EXHIBIT 10.1


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

                        CONFIDENTIAL TREATMENT REQUESTED

   Confidential Portions of this Agreement Which Have Been Redacted Are Marked
           with Brackets ([***]). The Omitted Material Has Been Filed
             Separately With the Securities and Exchange Commission.


                            ASSET PURCHASE AGREEMENT


                                  (FURADANTIN)


                                 by and between


                           DURA PHARMACEUTICALS, INC.


                                       and


                    FIRST HORIZON PHARMACEUTICAL CORPORATION


                          dated as of December 21, 2001



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

<PAGE>


                                Table of Contents


Article I. Definitions.........................................................1
         Section 1.01      Defined Terms.......................................1
         Section 1.02      Construction of Certain Terms and Phrases...........8

Article II. Purchase and Sale of Assets........................................8
         Section 2.01      Purchase and Sale of Assets.........................8

Article III. Assumption of Assumed Liabilities.................................9
         Section 3.01      Assumption of Assumed Liabilities...................9
         Section 3.02      Excluded Liabilities................................9

Article IV. Purchase Price and Payment.........................................9
         Section 4.01      Purchase Price......................................9
         Section 4.02      Purchase of Product Inventory.......................9
         Section 4.03      Allocation of Purchase Price.......................10
         Section 4.04      Payment of Sales, Use and Other Taxes..............10
         Section 4.05      Purchase Price Adjustment..........................11

Article V. Closing............................................................12
         Section 5.01      Time and Place.....................................12
         Section 5.02      Deliveries at Closing..............................12

Article VI. Representations and Warranties of Seller..........................13
         Section 6.01      Organization, Etc..................................13
         Section 6.02      Authority of Seller................................13
         Section 6.03      Consents and Approvals.............................14
         Section 6.04      Non-Contravention..................................14
         Section 6.05      Assumed Contracts..................................14
         Section 6.06      Intellectual Property Rights.......................15
         Section 6.07      Litigation.........................................15
         Section 6.08      Compliance with Law................................16
         Section 6.09      Regulatory Matters.................................16
         Section 6.10      Brokers............................................16
         Section 6.11      Title..............................................16
         Section 6.12      Inventory..........................................16
         Section 6.13      Material Facts.....................................17
         Section 6.14      Insurance..........................................17
         Section 6.15      No Other Warranties................................17
         Section 6.16      Financial Statements...............................17
         Section 6.17      Ordinary Course of Business and No Adverse Effect..17
         Section 6.18      Confidential Information...........................18
         Section 6.19      Managed Care Agreements............................18
         Section 6.20      Customer Lists.....................................18
<PAGE>

Article VII. Representations and Warranties of Buyer..........................18
         Section 7.01      Corporate Organization.............................18
         Section 7.02      Authority of Buyer.................................18
         Section 7.03      Consents and Approvals.............................19
         Section 7.04      Non-Contravention by Buyer.........................19
         Section 7.05      Litigation.........................................19
         Section 7.06      Financing..........................................20
         Section 7.07      Brokers............................................20

Article VIII. Covenants of the Parties........................................20
         Section 8.01      Cooperation........................................20
         Section 8.02      Access.............................................20
         Section 8.03      Public Announcements...............................21
         Section 8.04      Non-Solicitation...................................21
         Section 8.05      Corporate Names....................................22
         Section 8.06      Assistance in Collecting Certain Amounts...........22
         Section 8.07      Handling of Product Inventory......................22
         Section 8.08      Differentiation of Product.........................23
         Section 8.09      Regulatory Matters.................................23
         Section 8.10      Product Returns, Chargebacks and Rebates...........24
         Section 8.11      Compliance Audits..................................25
         Section 8.12      Labeling Requirements..............................25
         Section 8.13      Acknowledgement by Buyer of Restrictive Covenant...25
         Section 8.14      Transitional Regulatory Services...................25
         Section 8.15      Non-Competition....................................26
         Section 8.16      Audit Financial Information........................26
         Section 8.17      Government Multi-Product Contracts.................27
         Section 8.18      Further Assurances.................................27
         Section 8.19      Notice to Customers................................28

Article IX. Conditions to the Obligations of Seller...........................28
         Section 9.01      Representations, Warranties and Covenants..........28
         Section 9.02      No Actions or Proceedings..........................28
         Section 9.03      Consents...........................................28
         Section 9.04      Closing Deliveries.................................28
         Section 9.05      Other Closing Deliveries...........................28

Article X. Conditions to the Obligations of Buyer.............................29
         Section 10.01     Representations, Warranties and Covenants..........29
         Section 10.02     No Actions or Proceedings..........................29
         Section 10.03     Consents...........................................29
         Section 10.04     Closing Deliveries.................................29
         Section 10.05     Other Closing Deliveries...........................29

Article XI. Indemnification...................................................29
         Section 11.01     Survival of Representations, Warranties, Etc.......29
         Section 11.02     Indemnification....................................30

<PAGE>

         Section 11.03     Limitations........................................32
         Section 11.04     Limitation of Liability............................33

Article XII. Miscellaneous....................................................34
         Section 12.01     Confidentiality....................................34
         Section 12.02     Notices............................................34
         Section 12.03     Entire Agreement...................................36
         Section 12.04     Waiver.............................................36
         Section 12.05     Amendment..........................................36
         Section 12.06     Third Party Beneficiaries..........................36
         Section 12.07     Assignment; Binding Effect.........................36
         Section 12.08     Headings...........................................36
         Section 12.09     Severability.......................................36
         Section 12.10     Governing Law......................................37
         Section 12.11     Expenses...........................................37
         Section 12.12     Counterparts.......................................37
         Section 12.13     Schedules, Exhibits and Other Agreements...........37


         Exhibit A.........Intellectual Property

         Exhibit B.........Trademark Assignment

         Exhibit C.........Assignment and Assumption Agreement

         Exhibit D.........Bill of Sale

         Exhibit E.........Supply Agreement

         Exhibit F.........Transition Services and Regulatory Plan





<PAGE>
                            ASSET PURCHASE AGREEMENT

     This Asset Purchase  Agreement (this  "Agreement") is made and entered into
as  of  December  21,  2001,  by  and  between   First  Horizon   Pharmaceutical
Corporation, a Delaware corporation ("Buyer"), and Dura Pharmaceuticals, Inc., a
Delaware corporation ("Seller").

                                    RECITALS

     WHEREAS,  subject to the terms and  conditions  of this  Agreement,  Seller
desires  to sell to Buyer,  and Buyer  desires  to  purchase  from  Seller,  the
Purchased Assets (as defined below) and Product Inventory (as defined below).

                                    AGREEMENT

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
and promises  contained herein,  and for other good and valuable  consideration,
the receipt and sufficiency of which hereby are acknowledged,  the Parties agree
as follows:

                             Article I. Definitions

     Section 1.01 Defined Terms.

     As used in this  Agreement,  the following  defined terms have the meanings
described below:

     "Accounts  Receivable"  means all trade  accounts and notes  receivable and
other  miscellaneous  receivables of the Business,  including those that are not
evidenced by instruments or invoices existing as of the Closing.

     "Action or Proceeding"  means any action,  suit,  proceeding,  arbitration,
Order,  inquiry,  hearing,  assessment  with  respect to fines or  penalties  or
litigation (whether civil, criminal, administrative,  investigative or informal)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental or Regulatory Authority.

     "Actual Q1 Sales" has the meaning set forth in Section 4.05(a)(ii).

     "Actual Q1 Units Sold" has the meaning set forth in Section 4.05(a)(i).

     "Adverse  Effect" means an effect or condition that  individually or in the
aggregate or together with all other events,  or changes,  or occurrences is, or
reasonably  could be expected  to be, (i)  materially  adverse to the  Purchased
Assets, the Product Inventory, the business, results of operations, or financial
condition  of the  Business,  or the Product or (ii)  materially  adverse to the
ability  of  a  Party  to  consummate  the  transactions  contemplated  by  this
Agreement.

     "Affiliate"  means,  with  respect to any Person,  any other  Person  which
controls,  is  controlled  by or is under  common  control  with such  person or

<PAGE>

entity. A Person shall be regarded as in control of another Person if it owns or
controls, directly or indirectly, (i) in the case of corporate entities at least
fifty percent (50%) (or the maximum ownership  interest permitted by law) of the
equity  securities  in the subject  entity  entitled to vote in the  election of
directors and, (ii) in the case of an entity that is not a corporation, at least
fifty percent (50%) (or the maximum ownership  interest permitted by law) of the
equity  securities  or other  ownership  interests  with the power to direct the
management  and  policies  of such  subject  entity  or  entitled  to elect  the
corresponding management authority, provided, however, that the term "Affiliate"
shall  not  include  subsidiaries  or  other  entities  in  which a Party or its
Affiliates  owns a majority of the ordinary  voting  power  necessary to elect a
majority of the board of directors or other governing  board,  but is restricted
from electing  such  majority by contract or otherwise,  until such time as such
restrictions are no longer in effect.

     "Agreement" has the meaning set forth in the Preamble hereto.

     "Assets and  Properties"  of any Person means all assets and  properties of
any kind, nature,  character and description  (whether real,  personal or mixed,
whether tangible or intangible,  whether absolute, accrued, contingent, fixed or
otherwise  and  wherever  situated),  including  the goodwill  related  thereto,
operated,  owned or leased by such Person,  including  cash,  cash  equivalents,
accounts and notes receivable,  chattel paper, documents,  instruments,  general
intangibles,  regulatory approvals, equipment, inventory, goods and intellectual
property.

     "Assignment and Assumption  Agreement" has the meaning set forth in Section
5.02(a)(ii).

     "Assumed  Contract"  means (i) any Contract listed on Schedule 6.05 or (ii)
any  Contract  in  effect  as of  the  Closing  to  which  Seller  or any of its
Affiliates is a party with a remaining payment obligation by Seller of less than
$10,000 that relates exclusively to the Business.

     "Assumed Liabilities" means:

     (i) all  accounts  payable  incurred by Buyer or an Affiliate of Buyer with
respect to the Business subsequent to the Closing;

     (ii) all Liabilities and  obligations  that Buyer has expressly  assumed or
agreed to assume under this Agreement;

     (iii) all Liabilities and obligations  arising  subsequent to closing under
any Assumed Contract;

     (iv)  except  as  otherwise   provided   herein,   all  state  and  federal
Medicaid/Medicare  rebates  related to Product and Product  Inventory sold after
the Closing;

     (v) except as otherwise provided herein, all credits,  chargeback  rebates,
utilization  based rebates,  reimbursements  and similar payments to wholesalers
and other distributors,  buying groups,  insurers and other institutions related
to Product and Product Inventory that is sold after Closing;

                                       2
<PAGE>


     (vi) all Liabilities and obligations related to product liability claims or
threatened  claims or injuries  caused by Product and Product  Inventory (but in
the case of Product  Inventory,  only to the  extent  that the  subject  product
liability  claims  or  threatened  claims  or  injuries  are due to the  acts or
omissions  of  Buyer),  in each case  sold by or on  behalf  of Buyer  after the
Closing;

     (vii) any Liability for Taxes in relation to periods following the Closing;
and

     (viii) all other  Liabilities and obligations  arising out of the operation
or conduct of the Business after the Closing.

     "Auditor" has the meaning set forth in Section 4.02(b).

     "Books and  Records"  means  copies of all files,  documents,  instruments,
papers,  books and  records  owned by Seller  or an  Affiliate  of Seller to the
extent  relating  exclusively  to the  Business,  including  any pricing  lists,
customer lists,  vendor lists,  financial data,  research and development files,
marketing  materials  (if  any),  regulatory  files,  clinical  studies  and all
documentation  relating to the Intellectual Property, but excluding (i) any such
items to the extent that any applicable Law prohibits their  transfer,  and (ii)
any such items which the Seller is  contractually  prevented from  transferring,
provided  that  Seller  will  provide  Buyer  with  access  to  these  items  in
sub-clauses (i) and (ii) (collectively  referred to herein as  "Non-transferable
Books and Records") to the fullest  extent  permitted by applicable  Law or such
contract.  From and after the Closing if Seller  discovers in its possession (x)
any  files,  documents,  instruments,  papers,  books  and  records  that  would
otherwise constitute "Books and Records" and have not theretofore been delivered
to Buyer in  accordance  with the  terms  hereof  ("Newly  Discovered  Books and
Records") or (y) any  Non-transferable  Books and  Records,  then in the case of
clause (x) above,  Seller shall promptly deliver such Newly Discovered Books and
Records to Buyer,  and in the case of clause (y) above,  Seller  shall  promptly
advise Buyer that such Non-transferable  Books and Records cannot be transferred
to Buyer and Seller will provide Buyer access to such Non-transferable Books and
Records  to the  fullest  extent  permitted  by  applicable  Law  or  applicable
contract, as the case may be.

     "Business" means the activities of  manufacturing,  marketing,  selling and
distributing the Product in the Territory.

     "Business Day" means a day other than Saturday,  Sunday or any day on which
banks located in New York City are authorized or obligated to close.

     "Buyer" has the meaning set forth in the Preamble to this Agreement.

     "Buyer Closing Documents" has the meaning set forth in Section 7.02.

     "Buyer  Disclosure  Schedule"  has the  meaning  set forth in  Article  VII
hereof.

     "Buyer Governmental Consent" has the meaning set forth in Section 7.03(a).

