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                                                                    EXHIBIT 10.1

                     MASTER DEVELOPMENT AND SUPPLY AGREEMENT

        THIS MASTER DEVELOPMENT AND SUPPLY AGREEMENT (the "Agreement") is
entered into as of March 20, 2000 (the "Effective Date"), between COOK IMAGING
CORPORATION, D.B.A. COOK PHARMACEUTICAL SOLUTIONS, an Indiana corporation,
having principal offices at 927 South Curry Pike, Bloomington, Indiana, 47403
("Contractor"), and PHARMACYCLICS, INC., a Delaware corporation, having its
principal executive offices at 995 E. Arques Avenue, Sunnyvale, California
94086-4521 ("PCYC"). Contractor and PCYC are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."

                                   WITNESSETH

        WHEREAS, PCYC is engaged in the development of and owns or has a license
to certain rights relating to its proprietary compounds motexafin lutetium and
motexafin gadolinium, each of which is a human pharmaceutical agent for the
treatment of certain diseases, and wishes to develop, market and commercially
distribute such agents;

        WHEREAS, Contractor desires to manufacture, fill, seal, sterilize,
label, package, test and ship finished Drug Products (as defined below) for
PCYC; and

        WHEREAS, PCYC desires to have Contractor manufacture, fill, seal,
sterilize, label, package, test and ship Drug Products in the quantities and on
the terms hereinafter set forth;

        NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises hereinafter set forth, the Parties hereby agree as follows:

                                    ARTICLE 1

                                  DEFINITIONS.

        As used herein, the following capitalized terms shall have the following
meanings:

        1.1 "ACTIVE PHARMACEUTICAL INGREDIENT" OR "API" shall mean a bulk form
of the pharmaceutically active compound motexafin lutetium and motexafin
gadolinium, as applicable, to be supplied to Contractor by or on behalf of PCYC
for use in the Manufacture of Drug Products hereunder.

        1.2 "AFFILIATE" shall mean, as to a Party hereto, any person,
corporation, company, partnership, joint venture, firm and/or other entity which
controls, is controlled by or is under common control with such Party. For these
purposes, "control" means direct or indirect ownership or control of at least
fifty percent (50%) of the outstanding voting securities of a corporation or a
comparable equitable interest in any other type of entity.

         1.3 "ANNUAL FORECAST" shall have the meaning described in Section
3.3.2.

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

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        1.4 "API SPECIFICATIONS" shall mean, with respect to each API, the
detailed analytical description of such API, which shall be provided by PCYC to
Contractor reasonably in advance of the commencement of Contractor's
Manufacturing activities under this Agreement, and which shall be a part of the
Drug Product Appendix.

        1.5 "BACKGROUND TECHNOLOGY" shall mean (a) all inventions that are
necessary or useful for the use or sale of a Drug Product in the applicable
Territories that are owned or controlled by Contractor during the term of this
Agreement, and all patents (including without limitation reissues,
re-examinations and inventor's certificates) covering such inventions; and (b)
all information, trade secrets and know-how that are necessary or useful for the
use or sale of a Drug Product in the applicable Territories, and that are owned
or controlled by Contractor during the term this Agreement. Notwithstanding the
foregoing, "Background Technology" shall not include any Manufacturing
Technology.

        1.6 "BATCH" shall mean a specific quantity of a Drug Product comprising
a number of Units mutually agreed upon between PCYC and Contractor, and that (a)
is intended to have uniform character and quality within specified limits, and
(b) is produced according to a single manufacturing order during the same cycle
of manufacture.

        1.7 "CALENDAR YEAR" shall mean each consecutive twelve (12) month period
beginning January 1 and ending December 31.

        1.8 "COMPONENTS" shall mean, with respect to a Drug Product, all raw
material, API, primary packaging, secondary packaging and labeling to be used in
the Manufacture of such Drug Product hereunder.

        1.9 "COMPONENT SPECIFICATIONS" shall mean the written specifications for
each Component for each Drug Product to be Manufactured hereunder, as set forth
in the applicable Drug Product Appendix.

        1.10 "CONTRACTOR'S CAPACITY" means, with respect to each Drug Product to
be Manufactured by Contractor hereunder, Contractor's Manufacturing capacity for
such Drug Product, as set forth in the applicable Drug Product Appendix.

        1.11 "CONTRACTOR COMPONENTS" shall mean, with respect to each Drug
Product to be Manufactured hereunder, those Components for such Drug Product
that Contractor is obligated to supply as set forth in the applicable Drug
Product Appendix.

        1.12 "CURRENT GOOD MANUFACTURING PRACTICES" OR "CGMP" shall mean: (a)
the good manufacturing practices required by the FDA and set forth in the FD&C
Act or FDA regulations (including without limitation 21 CFR 210 and 211),
policies, or guidelines, in effect at any time during the term of this
Agreement, for the manufacture and testing of pharmaceutical materials as
applied to bulk pharmaceuticals and Drug Products, and (b) the corresponding
requirements of each applicable Regulatory Authority.

        1.13 "DEVELOPMENT PLAN" shall mean, with respect to a Drug Product to be
Manufactured hereunder, the detailed development plan describing the research
and development activities to be performed by Contractor hereunder, as further
described in Section 2.1.

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        1.14 "DRUG PRODUCT" shall mean formulated API filled into vials,
syringes and/or other designated containers, in final packaged and labeled form.

        1.15 "DRUG PRODUCT APPENDIX" shall mean, for each Drug Product to be
Manufactured hereunder, the Drug Product Specifications, the price per Unit and
the process development, validation and Manufacturing activities to be performed
by Contractor for such Drug Product, including without limitation the testing
programs and development schedules, to be agreed upon by the Parties as further
described in Section 2.4. The documentation comprising the Drug Product
Appendices shall be attached and incorporated herein as Schedule 1.15 hereto,
and may be amended only by the Parties' written agreement.

        1.16 "DRUG PRODUCT SPECIFICATIONS" shall mean the written specifications
for the Manufacture of a Drug Product hereunder, as detailed in the applicable
Drug Product Appendix.

        1.17 "FACILITY" shall mean Contractor's Manufacturing facility located
at 927 South Curry Pike, Bloomington, Indiana.

        1.18 "FDA" shall mean the United States Food and Drug Administration or
any successor entity thereto.

        1.19 "FD&C ACT" shall mean the United States Federal Food, Drug and
Cosmetic Act, as may be amended from time to time.

        1.20 "IDENTIFICATION TESTING STANDARDS" means the identification
standards for each Drug Product to be Manufactured hereunder as set forth in the
applicable Drug Product Appendix.

        1.21 "IND" shall mean an Investigational New Drug Application filed with
the FDA, or a corresponding application filed with any other Regulatory
Authority.

        1.22 "INITIAL DRUG PRODUCT" shall mean the formulation of [***], as
further described in the Initial Drug Product Appendix.

        1.23 "INITIAL DRUG PRODUCT APPENDIX" shall mean the [***] Drug Product
Appendix attached as part of Schedule 1.15 as of the Effective Date.

        1.24 "IP" shall mean any and all inventions, improvements, information
and know-how, including without limitation those related to processes,
compositions of matter and methods of use, made by or on behalf of either Party
individually or jointly, that arise out of the performance of this Agreement or
pursuant to work conducted by Contractor on behalf of PCYC prior to the
Effective Date, whether protectable by patent or as a trade secret, and all
intellectual property rights therein and thereto.

        1.25 "LICENSED TECHNOLOGY" shall mean all patents (including without
limitation, reissues, re-examinations and inventor's certificates) covering the
Manufacture of the Drug Products hereunder, and all information, trade secrets
and know-how related thereto, that PCYC possesses as of the Effective Date or
acquires during the term of this Agreement, whether by

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

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ownership, co-ownership or license, and to which PCYC has the right to grant a
license or sublicense to Contractor hereunder.

        1.26 "MANUFACTURE" OR "MANUFACTURING" shall mean the formulation,
filling, sealing, sterilizing, packaging, testing and labeling of Drug Products,
the storage and testing of Components and the storage of in-process Drug
Products.

        1.27 "MANUFACTURING TECHNOLOGY" shall mean (a) all Contractor IP (as
defined in Section 11.3.2) and Contractor's interest all jointly-owned IP (as
defined in Section 11.3.3) that is necessary or useful for the Manufacture of
Drug Products, and (b) all patents (including without limitation reissues,
re-examinations and inventor's certificates) covering any IP described in
subclause (a) above.

        1.28 "MASTER BATCH RECORD" shall mean, with respect to each Drug Product
to be Manufactured hereunder, the formal set of instructions for the Manufacture
of such Drug Product, as further described in Section 6.1.

        1.29 "MATERIAL SUPPLY BREACH" shall mean, on a Drug Product-by-Drug
Product basis, a failure of Contractor to supply to PCYC both (a) at least [***]
of PCYC's binding forecasted requirements of such Drug Product (or actual orders
placed pursuant to Section 3.4, if less) that are due for delivery during the
then-current calendar quarter; and (b) at least [***] of PCYC's binding
forecasted requirements for such Drug Product pursuant to Section 3.3.2 (or
actual orders placed pursuant to Section 3.4, if less) for delivery in the
immediately preceding calendar quarter. Solely for purposes of Section 3.7.2,
but for no other purpose hereunder, "Material Supply Breach" shall include
Contractor's failure to supply such Drug Product as described in the preceding
sentence due to a Force Majeure Event (as defined in Article 13); provided,
however, that no Material Supply Breach shall be deemed to have occurred in the
event that Contractor's failure to supply such Drug Product as described in (a)
or (b) above is a direct result of the failure of PCYC or its designated
suppliers to supply conforming API or other PCYC Components within the time
period required for Contractor's timely Manufacture hereunder.

        1.30 "MINIMUM ORDER COMMITMENT" shall have the meaning ascribed in
Section 3.3.4.

        1.31 "NDA" shall mean a New Drug Application filed with the FDA or any
other regulatory filing necessary to obtain marketing approval from a Regulatory
Authority.

        1.32 "PACKAGING SPECIFICATIONS" shall mean, with respect to each Drug
Product to be Manufactured hereunder, the written specifications for the primary
packaging (i.e. the immediate Drug Product container and sealing device) and
secondary packaging (i.e. the cartons, inserts, labels and other external
packaging) for such Drug Product as described in the applicable Drug Product
Appendix.

