product from DSM during the term of this Product Schedule. The
          parties acknowledge that market dynamics, including additional third
          party entrants and potential line extensions by AAI, will affect the
          quantity necessary to satisfy AAI's commercial requirements.

     (c)  From and after the Effective Date of this Product Schedule and for a
          period of two (2) years following the expiration, or termination of
          this Product Schedule for any reason other than material breach by
          AAI, hereof (and the Supply Agreement, to the extent related hereto),
          DSM shall not manufacture, process, formulate, package, label, test or
          sell, on behalf of itself or any other entity, any pain relief product
          containing a formulation of propoxephene.


                     DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 1

<PAGE>

     (d)  In the event that AAI forecasts zero (0) quantities of Darvocet-N 100
          for a period of [**] consecutive months, then this Product Schedule
          shall be deemed to be terminated.

7.   SPECIAL SHIPPING INSTRUCTIONS: Davocet N-100 is a Schedule IV Controlled
     Substance and thus must be handled per the applicable laws and regulations.
     The carrier shall be subject to the mutual agreement of the Parties.

This Schedule is subject to and incorporates all terms and conditions of the
Supply Agreement, and, except as modified herein, all terms and conditions of
the Supply Agreement shall remain in full force and effect.

Each party represents that neither this Schedule nor any of its obligations
hereunder or under the Supply Agreement incorporated herein by reference will
conflict with, or result in a breach of, any arrangements or agreement between
such party and any third party.

IN WITNESS WHEREOF, each of the undersigned parties hereby accepts and agrees to
the terms and conditions of this Schedule, including their respective
obligations set forth in the Supply Agreement and incorporated herein by
reference.

DSM PHARMACEUTICALS, INC.               AAIPHARMA LLC


By: /s/ Terence S. Novak                By: /s/ David M. Hurley
    ---------------------------------       ------------------------------------
    Terence S. Novak                        David M. Hurley, Chief Operating
    Sr. V.P. Commercial Operations          Officer of aaiPharma Inc.

Date: 1/26/04                           Date: January 30, 2004


                     DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 2
<PAGE>
                                  ATTACHMENT 1

I. DEVELOPMENT SCOPE:

Manufacturer will perform the following transfer activities for Darvocet-N 100:

<TABLE>
<CAPTION>
Description of Service                                                     Price
----------------------                                                     -----
<S>                                                                        <C>
PHASE I - DARVOCET-N 100
   Cleaning Residue Detection Method Transfer                              $[**]
   Create Items Numbers and Analytical Standards                           $[**]
   Receive and Release Raw Materials                                       $[**]
   Provide Technical Transfer Report - Lilly API                           $[**]
   Provide Technical Transfer Report - Mallinckrodt API                    $[**]
   Provide Submission ready Documentation (copies of CoA, Batch Records)   $[**]
   Raw Materials                                                           $[**]
   Hartnett Printer Validation/Installation                                $[**]
   Development Work / Fette Press                                          $[**]
   Manufacturing Process Qualification                                     $[**]
   Packaging Process Qualification - 100 & 500 Count                       $[**]
   Cleaning Process Qualification                                          $[**]
   Validation Master Plan and Summary Report                               $[**]
      SUB-TOTAL $[**]
</TABLE>

Experimental, Stability and Validation Batches

<TABLE>
<CAPTION>
PRODUCT                                          QTY   PRICE/BATCH   EXTENDED PRICE
-------                                          ---   -----------   --------------
<S>                                              <C>   <C>           <C>
PHASE I
DARVOCET-N 100 - LILLY API
Experimental Batch                                1       $[**]           $[**]
   Submission Batch                               1       $[**]           $[**]
Validation Batch (500 & 100 Count) - Lilly API    3       $[**]           $[**]
Validation Batch (500 & 100 Count) -
   Mallincrodt API                                1       $[**]           $[**]
   Avicel Trial                                   1       $[**]           $[**]
   Placebo Batch                                  1       $[**]           $[**]
   Scale - Up Batch                               1       $[**]           $[**]
   Scale - Up Batch                               1       $[**]           $[**]
      TOTAL                                                               $[**]
</TABLE>

ASSUMPTIONS

1.   Batch prices include raw materials and packaging materials.

2.   Submission batch prices include packaging 100 count and 500 count bottles.


                     DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 3

<PAGE>

3.   Analytical testing required to execute this project will be performed by
     AAI, with the exception of residual cleaning analysis and component release
     testing.