     "Buyer Governmental  Multi-Product  Contracts" has the meaning set forth in
Section 8.17.


                                       3
<PAGE>

                                      [***] - CONFIDENTIAL  TREATMENT  REQUESTED

     "Buyer Indemnified Parties" has the meaning set forth in Section 11.02(a).

     "Buyer   Labeling"  means  the  printed  labels,   labeling  and  packaging
materials,  including printed carton, container labels and package inserts, used
by Buyer and bearing Buyer's name for the Product.

     "Buyer Third Party Consent" has the meaning set forth in Section 7.03(b).

     "Closing" has the meaning set forth in Section 5.01.

     "Closing Date" means the date that the Closing  actually occurs as provided
in Section 5.01.

     "Closing Payment" has the meaning set forth in Section 4.01(a).

     "Confidential Information" has the meaning set forth in Section 13.01.

     "Contract"  means  any and all  commitments,  contracts,  Purchase  Orders,
leases, or other agreements, whether written or oral.

     "Corporate Names" has the meaning set forth in Section 8.05(a).

     "Damages" has the meaning set forth in Section 11.02(a).

     "Disclosing Party" has the meaning set forth in Section 13.01(a).

     "Encumbrance" means any mortgage,  pledge,  assessment,  security interest,
deed of trust,  lease, lien, adverse claim, levy, charge or other encumbrance of
any  kind,  or any  conditional  sale or  title  retention  agreement  or  other
agreement to give any of the foregoing in the future.

     "Excluded  Assets"  means all  Assets  and  Properties  of  Seller  and its
Affiliates except the Purchased Assets and the Product Inventory.

     "Excluded  Liabilities" means all Liabilities and obligations of Seller and
its Affiliates except the Assumed Liabilities.

     "Expiration Date" means the date [***]after the Closing Date.

     "FSS" has the meaning set forth in Section 8.10 (c).

     "Garraton  Agreement"  means the Distributor  Agreement dated May 28, 1981,
between  Norwich-Eaton  Pharmaceuticals  and  Luis  Garraton,  Inc.,  which  was
subsequently assigned to Seller.

     "Goodwill" means goodwill  associated with the Business other than goodwill
associated with any trademark, trade name, service mark, service name, slogan or
logo or other  intellectual  property or assets owned by Seller and not included
in the Purchased Assets or Product Inventory.

                                       4
<PAGE>

     "Government  Multi-Product  Contracts"  means all Contracts by which Seller
dispenses  Product through a Governmental  or Regulatory  Authority (such as the
Medicaid  program or a state  equivalent),  together  with other  pharmaceutical
products of Seller.

     "Governmental  or  Regulatory   Authority"   means  any  court,   tribunal,
arbitrator,  authority, agency, commission, official or other instrumentality of
the United States or other country, or any supra-national  organization,  state,
county, city or other political subdivision thereof.

     "Indemnification  Claim  Notice"  has the  meaning  set  forth  in  Section
11.02(c).

     "Indemnified Party" has the meaning set forth in Section 11.02(c).

     "Indemnifying Party" has the meaning set forth in Section 11.02(c).

     "Indemnitee" and  "Indemnitees"  have the respective  meanings set forth in
Section 11.02(c).

     "Intellectual  Property"  means  intellectual  property  rights owned by or
licensed  to  Seller  and its  Affiliates  to the  extent  used  exclusively  in
connection with the Business  including:  (i) Know-How;  (ii) copyrights;  (iii)
trade dress and logos and (ii) the Trademark.

     "Inventory Payment" has the meaning set forth in Section 4.02(a).

     "Inventory  Payment  Adjustment"  has the  meaning  set  forth  in  Section
4.02(b).

     "Know-How"  means all  information and know-how owned or licensed by Seller
and its  Affiliates  to the  extent  used  exclusively  in  connection  with the
Business,  including any technical information,  formulae,  processes,  clinical
studies, trade secrets, confidential information, documents, materials, customer
lists, technology, formulations, Product specifications,  testing data, reports,
criteria, procedures and analytical methods, in each case in tangible form.

     "Knowledge"  with respect to any Party,  means the actual  knowledge of the
senior management of such Party and in the case of Seller, also means the actual
knowledge of management involved with the Product.

     "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.

     "Liability"  means any  liability  (whether  known or unknown,  asserted or
unasserted,   absolute  or  contingent,  accrued  or  unaccrued,  liquidated  or
unliquidated, and due or to become due), including any liability for Taxes.

     "New Drug  Application"  or "NDA"  mean the  application  (U.S.  NDA Number
9-175) for the Product  prepared  pursuant to  applicable  FDA  Regulations  for
filing with the FDA for  authorization  to market the Product  within the United


                                       5
<PAGE>

States,  including all  additions,  supplements,  extensions  and  modifications
thereto and all legal rights and  privileges  belonging or accruing to the owner
or holder of such application.

     "Non-disclosing Party" has the meaning set forth in Section 13.01(a).

     "Order" means any writ,  judgment,  decree,  injunction or similar order of
any Governmental or Regulatory  Authority (in each such case whether preliminary
or final).

     "Ordinary Course of Business" means such action that is consistent with the
past practices of the Business.

     "P&G" means Procter & Gamble Pharmaceuticals, Inc.

     "P&G Asset  Purchase  Agreement  Consent"  means a consent  executed by P&G
pursuant to which P&G consents to Seller's  assignment of all of Seller's rights
and obligations  under Sections 5.3, 5.10, 8.4 and Articles 9 and 10 thereof and
such other provisions thereof as Buyer shall specifically request.

     "P&G Consents" means the P&G Asset Purchase  Agreement  Consent and the P&G
Manufacturing Agreement Consent.

     "P&G  Manufacturing  Agreement  Consent"  means a consent  executed  by P&G
pursuant to which P&G consents to Seller's  assignment of all of Seller's rights
and obligations under the P&G Manufacturing Agreement to Buyer.

     "P&G  Manufacturing  Agreement" means that certain  Contract  Manufacturing
Agreement between P&G and Seller dated May 7, 1996.

     "P&G Asset Purchase  Agreement"  means that certain  Agreement for Purchase
and Sale of Furadantin Assets between P&G and Seller dated May 7, 1996.

     "P&G Agreements"  means the P&G  Manufacturing  Agreement and the P&G Asset
Purchase Agreement.

     "Parties" means Buyer and Seller.

     "Party" means each of Buyer and Seller.

     "Permitted  Encumbrance" means (i) any Encumbrance for Taxes not yet due or
delinquent  or for those  Taxes  being  contested  in good faith by  appropriate
proceedings for which adequate reserves have been established and (ii) any minor
imperfection  of  title  or  similar  Encumbrance  that  individually  or in the
aggregate would not have an Adverse Effect.

     "Person"  means  any  natural  person,  corporation,  general  partnership,
limited partnership, limited liability company,  proprietorship,  other business
organization, trust, union, association or Governmental or Regulatory Authority.


                                       6
<PAGE>


                                      [***] - CONFIDENTIAL  TREATMENT  REQUESTED

     "Product" means nitrofurantoin  suspension  pharmaceutical  products in the
formulation sold by or on behalf of Seller or its Affiliates under the trademark
FURADANTIN(R) prior to the Closing.

     "Product Inventory" means all inventory of finished Product owned as of the
Closing  by  Seller or any  Affiliate  thereof  whether  held at a  location  or
facility of Seller or any  Affiliate (or any other Person on behalf of Seller or
any  Affiliate)  or in transit to or from Seller or any  Affiliate (or any other
such other Person); provided that the expiration date for such Product Inventory
is at least [***] after the Closing Date.

     "Purchased  Assets" means,  subject to Section 2.01 and except as otherwise
provided on the Seller Disclosure Schedule: (i) the Intellectual Property;  (ii)
the  Assumed  Contracts;  (iii)  the  Regulatory  Approvals;  (iv) the Books and
Records;  (v) the  Goodwill;  and (vi) all  other  assets  of the  Seller or its
Affiliates  which relate  exclusively  to the  Business  other than the Garraton
Agreement, the P&G Agreements, and Government Multi-Product Contracts.

     "Purchase  Orders" means all purchase orders for Products as of the Closing
Date which are unfulfilled.

     "Product Sales Reports"  means the internally  generated  reports of Seller
attached hereto as Schedule 1.01(a).

     "Product  Sales  Reports  Compilation  Methodology"  means  the  internally
generated  schedule  of  Seller  entitled  "Product  Sales  Reports  Compilation
Methodology" dated December 19, 2001 and attached hereto as Schedule 1.01(b).

     "Q1" has the meaning set forth in Section 4.05(a)(i).

     "Q1 Units Threshold" has the meaning set forth in Section 4.05(a)(i).

     "Regulatory  Approvals" means, as they relate exclusively to the Product in
the Territory,  and to the extent owned or licensed by Seller or its Affiliates,
all applications, permits, licenses, approvals, registrations and authorizations
relating to the Product  issued by any  Governmental  or  Regulatory  Authority,
including the NDA.

     "Seller" has the meaning set forth in the Preamble to this Agreement.

     "Seller Closing Documents" has the meaning set forth in Section 6.02.

     "Seller  Disclosure  Schedule" has the meaning set forth in the preamble to
Article VI of this Agreement.

     "Seller Governmental Consent" has the meaning set forth in Section 6.03(a).

     "Seller Third Party Consent" has the meaning set forth in Section 6.03(b).

     "Supply Agreement" has the meaning set forth in Section 5.02(a)(vi).

                                       7
<PAGE>

     "Tax" means all of the following tax in connection  with the  operations of
the  Business:  (i) any net income,  alternative  or add-on  minimum tax,  gross
income, gross receipts, sales, use, ad valorem,  transfer,  franchise,  profits,
license, excise, severance, stamp, occupation, premium, property,  environmental
or windfall profit tax,  custom,  duty or other tax,  governmental  fee or other
like assessment imposed by an governmental,  regulatory or administrative entity
or agency  responsible for the imposition of any such tax (domestic or foreign);
(ii) any Liability  for the payment of any amounts of the type  described in (i)
as a result of being a member of any affiliated, consolidated, combined, unitary
or other group for any Taxable  period;  and (iii) any Liability for the payment
of any amounts of the type  described  in (i) or (ii) as a result of any express
or implied obligation to indemnify any other person.

     "Territory" means the United States and Puerto Rico.

     "Third Party Claim" has the meaning set forth in Section 11.02(d).

     "Trademark" means the United States registered trademark FURADANTIN and all
common law rights in the trademark  FURADANTIN in the Territory and all goodwill
associated therewith.

     "Transition Services and Regulatory Plan" means that certain transition and
regulatory plan in substantially the form of Exhibit F hereto.

     Section 1.02 Construction of Certain Terms and Phrases.

     Unless the context of this Agreement otherwise  requires:  (a) words of any
gender include each other gender;  (b) words using the singular or plural number
also  include  the  plural  or  singular  number,  respectively;  (c) the  terms
"hereof,"  "herein,"  "hereby"  and  derivative  or similar  words refer to this
entire Agreement;  (d) the terms "Article,"  "Section" or "Exhibit" refer to the
specified Article,  Section or Exhibit of this Agreement; (e) the term "or" has,
except where  otherwise  indicated,  the inclusive  meaning  represented  by the
phrase,  "and/or";  and  (f)  the  term  "including"  means  "including  without
limitation."  Whenever this  Agreement  refers to a number of days,  such number
shall refer to calendar days unless Business Days are specified.  All accounting
terms used but not otherwise  defined herein shall have the meanings ascribed to
such terms under U.S. Generally  Accepted  Accounting  Principles,  consistently
applied.

                    Article II. Purchase and Sale of Assets

     Section 2.01 Purchase and Sale of Assets.

     (a) Subject to the terms and conditions of this Agreement,  at the Closing,
Seller shall, or shall cause its relevant Affiliates to, sell, transfer, convey,
assign and deliver to Buyer,  and Buyer shall purchase,  acquire and accept from
Seller and such Affiliates of Seller,  all of Seller's and each such Affiliate's
right, title and interest,  as of the Closing, in and to the Purchased Assets in
the  Territory  free  and  clear  of  any  Encumbrances  (other  than  Permitted
Encumbrances).

     (b)  Notwithstanding  anything contained in this Agreement to the contrary,
(i) from and after the Closing,  Seller and its  Affiliates  shall retain all of


                                       8
<PAGE>

their right,  title and interest in and to the Excluded Assets,  and (ii) Seller
may retain the  originals  of all Books and Records and an archival  copy of all
Assumed Contracts and other documents or materials conveyed hereunder to be held
by Seller subject to Section 13.01 hereof.

     (c) Buyer  acknowledges  and agrees that it is not  purchasing any right to
manufacture,  use, market, sell or distribute,  nor to grant to any other Person
any right to manufacture,  use, market,  sell or distribute,  any of the Product
outside of the Territory.

                Article III. Assumption of Assumed Liabilities.

     Section 3.01 Assumption of Assumed Liabilities.

     Subject to the terms and  conditions of this  Agreement,  as of the Closing
Date, Buyer agrees to assume, satisfy,  perform, pay, discharge and otherwise be
responsible for the Assumed Liabilities. Except for the Assumed Liabilities, the
Buyer is not assuming nor shall Buyer be responsible for Liability of the Seller
or its  Affiliates,  whether  absolute  or  contingent,  accrued  or  unaccrued,
asserted or unasserted, or otherwise.