        1.33 "PCYC COMPONENTS" shall mean, with respect to a particular Drug
Product, those Components for such Drug Product that PCYC is obligated to supply
as set forth in the applicable Drug Product Appendix.

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

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        1.34 "PRIMARY SOURCE CONTRACT REQUIREMENTS" shall mean [***] of PCYC's
requirements of each Drug Product for which the Parties have agreed upon a Drug
Product Appendix (as further described in Section 2.4) for sale and distribution
by PCYC in the Territories per Calendar Year, less the Secondary Source Contract
Requirements for such Drug Product as further described in Section 3.7.1;
provided that in no event shall the "Primary Source Contract Requirements" for
such Drug Product be greater than Contractor's Capacity for such Drug Product.

        1.35 "PROJECT PLAN" shall mean the plan setting forth the schedule for
the initial Manufacture of each Drug Product (i.e., prior to commercial
Manufacture), which shall be developed by Contractor and agreed to in writing by
PCYC, as further described in Section 2.2, and which shall be incorporated by
reference into this Agreement.

        1.36 "PURCHASE ORDERS" shall mean purchase orders from PCYC to
Contractor, which shall specify: (a) the number of Units of each Drug Product to
be Manufactured by Contractor, (b) the Purchase Price of such Drug Product as
set forth in the applicable Drug Product Appendix, (c) the dates on which such
Drug Product shall be shipped, and (d) the shipping address(es) designated by
PCYC.

        1.37 "PURCHASE PLAN" shall have the meaning ascribed in Section 3.3.2.

        1.38 "PURCHASE PRICE" shall mean the price per Unit of a Drug Product
Manufactured by Contractor hereunder as further described in Section 4.1.2.

        1.39 "QC SAMPLE" shall have the meaning ascribed in Section 5.1.

        1.40 "REGULATORY APPROVAL" shall mean all authorizations by the
appropriate Regulatory Authority necessary for commercial sale in a
jurisdiction, including without limitation approval of labeling, price,
reimbursement and Manufacturing.

        1.41 "REGULATORY AUTHORITY" shall mean, with respect to each Drug
Product to be Manufactured hereunder, any supranational, national, state or
local regulatory agency, department, bureau, commission, council or other
governmental entity in any applicable Regulatory Jurisdiction.

        1.42 "REGULATORY JURISDICTION" shall mean, with respect to each Drug
Product to be Manufactured hereunder, the United States, Canada and any other
jurisdiction set forth in the applicable Drug Product Appendix.

        1.43 "REGULATORY PLAN" shall mean the document containing regulatory
services and support for the development of regulatory submissions and
supporting documentation to be provided to PCYC by Contractor, which shall be
developed by Contractor and agreed to in writing by PCYC as further described in
Section 2.3, and shall be incorporated by reference into this Agreement.

        1.44 "RELEASED EXECUTED BATCH RECORD" shall mean the completed batch
record and associated deviation reports, investigation reports and certificates
of analysis created by

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

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Contractor for each Batch Manufactured hereunder, including written confirmation
that such batch record has been reviewed and approved by Contractor's quality
assurance unit.

        1.45 "SECONDARY SOURCE" shall mean a third party manufacturer of Drug
Product for PCYC.

        1.46 "SECONDARY SOURCE CONTRACT REQUIREMENTS" shall mean, with respect
to each Drug Product, those quantities of PCYC's annual requirements of such
Drug Product for sale and distribution by PCYC in the Territories for which PCYC
has the right to engage a Secondary Source to Manufacture, as determined
pursuant to Section 3.7.1.

        1.47 "TERRITORIES" shall mean, with respect to each Drug Product, the
United States of America, Canada and any additional territories set forth in the
applicable Drug Product Appendix.

        1.48 "TESTING STANDARDS AND PROCEDURES" shall mean, with respect to each
Drug Product Manufactured hereunder, the written standards and procedures for
evaluating compliance with the applicable Drug Product Specifications and
Component Specifications, as mutually agreed upon in writing by PCYC and
Contractor, and incorporated in the applicable Drug Product Appendix.

        1.49 "UNIT" shall mean an individually packaged dose of a Drug Product,
including by way of example, a vial, IV bag or pre-filled syringe, as specified
in the applicable Drug Product Appendix.

                                    ARTICLE 2

                       DEVELOPMENT AND MANUFACTURING PLANS

        2.1 DEVELOPMENT PLAN.

               2.1.1 If requested by PCYC, the Parties shall undertake a
Manufacturing process development project for one or more of the Drug Products
to be Manufactured by Contractor hereunder, consisting of the specific research
and development activities agreed upon by the Parties and detailed in a
Development Plan, subject to the terms of this Section 2.1. The Parties shall
use good faith, commercially reasonable diligent efforts to complete
successfully each such development project in accordance with the applicable
Development Plan. The Parties shall conduct each such development project in
accordance with a timetable that the Parties shall develop and which shall be
set forth in the applicable Development Plan.

               2.1.2 The Parties shall undertake a Manufacturing process
development project, as described in Section 2.1.1, for the Initial Drug
Product. Each Development Plan for the Initial Drug Product shall be developed
in accordance with Section 2.1.3, and shall comply with outline of research and
development activities set forth in the Drug Product Development Requirements in
the Initial Drug Product Appendix.

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               2.1.3 (a) Contractor shall prepare and deliver two (2) copies of
the first Development Plan for the Initial Drug Product to PCYC as soon as
possible following the Effective Date, but in no event later than thirty (30)
days following the Effective Date.

                      (b) For each Drug Product for which PCYC requests
Contractor to perform development services hereunder, other than the Initial
Drug Product, Contractor shall prepare and deliver two (2) copies of each
proposed Development Plan to PCYC as soon as possible following its receipt of
PCYC's request for development services, but in any event, no later than sixty
(60) days from the date that such request was received.

                      (c) Following receipt of Contractor's proposed Development
Plan under subsection (a) or (b) above, PCYC shall either sign such Development
Plan and return one (1) copy to Contractor or shall return an amended
Development Plan acceptable to PCYC, in each case within five (5) business days
of receipt of such Development Plan from Contractor. If such amended Development
Plan is not acceptable to Contractor, then Contractor shall so notify PCYC
within five (5) business days of Contractor's receipt of such amended
Development Plan, and the Parties shall promptly meet in order to resolve in
good faith any outstanding disagreements with respect to such amended
Development Plan. In no event shall Contractor be required to schedule any
development activities under this Section 2.1 with respect to any Drug Product
until a Development Plan for such Drug Product has been approved in writing by
both PCYC and Contractor. Notwithstanding the foregoing, in the event that the
Parties are unable to reach agreement using good-faith efforts with respect to a
particular Development Plan within ninety (90) days from the date of request (or
ninety (90) days from the Effective Date in the case of the first Development
Plan for the Initial Drug Product), then either Party shall have the right to
terminate this Agreement with respect to the Drug Product that is the subject of
such Development Plan upon written notice to the other Party.

        2.2 PROJECT PLAN. Contractor shall deliver two (2) copies of each
Project Plan to PCYC at least six (6) calendar weeks prior to the date of
initial Manufacture of the applicable Drug Product. PCYC shall either sign such
Project Plan and return one (1) copy to Contractor or shall return an amended
Project Plan acceptable to PCYC, in each case within five (5) business days of
receipt of such Project Plan from Contractor. If such amended Project Plan is
not acceptable to Contractor, then Contractor shall so notify PCYC within five
(5) business days of Contractor's receipt of such amended Project Plan, and the
Parties shall promptly meet in order to resolve in good faith any outstanding
disagreements with respect to such amended Project Plan. In no event shall
Contractor be required to schedule the Manufacture of any Drug Product until a
Project Plan for such Drug Product has been approved in writing by both PCYC and
Contractor.

        2.3 REGULATORY PLAN. Contractor shall deliver two (2) copies of the
Regulatory Plan for each Drug Product to PCYC at least fourteen (14) calendar
days prior to the date that Contractor is to initiate Manufacture of the
registration batches of the applicable Drug Product. PCYC shall either sign such
Regulatory Plan and return one (1) copy to Contractor or shall return an amended
Regulatory Plan acceptable to PCYC, in each case within five (5) business days
of receipt of such Regulatory Plan from Contractor. If such amended Regulatory
Plan is not acceptable to Contractor, then Contractor shall so notify PCYC
within five (5) business days of Contractor's receipt of such amended Regulatory
Plan, and the Parties shall promptly meet in

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order to resolve in good faith any outstanding disagreements with respect to
such amended Regulatory Plan. Contractor shall not commence Manufacture of any
registration batches of a Drug Product until the Regulatory Plan for such Drug
Product has been agreed upon by the Parties. Notwithstanding the foregoing, in
the event that the Parties are unable to reach agreement using good-faith
efforts with respect to a particular Regulatory Plan within ninety (90) days
from the date of request, then PCYC shall have the right to engage a third party
to perform the regulatory work with respect to the Drug Product that is the
subject of such Regulatory Plan upon written notice to Contractor, and
Contractor shall cooperate reasonably with such third party in its conduct of
such regulatory work.

        2.4 DRUG PRODUCT APPENDICES. For each Drug Product to be Manufactured by
Contractor hereunder, the Parties shall agree in writing upon a Drug Product
Appendix. As of the Effective Date, the Parties have agreed to the Initial Drug
Product Appendix. For all Drug Products which PCYC desires Contractor to
Manufacture hereunder, other than the Initial Drug Product, PCYC shall prepare
and deliver to Contractor two (2) copies of the corresponding Drug Product
Appendix. Contractor shall either sign such Drug Product Appendix and return one
(1) copy to PCYC, or shall return an amended Drug Product Appendix acceptable to
Contractor, in each case within five (5) business days of receipt of such Drug
Product Appendix from PCYC. If such amended Drug Product Appendix is not
acceptable to PCYC, then PCYC shall so notify Contractor within five (5)
business days of PCYC's receipt of such amended Drug Product Appendix, and the
Parties shall promptly meet in order to resolve in good faith any outstanding
disagreements with respect to such amended Drug Product Appendix. In no event
shall Contractor be required to schedule Manufacture with respect to any Drug
Product until a Drug Product Appendix for such Drug Product has been approved in
writing by both PCYC and Contractor. Notwithstanding the foregoing, in the event
that the Parties are unable to reach agreement using good-faith efforts with
respect to a particular Drug Product Appendix within ninety (90) days from the
date of request, then either Party shall have the right to terminate this
Agreement with respect to the Drug Product that is the subject of such Drug
Product Appendix upon written notice to the other Party.