4.   A validated method for residual detection will be transferred to
     Manufacturer from AAI.

II. COMMERCIAL PRICING:

<TABLE>
<CAPTION>
Product            Anticipated Annual Volume Units   Commercial Price/Unit
-------            -------------------------------   ---------------------
<S>                <C>                               <C>
Darvocet-N 100
100 Count Bottle                 [**]                        $[**]
Darvocet-N 100
500 Count Bottle                 [**]                        $[**]
</TABLE>

ASSUMPTIONS

1.   Pricing review principles are more fully described in the Supply Agreement.

2.   Propoxyphene Napsylate will be available to Manufacturer at a cost of
     $[**]/Kg

3.   Darvocet-N 100 - Bottle of 100 Package Configuration

     a.   200cc round bottle

     b.   38mm C/R cap with induction seal

     c.   16 gram Rayon coil

     d.   One label per bottle

     e.   One topsert applied by glue to the top of each bottle

     f.   Six bottles per bundle

     g.   Forty-eight bottles per shipper

     h.   Unprinted shipper with shipping label

4.   Darvocet-N 100 - bottle of 500 Package Configuration

     a.   625cc round bottle

     b.   53mm C/T cap with induction seal

     c.   28gm Rayon coil

     d.   One label per bottle

     e.   One topsert applied by glue to top of each cap

     f.   Six bottles per bundle

     g.   Twelve bottles per shipper

     h.   Unprinted shipper with shipping label

III. GENERAL PROJECT ASSUMPTIONS

1.   The project's scope involves technology transfer of Darvocet-N 100
     manufacture and is therefore developmental in nature. As such, issues and
     unexpected outcomes are anticipated for which ongoing technical support by
     Manufacturer may be required. The project will be executed by Manufacturer
     on a best efforts basis.

2.   Manufacturer Regulatory Affairs will provide, at a minimum, in-house
     regulatory support and raw data necessary to support the regulatory
     submission. Additional Regulatory consulting will be billed at a rate of
     $[**] per hour as requested.


                     DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 4

<PAGE>

3.   The cost of Manufacturer vendor audits for client specified components, if
     required, are incremental to this proposal. AAI, at its discretion, may
     hire Manufacturer to perform such audits or perform the audits itself.

4.   All manufacturing will take place at the Manufacturer's facility in
     Greenville, North Carolina.

5.   All documentation and reports will be provided in standard Manufacturer
     format(s). Any preparation of AAI-specific report formats or any
     reformatting of previously prepared reports will be provided at additional
     costs.

6.   For non-US destinations: All fees are quoted and payable in US dollars. Any
     shipping or other expenses due and payable after delivery FOB to a common
     carrier by Manufacturer will be the responsibility of AAI. Examples of such
     amounts include, but are not limited to: export fees, customs, tariffs,
     excise fees, brokerage charges, port fees, importation charges,
     documentation certification and/or notarization, etc.

IV. CAPITAL ESTIMATE:

DSM will purchase the items listed below. AAI will reimburse DSM for the cost of
the items purchased and all out-of-pocket expenses associated with the purchase
and installation of such items.

<TABLE>
<CAPTION>
Description                             Cost
-----------                            -----
<S>                                    <C>
Compressing Tooling (Darvocet-N 100)   $[**]
Printer Tooling (Darvocet-N 100)       $[**]
Compressing Tooling (PO 4537080)       $[**]
Change Parts Quote (PO 4542225)        $[**]
</TABLE>


                     DARVOCET-N 100 PRODUCT SCHEDULE: PAGE 5