     Section 3.02 Excluded Liabilities.

     Seller and its Affiliates  shall retain and remain solely  responsible  for
and to  satisfy,  perform,  pay and  discharge  when due,  any and all  Excluded
Liabilities.

                     Article IV. Purchase Price and Payment

     Section 4.01 Purchase Price.

     As consideration for the Purchased Assets, Buyer shall:

     (a) pay to Seller at the  Closing an  aggregate  of Fifteen  Million  Eight
Hundred Thousand Dollars ($15,800,000) (the "Closing Payment"); and

     (b) assume the Assumed Liabilities.

     The  Closing  Payment  shall  be paid by Buyer  to  Seller  in cash by wire
transfer of immediately  available funds to an account or accounts designated by
Seller prior to the Closing Date.

     Section 4.02 Purchase of Product Inventory

     (a) As soon as  practicable  following  the Closing,  but in no event later
than four (4) Business Days following the Closing, Seller shall deliver to Buyer
at 660  Hembree  Parkway,  Suite  106,  Roswell,  Georgia  30076,  or such other
location or locations as Buyer shall designate in writing, all Product Inventory
on hand purchased hereunder; provided, however, that five (5) batches of Product
Inventory will be delivered to such location within four (4) Business Days after
Seller's completion of standard release procedures with respect to such five (5)
batches of Product  Inventory,  but in no event  later than  January  14,  2002.


                                       9
<PAGE>

Subject to adjustment as provided in Section 4.02(b),  Buyer shall pay to Seller
a price equal to  $80,710.22  (calculated in accordance with the per unit prices
set forth in Section  4.1 of the Supply  Agreement)  for the  Product  Inventory
("Inventory Payment"),  which amount shall be payable within ten (10) days after
receipt of an invoice therefor from Seller.  The Inventory Payment shall be paid
in cash by wire  transfer  of  immediately  available  funds  to an  account  or
accounts  designated  by Seller not less than two (2) Business Days prior to the
date on which such payment is due. Title to and risk of loss with respect to any
Product  Inventory shall pass from Seller to Buyer upon delivery of such Product
Inventory to Buyer's designated facility. Buyer shall notify Seller of any claim
that the Product  Inventory fails to conform to required  specifications  within
five (5) days from delivery of such Product Inventory to Buyer.

     (b) Within  five (5)  Business  Days  after all the  Product  Inventory  is
delivered pursuant to Section 4.02(a),  Buyer shall notify Seller if it believes
that there is a discrepancy  between the amount of Product  Inventory  delivered
and the amount of Product  Inventory set forth in the Product  Inventory invoice
delivered by Seller pursuant to Section  4.02(a).  After  receiving  notice from
Buyer of an alleged  discrepancy,  the Parties  shall use good faith  efforts to
resolve such dispute.  If the Parties are unable to resolve such dispute  within
thirty (30) days, then either Party may request that an independent  third party
experienced  in  pharmaceutical  inventory  matters  ("Auditor") be appointed to
audit the Product  Inventory.  Such Auditor  shall be mutually  agreeable to the
Parties.  The decision of the Auditor shall be final and binding on the Parties,
absent manifest error.  The fees of the Auditor shall be paid one-half by Seller
and one-half by Buyer.  The amount of any  adjustment to the Inventory  Payment,
either as agreed to by the Parties or as  determined  by the  Auditor,  shall be
referred to as the  "Inventory  Payment  Adjustment".  If Buyer does not provide
notice of a discrepancy  within such five (5) Business Day period, the amount of
Product Inventory set forth in the Product Inventory invoice delivered by Seller
pursuant to Section 4.02(a) shall be final and binding on the Parties.

     (c) The Inventory  Payment  Adjustment shall be paid by Buyer or Seller, as
the case may be,  not  later  than  five  (5)  Business  Days  after  the  final
determination  of the amount of Product  Inventory  in  accordance  with Section
4.02(b).

     Section 4.03 Allocation of Purchase Price.

     (a) Buyer and  Seller  agree (i) to  report  the sale and  purchase  of the
Purchased  Assets and Product  Inventory  for Tax  purposes in  accordance  with
allocations  mutually  agreed to in good faith within thirty (30) days following
the Closing and (ii) not to take any position inconsistent with such allocations
on any of their respective tax returns.

     (b) All payments  made  pursuant to Sections  4.02(c),  4.05 and Article XI
shall be deemed adjustments to the Closing Payment and the Inventory Payment, as
the case may be.

     Section 4.04 Payment of Sales,  Use and Other Taxes.  Buyer shall be solely
responsible for all sales, use,  transfer,  value added and other related Taxes,
if any,  arising out of the sale by Seller and its  Affiliates  of the Purchased
Assets and  Product  Inventory  to Buyer  pursuant to this  Agreement,  it being
acknowledged  and  specifically  agreed,  however,  that  Buyer  shall  have  no
responsibility  for, and Seller will be solely  responsible for, any Tax payable
on any income or gain of Seller or its  Affiliates  arising from the sale of the
Purchased Assets or Product Inventory or otherwise arising under this Agreement.
Buyer hereby waives compliance by Seller



                                       10
<PAGE>

                                        [***] - CONFIDENTIAL TREATMENT REQUESTED

with the  provisions of the bulk  transfer laws of any state,  and Seller hereby
agrees to  indemnify,  pursuant  to the terms of  Article  XI  hereof,  and hold
harmless Buyer from any Liability resulting from such noncompliance.

     Section 4.05 Purchase Price Adjustment.

     The Closing Payment shall be subject to adjustment as follows:

     (a) First Quarter Adjustment.

          (i) If, during the quarter ending March 31, 2002 ("Q1"), Buyer has not
raised the price of the Product by more than [***] from the price of the Product
as of Closing Date, and in the event that (i) the units  threshold of [***]ml of
Product (the "Q1 Units  Threshold")  is greater than (ii) the Buyer's  aggregate
sales of units (by ml) in the  Territory  during Q1  ("Actual  Q1 Units  Sold"),
Seller  shall pay to Buyer an amount  equal to [***] per ml for the  portion  of
units, if any, equaling the difference between the Q1 Units Threshold and Actual
Q1 Units Sold; and

          (ii) If,  during Q1, Buyer has raised the price of the Product by more
than  [***]from the price as of the Closing Date,  and in the event that (i) the
sales  threshold  of $[***]  (the "Q1 Sales  Threshold")  is  greater  than (ii)
Buyer's  aggregate gross sales before any deduction for the sale of the Products
in the Territory  sold during Q1 ("Actual Q1 Sales"),  Seller shall pay to Buyer
an amount equal to the portion,  if any, of the difference  between the Q1 Sales
Threshold and Actual Q1 Sales.

The payment made under either Section 4.05(a)(i) or (ii) above, if any, shall be
referred to herein as the "Q1 Payment."

     (b) Reports;  Payments.  In connection  with the  adjustments  set forth in
Section 4.05(a) hereof,  Buyer shall provide a report (the "Quarter  Report") to
Seller no later  than  sixty  (60) days  after the end of Q1  setting  forth the
calculation of Actual Q1 Sales and the amount of the Q1 Payment (if any) due, in
sufficient  detail to permit  Seller to  determine  whether the  calculation  of
Actual Q1 Units Sold or Actual Q1 Sales,  as the case may be, and the Q1 Payment
(if any) due is accurate.  Seller shall notify Buyer in writing  within five (5)
Business Days after  receiving the Quarter  Report of whether Seller agrees with
or disputes  Buyer's  calculation of Actual Q1 Units Sold or Actual Q1 Sales, as
the case may be, and the amount of the Q1  Payment  (if any).  In the event that
Seller agrees with Buyer's calculation of the Q1 Payment,  Seller shall promptly
pay any such Q1 Payment  to Buyer.  In the event that  Seller  disputes  Buyer's
calculation  of the Q1 Payment (if any),  the Parties  shall  attempt to resolve
such dispute in good faith.  The Q1 Payment (if any) to be made pursuant to this
Section 4.05 shall be paid by wire transfer of immediately available funds to an
account or accounts designated by Buyer in writing.


                                       11
<PAGE>


                               Article V. Closing

     Section 5.01 Time and Place.

     The closing of the transactions  contemplated by this Agreement,  including
without  limitation  the  purchase  and  sale of the  Purchased  Assets  and the
assumption  of the  Assumed  Liabilities  (the  "Closing")  shall  take place as
promptly as practicable,  but no later than December 21, 2001, at the offices of
Brobeck,  Phleger & Harrison LLP,  12390 El Camino Real,  San Diego,  California
92130,  unless  another  time or place  shall be agreed to by the  Parties.  The
Closing shall be deemed  completed as of 11:59 a.m. Pacific Standard Time on the
evening of the Closing Date.

     Section 5.02 Deliveries at Closing.

     (a) Closing Deliveries by Seller.

     At the Closing, Seller shall deliver or cause to be delivered to Buyer:

          (i)  the  intellectual  property  assignment  documents  necessary  to
transfer  the  Intellectual  Property  to  Buyer,  substantially  in the form of
Exhibit A hereto, (the "Intellectual Property Assignment");

          (ii) the  trademark  assignment  documents  necessary  to transfer the
Trademark  to  Buyer,  substantially  in the  form of  Exhibit  B  hereto,  (the
"Trademark Assignment");

          (iii) an assignment  and assumption  agreement  assigning to Buyer all
rights  and  obligations  of Seller  and its  Affiliates  in and to the  Assumed
Liabilities, substantially in the form of Exhibit C hereto, (the "Assignment and
Assumption Agreement");

          (iv) copies of all Seller Third Party Consents (if any);

          (v) a bill  of  sale  to  transfer  the  Purchased  Assets  to  Buyer,
substantially in the form of Exhibit D hereto, (the "Bill of Sale");

          (vi) the supply  agreement  between Buyer and Seller  substantially in
the form of Exhibit E hereto (the "Supply Agreement");

          (vii) the certificates and other documents to be delivered pursuant to
Article X hereof; and

          (viii)  such  other  documents  as  may  be  reasonably  necessary  or
appropriate to consummate the transactions contemplated hereby.

     (b) Closing Deliveries by Buyer.

     At the Closing, Buyer shall deliver or cause to be delivered to Seller:

          (i) the Closing Payment in accordance with Section 4.01 hereof;

                                       12
<PAGE>

          (ii) the Assignment and Assumption Agreement;

          (iii)  such  instruments  of  assumption  and  other   instruments  or
documents,  in form and substance reasonable  acceptable to Seller and Buyer, as
may be necessary to effect Buyer's assumption of the Assumed Liabilities;

          (iv) the Supply Agreement;

          (v) copies of all Buyer Third Party Consents (if any);

          (vi) the certificates and other documents to be delivered  pursuant to
Article IX hereof; and

          (vii) such other  documents  as may be  necessary  or  appropriate  to
consummate the transactions contemplated hereby.

              Article VI. Representations and Warranties of Seller

     Except as  specifically  disclosed in the disclosure  schedule  supplied by
Seller  to Buyer  and  dated  as of the  date  hereof  (the  "Seller  Disclosure
Schedule"),   which   Seller   Disclosure   Schedule   shall  be  deemed  to  be
representations  and warranties of Seller as if made herein,  Seller  represents
and warrants to Buyer as of the date hereof, as follows:

     Section 6.01 Organization, Etc.

     Seller  is a  corporation  duly  organized,  validly  existing  and in good
standing under the laws of the State of Delaware and has all requisite power and
authority to own its assets and carry on the Business as currently  conducted by
it. Each  Affiliate of Seller  selling,  transferring,  conveying,  assigning or
delivering any Purchased Assets or Product Inventory is duly organized,  validly
existing and in good standing under the laws of its jurisdiction of organization
and has all  requisite  power and  authority  to own its assets and carry on the
Business as currently conducted by it.

     Section 6.02 Authority of Seller.

     Seller has all  necessary  power and  authority  and has taken all  actions
necessary to enter into this  Agreement and the other  agreements to be executed
and delivered by the Seller at the Closing (the "Seller Closing  Documents") and
to carry out the  transactions  contemplated  hereby and  thereby.  The Board of
Directors or  Executive  Committee of the Board of Directors of Seller has taken
any action required by Law or its organizational  documents to be taken by it to
authorize the execution  and delivery of this  Agreement and the Seller  Closing
Documents by the Seller and the  consummation of the  transactions  contemplated
hereunder and  thereunder.  This Agreement and each Seller Closing  Document has
been duly and validly  executed and  delivered by Seller and,  when executed and
delivered by Buyer,  will  constitute a legal,  valid and binding  obligation of
Seller enforceable against it in accordance with its terms except (a) as limited
by applicable bankruptcy, insolvency, reorganization,  moratorium and other laws
of general application affecting enforcement of creditors rights generally,  and
(b) as limited by laws  relating to the  availability  of specific  performance,
injunctive relief or other equitable remedies.

                                       13
<PAGE>

     Section 6.03 Consents and Approvals.

     (a)  All  consents,   waivers,   approvals,   Orders,   authorizations  of,
declarations or filings with any  Governmental  or Regulatory  Authority (each a
"Seller Governmental Consent") that are required by or with respect to Seller or
its  Affiliates in connection  with the execution and delivery of this Agreement
and the Seller  Closing  Documents  by the Seller,  and its  performance  of its
obligations  hereunder and thereunder  are set forth on Schedule  6.03(a) of the
Seller Disclosure Schedule.  Each Seller Governmental Consent has been obtained,
except to the extent that the failure to obtain such Seller Governmental Consent
would not have an Adverse Effect.