        2.5 AMENDMENT OF PLANS AND DRUG PRODUCT APPENDICES. The Development
Plans, Project Plans, Regulatory Plans and Drug Product Appendices each may be
amended from time to time, as the Parties' experience with the development,
Manufacture, testing and use of the applicable Drug Product warrants, upon
mutual written agreement of PCYC and Contractor.

        2.6 NO AMENDMENT OF AGREEMENT. In the event that the terms of any
Development Plan, Project Plan, Regulatory Plan or Drug Product Appendix are
inconsistent with the terms of this Agreement, this Agreement shall control,
unless otherwise explicitly agreed to in writing by the Parties. No Development
Plan, Project Plan, Regulatory Plan or Drug Product Appendix shall be deemed to
amend this Agreement.

        2.7 EFFECT OF TERMINATION UNDER SECTIONS 2.1.3(c) OR 2.4. No termination
under Section 2.1.3(c) or 2.4 with respect to a particular Drug Product will
relieve either Party of any obligation accruing with respect to such Drug
Product prior to such termination. In the event that PCYC terminates this
Agreement with respect to a particular Drug Product pursuant to Section 2.1.3(c)
or 2.4, then PCYC shall reimburse Contractor for all documented, reasonable

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noncancellable costs incurred by Contractor for work performed with respect to
such Drug Product in accordance with PCYC's written request.

                                    ARTICLE 3

                 PURCHASE AND SUPPLY OF DRUG PRODUCT; FORECASTS.

        3.1 AGREEMENT TO PURCHASE AND SUPPLY.

               3.1.1 During the term of this Agreement, PCYC agrees to purchase
from Contractor and Contractor agrees to Manufacture, sell, deliver and invoice,
pursuant to the terms and conditions of this Agreement, including without
limitation the applicable Drug Product Appendix, such quantities of each Drug
Product as may be set forth on Purchase Orders placed by PCYC and accepted by
Contractor for sale by PCYC. PCYC shall purchase at least the Primary Source
Contract Requirements of such Drug Product from Contractor and Contractor shall
Manufacture, sell, deliver and invoice such Primary Source Contract Requirements
to PCYC, except as set forth in Sections 3.3.3, 3.3.5, 3.7.2 and 5.3.2.
Contractor acknowledges and agrees that PCYC shall have no obligation under this
Section 3.1 with respect to any Drug Product for which the Parties have not
entered into a Drug Product Appendix. Notwithstanding the foregoing, PCYC shall
not contract with any third party for the Manufacture of any Drug Product for
sale and distribution by PCYC in the Territories if the Parties have agreed upon
a Development Plan for such Drug Product pursuant to Section 2.1.3(c), except as
permitted pursuant to Section 3.7; provided that Contractor is performing in
accordance with such Development Plan; and provided further that Contractor
demonstrates to PCYC's reasonable satisfaction that Contractor is capable of
Manufacturing sufficient amounts of such Drug Product in accordance with the
warranties set forth in Section 8.2 to meet PCYC's requirements in the
applicable Territories.

               3.1.2 If PCYC wishes to have Contractor Manufacture a Drug
Product for distribution or sale outside of the Territories, then PCYC shall so
notify Contractor and Contractor shall Manufacture such Drug Product in
accordance with this Agreement. If such Drug Product requires specifications
different from those required in the applicable Regulatory Jurisdictions for
such Drug Product, then the Parties agree to work together to achieve mutually
satisfactory development objectives and identification of associated costs,
which costs shall be set forth in the applicable Drug Product Appendix. In no
event will Contractor be required to Manufacture Drug Products for sale outside
of the Territory unless otherwise agreed in the applicable Drug Product
Appendix.

        3.2 SUPPLY OF COMPONENTS.

               3.2.1 Contractor shall supply, at its expense, all Contractor
Components necessary to Manufacture each Drug Product. PCYC shall supply, at its
expense, all PCYC Components necessary to Manufacture each Drug Product
hereunder. PCYC, at its expense, shall deliver or cause to be delivered a
reasonably sufficient amount of API and other PCYC Components for each Drug
Product to the Facility at least thirty (30) days in advance of the date set
forth in the applicable Project Plan for Manufacture of such Drug Product, such
that Contractor can fill all Purchase Orders for such Drug Product then
outstanding. Upon receipt of

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the API and other PCYC Components as set forth above, Contractor shall review
the accompanying certificate of analysis and test the API and other PCYC
Components for conformance with the Identification Testing Standards, in
accordance with the analytical test methods set forth in the applicable Drug
Product Appendix. Both the Identification Testing Standards and related
analytical test methods may be amended from time to time upon mutual written
agreement of PCYC and Contractor.

               3.2.2 Contractor shall, within fifteen (15) days of receipt of
the API and other PCYC Components, determine whether the API and other PCYC
Components meet the Identification Testing Standards, unless otherwise set forth
in the applicable Drug Product Appendix. If Contractor determines that such API
and other PCYC Components meet the Identification Testing Standards, then such
API and other PCYC Components shall be used by Contractor in performing its
Manufacture and supply obligations under this Agreement. If Contractor
determines that such API or other PCYC Component does not meet the
Identification Testing Standards, then Contractor shall make no use of such
non-conforming API or other PCYC Component and shall promptly confer with PCYC
to determine how to proceed. Contractor shall return or destroy any
non-conforming API or other PCYC Component as directed by PCYC in writing and at
PCYC's expense.

               3.2.3 From the time of delivery of API and other PCYC Components
to Contractor until (a) delivery by Contractor of Drug Product, or (b) return,
destruction or rework of API or other PCYC Component by Contractor that do not
meet the Identification Testing Standards, each in the manner provided in this
Agreement, Contractor shall use commercially reasonable care and comply with all
applicable laws, rules, regulations and guidelines in the use, storage, handling
and transportation of such API and other PCYC Components. PCYC shall retain all
right, title and interest to all API and other PCYC Components at all times
during the term of this Agreement. Cook shall not (i) sell, provide or transfer
any Drug Product to any third party, nor (ii) use, allow any third party to use
nor otherwise dispose of any Drug Product, except in each case as specifically
set forth in this Agreement or as expressly authorized by PCYC in writing. PCYC
shall bear all risk of damage or loss to all API and other PCYC Components and
all Drug Products, except to the extent such damage or loss is caused by the
negligence or willful misconduct of Contractor or its subcontractors hereunder.

        3.3 FORECASTS.

               3.3.1 For each Calendar Year during which PCYC intends for
Contractor to Manufacture a Drug Product hereunder, PCYC shall use commercially
reasonable efforts to provide Contractor with a preliminary, non-binding
forecast of the number of Units of such Drug Product that PCYC anticipates
marketing in the Territories during such Calendar Year no later than November 1
of the year preceding such Calendar Year; provided that for the first Calendar
Year in which PCYC intends for Contractor to Manufacture such Drug Product, PCYC
shall use commercially reasonable efforts to provide such preliminary,
non-binding forecast at least sixty (60) days prior to its submission of its
first Purchase Plan for such Drug Product.

               3.3.2 Commencing at or, at PCYC's election, prior to the time at
which PCYC receives notice of the first Regulatory Approval in the Territories
of each Drug Product to be Manufactured hereunder, PCYC shall provide to
Contractor at the beginning of each calendar

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quarter a written rolling twelve (12) month forecast of the quantities of such
Drug Product it intends in good faith to purchase under this Agreement during
such 12 month period (each such forecast, a "Purchase Plan"). The first Purchase
Plan provided for such Drug Product for each Calendar Year (the "Annual
Forecast") shall also contain a detailed monthly forecast for each form of such
Drug Product to be Manufactured during such Calendar Year and each country for
which such Drug Product is to be Manufactured. The Purchase Plan shall supersede
any existing Project Plan for the relevant Drug Product to the extent
applicable. PCYC shall have the right, but not the obligation, to provide such
Purchase Plans, and to place Purchase Orders for and purchase Drug Product in
quantities in excess of those set forth in its Purchase Plans; provided that
Contractor shall have no obligation to accept and fulfill any Purchase Order not
covered by a Purchase Plan except to the extent provided in Section 3.3.3. The
total quantity of Drug Product forecasted for the initial calendar quarter
covered by each Purchase Plan shall be considered a firm commitment on the part
of PCYC, except as set forth in Section 3.3.5.

               3.3.3 During any Calendar Year, Contractor shall have no
obligation to provide any quantity of a Drug Product in excess of [***] of the
Annual Forecast for such Drug Product for such Calendar Year, but shall use all
reasonable efforts to supply PCYC such additional quantities of such Drug
Product as may be ordered by PCYC. Contractor shall have no obligation to supply
any quantity of Drug Product to PCYC to the extent that such quantity is in
excess of Contractor's Capacity for such Drug Product, subject to Contractor's
obligation to so notify PCYC and PCYC's right to purchase such excess amounts of
such Drug Product from a Secondary Source as set forth in the following
sentence. In the event that Contractor is unable to supply any amount of Drug
Product to PCYC for any reason, Contractor shall notify PCYC as soon as
possible, whereupon the Primary Source Contract Requirement for such Drug
Product shall be reduced by such amount, and the Secondary Source Contract
Requirement for such Drug Product shall be commensurately increased.

               3.3.4 (a) In the event that PCYC, during any Calendar Year
following Regulatory Approval of a Drug Product by the FDA, orders less than the
Minimum Order Commitment for such Drug Product (as defined in subsection (b)
below) during such Calendar Year, PCYC shall pay to Contractor an amount equal
to [***] (the "Shortfall"), within thirty (30) days of receipt of invoice.
PCYC's payment to Contractor for the Shortfall pursuant to this Section 3.3.4
shall be Contractor's sole and exclusive remedy for PCYC's failure to order at
least the Minimum Order Commitment of a Drug Product during a Calendar Year.

                     (b) For each Drug Product Manufactured hereunder, and
except as set forth in subsection (c) below, the "Minimum Order Commitment" for
the entirety of the applicable Territories for each Calendar Year shall be the
following percentage of the number of Units set forth in the Annual Forecast
(the "Purchase Plan Units");

                             (i) The Minimum Order Commitment shall be [***] of
the Purchase Plan Units for the Calendar Year in which such Drug Product first
receives Regulatory Approval in the Territories. If the date of such Regulatory
Approval is on or after July 1 of such Calendar Year, then the Minimum Order
Commitment shall also be [***] of the Purchase Plan Units for the following
Calendar Year (in total, the "[***] Period");

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       11
<PAGE>   12

                             (ii) For the first Calendar Year following the
[***] Period described in subsection (i) above, the Minimum Order Commitment
shall be [***] of the Purchase Plan Units;

                             (iii) For the second Calendar Year following the
[***] Period described in subsection (i) above and thereafter, the Minimum Order
Commitment shall be [***] of the Purchase Plan Units.

                      (c) Notwithstanding subsection (b) above, and solely with
respect to the Initial Drug Product, in the event the Initial Drug Product has
not received Regulatory Approval in the Territories by December 31, 2000, then
the Minimum Order Commitment for the Initial Drug Product for the entirety of
the Territories shall be calculated as follows:

                             (i) The Minimum Order Commitment shall be [***] of
the Purchase Plan Units for the Calendar Year in which such Drug Product first
receives Regulatory Approval in the Territories. If the date of such Regulatory
Approval is on or after July 1 of such Calendar Year, then the Minimum Order
Commitment shall also be [***] of the Purchase Plan Units for the following
Calendar Year (in total, the "[***] Period");

                             (ii) For the first Calendar Year following the
[***] Period described in subsection (i) above and thereafter, the Minimum Order
Commitment shall be [***] of the Purchase Plan Units.

                      (d) The Minimum Order Commitment may be adjusted with
respect to one or more countries in the applicable Territories, as further
described in Section 3.3.5(a).

               3.3.5 Notwithstanding Section 3.3.4, in the event that PCYC is
required by a Regulatory Authority to cease the sale of a Drug Product in a
country or countries, then the following shall apply:

                      (a) The Minimum Order Commitment for such Drug Product
with respect to such country(ies) shall be deemed to be [***] of the Units of
such Drug Product forecast for such country(ies) under the Annual Forecast for
the Calendar Year in which such order or notice of such withdrawal was received
by PCYC occurred (the "Cessation Year"); provided that the Minimum Order
Commitment shall remain at the levels set forth in Section 3.3.4(b) for the
remainder of the applicable Territories during the Cessation Year. Following the
Cessation Year, the Minimum Order Commitment for each Calendar Year for the
entirety of the applicable Territories shall be deemed to be [***] of the
Purchase Plan Units for each such Calendar Year.

                      (b) PCYC shall have the right to cancel all Purchase
Orders placed for such Drug Product for such country under the relevant Purchase
Plan for the first ninety (90) day period following the date that such order or
notice of such withdrawal was received by PCYC (the "Cessation Date") upon
written notice to Contractor within ten (10) days following the Cessation Date
(the "Cancellation Notice"), subject to Section 3.5. Notwithstanding the
foregoing, PCYC shall remain obligated to purchase at the applicable Purchase
Price any Batch of such Drug Product Manufactured by Contractor, or for which
Contractor has commenced Manufacture (i.e. for which Contractor has put the
relevant API into formulation), prior to

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       12
<PAGE>   13
Contractor's receipt of the Cancellation Notice, subject to PCYC's receipt and
acceptance of such Batch. All Drug Product purchased by PCYC pursuant to this
subsection (a) shall accrue towards the Minimum Order Commitment for such Drug
Product.

                      (c) At PCYC's sole election and discretion, PCYC may
terminate this Agreement with respect to the Manufacture and supply of such Drug
Product for such countries within ninety (90) days of the end of the calendar
quarter in which the Cessation Date falls by providing written notice thereof to
Contractor, which notice shall specify the country(ies) to which such
termination shall apply. Following Contractor's receipt of such notice, PCYC
shall have no further obligations or liability hereunder, including without
limitation its obligations under Section 3.3.4, with respect to such Drug
Product for such country(ies); provided that:

                             (i) PCYC shall reimburse Contractor for its costs
relating to any binding Purchase Orders placed for such Drug Product and
cancelled as a result of such termination in accordance with Section 3.5;

                             (ii) PCYC shall remain obligated to purchase at the
applicable Purchase Price any Batch of such Drug Product Manufactured by
Contractor, or for which Contractor has commenced Manufacture (i.e. for which
Contractor has put the relevant API into formulation), prior to Contractor's
receipt of such notice of termination, subject to PCYC's receipt and acceptance
of such Batch. All Drug Product purchased by PCYC pursuant to this subsection
(ii) shall accrue towards the Minimum Order Commitment for such Drug Product;
and

                             (iii) in the event that PCYC has not met the
Minimum Order Commitment for such Drug Product as of the date of such
termination, as adjusted under this Section 3.3.5 (i.e. the Minimum Order
Commitment for such Drug Product for such country(ies) calculated in accordance
with subsection (b) above plus the Minimum Order Commitment for such Drug
Product for the remainder of the Territories calculated in accordance with
Section 3.3.4(b)), then:

                                    (1) PCYC shall pay to Contractor within
thirty (30) days of the effective date of such termination an amount equal to
[***] of the aggregate Purchase Price for the unpurchased Units of such Drug
Product remaining from such adjusted Minimum Order Commitment as of such date as
an advance payment against such adjusted Minimum Order Commitment.

                                    (2) For the remainder of such Calendar Year,
until PCYC has purchased sufficient quantities of such Drug Product to meet such
adjusted Minimum Order Commitment, the Purchase Price for such Drug Product
shall be reduced by [***]. Thereafter, the full Purchase Price set forth in the
applicable Drug Product Appendix shall once again apply.

                                    (3) In the event that PCYC has not met such
adjusted Minimum Order Commitment by the end of such Calendar Year, then PCYC
shall pay to Contractor an amount equal to [***] of the aggregate Purchase Price
for the unpurchased Units

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       13
<PAGE>   14

of such Drug Product remaining from such adjusted Minimum Order Commitment
within thirty (30) days of receipt of invoice.

                      Solely for purposes of example:

                      -   [***]

        3.4 PURCHASE ORDERS. All purchases of Drug Products shall be made
pursuant to written Purchase Orders which shall be delivered to Contractor at
least ninety (90) days in advance of the date of shipment specified in said
Purchase Order. To the extent that the terms of a Purchase Order are
inconsistent with the terms of this Agreement, this Agreement shall control.
Contractor shall ship all Drug Products as set forth in Section 5.5 by the date
and in the quantities specified in the applicable Purchase Order. Contractor
shall be obligated to accept any Purchase Order within the range of permitted
variation in the forecasted quantities as set forth in Section 3.3.3. Any other
Purchase Order shall be binding on Contractor only if it is accepted by
Contractor, which acceptance shall not be unreasonably withheld. PCYC shall be
obligated to buy and Contractor shall be obligated to sell only the quantities
of Drug Product which are subject to a Purchase Order accepted by Contractor.
Any Purchase Order (or portion thereof) for which PCYC has not received a
written rejection from Contractor within fifteen (15) business days of
Contractor's receipt of such Purchase Order shall be deemed accepted by
Contractor. In the event that Contractor rejects any Purchase Order or portion
thereof in accordance with Section 3.3.3, the Primary Source Contract
Requirements for such Drug Product shall be reduced by such rejected amount, and
the Secondary Source Contract Requirements for such Drug Product shall be
commensurately increased.

        3.5 AMENDMENT OR CANCELLATION OF PURCHASE ORDER.

               3.5.1 Subject to Section 3.4, PCYC may amend or cancel any
Purchase Order by providing Contractor written notice of such amendment or
cancellation no later than fifteen (15) calendar days after Contractor's
acceptance of the original Purchase Order or as provided in Section 3.3.5.

               3.5.2 In the event that PCYC amends or cancels any Purchase
Order, PCYC shall reimburse Contractor for any non-cancelable, out-of-pocket
costs reasonably incurred by Contractor in fulfilling such amended or canceled
Purchase Order up to the time of Contractor's receipt of such notice of
amendment or cancellation, subject to the terms of this Section 3.5. In the case
of an amended Purchase Order, such reimbursement shall only be made to the
extent of costs that will not be recovered by Contractor upon payment for
quantities of Drug Product delivered under the amended Purchase Order. Such
reimbursement shall include without limitation the actual cost of any excess or
obsolete materials purchased by Contractor for its performance of a binding
Purchase Order. PCYC shall also reimburse Contractor for the actual cost of any
such excess or obsolete materials that are unique to the Drug Product and are
purchased by Contractor based upon the Purchase Plans described in Section 3.3,
but only to the extent that the quantities of Drug Product forecasted for such
period exceed the quantities covered by Purchase Orders. At PCYC's election,
Contractor shall deliver to PCYC any materials for which PCYC has reimbursed
Contractor pursuant to this Section 3.5.2.

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       14
<PAGE>   15

               3.5.3 Notwithstanding any other provision of this Section 3.5,
PCYC's reimbursement obligations under this Section 3.5 for any materials shall
apply only to the extent that such materials cannot reasonably be used by
Contractor in fulfilling a subsequent Purchase Order or in fulfilling purchase
orders for other customers.

               3.5.4 PCYC's right to amend or cancel a Purchase Order shall not
affect its obligation to meet the Minimum Order Commitment under Section 3.3.4,
subject to Section 3.3.5.