     (b) All consents, waivers, approvals, authorizations of, or notices to, any
third party (other than a Governmental or Regulatory  Authority) (each a "Seller
Third Party  Consent")  that are  required  by or with  respect to Seller or its
Affiliates in connection  with the execution and delivery of this  Agreement and
the  Seller  Closing  Documents  by  the  Seller,  and  its  performance  of its
obligations  hereunder and thereunder  are set forth on Schedule  6.03(b) of the
Seller  Disclosure  Schedule.  Each Seller Third Party Consent (if any) has been
obtained,  except to the extent that the  failure to obtain  such  Seller  Third
Party Consent (if any) would not have an Adverse Effect.

     Section 6.04 Non-Contravention.

     The  execution and delivery by Seller of this  Agreement  does not, and the
performance by it of its obligations  under this Agreement and the  consummation
of the transactions contemplated hereby will not:

     (a)  conflict  with or result in a violation or breach of any of the terms,
conditions  or  provisions  of  the  Certificate  of   Incorporation   or  other
organizational documents of Seller;

     (b)  conflict  with or  result  in a  violation  or  breach  of any term or
provision of any Law applicable to Seller, the Business, the Purchased Assets or
the Product Inventory; or

     (c) conflict with or result in a breach or default (or an event which, with
notice or lapse of time or both, would constitute a breach or default) under, or
result in the  termination or  cancellation  of, or accelerate  the  performance
required by, or result in the creation or imposition  of any security  interest,
lien or any other  Encumbrance  (other  than a Permitted  Encumbrance)  upon any
Assumed Contract,  other than such conflicts,  breaches or defaults as would not
have an Adverse Effect.

     Section 6.05 Assumed Contracts.

     Except for the P&G  Agreements,  the Garraton  Agreement and the Government
Multi-Product  Contracts,  Section 6.05 of the Seller  Disclosure  Schedule sets
forth a complete and correct list of each written  Contract  assignable to Buyer
by its terms to which  Seller or any of its  Affiliates  is a party that relates
exclusively  to the Business and that relates to the purchase or  disposition of
assets,  or the  provision of services by or for the  Business,  with a value in
excess of Ten Thousand Dollars ($10,000.00). Each of the Assumed Contracts is in


                                       14
<PAGE>

effect and  constitutes a legal,  valid and binding  agreement,  enforceable  in
accordance with its terms,  of Seller or an Affiliate of Seller;  and Seller has
performed all of its required material obligations under, and is not in material
violation  or breach of or default  under,  any such  Assumed  Contract.  To the
Knowledge  of Seller,  the other  parties to the  Assumed  Contracts  are not in
material  violation  or breach of or default  under any such  Assumed  Contract.
Seller has made  available to Buyer  complete and correct  copies of all Assumed
Contracts  identified in Section 6.05 of the Seller Disclosure  Schedule.  Other
than the P&G Agreements, the Garraton Agreement and the Government Multi-Product
Contracts,  the Assumed Contracts are all the Contracts necessary to conduct the
Business as it is currently being conducted.  Seller has not given notice to P&G
pursuant to Section 7.2 of the P&G  Manufacturing  Agreement of any intention by
Seller to terminate the P&G Manufacturing Agreement.

     Section 6.06 Intellectual Property Rights.

     Section  6.06 of the  Seller  Disclosure  Schedule  sets  forth  all of the
registrations  (and applications  therefor) of the trademarks which are owned or
controlled by the Seller or any of its Affiliates in the Territory  which relate
exclusively  to  the  Product.  There  are no  royalty,  commission  or  similar
obligations  on the  Seller or its  Affiliates  applicable  to the  Intellectual
Property  included  in the  Purchased  Assets.  The  Seller  has not  agreed  to
indemnify  any person  for or  against  any  infringement  by such  Intellectual
Property  or  products  or methods of  conducting  the  Business.  Seller or its
Affiliates  own all  right,  title and  interest  in and to, or have a  license,
sublicense  or other  permission to use and  transfer,  all of the  Intellectual
Property,  free and clear of all  Encumbrances  except  Permitted  Encumbrances.
Neither  Seller nor any of its  Affiliates  has received any written notice from
any  person,  or has  Knowledge,  (i)  that the  operation  of the  Business  as
currently  conducted  infringes or  misappropriates  the  intellectual  property
rights  (including  trademark rights) of any third party, or (ii) that any third
party has infringed or misappropriated or is infringing or misappropriating  any
of the Intellectual Property, except where such infringement or misappropriation
would not have an Adverse Effect.  All necessary  registration,  maintenance and
renewal fees in connection  with such  Intellectual  Property have been paid and
all necessary  documents and  certificates in connection with such  Intellectual
Property  have  been  filed  with  the  relevant   Governmental   or  Regulatory
Authorities for the purposes of maintaining such Intellectual  Property,  except
where the failure to take any such action would not have an Adverse Effect,  and
as of the Closing  Date,  the  Trademark  is in full force and  effect.  Neither
Seller nor any of its  Affiliates  has Knowledge of any act or failure to act by
any of them or any of their respective directors, officers, employees, attorneys
or agents during the  prosecution or  registration  of, or any other  proceeding
relating to, any of the  Intellectual  Property or of any other fact which could
render invalid or  unenforceable,  or negate the right to issuance of any of the
Intellectual Property.

     Section 6.07 Litigation.

     There are no Actions or Proceedings  currently pending or, to the Knowledge
of Seller,  threatened or reasonably anticipated against, relating to, affecting
or arising in connection with (a) the Purchased Assets, the Product Inventory or
the Business,  except for such Actions or Proceedings  that could not reasonably
be  expected  to  have  an  Adverse  Effect;  (b)  this  Agreement;  or (c)  the
transactions contemplated by this Agreement.  Seller is not subject to any Order
that could  reasonably be expected to materially  impair or delay the ability of
Seller to perform its obligations hereunder.

                                       15
<PAGE>

                                        [***] - CONFIDENTIAL TREATMENT REQUESTED

     Section 6.08 Compliance with Law.

     Since January 1, 2000, Seller and its Affiliates have operated the Business
substantially in compliance with all applicable Laws, except where failure to so
comply  could not  reasonably  be expected to result in an Adverse  Effect,  and
neither  Seller  nor any of its  Affiliates  has  received  any  written  notice
alleging  any  violation  of such Laws,  except for  violations  which could not
reasonably be expected to result in an Adverse Effect.

     Section 6.09 Regulatory Matters.

     (a) All of the  Regulatory  Approvals are in full force and effect and have
been duly and validly issued. Since January 1, 2000, there has been no Action or
Proceeding  by any  Governmental  or  Regulatory  Authority  pending  or, to the
Knowledge of Seller,  threatened seeking the a Product recall, market withdrawal
or  post  sale  warning,  or the  revocation  or  suspension  of any  Regulatory
Approval.  Seller has made available to Buyer complete and correct copies of all
Regulatory Approvals.

     Section 6.10 Brokers.

     Seller has not  retained  any broker in  connection  with the  transactions
contemplated  hereunder.  Buyer has no, and will have no,  obligation to pay any
brokers,  finders,  investment  bankers,  financial  advisors or similar fees in
connection with this Agreement or the transactions contemplated hereby by reason
of any action taken by or on behalf of Seller.

     Section 6.11 Title.

     Seller has good and  marketable  title to the Purchased  Assets and Product
Inventory,   free  and  clear  of  all   Encumbrances   (other  than   Permitted
Encumbrances).  Seller has not received any written notice of any adverse claims
of ownership to the Purchased Assets or Product Inventory,  and to the Knowledge
of Seller,  there exists no set of facts or  circumstances  that would  indicate
that there is any  reasonable  basis to believe that any Person or Persons could
assert a claim of ownership,  right of  possession or use in any way  materially
adverse  to  Buyer's  rights in and to any of the  Purchased  Assets or  Product
Inventory.  Except  for the  P&G  Agreements,  the  Garraton  Agreement  and the
Government  Multi-Product  Contracts, the Purchased Assets and Product Inventory
constitute  all of the assets  necessary  for the  conduct of the  Business,  as
presently  conducted by Seller and its Affiliates and as conducted by Seller and
its Affiliates since January 1, 2001.

     Section 6.12 Inventory.

     All Product  included in Product  Inventory has an expiration date which is
not less than [***]  after the  Closing  Date and is  saleable  in the  Ordinary
Course of Business,  except for normal and customary  amounts of below  standard
quality Product. All of the finished Product included in Product Inventory shall
have been produced or  manufactured in accordance  with the  specifications  for
such  Product  as  set  forth  in  the  applicable   Regulatory   Approvals  and
substantially  in compliance with applicable Law, other than, in either case, as
would have no Adverse Effect.

                                       16
<PAGE>

     Section 6.13 Material Facts.

     To the  Knowledge  of Seller,  neither this  Agreement  nor any schedule or
exhibit hereto nor any written statement or certificate  furnished in connection
herewith or any of the transactions contemplated hereby (including,  the Product
Sales Reports and Product Sales Reports  Compilation  Methodology),  contains an
untrue  statement of fact or omits to state a fact that is necessary in order to
make  the  statements  contained  herein  and  therein,  in  the  light  of  the
circumstances under which they are made, not materially misleading.

     Section 6.14 Insurance.

     There  are no  material  claims  arising  out of or  based  upon any of the
insurance  policies of the Seller or its Affiliates  relating to the Product and
to the Knowledge of the Seller, no basis for any such material claim exists.

     Section 6.15 No Other Warranties.

     EXCEPT AS SET FORTH IN THIS  ARTICLE VI,  SELLER IS SELLING  THE  PURCHASED
ASSETS  AND  PRODUCT   INVENTORY   HEREUNDER   ON  AN  "AS  IS"  BASIS   WITHOUT
REPRESENTATION  OR  WARRANTY  AS TO THE  PRODUCT,  THE  PRODUCT  INVENTORY,  THE
PURCHASED ASSETS OR THE BUSINESS WHETHER EXPRESS OR IMPLIED INCLUDING WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR INFRINGEMENT OF THIRD
PARTY RIGHTS, AND ALL SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED.

     Section 6.16 Financial Statements.

     Seller represents and warrants that the Product Sales Reports were prepared
in good faith in accordance with the books and records of Seller and the Product
Sales Report  Compilation  Methodology  on a  consistent  basis  throughout  the
periods indicated.

     Section 6.17 Ordinary Course of Business and No Adverse Effect

     Since  January 1, 2001,  the  Business  has been  operated in the  Ordinary
Course of  Business,  including  the sale or offer for sale of Product.  Without
limiting the generality of the preceding sentence, since January 1, 2001 neither
Seller nor any of its Affiliates has sold Product to wholesalers or distributors
at prices  below its  standard  selling  price  outside the  Ordinary  Course of
Business or made any promotions or offers to wholesalers or distributors outside
the Ordinary  Course of Business.  Since January 1, 2001,  (a) there has been no
effect or condition that  individually  or in the aggregate or together with all
other events, or changes,  or occurrences is, or reasonably could be expected to
be  materially  adverse to the  Purchased  Assets,  the Product  Inventory,  the
Business,  or the  Product;  (b) there has been no damage or  impairment  to, or
destruction or loss of, the Purchased Assets or the Product Inventory,  that had
or could  reasonably  be expected to have an Adverse  Effect;  and (c) there has
been no sale,  assignment,  transfer  or  Encumbrance  (other  than a  Permitted
Encumbrance) of the Purchased Assets or Product  Inventory  outside the Ordinary
Course of Business.

                                       17
<PAGE>

     Section 6.18 Confidential Information

     Seller and its Affiliates have protected the  confidential  and proprietary
information  relating  to the  Product  in a  manner  consistent  with  how each
protects   confidential   and  proprietary   information   relating  to  similar
non-promoted products.

     Section 6.19 Managed Care Agreements.

     Neither  the  Seller  nor any of its  Affiliates  is a party  to or has any
obligations  or  entitled  to rights  under any  private  managed  care or group
purchasing contracts in connection with the Business.

     Section 6.20 Customer Lists.

     Section 6.20 of the Seller Disclosure Schedule contains a true and complete
list of Seller's top twenty (20) customers, based on dollar volume of sales from
January 1, 2001 through  December 17, 2001,  together with such customers' names
and addresses.

              Article VII. Representations and Warranties of Buyer

     Except as  specifically  disclosed in the disclosure  schedule  supplied by
Buyer  to  Seller  and  dated  as of the  date  hereof  (the  "Buyer  Disclosure
Schedule"),   which   Buyer   Disclosure   Schedule   shall  be   deemed  to  be
representations and warranties of Buyer as if made herein,  Buyer represents and
warrants to Seller as of the date hereof, as follows:

     Section 7.01 Corporate Organization.

     Buyer  is a  corporation  duly  organized,  validly  existing  and in  good
standing under the laws of the State of Delaware.  Buyer has all requisite power
and authority to own its assets and carry on its business as currently conducted
by it. Buyer is duly  authorized to conduct its business and is in good standing
in each  jurisdiction  where  such  qualification  is  required,  except for any
jurisdiction  where  failure to so qualify  could not  reasonably  be  expected,
individually  or in the aggregate,  to have a material  adverse effect on it, or
materially  impair or delay its  ability to perform its  respective  obligations
hereunder.

     Section 7.02 Authority of Buyer.