        3.6 TESTING OF BATCHES BY CONTRACTOR. Contractor will test each Batch of
Drug Product in accordance with the applicable Testing Standards and Procedures,
and shall supply PCYC with a certificate of analysis confirming that such Batch
meets the Drug Product Specifications and Packaging Specifications at the time
of batch release if practicable, but in any event no later than with shipment of
such Batch in connection with commercial Manufacturing. Contractor shall hold
and store samples from each Batch as and for the period required under cGMP. If
Contractor notices any testing or material manufacturing discrepancies during
the Manufacturing of a Drug Product, Contractor shall promptly notify PCYC. PCYC
may retest a Drug Product as more fully set forth in Section 5.2 to confirm that
it meets the applicable Drug Product Specifications and Packaging
Specifications. The Drug Product Specifications, Packaging Specifications,
Testing Standards and Procedures and Drug Product Appendices each may be amended
from time to time, as the Parties' experience with the Manufacture, testing and
use of each Drug Product warrants, upon mutual written agreement of PCYC and
Contractor.

        3.7 SECONDARY SOURCES.

               3.7.1  ALLOCATION OF MANUFACTURING.

                      (a) PCYC reserves the right to secure the Manufacturing of
each Drug Product Manufactured by Contractor hereunder, or other forms of
manufacturing assistance, from a Secondary Source as provided in this Section
3.7. For the supply of such Drug Product covered by this Agreement that is to be
sold or distributed by PCYC in the Territories, PCYC shall receive no more than
its Secondary Source Contract Requirements for each Drug Product (as determined
in accordance with this Section 3.7.1) from Secondary Sources, except as set
forth in Section 3.7.2. Contractor acknowledges that PCYC requires at least one
Secondary Source to be qualified for each Drug Product as soon as possible
following the Effective Date, and thereafter during the term of this Agreement.

                      (b) The Secondary Source Contract Requirements for each
Drug Product shall initially be set at the minimum quantity of such Drug Product
necessary to qualify a Secondary Source to Manufacture such Drug Product during
the applicable Calendar Year (the "Qualification Amount," as determined in
subsection (c) below), and the Primary Source Contract Requirement shall be
reduced by such amount, except as follows: In the event that the Annual Forecast
for a Drug Product is less than twice the Qualification Amount, PCYC shall not
qualify such Secondary Source site for such Drug Product, and the Primary Source
Contract Requirements shall not be so reduced.

                                       15
<PAGE>   16

                      (c) As of the Effective Date, the "Qualification Amount"
shall be deemed to be [***] full-scale Batches of the applicable Drug Product
per Calendar Year Manufactured at the Secondary Source manufacturing site. In
the event that, at any time following the Effective Date, the then-current
Qualification Amount for such Drug Product is insufficient to maintain the
qualification of a Secondary Source to Manufacture such Drug Product for
Regulatory Approval, PCYC shall give Contractor written notice thereof. Upon
Contractor's receipt of such notice, the Qualification Amount for such Drug
Product automatically shall be increased to the minimum quantity of such Drug
Product necessary to qualify such Secondary Source for Regulatory Approval, and
the Primary Source Contract Requirements shall be commensurately reduced.

                      (d) [***]

                      (e) The Secondary Source Contract Requirements for each
Drug Product may be further adjusted as set forth in Sections 3.3.3, 3.4, 3.5
and 5.3.2.

               3.7.2  MATERIAL SUPPLY BREACH.

                      (a) In the event of a Material Supply Breach, PCYC shall
provide Contractor written notification of such Material Supply Breach. Upon
Contractor's receipt of such notice and failure to cure such Material Supply
Breach within twenty (20) calendar days of such notice, the Secondary Source
Contract Requirements for such Drug Product shall be increased by an amount
equal to Contractor's shortfall in fulfilling the Purchase Orders for such Drug
Product, and the Primary Source Contract Requirements for such Drug Product
shall be commensurately reduced.

                      (b) In the event that Contractor reasonably anticipates
that there is a substantial likelihood that a Material Supply Breach will occur,
Contractor shall promptly notify PCYC in writing thereof. Upon receipt of such
notice, the Parties shall promptly confer to discuss the circumstances and
magnitude of such potential Material Supply Breach, and to determine in good
faith whether there are any reasonable steps that Contractor could take to avoid
such Material Supply Breach. If PCYC is not reasonably satisfied that Contractor
will be able to avoid such Material Supply Breach, then the Secondary Source
Contract Requirements for such Drug Product shall be increased by an amount
equal to Contractor's good-faith projection of its shortfall in fulfilling the
Purchase Orders for such Drug Product, and the Primary Source Contract
Requirements for such Drug Product shall be commensurately reduced.

        3.8 CONTRACTOR'S FACILITY. All Manufacture of Drug Product hereunder
shall be conducted at the Facility. In the event that Contractor sells or
otherwise transfers ownership or control of the Facility to any third party or
Affiliate, such third party or Affiliate shall expressly assume Contractor's
obligations hereunder; provided, however, that any such assumption shall not
relieve Contractor of any liability for such third party's or Affiliate's
failure to perform under this Agreement. Contractor hereby expressly waives any
requirement that PCYC exhaust any right, power or remedy, or proceed against
such third party or Affiliate, for any obligation or performance hereunder prior
to proceeding directly against Contractor.

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       16
<PAGE>   17

                                    ARTICLE 4

                           PURCHASE PRICE AND PAYMENT.

        4.1 PURCHASE PRICE.

               4.1.1 Subject to the terms of this Section 4.1, PCYC shall pay
Contractor for development work as per the applicable Development Plan and for
regulatory work as per the applicable Regulatory Plan. For each Drug Product to
be used for commercial sale, PCYC shall pay Contractor the Purchase Price as
calculated in Section 4.1.2, which Purchase Price shall be deemed to be full
compensation for all work performed by Contractor relating to the Manufacture
and supply of such Drug Product hereunder, including without limitation all
Contractor Components used in such Manufacture, all inspection and testing
activities performed by Contractor and delivery of such Drug Product as set
forth in Section 5.5, unless expressly provided otherwise herein.

               4.1.2 For each Drug Product Manufactured and supplied by
Contractor to PCYC hereunder, the Purchase Price shall be based on the price per
Unit set forth in the Drug Product Pricing section of the applicable Drug
Product Appendix, in accordance with the incremental pricing schedule set forth
therein.

               4.1.3 Upon the first anniversary of the date of Regulatory
Approval of each Drug Product in the United States, and annually thereafter, the
Purchase Price of such Drug Product may be adjusted by written notice to PCYC to
reflect changes, as demonstrated by written records, in the costs of the
materials provided by Contractor for, or wages paid by Contractor directly
related to, the Manufacture of such Drug Product hereunder, which notice shall
set forth the amount of such increase and supporting documentation.
Notwithstanding the foregoing, such adjustment shall not result in an increase
in excess of the annual percentage increase for the most recent twelve (12)
month period for which figures are available in the Price Index, Pharmaceutical
Preparations, Ethical (Prescription), Commodity Code 06-35, issued by the Bureau
of Labor Statistics, U.S. Department of Labor.

        4.2 PAYMENT. All development work shall be invoiced in accordance with
the prices stated in the applicable Development Plan or Project Plan, which may
include Batches for clinical or experimental use. All regulatory work shall be
invoiced in accordance with the prices stated in the applicable Regulatory Plan.
Each Drug Product Manufactured and supplied hereunder for commercial sale shall
be invoiced at the Purchase Price at time of shipment for quantities actually
shipped (plus QC Samples and Contractor's GMP retains). Payments by PCYC shall
be made in U.S. dollars by check mailed to Contractor by regular first class
mail within thirty (30) days from the later of the date of shipment or PCYC's
receipt of invoice. In the event that PCYC rejects a Batch of a Drug Product
pursuant to Section 5.2, any amounts paid by PCYC for such rejected Drug Product
shall immediately, at PCYC's election, either be credited to PCYC's account or
refunded to PCYC. If payment is not promptly made by PCYC as set forth in this
Section 4.2, then:

               4.2.1 After ten (10) days written notice to PCYC of such payment
deficiency, Contractor may refuse all further orders until PCYC's account is
paid in full, unless PCYC, in

                                       17
<PAGE>   18
good faith, disputes Contractor's claim of such payment deficiency and is
otherwise paying its invoices on a current basis; and

               4.2.2 After thirty (30) days written notice to PCYC of such
payment deficiency, if PCYC has failed to cure such payment deficiency within
such thirty day period, Contractor may then terminate this Agreement, either in
its entirety or solely with respect to the Drug Product to which such payment
deficiency relates, with the effect set forth in Section 12.4 hereof, unless
PCYC, in good faith, disputes Contractor's claim of such payment deficiency and
is otherwise paying its invoices on a current basis.

        All late payments may bear interest at the rate of one and one half
percent (1.5%) per month from the designated due date.

        4.3 ADDITIONAL PAYMENTS.

               4.3.1 Additional work created by changes in manufacturing
schedules, odd lot sizes or non-compliance by PCYC with its material obligations
hereunder, which is directly attributable to PCYC, will be billed by Contractor
to PCYC separately; provided that such work and its associated costs have been
previously approved by PCYC in writing. If PCYC does not approve such additional
work and its associated costs, and such work is directly and solely attributable
to PCYC's noncompliance with its material obligations hereunder, then PCYC shall
promptly notify Contractor in writing that PCYC does not approve such work, and
shall pay Contractor a cancellation fee in the amount set forth in the
applicable Drug Product Appendix.

               4.3.2 Notwithstanding Section 4.3.1, in the event that Contractor
receives the API or other PCYC Components for the Manufacture of a Drug Product
from PCYC less than thirty (30) days prior to the scheduled date of Manufacture
of such Drug Product but sufficiently in time to permit Manufacture of such Drug
Product by such scheduled date, as reasonably determined by Contractor,
Contractor shall charge PCYC an additional fee of [***] and shall Manufacture
such Drug Product as per the original schedule. Such additional fee shall be
Contractor's sole and exclusive remedy for such late delivery of such API or
other PCYC Components.

        4.4 RECORDS. Contractor shall keep accurate records in sufficient detail
to permit the determination of all invoices and fees payable, credits due and
Units of Drug Product Manufactured hereunder. Within ten (10) days following a
request by PCYC, Contractor shall permit PCYC or its designee to examine such
records during ordinary business hours for the purpose of verifying the
correctness of any such invoices, fees, credits and Units. Contractor shall
retain such records for at least three (3) years from the date of each invoice
to which such records pertain or for such longer period as may be required by
any regulatory body. Such review shall be limited to once annually or more
frequently for cause, as defined in Section 6.2.5.