     Buyer has all  necessary  power  and  authority  and has taken all  actions
necessary to enter into this  Agreement and the other  agreements to be executed
and  delivered by Buyer at the Closing (the "Buyer  Closing  Documents")  and to
carry out the transactions  contemplated hereby. The Board of Directors of Buyer
has taken all action  required by Law, its  Certificate  of  Incorporation,  its
Bylaws or otherwise to be taken by it to authorize the execution and delivery of
this  Agreement  and  the  Buyer  Closing   Documents  by  the  Buyer,  and  the
consummation of the transactions  contemplated  hereby.  This Agreement has been
duly and  validly  executed  and  delivered  by  Buyer,  and the  Buyer  Closing


                                       18
<PAGE>

Documents have been duly and validly executed and delivered by Buyer,  and, when
executed and  delivered by Seller as  necessary,  each will  constitute a legal,
valid and binding obligation of Buyer, enforceable against it in accordance with
its  terms  except  (a)  as  limited  by  applicable   bankruptcy,   insolvency,
reorganization,  moratorium  and other  laws of  general  application  affecting
enforcement of creditors rights  generally,  and (b) as limited by laws relating
to  the  availability  of  specific  performance,  injunctive  relief  or  other
equitable remedies.

     Section 7.03 Consents and Approvals.

     (a)  All  consents,   waivers,   approvals,   Orders,   authorizations  of,
declarations or filings with any  Governmental  or Regulatory  Authority (each a
"Buyer  Governmental  Consent") that are required by or with respect to Buyer in
connection  with the execution  and delivery of this  Agreement by Buyer and the
Buyer Closing Documents, and Buyer's performance of its obligations hereunder or
thereunder are set forth on Schedule 7.03(a).  Each Buyer  Governmental  Consent
has been  obtained,  except to the extent  that the failure to obtain such Buyer
Governmental Consent would not have an Adverse Effect.

     (b) All consents, waivers, approvals, authorizations of, or notices to, any
third party (other than a Governmental or Regulatory  Authority)  (each a "Buyer
Third  Party  Consent")  that  are  required  by or with  respect  to  Buyer  in
connection  with the  execution  and  delivery of this  Agreement  and the Buyer
Closing  Documents,  and Buyer's  performance  of its  obligations  hereunder or
thereunder are set forth on Schedule 7.03(b). Each Buyer Third Party Consent has
been obtained,  except to the extent that the failure to obtain such Buyer Third
Party Consent would not have an Adverse Effect.

     Section 7.04 Non-Contravention by Buyer.

     The  execution  and delivery by Buyer of this  Agreement  does not, and the
performance by it of its obligations  under this Agreement and the  consummation
of the transactions contemplated hereby will not:

     (a)  conflict  with or result in a violation or breach of any of the terms,
conditions  or  provisions  of  the  Certificate  of   Incorporation   or  other
organizational documents of Buyer;

     (b)  conflict  with or  result  in a  violation  or  breach  of any term or
provision of any Law applicable to Buyer other than such  conflicts,  violations
or breaches as would not have an Adverse Effect; or

     (c) conflict with or result in a breach or default (or an event which, with
notice or lapse of time or both, would constitute a breach or default) under, or
result in the  termination or  cancellation  of, or accelerate  the  performance
required by, or result in the creation or imposition  of any security  interest,
lien or any other  Encumbrance  (other  than a Permitted  Encumbrance)  upon any
Contract  to which  Buyer is a party or by which  Buyer or any of its  assets is
bound,  other than such  conflicts,  breaches  or  defaults as would not have an
Adverse Effect.

     Section 7.05 Litigation.

     There are no Actions or Proceedings  pending,  or to the Knowledge of Buyer
threatened  or  anticipated,  against,  relating  to,  affecting  or  arising in


                                       19
<PAGE>

connection with (a) this Agreement or (b) the transactions  contemplated by this
Agreement.  Buyer is not subject to any Order that could  reasonably be expected
to  materially  impair or delay the ability of Buyer to perform its  obligations
hereunder.

     Section 7.06 Financing.

     Buyer will have funds  sufficient to pay the Closing Payment on the Closing
Date.

     Section 7.07 Brokers.

     Buyer has not  retained  any  broker in  connection  with the  transactions
contemplated  hereunder.  Seller has no, and will have no, obligation to pay any
brokers,  finders,  investment  bankers,  financial  advisors or similar fees in
connection with this Agreement or the transactions contemplated hereby by reason
of any action taken by or on behalf of Buyer.



                     Article VIII. Covenants of the Parties

     Section 8.01 Cooperation.

     (a) Each Party shall cooperate fully with the other in preparing and filing
all  notices,  applications,  submissions,  reports  and other  instruments  and
documents  that are  necessary,  proper or advisable  under  applicable  Laws to
consummate and make effective the  transactions  contemplated by this Agreement,
including  Seller's  cooperation  in the efforts of Buyer to obtain any consents
and approvals of any Governmental or Regulatory  Authority required for Buyer to
be able to own the Purchased Assets and Product Inventory.

     (b) As soon as reasonably  practicable after the Closing,  (i) Seller shall
deliver or cause to be delivered to Buyer  physical  possession  of all tangible
personal  property  included in the Purchased  Assets,  including the Regulatory
Approvals  and the Books and Records  and (ii)  Seller and Buyer  shall  jointly
effectuate  the delivery to the FDA notice that Seller has  transferred to Buyer
the title to the NDA,  together  with all other  notices  and  filings  of Buyer
required by applicable Laws.

     (c) From and after the  Closing  Date,  Seller  shall use its  commercially
reasonable  efforts in assisting Buyer in effecting an orderly transition of the
conduct by Buyer of the Business following the Closing.

     Section 8.02 Access.

     (a) From the date hereof until the Closing,  Seller shall,  and shall cause
its relevant Affiliates to, permit Buyer and its representatives to have access,
during regular  business  hours and upon  reasonable  agreed upon times,  to the

                                       20
<PAGE>


                                        [***] - CONFIDENTIAL TREATMENT REQUESTED

assets of the  Business  that will be  Purchased  Assets and Product  Inventory,
subject to reasonable  rules and regulations of Seller and any applicable  Laws.
Seller shall instruct its employees, counsel and financial advisors to cooperate
with Buyer in its investigation of the Business;  it being understood that Buyer
shall  reimburse  Seller  promptly for  reasonable  and  necessary out of pocket
expenses  incurred by Seller or any  Affiliate of Seller in  complying  with any
such request by or on behalf of Buyer.

     (b) Upon the  request of Seller,  Buyer  shall at all times  following  the
Closing, to the extent permitted by Law, grant to Seller and its representatives
the right,  during normal business hours and at reasonably agreed upon times, to
inspect and copy the Books and Records and other documents in Buyer's possession
to the extent  pertaining to the operation of the Business  prior to the Closing
Date for Tax purposes and in connection  with Actions or Proceedings  (except as
otherwise stated in Section 8.02(c) below); provided that Seller shall reimburse
Buyer promptly for its reasonable and necessary  out-of-pocket expenses incurred
by Buyer in complying with any such request.

     (c) Buyer  agrees to keep and  maintain  all  Books and  Records  and other
documents in  existence  on the Closing Date and make  personnel of Buyer or its
Affiliates  available to Seller or its representatives to the extent such access
is reasonably  related to any Excluded Assets or otherwise  necessary for Seller
to comply  with or  enforce  the  terms of this  Agreement  or  comply  with any
applicable Law, for any periods  required by applicable Law; it being understood
that Seller shall  reimburse  Buyer promptly for reasonable and necessary out of
pocket expenses  incurred by Seller or any Affiliate of Seller in complying with
any such request by or on behalf of Buyer.

     Section 8.03 Public Announcements.

     Neither  Seller nor Buyer shall issue any press  release or make any public
announcement  or filing  with  respect to this  Agreement  and the  transactions
contemplated  hereby  without  obtaining the prior written  consent of the other
Party,  except as may be required by  applicable  Law upon the advice of counsel
and only if (a) the disclosing  Party provides the  non-disclosing  Party with a
reasonable opportunity to first review the release, first filing with respect to
the transactions  contemplated  hereby in which this Agreement is to be included
as an exhibit thereto or other public  announcement  and (b) if requested by the
nondisclosing  Party,  the  disclosing  Party uses its  commercially  reasonable
efforts to have requested  portions of such public filing afforded  confidential
treatment.

     Section 8.04 Non-Solicitation.

     Buyer  agrees  that,  without the prior  written  consent of Seller,  for a
period  commencing on the date hereof and expiring on the [***]  anniversary  of
the Closing Date, Buyer will not directly or indirectly (a) induce, encourage or
solicit any officer or  employee  of Seller or any of its  Affiliates  providing
services to the  Business  prior to the Closing to leave such  employment  or to
accept any other  position or employment  with Buyer or (b) assist any Affiliate
or representative of Buyer in doing the above.




                                       21
<PAGE>



     Section 8.05 Corporate Names.

     (a) Except as set forth in this Section 8.05, following the Closing,  Buyer
shall not have any rights by virtue of this Agreement or any of the transactions
or agreements contemplated hereby to any names,  trademarks,  trade names, trade
dress or logos  relating to Seller or any of the  Affiliates of Seller or any of
their  products  other than those  included in the  Intellectual  Property  (the
"Corporate Names").

     (b) Buyer may use the Corporate  Names in connection  with its operation of
the Business for up to twelve (12) months following the Closing (or such shorter
period as any Governmental or Regulatory  Authority shall designate),  solely in
connection with the sale and distribution of any items of Product  Inventory and
other Product that bear any of the Corporate  Names,  it being  understood  that
Buyer will use all commercially  reasonable efforts to use or sell such items of
Product  Inventory and Product bearing  Seller's name prior to selling any other
Product under the trademark or trade name of the Buyer.

     Section 8.06 Assistance in Collecting Certain Amounts.

     From and  after  the  Closing  Date,  Buyer  shall,  and  shall  cause  its
Affiliates  to,  remit  promptly to Seller or Seller's  relevant  Affiliate  any
payments or other sums  received by Buyer or its  Affiliates  that relate to any
sales,  shipments  or other  matters  occurring  before the Closing Date or that
otherwise are properly for the account of Seller or its  Affiliates.  If, within
twelve (12) months after the Closing Date, Seller or any Affiliate thereof shall
wish to make a claim or otherwise  take action with respect to an Excluded Asset
or Excluded Liability (including, an Account Receivable), Buyer shall, and shall
cause its  Affiliates  to,  assist,  cooperate  and consult  with Seller and its
Affiliates  with respect to such action;  provided  that Seller  promptly  shall
reimburse Buyer for all reasonable  out-of-pocket  expenses incurred by Buyer or
its  Affiliates in complying with Buyer's  obligations  under this Section 8.06,
and provided  further,  that such assistance and  cooperation  shall not require
instituting  or initiating  any judicial or other  proceedings  or taking of any
action  which  would  harm  or  have a  reasonable  likelihood  of  harming  the
relationship between the Buyer and the obligor of such Excluded Asset,  Excluded
Liability or Account Receivable.  From and after the Closing Date, Seller shall,
and shall cause its Affiliates to, remit promptly to Buyer any payments or other
sums received by Seller or its Affiliates  that relate to any sales or shipments
made by Buyer  after the  Closing  Date and Seller  shall,  and shall  cause its
Affiliates to, use commercially reasonable efforts to as promptly as practicable
transmit to Buyer all written  inquiries or orders relating to the Business that
are received by Seller or its  Affiliates  following the Closing Date;  provided
that Buyer promptly  shall  reimburse  Seller for all  reasonable  out-of-pocket
expenses  incurred  by Seller  or its  Affiliates  in  complying  with  Seller's
obligations under this Section 8.06.

     Section 8.07 Handling of Product Inventory.

     From and after the Closing,  Buyer shall hold,  store, and ship any Product
Inventory  in  accordance  with  (a)  all  applicable  Laws,  (b)  current  good
manufacturing  practices,  (c)  the  applicable  Regulatory  Approvals,  and (d)
applicable analytical methods and procedures,  material  specifications,  master
batch records, and stability protocols.



                                       22
<PAGE>

     Section 8.08 Differentiation of Product.

     From  and  after  the   Closing,   products   and  goods  of  the  Business
manufactured,  finished or sold by, or on behalf of Buyer shall be distinguished
from products and goods of the Business manufactured, finished or sold by, or on
behalf of, Seller and its Affiliates, by lot number.

     Section 8.09 Regulatory Matters.

     (a) Except as expressly  set forth in Section  8.01(b),  from and after the
Closing,  Buyer,  at its cost,  shall be solely  responsible  and liable for (i)
taking all actions,  paying all fees and conducting all  communication  with the
appropriate  Governmental or Regulatory  Authority required by Law in respect of
the Regulatory Approvals,  including preparing and filing all reports (including
adverse drug experience reports) with the appropriate Governmental or Regulatory
Authority  (whether  related to Product  sold  before or after  transfer of such
Regulatory  Approval),  (ii) taking all actions and conducting all communication
with  third  parties in respect of  Product  sold  pursuant  to such  Regulatory
Approval  (whether sold before or after transfer of such  Regulatory  Approval),
including responding to all complaints in respect thereof,  including complaints
related to tampering or  contamination,  and (iii)  investigating all complaints
and  adverse  drug  experiences  in  respect of Product  sold  pursuant  to such
Regulatory  Approval  (whether sold before or after transfer of such  Regulatory
Approval).

     (b) At a mutually agreed upon time after the Closing,  Seller shall provide
Buyer with information  relating to the  investigation  and reporting of adverse
experiences  regarding  the Product for three (3) years prior to the Closing and
all  other  information  which  is  materially  relevant  to the safe use of the
Product in Seller's  possession  as of the Closing.  From and after the Closing,
Seller  promptly (and in any event within a time frame that  reasonably  permits
Buyer to comply with the time  periods  required  by Law,  but in no event later
than 12 days) shall submit to Buyer all adverse drug  experience  information or
customer  complaints  brought  to the  attention  of  Seller in  respect  of the
Product,  as well as any material events and matters concerning or affecting the
safety or efficacy of the Product.  Subject to Section  8.14  hereof,  after the
Closing,  Buyer shall have all  responsibility for required reporting of adverse
experiences  for the Product.  In addition,  Seller shall cooperate with Buyer's
reasonable  requests and use commercially  reasonable efforts to assist Buyer in
connection  with the  investigation  of and response to any complaint or adverse
drug  experience  related  to a  Product  sold by or on  behalf of Seller or its
Affiliates.

     (c) From and  after  the  Closing,  Buyer,  at its  cost,  shall be  solely
responsible and liable for conducting all voluntary and  involuntary  recalls of
units of Product sold pursuant to such Regulatory  Approval (whether sold before
or after transfer of such Regulatory  Approval),  including  recalls required by
any Governmental or Regulatory Authority and recalls of units of Product sold by
or on  behalf  of Seller or its  Affiliates  deemed  necessary  by Seller in its
reasonable discretion;  provided, however, that Seller shall reimburse Buyer for
the  reasonable  expenses and costs of conducting  recalls  relating to Products
sold by or on behalf of  Seller  prior to the  Closing  and  Product  Inventory,
including the costs of notifying  customers,  the costs associated with shipment
of such  recalled  Products,  the price  paid for such  Product  Inventory,  and
reasonable  credits extended to customers in connection with the recall.  Seller


                                       23
<PAGE>

                                        [***] - CONFIDENTIAL TREATMENT REQUESTED

promptly  shall notify Buyer in the event that a recall of Product sold by or on
behalf of Seller or its Affiliates is necessary.

     Section 8.10 Product Returns, Chargebacks and Rebates.

     (a) Product Returns.  For the period from the Closing through [***], Seller
will, at its sole cost and expense, process and issue credits (or render payment
in such other form as Seller may  determine)  for all returned  Product  bearing
Seller's  NDC numbers and  evidenced by lot number as being sold by or on behalf
of Seller. Such handling of returned Products by Seller, and the issuance of any
credits or other form of  reimbursement  in  connection  therewith,  shall be in
accordance with Seller's then current returned goods policy. Buyer will process,
and be solely  responsible  for  reimbursements  with respect to Product returns
arising with respect to, or resulting from,  shipping errors,  damage in transit
and  shortages  relating  to Buyer's  sales of  Products  after the  Closing and
Product with Buyer's NDC number.

          (i) All Products returned to Buyer through [***], bearing Seller's NDC
numbers and  evidenced  by lot number as sold by or on behalf of Seller shall be
the financial responsibility of Seller.

          (ii)  Effective  as of [***],  Buyer  shall be solely and  exclusively
responsible for processing any and all returned Products (including all returned
Products  bearing Seller's NDC's) and for the issuance of any and all credits or
other reimbursement  therefor.  Any and all returned Products received by Seller
on and after [***] will be  destroyed  by Seller,  and Seller  will,  after such
destruction,  forward  to Buyer  any  necessary  accompanying  documentation  to
determine the appropriate credit. Except as otherwise provided herein, Buyer and
Seller will not bill one another for costs incurred  strictly for the processing
of claims for returned Products. Seller and Buyer will use reasonable efforts in
requesting that customers direct all Product returns after [***] to Buyer.

          (iii)  Buyer  and  Seller  shall  be  responsible   for  handling  the
destruction  of any  Product  returned  to  their  respective  returns  handling
facility.  If  Buyer  or  Seller  destroys  Product  for  which  the  other  was
financially  responsible as set forth in this Section, that party shall bill the
other party for the cost of the  destruction.  Each such invoice shall set forth
the number of units processed,  together with such other information as shall be
necessary to support the invoice.  Each party shall,  within thirty (30) days of
its receipt of invoice, pay the other party for the full invoiced amount.

     (b)  Government  Rebates.  Seller  shall  be  responsible  for all  rebates
pursuant to any government rebate programs with respect to government claims for
the Products indicating Seller's NDC numbers and dispensed prior to [***]. Buyer
shall  reimburse  Seller for all rebates  that Seller is  obligated  to pay with
respect to  government  claims for the Product  dispensed  after [***] (it being
understood  and agreed that the  dispense  date  contained  in any report from a
state rebate program shall be used for purposes of determining  the date of such
claim).  All payments due Seller under this Section  shall be made within thirty
(30)  days of  submission  to Buyer of  invoices  that  describe  the  requested
payments in reasonable detail.

                                       24
<PAGE>


                                        [***] - CONFIDENTIAL TREATMENT REQUESTED

     (c) Chargeback Claims.  Except as limited in Section 8.10(d) below,  Seller
shall be financially responsible for all chargeback claims for the Products with
a  chargeback  invoice  dated  (i.e.  date of sale  from the  wholesaler  to the
wholesaler customer,  subsequently  referred to as the "Activity Date") prior to
[***] (the  "Transition  Chargebacks").  Buyer shall process and be  financially
liable for all  chargeback  claims with an Activity  Date  subsequent  to [***].
Notwithstanding  the  foregoing,  the parties  acknowledge  that the VA National
Acquisition  Center  must  approve  the removal of the  Products  from  Seller's
Federal Supply  Schedule  ("FSS") before the  responsibility  of processing such
rebates is  transferred  from  Seller to Buyer.  Accordingly,  in the event such
approval is not obtained prior to [***], Seller shall continue to be responsible
for processing the FSS chargebacks on Buyer's behalf,  and Buyer shall reimburse
Seller for same.  Buyer and Seller agree that (a) Seller's  financial  liability
for the Transition  Chargebacks  shall be limited to those commercial  customers
with which Seller has chargeback obligations as of the Closing, and (b) any such
chargebacks issued by Seller shall be made on terms and conditions comparable to
Seller's  obligations  as of the Closing with respect to each customer and shall
be based on Seller's terms of respective agreements as of the Closing.

     Section 8.11 Compliance Audits.

     From and after the Closing,  from time to time as Seller may elect,  during
normal business hours and upon not less than three (3) days prior written notice
to Buyer, Buyer shall permit duly authorized representatives of Seller to review
and  inspect  the  premises,   facilities,   Product   Inventory,   records  and
documentation  maintained by Buyer for the purpose of determining  compliance by
Buyer with its obligations under this Agreement.

     Section 8.12 Labeling Requirements.

     Following the Closing,  Buyer shall promptly and at its own expense use all
reasonable efforts to obtain such FDA approvals necessary for Buyer Labeling for
the Product to be manufactured  after the Closing and, promptly comply with such
FDA approvals upon receipt thereof.

     Section 8.13 Acknowledgement by Buyer of Restrictive Covenant.

     Buyer hereby specifically  acknowledges and agrees that it has read Article
10 of the P&G Asset Purchase Agreement (the "Restrictive  Covenant") and that it
understands the terms contained therein.

     Section 8.14 Transitional Regulatory Services.

     During a transitional  period of up to [***] following the Closing (or such
lesser period as it takes for Buyer to complete  arrangements for the assumption
of such regulatory activities),  and in accordance with the terms and conditions
of the Transition  Services and Regulatory Plan, Seller and its Affiliates shall
maintain  the  Regulatory  Approvals  and perform  other  regulatory  compliance
activities  required to be  performed  under the  Regulatory  Approvals  (to the
extent  that such  activities  have not then been  assumed by Buyer) in a manner
consistent with the regulatory  procedures of Seller and its Affiliates in place
for the Product as of the date hereof. All costs and expenses for such


                                       25
<PAGE>

                                        [***] - CONFIDENTIAL TREATMENT REQUESTED

maintenance and performance will be the responsibility of Buyer; provided,  that
Buyer shall not be responsible  for Seller's  general  overhead or other similar
internal  costs or expenses of Seller.  Buyer shall make all filings  with,  and
take all other  actions  required  by,  applicable  Governmental  or  Regulatory
Authorities  that are necessary to permit  Seller and its  Affiliates to provide
the maintenance and performance  contemplated by this Section 8.14. Buyer hereby
covenants and agrees to use all commercially  reasonable efforts to complete the
arrangements  for  the  assumption  of  such  regulatory  activities  as soon as
practicable after the Closing.

     Section 8.15 Non-Competition.

     Seller  agrees that for a period of [***]  commencing  on the Closing Date,
unless acting pursuant hereto or pursuant to the Supply Agreement or acting with
the prior written consent of the Buyer, neither Seller nor Elan Pharmaceuticals,
Inc. will actively sell or promote in the Territory any  pharmaceutical  product
for  the  treatment  of  pediatric   urinary  tract   infection  which  contains
nitrofurantoin as its active pharmaceutical ingredient and has substantially the
same formulation as the Product (a "Competing Product"); provided, however, that
(A) passive investment by Seller, Elan Pharmaceuticals, Inc. and/or any of their
Affiliates,  which shall not exceed a [***] percent  ([***]%) equity interest in
the aggregate,  in a Person who develops,  manufactures,  markets or distributes
any  Competing  Product  shall not be deemed to be a violation  of this  Section
8.15;  and  (B)  nothing  herein  shall   restrain  or  prevent   Seller,   Elan
Pharmaceuticals,  Inc. or any of their  Affiliates  from purchasing or otherwise
acquiring any Person (or part thereof) that engages in the activities  otherwise
restricted  pursuant  to this  Section  8.15 if such  Person's  total  sales  to
unaffiliated  entities  attributable  to Competing  Products on the date of such
purchase or  acquisition  or  thereafter  do not exceed  [***]  ([***]%) of such
Person's  total sales.  The Parties  hereto agree that the duration,  geographic
scope and other provisions set forth in this Section 8.16 are reasonable. In the
event that any court of competent  jurisdiction  determines  that the  duration,
geographic  scope  or any  other  provisions  are  unreasonable  and  that  such
provision is to that extent  unenforceable,  the parties  hereto agree that such
provision shall be interpreted in accordance  with Section 13.09 hereof.  Seller
agrees on behalf of itself and Elan  Pharmaceuticals,  Inc.  that damages are an
inadequate  remedy for any breach of the  provisions  set forth in this  Section
8.15 and that Buyer shall,  whether or not it is pursuing any potential remedies
at law, be  entitled to an  injunction  restraining  any further  breach of such
provisions.

     Section 8.16 Audit Financial Information.

     Buyer  has  informed  Seller  that  the  consummation  of the  transactions
contemplated  hereby will require Buyer to file a Current  Report on Form 8-K in
accordance  with the  Securities  Exchange Act of 1934, as amended and the rules
and regulations  promulgated  thereunder,  pursuant to Items 2 and 7 of Form 8-K
(the "8-K Filing").  Buyer  acknowledges  and agrees that subsequent to Closing,
Seller will  conduct an audit of certain  financial  information  related to the
Product and the Business  for purposes of making the 8-K Filing  pursuant to the
terms hereof,  with respect to the results of such audit to be provided to Buyer
on or before January 31, 2002.  During normal  business  hours,  upon reasonable
prior  notice and in such  manner as will not  unreasonably  interfere  with the
conduct of the business of Seller and its  Affiliates,  Seller shall provide and
shall cause its Affiliates to provide,  until  February 28, 2002,  Buyer and its
representatives  reasonable access to the books, records,  financial information


                                       26
<PAGE>

and personnel of Seller insofar as such books, records and financial information
relate to the  Product  and the  Business as  conducted  by Seller  prior to the
Closing Date as is  reasonably  necessary to make the 8-K Filing or an amendment
thereto.   All  costs  and   expenses   related  to  such  audit  shall  be  the
responsibility of the Buyer.  Buyer's access to such books,  records,  financial
information  and personnel of the Seller and its Affiliates  shall be subject to
the same  restrictions  as set forth in Section  13.01.  Any third party auditor
utilized  by Buyer  pursuant to this  Section  8.16 shall be selected by Seller,
subject  to Buyer's  prior  written  consent,  which  shall not be  unreasonably
withheld,  and such third party  auditor  will only be permitted to conduct such
audit if it  executes  a  confidentiality  agreement  with  Seller or any of its
Affiliates affected by such audit.

     Section 8.17 Government Multi-Product Contracts.