        4.5 ARTWORK. PCYC shall supply, at its own cost, all camera ready
artwork for labels (including art work for shipping labels) for each Drug
Product at least sixty (60) days prior to the shipping date. PCYC is responsible
for ensuring that all data and information supplied to Contractor for labeling
shall comply with the laws and regulations of the applicable Regulatory
Authority, and the reasonable cost of any changes requested by PCYC in such
labeling shall be

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       18
<PAGE>   19
borne by PCYC. Contractor hereby consents to the use of its name on any such
artwork, or otherwise on any packaging or labeling, only if required under the
FD&C Act or any comparable regulatory requirements of any agency of the United
States or any other Regulatory Authority, and in a manner approved by Contractor
in its sole, reasonable discretion.

                                    ARTICLE 5

                    DELIVERY AND ACCEPTANCE OF DRUG PRODUCT.

        5.1 QUALITY CONTROL SAMPLE OF DRUG PRODUCT. Prior to the shipment of any
Batch of Drug Product, Contractor shall provide PCYC with (a) a quality control
sample of such Batch as specified in the applicable Drug Product Appendix (the
"QC Sample") for the purpose of confirming that such Batch meets the Drug
Product Specifications and Packaging Specifications; (b) one copy of the
corresponding Released Executed Batch Record, together with written confirmation
that such batch record has been reviewed and approved by Contractor's quality
assurance unit; and (c) a certificate of analysis for such Batch.

        5.2 ACCEPTANCE AND REJECTION OF DRUG PRODUCT.

               5.2.1 PCYC may reject any Batch delivered hereunder that does not
conform with the applicable Project Plan, Master Batch Record, Contractor's
standard operating procedures, certificate of analysis, Drug Product
Specifications or Packaging Specifications (collectively, the "Specifications")
based upon PCYC's testing of the QC Sample in accordance with the Testing
Standards and Procedures. Any such notice of rejection shall be in writing and
shall indicate the reasons for such rejection. Such notice is to be delivered to
Contractor within fifteen (15) days from PCYC's receipt of the QC Sample from
the designated carrier. If no such notice of rejection is received, then PCYC
shall be deemed to have accepted such Batch at the end of such fifteen-day
period and to have waived its right to revoke acceptance, subject to Section
7.3.

               5.2.2 (a) After notice of rejection is given, PCYC shall
cooperate with Contractor in determining whether rejection is necessary or
justified and deliver to Contractor a sample of the allegedly non-conforming QC
Sample for Contractor's evaluation. Contractor will evaluate process issues and
other reasons for such non-compliance. Contractor shall notify PCYC as promptly
as reasonably possible whether it accepts PCYC's basis for any rejection and
may, at Contractor's cost, inspect PCYC's or its designee's facilities to
confirm the testing results, which PCYC shall make reasonably available upon
Contractor's request.

                      (b) If Contractor disagrees with PCYC's determination that
a QC Sample does not meet the Specifications or that such alleged non-conformity
was caused by the acts or omissions of Contractor, such QC Sample shall be
submitted to a mutually acceptable, independent third party laboratory, or third
party consultant, if appropriate. Such third party laboratory or consultant
shall determine whether such QC Sample conforms to the Specifications. The
Parties agree that such third party laboratory's or consultant's determination
shall be final and determinative.

                                       19
<PAGE>   20

                             (i) If the third party laboratory or consultant
determines that such QC Sample meets the Specifications, or if it is otherwise
determined that the non-conformity was not caused by the acts or omissions of
Contractor, then PCYC shall be deemed to have accepted such Batch, and shall pay
for such Batch as set forth in Section 4.2.

                             (ii) If the third party laboratory or consultant
determines that such Drug Product does not meet the Specifications, and if it is
otherwise determined that such non-conformity was caused by the acts or
omissions of Contractor, then such Batch shall be deemed rightfully rejected,
and PCYC shall have no further obligation under this Agreement with respect to
such Batch. Any amounts paid by PCYC pursuant to Section 4.2 with respect to
such Batch and PCYC's out-of-pocket cost of the API and other PCYC Components
consumed in the Manufacture of the rejected Batch shall, at PCYC's election,
either be refunded to PCYC or credited to PCYC's account.

                             (iii) The Party against whom the third party
laboratory or consultant rules shall bear all costs of the third party
laboratory or consultant with respect to such testing of such Batch.

        5.3 REPLACEMENT BATCHES.

               5.3.1 Whether or not Contractor accepts PCYC's basis for
rejection under Section 5.2, promptly on receipt of a notice of rejection of a
Batch and receipt of API from PCYC, Contractor shall use reasonable efforts at
PCYC's written request to replace such rejected Batch, and PCYC shall purchase
such replacement Batch at the applicable Purchase Price, subject to its
acceptance of such Batch pursuant to Section 5.2. If Contractor does not accept
PCYC's basis for such rejection, then Contractor shall initially bear the
expenses of the independent third party laboratory or consultant described in
Section 5.2.2(b), subject to Section 5.2.2(b)(iii).

               5.3.2 In the event that Contractor does not give PCYC written
notice, within fifteen (15) days of its receipt of PCYC's written request, that
it will be able to replace such rejected Batch within a period of time
reasonably acceptable to PCYC, the Secondary Source Contract Requirements shall
be increased by the amount of such Batch, and the Primary Contract Source
Requirements for such Drug Product for that Calendar Year shall be
commensurately reduced. Notwithstanding the foregoing, if it is subsequently
determined pursuant to Section 5.2.2 that the rejected Batch does conform to the
applicable Specifications, then the Secondary Source Contract Requirements shall
be reduced, and the Primary Source Contract Requirements shall be increased, by
the amount of such Batch; provided that PCYC's purchase of a replacement Batch
from a Secondary Source shall not be deemed a breach of this Agreement.

        5.4 DESTRUCTION OF DRUG PRODUCT. Neither Party may destroy any Drug
Product alleged not to meet the Specifications until the third party laboratory
or consultant determines whether such Drug Product meets such Specifications and
provides written notification to the Parties with respect to such determination,
unless Contractor accepts PCYC's basis for such rejection. Thereafter,
Contractor shall have the obligation to destroy, or have destroyed, at its cost,
all such rejected Drug Product. Upon Contractor's written request and at
Contractor's cost,

                                       20
<PAGE>   21
PCYC shall return to Contractor any rejected Drug Product. The Parties agree
that in the event of destruction of Drug Product, the method of such destruction
shall be in compliance with all Federal, state and local laws, rules and
regulations.

        5.5 DELIVERY OF DRUG PRODUCT. All deliveries of Drug Product and QC
Samples shall be shipped FCA (INCOTERMS 1990) the Facility to a location
designated by PCYC. All Batches shall be so shipped within fifteen (15) days of
acceptance of each Batch pursuant to Section 5.2. PCYC shall be responsible for
all freight and delivery charges, including without limitation insurance
charges, and shall assume all risk of loss of the Drug Product and QC Samples
after transfer of possession to the designated carrier.

        5.6 PCYC COMPONENT NON-CONFORMITY.

               5.6.1 If any Batch is rejected by PCYC, and such Batch's failure
to meet the Specifications is a result of non-conforming API or other PCYC
Component, then PCYC shall be obligated to pay the full Purchase Price for such
rejected Batch, except as set forth in Section 5.6.2. Any disputes regarding the
rejection of such Batch shall be resolved by a third party laboratory or
consultant pursuant to Section 5.2.2.

               5.6.2 Where a rejected Batch's failure to meet the applicable
Specifications is a result of non-conforming API or other PCYC Components, and
such non-conformance of the API or other PCYC Components would have been
reasonably evident from the identification testing performed by Contractor
pursuant to Section 3.2.2, then PCYC shall supply Contractor with the applicable
API and other PCYC Components for such Batch, at PCYC's expense, and Contractor
shall Manufacture a replacement Batch of such Drug Product, as promptly as
reasonably possible and at Contractor's expense, and subject to PCYC's
acceptance thereof pursuant to Section 5.2. Contractor's Manufacture of such
replacement Batch pursuant to this Section 5.2.2 shall be PCYC's sole and
exclusive remedy for Contractor's failure to identify such non-conforming API or
other PCYC Component and its subsequent Manufacture of such non-conforming Drug
Product hereunder.

                                    ARTICLE 6

                         QUALITY ASSURANCE; REGULATORY.

        6.1 MASTER BATCH RECORD. Each Master Batch Record for each Drug Product
shall be prepared and maintained in Contractor's standard format by Contractor,
using PCYC's master formula and technical support. Each Master Batch Record
shall be subject to approval by Pharmacyclics' Chemical Operations and Quality
Assurance groups.

        6.2 AUDITS.

               6.2.1 PCYC shall have the right to conduct a general audit of the
Facility and of the equipment, system and processes used in the Manufacture of
the Drug Product to evaluate compliance with cGMP on a yearly basis, or more
frequently for cause as set forth in Section 6.2.5. PCYC may make
recommendations to Contractor based on such audit, and Contractor agrees to give
such recommendations good faith consideration. Contractor shall be

                                       21
<PAGE>   22

responsible for compliance with cGMP and shall promptly take such action as may
be necessary to bring said equipment, system, processes and Facility into
conformance therewith.

               6.2.2 In the event that PCYC notifies Contractor following an
audit under this Section 6.2 that Contractor is not in compliance with cGMP, and
Contractor disagrees with such finding, then the Parties shall engage a mutually
acceptable independent expert to audit Contractor and to determine whether
Contractor is cGMP compliant. The findings of such expert shall be final and
binding upon the Parties. The Party with whom such expert disagrees shall pay
the costs of such expert.

               6.2.3 Reasonable notice will be provided by PCYC to Contractor to
schedule the date of such audit. If Contractor needs to cancel such audit due to
events outside of Contractor's reasonable control (e.g., FDA inspection
unrelated to the Drug Product, act of God, etc.), Contractor will immediately
contact PCYC to re-schedule the audit.

               6.2.4 If PCYC requests additional audits which are not (a) due to
Contractor's compliance status, either with respect to cGMP or with the terms of
this Agreement, or (b) as a prerequisite to receipt of Regulatory Approval, then
PCYC shall reimburse Contractor for its reasonable, documented expenses incurred
in hosting such audit including time spent in preparation and follow-up, at the
rate of [***] per hour.