     From and after  the  Closing  Date,  Buyer  shall  honor  and  perform  all
obligations and liabilities of Seller arising subsequent to Closing and relating
to the Product  under and pursuant to each  Government  Multi-Product  Contract,
until  such time as Seller has  terminated  each such  Government  Multi-Product
Contract as provided  below.  Seller  agrees that after the Closing Date it will
not take any action with respect to any Government  Multi-Product  Contract that
would extend the term of such Government  Multi-Product contract with respect to
the Product,  create or agree to any additional  obligations with respect to the
Product, or otherwise adversely affect Buyer or the Business,  without the prior
written consent of Buyer,  although  Seller may enter into a separate  agreement
with such  government  party,  provided that such  agreements do not contain any
provisions  relating to the Product or the Business.  Buyer hereby covenants and
agrees to use all  commercially  reasonable  efforts to enter into  Contracts as
soon as  practicable  after the  Closing by which  Buyer will  dispense  Product
through a Governmental or Regulatory  Authority (such as the Medicaid program or
a state  equivalent),  together  with  other  pharmaceutical  products  of Buyer
("Buyer Government  Multi-Product  Contracts").  Seller agrees to coordinate its
termination of the rights and  obligations of Seller with respect to the Product
under each Government  Multi-Product  Contract,  to the extent  permitted by the
terms thereof,  with Buyer's  timing of Buyer's entry into the Buyer  Government
Multi-Product Contracts.

     Section 8.18 Further Assurances.

     (a) On and after  the  Closing,  Seller  shall  from  time to time,  at the
request of Buyer,  execute and deliver,  or cause to be executed and  delivered,
such other instruments of conveyance and transfer and take such other actions as
Buyer  may  reasonably  request,  in order to more  effectively  consummate  the
transactions  contemplated hereby and to vest in Buyer good and marketable title
to the Purchased Assets and the Product Inventory.

     (b) Seller shall use all commercially  reasonable efforts to obtain the P&G
Consents without cost to Buyer.

     (c)  Seller  shall use all  commercially  reasonable  efforts to obtain for
Buyer, without cost to Buyer, through Seller's  negotiations with P&G, a six (6)
month  extension  of the P&G  Manufacturing  Agreement  over its current term on
substantially the same terms and conditions as currently in effect.

     (d)  Seller  shall use all  commercially  reasonable  efforts to obtain for
Buyer,  without  cost  to  Buyer,  through  Seller's  negotiations  with  P&G an


                                       27
<PAGE>

agreement with P&G to supply to Buyer for at least five (5) years  subsequent to
Closing nitrofurantoin as the active pharmaceutical ingredient of the Product.

     (e) On and after the Closing, Buyer shall from time to time, at the request
of Seller,  take such actions as Seller may reasonably request, in order to more
effectively consummate the transactions  contemplated hereby,  including Buyer's
assumption of the Assumed Liabilities.

     Section 8.19 Notice to Customers.

     Seller  agrees  to  cooperate  with  Buyer,  at  Buyer's  request,  in  the
notification to customers of the transactions contemplated by this Agreement and
Seller  agrees not to notify  any  customer  of such  transactions  without  the
consent  of Buyer.  Such  notification  shall be in such  form as is  reasonably
satisfactory  to both  Buyer  and  Seller  and  shall be  negotiated  as soon as
reasonably practicable after the Closing.



              Article IX. Conditions to the Obligations of Seller

     The obligation of Seller to effect the transactions  contemplated hereby is
subject to the satisfaction (or waiver by Seller),  at or before the Closing, of
each of the following conditions:

     Section 9.01 [Intentionally Omitted]

     Section 9.02 No Actions or Proceedings.

     No Actions or  Proceedings  that  question  the validity or legality of the
transactions  contemplated  hereby shall have been  instituted or threatened and
not settled or otherwise terminated.

     Section 9.03 Consents.

     All Buyer  Governmental  Consents and Buyer Third Party Consents shall have
been obtained or made.

     Section 9.04 Closing Deliveries.

     Buyer shall have  executed  and  delivered,  or caused to be  executed  and
delivered,  the documents  required to be executed and delivered by or on behalf
of Buyer pursuant to Section 5.02(b) hereof.

     Section 9.05 Other Closing Deliveries.

     Buyer shall have delivered to Seller such other  certificates and documents
customary  in  transactions  similar  to  those  contemplated  hereby  that  are
reasonably requested by Seller.

                                       28
<PAGE>

               Article X. Conditions to the Obligations of Buyer

     The obligation of Buyer to effect the transactions  contemplated  hereby is
subject to the satisfaction (or waiver by Buyer),  at or before the Closing,  of
each of the following conditions:

     Section 10.01 [Intentionally Omitted].

     Section 10.02 No Actions or Proceedings.

     No Actions or  Proceedings  that  question  the validity or legality of the
transactions  contemplated  hereby shall have been  instituted or threatened and
not settled or otherwise terminated.

     Section 10.03 Consents.

     All Seller Governmental Consents and Seller Third Party Consents shall have
been obtained or made.

     Section 10.04 Closing Deliveries.

     Seller  shall have  executed  and  delivered,  or caused to be executed and
delivered,  the documents  required to be executed and delivered by or on behalf
of Seller pursuant to Section 5.02(a) hereof.

     Section 10.05 Other Closing Deliveries.

     Seller shall have delivered to Buyer such other  certificates and documents
customary  in  transactions  similar  to  those  contemplated  hereby  that  are
reasonably requested by Buyer.

                          Article XI. Indemnification

     Section 11.01 Survival of Representations, Warranties, Etc.

     The  representations  and warranties of Seller and Buyer  contained in this
Agreement,  including the representations and warranties of Seller and Buyer set
forth in Article VI and Article VII hereof, shall survive the Closing and remain
in full  force and effect  until the  Expiration  Date,  and all  covenants  and
agreements  made herein  (except as otherwise  expressly set forth herein) shall
survive the Closing  indefinitely.  All representations and warranties contained
in Article VI and Article  VII of this  Agreement  and all claims  with  respect
thereto shall terminate on the Expiration  Date;  provided that if notice of any
claim for  indemnification  pursuant to Section 11.02(a)(i) or 11.02(b)(i) shall
have been given  prior to the  Expiration  Date and such notice  describes  with
specificity the circumstances with respect to which such  indemnification  claim
relates,  such indemnification claim shall survive until such time as such claim
is finally resolved.

                                       29
<PAGE>

     Section 11.02 Indemnification.

     (a) By Seller.  Subject to Sections  11.03 and 11.04 of this  Agreement and
Section 8.14 of the Supply Agreement,  from and after the Closing,  Seller shall
indemnify,  reimburse, defend and hold harmless Buyer, its Affiliates, and their
respective  officers,  directors,  employees,  agents,  successors  and  assigns
(collectively,  the "Buyer  Indemnified  Parties")  from and against any and all
costs, losses, Liabilities, damages, lawsuits, deficiencies, claims and expenses
(including  interest,   penalties  and  reasonable  fees  and  disbursements  of
attorneys  and experts paid in  connection  with the  investigation,  defense or
settlement of any of the foregoing) (collectively, the "Damages"), to the extent
relating to or resulting from (i) any inaccuracy or breach of any representation
or warranty of Seller herein or in any other Seller Closing  Document;  (ii) any
breach or default of a covenant or agreement  of Seller  herein or in any Seller
Closing  document;  (iii) Seller's  conduct of the Business prior to the Closing
(other than with  respect to the Assumed  Liabilities);  and (iv) the failure of
Seller to pay, perform or discharge any Excluded Liabilities.

     (b) By Buyer.  Subject  to  Sections  11.03 and  11.04,  from and after the
Closing, Buyer shall indemnify,  reimburse, defend and hold harmless Seller, its
Affiliates  and  their  respective  officers,   directors,   employees,  agents,
successors and assigns (collectively, the "Seller Indemnified Parties") from and
against any and all Damages  resulting  from (i) any inaccuracy or breach of any
representation  or warranty of Buyer  herein or in any Buyer  Closing  Document,
(ii) any breach or default of a covenant or  agreement of Buyer herein or in any
Buyer Closing Document; (iii) Buyer's conduct of the Business from and after the
Closing;  (iv) the  failure of Buyer to pay,  perform or  discharge  any Assumed
Liabilities; and (v) any payments that Seller may be obligated to make on behalf
of Buyer under any agreement between Buyer and P&G.

     (c) Procedures.  The indemnified Party (the "Indemnified Party") shall give
the  indemnifying  Party (the  "Indemnifying  Party")  prompt written notice (an
"Indemnification  Claim  Notice") of any Damages or discovery of fact upon which
such  Indemnified  Party  intends to base a request  for  indemnification  under
Section 11.02(a) or Section 11.02(b),  provided that no delay on the part of the
Indemnified  Party  in  notifying  the  Indemnifying  Party  shall  relieve  the
Indemnifying  Party from any obligation  hereunder unless the Indemnifying Party
is materially prejudiced thereby. Each Indemnification Claim Notice must contain
a reasonable  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 Agreement.

     (d) Third Party Claims. The obligations of an Indemnifying Party under this
Section  11.02 with  respect to Damages  arising  from claims of any third party
that are  subject to  indemnification  as  provided  for in Section  11.02(a) or
Section  11.02(b) (a "Third Party  Claim")  shall be governed upon the following
additional terms and conditions:

                                       30
<PAGE>

          (i) At its option,  the  Indemnifying  Party may assume the defense of
any Third Party Claim by giving written notice to the  Indemnified  Party within
thirty (30) days after the  Indemnifying  Party's receipt of an  Indemnification
Claim  Notice.  The  assumption  of the  defense of a Third  Party  Claim by the
Indemnifying  Party  shall  not  be  construed  as an  acknowledgment  that  the
Indemnifying Party is liable to indemnify any Indemnitee in respect of the Third
Party Claim, nor shall it constitute a waiver by the  Indemnifying  Party of any
defenses it may assert against any Indemnitee's claim for indemnification.  Upon
assuming the defense of a Third Party Claim, the Indemnifying  Party may appoint
as lead  counsel  in the  defense  of the Third  Party  Claim any legal  counsel
selected  by  the  Indemnifying  Party  that  is  reasonably  acceptable  to the
Indemnified  Party. In the event the Indemnifying Party assumes the defense of a
Third  Party  Claim,  the  Indemnified  Party  shall  promptly  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, except as provided
in  subsection  (ii) below,  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  ultimately  determined  that  the  Indemnifying  Party is not  obligated  to
indemnify,  defend or hold  harmless  an  Indemnitee  from and against the Third
Party Claim, the Indemnified  Party shall reimburse the  Indemnifying  Party for
any and all costs and expenses (including attorneys' fees and costs of suit) and
any Damages incurred by the Indemnifying Party in its defense of the Third Party
Claim with respect to such Indemnitee.

          (ii) Without  limiting  Section  11.02(d)(i),  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 (A) the
employment   thereof  has  been  specifically   authorized  in  advance  by  the
Indemnifying  Party in writing,  (B) the Indemnifying Party has failed to assume
the defense and employ counsel in accordance with Section  11.02(d)(i) (in which
case the Indemnified  Party shall control the defense) or (C) if the Indemnified
Party and the  Indemnifying  Party are both named parties to the  proceeding and
the  Indemnified  Party has  reasonably  concluded that there may be one or more
legal defenses that are different from or in addition to those  available to the
Indemnifying  Party (in which  case the  Indemnifying  Party  shall not have the
right to assume the  defense of such action on behalf of the  Indemnified  Party
and the  Indemnifying  Party shall be liable for all legal expenses  incurred by
the Indemnified Party in furtherance thereof).

          (iii) 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
materially 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  reasonable  discretion,  shall  deem  appropriate;
provided,  however,  that the  Indemnifying  Party  shall  have  obtained a full
release  from  such  Third  Party in  connection  with any  such  settlement  or
disposition.  With respect to all other Damages in  connection  with Third Party


                                       31
<PAGE>



                                        [***] - CONFIDENTIAL TREATMENT REQUESTED

Claims,  where the Indemnifying Party has assumed the defense of the Third Party
Claim in accordance with Section 11.02(d)(i),  the Indemnifying Party shall have
authority to consent to the entry of any judgment,  enter into any settlement or
otherwise  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  disposition  of Damages by an  Indemnitee  that is reached
without the written consent of the  Indemnifying  Party (which consent shall not
be  unreasonably  withheld or delayed).  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
which consent shall not be unreasonably withheld or delayed.

          (iv) 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.  If the
Indemnified  Party  controls the defense of the claim,  the  Indemnifying  Party
shall cooperate with the Indemnified Party on the terms described above.

     (e) Expenses.  Except as provided above, the costs and expenses,  including
fees  and  disbursements  of  counsel,  incurred  by the  Indemnified  Party  in
connection  with any  claim  shall be  reimbursed  on a  quarterly  basis by the
Indemnifying  Party,  without  prejudice to the  Indemnifying  Party's  right to
contest the Indemnified  Party's right to indemnification  and subject to refund
in the event the  Indemnifying  Party is ultimately  held not to be obligated to
indemnity the Indemnified Party.

     Section 11.03 Limitations.

     (a) In no event shall Seller be liable for any Damages  pursuant to Section
11.02(a) of this  Agreement  unless and until the  aggregate  amount of all such
Damages under this Agreement exceeds [***] Dollars ([***]), in which case Seller
shall be liable for all such Damages  including the first [***] Dollars ($[***])
of Damages.

     (b) In no event  shall the  aggregate  liability  of Seller for any Damages
pursuant to Section  11.02(a) exceed an aggregate  amount equal to [***] Dollars
($[***]);  and further,  in no event shall the aggregate liability of Seller for
any Damages  other than  Damages  arising out of Third Party  Claims  based upon
product  liability claims or threatened  claims or injuries caused by either (x)
Product  sold prior to the Closing or (y) Product  Inventory  (other than to the
extent  that the  subject  product  liability  claims  or  threatened  claims or



                                       32
<PAGE>


injuries  with respect to Product  Inventory are due to the acts or omissions of
Buyer) exceed an aggregate amount equal to [***] Dollars ($[***]).