               6.2.5 PCYC shall also have the right to conduct such audits as
necessary for cause. For purposes of this Section 6.2.5 and Section 4.4, "for
cause" shall include without limitation the following: failure of Drug Product
to meet Drug Product Specifications or Packaging Specifications; adverse audit
or inspection observations from a Regulatory Authority; inadequate Batch
documentation; and lack of follow-up on outstanding actions items from previous
audits, where "adverse" shall mean [***]. Such "for cause" audits shall not be
unreasonably requested by PCYC, and approval therefor shall not be unreasonably
withheld or delayed by Contractor. PCYC's failure to exercise its right to audit
the Facility will not represent a waiver of any future exercise of this right or
of any other rights under this Agreement, nor does it represent acceptance of
any conditions past or present that might exist or result from such conditions
at the Facility.

        6.3 REGULATORY MATTERS; RECORDS.

               6.3.1 Contractor shall keep documentation and records in
accordance with the requirements of cGMP. Copies of all documentation and
information relating to the Manufacture, processing, packaging and shipping of
Drug Products and/or required to support PCYC's NDA (or IND, if appropriate) or
other regulatory submission, including but not limited to information relating
to Batch records, methods, equipment and the Facility, will be provided by
Contractor to PCYC for review and inclusion as necessary in its regulatory
submissions. Contractor shall maintain all records and documentation under this
Section 6.3 and any inspection samples and data for at least one (1) year past
the expiration dates of each Batch or for such longer period as may be required
by cGMP or other regulations promulgated by the Regulatory Authorities
applicable to the relevant Drug Product. Contractor shall invoice PCYC, and PCYC
shall pay Contractor, for such regulatory work as set forth in the applicable
Regulatory Plan.

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       22
<PAGE>   23

               6.3.2 PCYC shall have sole responsibility, at its expense, for
obtaining all permits and licenses necessary or required for the sale, marketing
and commercialization of Drug Products. Contractor shall be responsible, at its
expense, for obtaining and maintaining all permits and licenses required for it
to carry out its development, regulatory and Manufacturing obligations
hereunder. Contractor agrees to use commercially reasonable efforts to assist
PCYC in obtaining any Regulatory Approval which may be required for the
marketing of Drug Products in any country agreed to in the applicable Regulatory
Plan. Such efforts shall include, without limitation, (a) providing information
in Contractor's possession that is useful or required by PCYC to submit
regulatory filings or obtain permits or licenses with respect to Drug Products,
including all information necessary for PCYC to complete the CMC portions of its
regulatory filings; (b) allowing the use of Contractor's name in any such
filings; and (c) taking any and all other actions reasonably required to assist
in the licensing of Drug Products.

               6.3.3 Upon the request of any Regulatory Authority, such entity
shall have access to observe and inspect the Facility and Contractor's
procedures used for the Manufacture, testing or storage of any API or Drug
Product, including process development and Manufacturing operations, and to
audit such Facility for compliance with cGMP and/or other applicable regulatory
standards. Contractor shall give PCYC immediate notice of any upcoming
inspections or audits by a Regulatory Authority of the Facility relating to any
Drug Product Manufactured hereunder, and shall provide PCYC the opportunity to
be present at such inspection or audit. Access to the Facility may be subject to
reasonable restrictions customarily placed upon visitors to the site.

               6.3.4 Contractor also agrees to notify PCYC within two (2)
business days of any written or oral inquiries, notifications, or inspection
activity by any Regulatory Authority (or any third party authorized by a
Regulatory Authority) in regard to any Drug Product. Contractor shall provide a
reasonable description to PCYC of any such inquiries, notifications or
inspections promptly (but in no event later than five (5) business days) after
such visit or inquiry. Contractor shall furnish to PCYC (a) within two (2)
business days after receipt, any report or correspondence issued by the
Regulatory Authority (or a third party authorized by a Regulatory Authority) in
connection with such visit or inquiry, including but not limited to, any FDA
Form 483 (List of Inspectional Observations) or warning letter, and (b) not
later than five (5) business days prior to the time it provides to a Regulatory
Authority, copies of any and all proposed written responses or explanations
relating to items set forth above (each, a "Proposed Response"), in each case
purged only of trade secrets or other confidential or proprietary information of
Contractor that are unrelated to its obligations under this Agreement or are
unrelated to Drug Products. Contractor shall discuss with PCYC any comments
provided by PCYC on the Proposed Response and the Parties shall mutually agree
on those portions of the final written response or explanation to be provided to
the Regulatory Authority that have a material effect on any Drug Product
Manufactured hereunder. Notwithstanding the preceding sentence, in the event
that either PCYC fails to promptly respond to the comments of Contractor in
connection with preparation of the Proposed Response or a portion of such
response is likely to have a material effect on Contractor's customers other
than PCYC, then Contractor shall have the sole right to prepare such portion of
such response, provided that Contractor shall in good faith consider PCYC's
comments relating thereto and shall use reasonable efforts to incorporate such
comments. After the filing of a response with the appropriate Regulatory
Authority, Contractor will notify PCYC of any further contacts with a Regulatory
Authority relating to

                                       23
<PAGE>   24
Contractor's Manufacture of Drug Products. Contractor shall respond to all
inquiries made by a Regulatory Authority relating to Contractor's Manufacture of
Drug Products hereunder in a timely manner.

               6.3.5 Contractor shall promptly notify PCYC of any other
production issues or other information of which Contractor becomes aware that
affect the regulatory status of a Drug Product or the ability of Contractor to
supply a Drug Product in accordance with PCYC's forecasted requirements.

               6.3.6 Contractor agrees to take reasonable steps to rectify or
resolve any deficiencies noted by a Regulatory Authority (or a third party
authorized by a Regulatory Authority) in a report or correspondence issued to
Contractor, and that are based on Contractor's performance under this Agreement.

               6.3.7 Each Party shall promptly notify the other of new
regulatory requirements of which it becomes aware which are relevant to the
Manufacture of a Drug Product under this Agreement and which are required by the
FDA, other applicable Regulatory Authority or other applicable laws or
governmental regulations, and shall confer with each other with respect to the
best means to comply with such requirements.

        6.4 DRUG MASTER FILE. Contractor shall file and maintain the appropriate
Drug Master File ("DMF") for its Manufacture of each Drug Product hereunder in
accordance with 21 CFR 314.420, as may be amended from time to time, at
Contractor's expense. Contractor shall provide PCYC with letters of
authorization to reference such DMF in its filings with the FDA and other
Regulatory Authorities.

        6.5 STABILITY TESTING. Contractor shall be responsible for performing
stability testing of each commercial Drug Product.

        6.6 CHANGES IN MANUFACTURE.

               6.6.1 Contractor shall not alter any processing steps with
respect to the Manufacture of each Drug Product, as such steps are set forth in
the NDA, DMF (or IND, if appropriate), applicable Manufacturing protocols,
Master Batch Records or any other document governing such steps. Contractor may,
from time to time, suggest to PCYC changes Contractor may wish to make in the
Manufacture of a Drug Product, the location of Manufacture within the Facility,
the equipment used to Manufacture such Drug Product or the process used to
Manufacture such Drug Product. Contractor shall notify PCYC of any such
suggested changes via Contractor's change notice procedure, but shall not
implement any such changes until signature approval has been received from
PCYC's authorized quality assurance and manufacturing representatives designated
in the applicable Drug Product Appendix. PCYC shall have no obligation to accept
any such suggestions.

               6.6.2 Notwithstanding Section 6.6.1, Contractor may make purely
administrative changes to a Master Batch Record, provided that Contractor
notifies PCYC in writing and delivers a copy of the revised Master Batch Record
to PCYC at least ten (10) days prior to using such Master Batch Record in
Manufacturing the applicable Drug Product.

                                       24
<PAGE>   25

               6.6.3 In the event that the location of Manufacture within the
Facility is changed in conformance with Section 6.6.1, the costs of such change,
including without limitation the costs of any additional testing and of updating
regulatory submissions relating to the Manufacture of the Drug Products in such
new location (collectively, the "Moving Costs") shall be allocated as follows,
unless otherwise agreed by the Parties in writing:

                      (a) If such change is initiated at Contractor's written
request (for example, because such new location would be more convenient for
Contractor, or because PCYC's forecasts for a Drug Product regularly exceed
Contractor's Capacity and Contractor desires to increase the Primary Source
Contract Requirements for such Drug Product), then Contractor shall bear all
Moving Costs, provided that PCYC shall bear the costs of the API necessary for
conducting validation runs in such new location; and

                      (b) If such change of location is initiated at PCYC's
written request (for example, because PCYC desires that Contractor increase its
Manufacturing capacity and/or because of lower costs of Manufacture in such
location) then PCYC shall bear all Moving Costs, provided that such lower costs
are passed through to PCYC.

                      For clarity, neither (i) PCYC's mere approval of
Contractor's request for a change in the location of Manufacture, nor (ii)
PCYC's submissions of forecasts for a Drug Product in excess of Contractor's
Capacity for such Drug Product without an affirmative written request by PCYC
that Contractor increase its Manufacturing capacity for such Drug Product, shall
be deemed a request by PCYC that the location of Manufacture be changed.

               6.6.4 (a) If facility, equipment, process, or system changes are
required of Contractor as a result of requirements set forth by a Regulatory
Authority, where (i) such requirements are not in force as of the Effective Date
("Regulatory Changes"), (ii) such Regulatory Changes do not involve normal
upgrades for cGMP purposes, and (iii) such Regulatory Changes apply solely to
the Manufacture and supply of one or more Drug Products and not to other
products manufactured by Contractor for its own use or for third parties, then
PCYC and Contractor will review such requirements and agree in writing to such
Regulatory Changes, and PCYC shall bear one hundred percent (100%) of the
reasonable, documented costs thereof, subject to subsection (c) below.

                      (b) If such Regulatory Changes apply to one or more Drug
Products as well as to other products manufactured by Contractor for itself or
for third parties, and such Regulatory Changes do not involve normal upgrades
for cGMP purposes, then PCYC shall pay a pro rata amount of the full, reasonable
costs of such Regulatory Changes based upon the proportion of time that such
facility is dedicated to the Manufacture of such Drug Product relative to the
Manufacture of all such other products, subject to subsection (c) below.