     (c) The amount of any Damages  under Section  11.02(a) or Section  11.02(b)
shall be reduced by the amount of any insurance proceeds paid to the Indemnified
Party relating to such claim.

     (d) Except with respect to claims based on fraud, notwithstanding any other
terms or  provisions  of this  Agreement  or any  terms or  provisions  under or
pursuant to any other agreement to which Buyer and Seller are parties, including
the Supply Agreement  (including  Section 8.14 thereof),  the right of the Buyer
Indemnified  Parties to indemnification  under this Article XI shall be the sole
and exclusive remedy, without duplication, of the Buyer Indemnified Parties with
respect to claims incurred in connection with, arising out of, resulting from or
incident to (i) any  inaccuracy or breach of any  representation  or warranty of
Seller  herein or in any  other  Seller  Closing  Document;  (ii) any  breach or
default of a covenant or  agreement  of Seller  herein,  or in any other  Seller
Closing  document;  (iii) Seller's conduct of the Business prior to the Closing;
or (iv) the  failure  of  Seller  to pay,  perform  or  discharge  any  Excluded
Liabilities.

     (e) Except with respect to claims based on fraud, notwithstanding any other
terms or  provisions  of this  Agreement  or any  terms or  provisions  under or
pursuant to any other agreement to which Buyer and Seller are parties, including
the Supply Agreement  (including Section 8.14 thereof),  the right of the Seller
Indemnified  Parties to indemnification  under this Article XI shall be the sole
and exclusive remedy,  without  duplication,  of the Seller Indemnified  Parties
with respect to claims incurred in connection  with,  arising out of,  resulting
from or  incident  to (i) any  inaccuracy  or  breach of any  representation  or
warranty of Buyer herein or in any other Buyer Closing Document; (ii) any breach
or default of a covenant  or  agreement  of Buyer  herein or in any other  Buyer
Closing  Document;  (iii)  Buyer's  conduct of the  Business  from and after the
Closing;  or (iv) the failure of Buyer to pay,  perform or discharge any Assumed
Liabilities;  and (v) any payments that Seller is obligated to make on behalf of
Buyer under any agreement between Buyer and P&G.

     Section 11.04 Limitation of Liability

     NOTWITHSTANDING  ANYTHING  TO THE  CONTRARY IN THIS  AGREEMENT  (SUBJECT TO
SECTION 8.14 OF THE SUPPLY AGREEMENT),  NEITHER SELLER NOR ANY OF ITS AFFILIATES
SHALL BE LIABLE TO THE BUYER OR ANY THIRD PARTY BY REASON OF ANY  REPRESENTATION
OR  WARRANTY,  CONDITION  OR OTHER TERM OR ANY DUTY OF COMMON  LAW, OR UNDER THE
EXPRESS TERMS OF THIS AGREEMENT, FOR ANY CONSEQUENTIAL, SPECIAL OR INCIDENTAL OR
PUNITIVE LOSS OR DAMAGE (WHETHER FOR LOSS OF CURRENT OR FUTURE PROFITS,  LOSS OF
ENTERPRISE  VALUE OR  OTHERWISE)  AND WHETHER  OCCASIONED  BY THE  NEGLIGENCE OF
SELLER  OR ITS  AFFILIATES  OR  ANY OF  THEIR  RESPECTIVE  OFFICERS,  DIRECTORS,
EMPLOYEES, AGENTS OR REPRESENTATIVES.



                                       33
<PAGE>


                      Article XII. [Intentionally Omitted]

                          Article XIII. Miscellaneous

     Section 13.01 Confidentiality.

     (a) In addition to the  restrictions  contained in Section 8.03,  after the
Closing,  no Party (a  "Disclosing  Party")  shall,  without  the prior  written
consent of the other Party (the "Non-disclosing Party"),  disclose to any Person
Confidential  Information (as defined below) of the Non-disclosing Party, except
to a Disclosing Party's or its Affiliates  employees or representatives who need
to know such information for any reason contemplated by this Agreement (and then
only to the extent that such  persons are under an  obligation  to maintain  the
confidentiality  of  the  Confidential  Information),  or use  any  Confidential
Information of the  Non-disclosing  Party for any reason other than contemplated
by this  Agreement  unless  such  Disclosing  Party has (i)  consulted  with the
Non-disclosing  Party and  obtained the  Non-disclosing  Party's  prior  written
consent, and (ii) been advised by counsel that disclosure is required to be made
under  applicable Law or the requirements of a national  securities  exchange or
another  similar  regulatory  body.  In the event that the  Disclosing  Party is
requested  or required  by  documents,  subpoena,  civil  investigative  demand,
interrogatories,  requests for information, or other similar process to disclose
any   Confidential   Information,   the  Disclosing   Party  shall  provide  the
Non-disclosing  Party with prompt  written  notice of such request or demands or
other similar process so that the  Non-disclosing  Party may seek an appropriate
protective  order  or,  if such  request,  demand or other  similar  process  is
mandatory,  waive the Disclosing  Party's compliance with the provisions of this
Section 13.01(a) as appropriate.

     (b) The term "Confidential Information" as used in this Section 13.01 means
(i) as to Buyer, all confidential  information relating to Buyer's business, the
Purchased Assets, the Product Inventory and the Assumed Liabilities, and (ii) as
to Seller, all confidential information relating to the Business (other than the
Purchased  Assets,  Product  Inventory  and  the  Assumed  Liabilities)  and the
business and operations of the Seller and its Affiliates, including the Excluded
Assets and the Excluded  Liabilities or other obligations other than the Assumed
Liabilities,  in each of (i) and (ii)  whether  disclosed  prior to or after the
date hereof.  The term "Confidential  Information" does not include  information
which  becomes  generally  available  to the  public  other  than as a result of
disclosure by the Disclosing Party, or becomes available to the Disclosing Party
on a non-confidential  basis from a source other than the Non-disclosing  Party,
provided that such source is not bound by a  confidentiality  agreement with the
Non-disclosing Party.

     (c) This Section 13.01 supercedes and replaces in its entirety that certain
letter agreement  relating to  confidentiality  previously  entered into between
Seller or its  Affiliate  and Buyer in connection  with the  negotiation  of the
transactions contemplated by this Agreement.

     Section 13.02 Notices.

     All notices, requests and other communications hereunder must be in writing
and will be deemed to have been duly given only if delivered  personally against
written receipt or by facsimile  transmission  with answer back  confirmation or


                                       34
<PAGE>

mailed  (postage  prepaid  by  certified  or  registered  mail,  return  receipt
requested) or by nationally  recognized overnight courier that maintains records
of delivery to the Parties at the following addresses or facsimile numbers:

     If   to Buyer to:  First  Horizon  Pharmaceutical  Corporation
                        660 Hembree Parkway,  Suite 106
                        Roswell,  GA 30076
                        Attention:  Vice  President of
                        Corporate Development Facsimile: (770) 442-9594

     With copies to:
                        Burke, Warren, McKay & Serritella, P.C.
                        330 North Wabash, 22nd Floor
                        Chicago, IL 60611
                        Attention: Christopher R. Manning
                        Facsimile: (312) 840-7900

     If to Seller to:   Dura Pharmaceuticals, Inc.
                        7475 Lusk Boulevard
                        San Diego, CA 92121
                        Attention:  Vice President Finance
                        and Vice President Commercial and Legal Affairs
                        Facsimile:  (858) 657-0981

                  and

                        Elan Pharmaceuticals, Inc.
                        7474 Lusk Boulevard
                        San Diego, CA 92121
                        Attention: Vice President Finance
                        and Vice President Commercial and Legal Affairs
                        Facsimile:  (858) 657-0981

     With copies to:    Brobeck, Phleger & Harrison, LLP
                        12390 El Camino Real
                        San Diego, CA 92130
                        Attention:  Faye H. Russell, Esq.
                        Facsimile: (858) 720-2555

All such  notices,  requests  and  other  communications  will (i) if  delivered
personally  to the  address as provided in this  Section,  be deemed  given upon
receipt,  (ii) if delivered by facsimile to the facsimile  number as provided in
this  Section,  be deemed  given upon  receipt by the sender of the answer  back
confirmation  and (iii) if delivered by mail in the manner described above or by
overnight  courier to the address as provided in this  Section,  be deemed given
upon receipt (in each case  regardless of whether such notice,  request or other
communication  is  received by any other  Person to whom a copy of such  notice,
request or other communication is to be delivered pursuant to this Section). Any
Party  from  time to time may  change  its  address,  facsimile  number or other
information for the purpose of notices to that Party by giving notice specifying
such change to the other  Parties  hereto in  accordance  with the terms of this
Section.

                                       35
<PAGE>

     Section 13.03 Entire Agreement.

     This Agreement (and all Exhibits, including, without limitation, the Supply
Agreement,  and Schedules  attached hereto and all other documents  delivered in
connection  herewith)  supersedes all prior discussions and agreements among the
Parties  with  respect to the subject  matter  hereof and  contains the sole and
entire  agreement  among the Parties  hereto with respect to the subject  matter
hereof.

     Section 13.04 Waiver.

     Any term or  condition of this  Agreement  may be waived at any time by the
Party that is  entitled  to the benefit  thereof,  but no such  waiver  shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the Party  waiving such term or  condition.  No waiver by any Party hereto of
any term or condition of this Agreement, in any one or more instances,  shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion.

     Section 13.05 Amendment.

     This Agreement may be amended,  supplemented  or modified only by a written
instrument duly executed by each Party hereto.

     Section 13.06 Third Party Beneficiaries.

     The terms and  provisions  of this  Agreement  are intended  solely for the
benefit  of each Party  hereto  and their  respective  successors  or  permitted
assigns  and it is not  the  intention  of the  Parties  to  confer  third-party
beneficiary rights upon any other Person.

     Section 13.07 Assignment; Binding Effect.

     Neither this Agreement nor any right,  interest or obligation hereunder may
be assigned by any Party hereto  without the prior written  consent of the other
Party hereto (which consent shall not be  unreasonably  withheld or delayed) and
any attempt to do so will be void; provided, however, such prior written consent
will not be required  with  respect to an  assignment  by either Party (i) to an
Affiliate of such Party so long as such Party remains bound by the terms hereof;
or  (ii)  in  connection  with a  merger,  sale  or  transfer  involving  all or
substantially  all of the assets of such Party.  This Agreement is binding upon,
inures to the  benefit of and is  enforceable  by the  Parties  hereto and their
respective successors and permitted assigns.

     Section 13.08 Headings.

     The headings used in this Agreement  have been inserted for  convenience of
reference only and do not define or limit the provisions hereof

     Section 13.09 Severability.

     If any  provision  of this  Agreement  is held to be  illegal,  invalid  or
unenforceable  under any present or future law, and if the rights or obligations


                                       36
<PAGE>

of any Party hereto under this  Agreement  will not be materially  and adversely
affected thereby, (a) such provision will be fully severable, (b) this Agreement
will be construed  and  enforced as if such  illegal,  invalid or  unenforceable
provision had never compromised a part hereof,  (c) the remaining  provisions of
this  Agreement will remain in full force and effect and will not be affected by
the illegal,  invalid or unenforceable  provision or by its severance  herefrom,
and (d) in lieu of such illegal, invalid or unenforceable provision,  there will
be  added  automatically  as a  part  of  this  Agreement  a  legal,  valid  and
enforceable  provision  as  similar  to  terms  to  such  illegal,   invalid  or
unenforceable  provision as may be possible  and  reasonably  acceptable  to the
Parties herein.

     Section 13.10 Governing Law.

     THIS  AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH THE
LAWS OF THE STATE OF DELAWARE  APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED IN
SUCH STATE, WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.

     Section 13.11 Expenses.

     Except as otherwise provided in this Agreement, each Party hereto shall pay
its own expenses and costs  incidental to the  preparation of this Agreement and
to the consummation of the transactions contemplated hereby.

     Section 13.12 Counterparts.

     This  Agreement  may be  executed  in any  number  of  counterparts  and by
facsimile,  each of which will be deemed an original,  but all of which together
will constitute one and the same instrument.

     Section 13.13 Schedules, Exhibits and Other Agreements.

     The  Exhibits,  Schedules,  other  agreements,   certificates  and  notices
specifically  referred to herein, and delivered pursuant hereto, are an integral
part of this Agreement.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                       37
<PAGE>


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

                                  DURA PHARMACEUTICALS, INC.



                                  By:
                                     -------------------------------------------
                                     Name:
                                     Title:




                                  FIRST HORIZON PHARMACEUTICAL CORPORATION



                                  By:  /s/ Balaji Venkataraman
                                     -------------------------------------------
                                     Name:   Balaji Venkataraman
                                     Title:  EVP, Corp. Dev./CFO






                  [SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]



<PAGE>


                                    Exhibit A

                        INTELLECTUAL PROPERTY ASSIGNMENT

<PAGE>


                                    Exhibit B

                              TRADEMARK ASSIGNMENT
<PAGE>


                                    Exhibit C

                       ASSIGNMENT AND ASSUMPTION AGREEMENT

<PAGE>


                                    EXHIBIT D

                                  BILL OF SALE

<PAGE>


                                    EXHIBIT E

                                SUPPLY AGREEMENT

<PAGE>

                                    EXHIBIT F

                            TRANSITION SERVICES PLAN



1426813