                      (c) Contractor shall have sole responsibility of
implementing such Regulatory Changes. PCYC shall bear the reasonable, documented
costs of such Regulatory Changes as set forth in subsection (a) and (b) above,
subject to PCYC's prior written approval of such costs. Notwithstanding any
other provision of this Section 6.6.4, if PCYC, in its sole discretion,
determines that it does not desire to pay such costs, then PCYC shall have the
right to terminate this Agreement with respect to the Drug Product(s) that are
the subject of such

                                       25
<PAGE>   26
Regulatory Changes, on ninety (90) days prior written notice, in which event
PCYC shall pay Contractor a cancellation fee equal to the applicable aggregate
Purchase Price for the Minimum Order Commitment for such Drug Product for the
Calendar Year in which the effective date of such termination occurs, less the
number of Units of such Drug Product purchased by PCYC as of the effective date
of such termination. Such payment shall be Contractor's sole and exclusive
remedy with respect to such termination.

               6.6.5 (a) If Contractor is required to obtain specialized
equipment in order to Manufacture Drug Products for PCYC, the cost of such
equipment shall by paid by PCYC subject to its prior written approval of such
costs. Contractor shall advise PCYC of the specialized equipment required and
the estimated costs associated with the purchase and installation of such
equipment. If PCYC, in its sole discretion, determines that it does not desire
to pay the costs for such equipment, then PCYC shall have the right to terminate
this Agreement with respect to the Drug Product(s) for which such equipment is
required, on ninety (90) days prior written notice. PCYC shall be invoiced for
all approved costs after installation and acceptance of such equipment by
Contractor. PCYC shall make payment no later than thirty (30) days after receipt
of invoice.

                      (b) Upon termination or expiration of this Agreement,
Contractor at its option, shall either (i) transfer ownership of the specialized
equipment paid for by PCYC pursuant to subsection (a) above to PCYC, or (ii)
purchase such equipment by paying PCYC the then-current book value of such
equipment. If Contractor uses such specialized equipment for any purpose other
than the Manufacture of Drug Products for PCYC hereunder, then Contractor shall
promptly notify PCYC and shall purchase the equipment from PCYC by paying PCYC
the then-current book value of the equipment, provided that any depreciation of
such equipment shall be calculated in accordance with Generally Accepted
Accounting Principles.

                      (c) This Section 6.6.5 shall not apply to any standard
equipment normally used or required for the Manufacture of Drug Products or for
additional standard equipment required to increase production capacity or
efficiency at the Facility. Contractor represents and warrants that, to its
knowledge as of the Effective Date, no specialized equipment will be required to
Manufacture the Initial Drug Product hereunder.

        6.7 EMERGENCY ACCESS. The Parties agree that in case of an emergency
affecting the quality of any Drug Product, a PCYC representative shall have
access to Contractor's project manager for the purpose of dealing with such
emergency, and shall have the right to audit the Facility for cause as set forth
in Section 6.2.5.

        6.8 COMPLIANCE WITH LAWS.

               6.8.1 Contractor shall comply with all applicable present and
future orders, regulations, requirements and laws of the United States federal,
state and local authorities and agencies, and all other Regulatory Authorities,
including without limitation all laws and regulations applicable to the
transportation, storage, use, handling and disposal of hazardous materials, in
each case to the extent that any such government has jurisdiction over
Contractor or the Manufacture, sale or use of a Drug Product. Contractor
represents and warrants to PCYC that it has and will maintain during the term of
this Agreement all government permits, including

                                       26
<PAGE>   27
without limitation health, safety and environmental permits, necessary for the
conduct of the actions and procedures that it undertakes pursuant to this
Agreement. Contractor agrees not to export, directly or indirectly, any United
States source technical data acquired from PCYC or any products utilizing such
data to countries outside the United States, which export may be in violation of
the United States export laws or regulations.

               6.8.2 PCYC shall comply with all applicable present and future
orders, regulations, requirements and laws of the United States federal, state
and local authorities and agencies, and all other Regulatory Authorities,
including without limitation all laws and regulations applicable to the
transportation, storage, use, handling and disposal of hazardous materials, in
each case to the extent that any such government has jurisdiction over PCYC or
the Manufacture, sale or use of a Drug Product. PCYC represents and warrants to
Contractor that it has and will maintain during the term of this Agreement all
government permits, including without limitation health, safety and
environmental permits, necessary for the conduct of the actions and procedures
that it undertakes pursuant to this Agreement. PCYC agrees not to export,
directly or indirectly, any United States source technical data acquired from
Contractor or any products utilizing such data to countries outside the United
States, which export may be in violation of the United States export laws or
regulations.

                                    ARTICLE 7

                              COMPLAINTS; RECALLS.

        7.1 COMPLAINTS AND ADVERSE REACTIONS.

               7.1.1 Contractor shall advise PCYC of any complaints, adverse
reaction reports, safety issues or toxicity issues relating to any Drug Product
of which it becomes aware, regardless of the origin of such information, within
the time frame required by cGMP and 21 CFR 312 and 314, and the corresponding
regulations of the applicable Regulatory Authorities (collectively, the
"Regulations") but in no event later than two (2) days from the initial
complaint or report. PCYC's obligation to notify Contractor promptly of such
complaints shall extend only to those complaints that may have relevance to the
Manufacturing activities conducted by Contractor, and shall not extend to
complaints or adverse reactions due to inherent Drug Product characteristics or
arising from the activities of third parties unrelated to Contractor.

               7.1.2 PCYC shall retain and manage complaints in accordance with
the Regulations. The Parties hereby agree to cooperate with one another and with
any Regulatory Authority in the evaluation and investigation of any complaint,
claim or adverse reaction report related to the Manufacture of such Drug Product
with the intention of complying with the Regulations.

               7.1.3 If any such event occurs, Contractor shall retain any
unused supplies of such Drug Product and its associated Components, including
without limitation the applicable API, and all associated Batch and other
production records in such manner as PCYC may reasonably direct. Such retention
shall be at PCYC's expense, except if such event is caused by Contractor's
wrongful act or omission. Contractor agrees to respond to PCYC in respect to
such complaint investigations involving Contractor's Manufacturing of a Drug
Product or services

                                       27
<PAGE>   28
rendered hereunder as soon as reasonably possible but in any case within thirty
(30) days from receipt by Contractor of the report of such complaint and sample
(if available), or in the case of a serious adverse event, within ten (10) days
from receipt of the report of such complaint and sample (if available). PCYC
and/or its designee shall serve as the sole point of contact with the FDA or
other applicable governmental entity concerning any complaints, adverse reaction
reports, safety issues or toxicity issues with respect to the Drug Product.

        7.2 DRUG PRODUCT DEFECTS. If either Party becomes aware at any time of
any defect or the possibility of any defect associated with any Drug Product
Manufactured by Contractor hereunder, said Party will notify the other Party
immediately and confirm the notification as soon as possible in writing.

        7.3 RECALLS. PCYC shall notify Contractor promptly if any Drug Product
Manufactured by Contractor hereunder is the subject of a recall or correction,
and PCYC and/or its designee shall have the sole responsibility for the handling
and disposition of such recall or correction. In the event that a recall is
required in connection with Contractor's breach of any of its warranties set
forth in Section 8.2 hereof, then Contractor shall reimburse PCYC for the
Purchase Price of such Drug Product actually returned, the corresponding cost of
the API and all other reasonable costs and expenses associated with such Drug
Product recall or correction, but only to the extent that the foregoing costs
and expenses are directly attributable to Contractor's breach of its warranties
hereunder, and only to the extent that such costs and expenses do not exceed the
amounts paid by PCYC under this Agreement with respect to such Drug Product. In
all other events of a recall, all costs and expenses incurred in connection with
such Drug Product recall shall be borne by PCYC. PCYC and/or its designee shall
serve as the sole point of contact with the FDA or other applicable Regulatory
Authority concerning any recall or correction with respect to the Drug Product.
For purposes of this Section 7.3, reasonable costs and expenses associated with
such Drug Product recall or correction shall not exceed the following amounts:

                                      [***]

                                    ARTICLE 8

                         REPRESENTATIONS AND WARRANTIES.

        8.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party hereby represents
and warrants to the other Party that: (a) the person executing this Agreement is
authorized to execute this Agreement; (b) this Agreement is legal and valid and
the obligations binding upon such Party are enforceable by their terms; and (c)
the execution, delivery and performance of this Agreement does not conflict with
any agreement, instrument or understanding, oral or written, to which such Party
may be bound, nor violate any law or regulation of any court, governmental body
or administrative or other agency having jurisdiction over it.

        8.2 CONTRACTOR WARRANTIES. Contractor warrants that all Drug Product
Manufactured by Contractor hereunder shall, at the time of delivery to PCYC's
designated

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       28
<PAGE>   29
carrier: (a) conform to the applicable Drug Product Specifications and Packaging
Specifications; (b) have been Manufactured, handled, stored, labeled, packaged
and transported in accordance with the Master Batch Records, and with cGMP and
all other applicable laws, regulations and other requirements of all applicable
Regulatory Authorities; and (c) not be (i) adulterated or misbranded by
Contractor within the meaning of the FD&C Act, or (ii) an article that may not
be introduced into interstate commerce under the provisions of Sections 404 or
505 of the FD&C Act. This warranty is exclusive and in lieu of all other
warranties, whether written or oral, implied or statutory. Except for those
warranties set forth in Sections 8.2, 8.3 and 8.4 of this Agreement, Contractor
makes no other warranties, written, oral, express or implied, with respect to
any Drug Product. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT ARE HEREBY DISCLAIMED BY CONTRACTOR. NO
WARRANTIES OF CONTRACTOR MAY BE CHANGED BY ANY REPRESENTATIVE OF CONTRACTOR.
PCYC accepts all Drug Product Manufactured by Contractor hereunder subject to
the terms of this Section 8.2.

        8.3 NO DEBARMENT OR CONVICTIONS. Contractor represents and warrants
that: (a) it has not and will not use in any capacity the services of any
persons debarred under 21 U.S.C. Section 335(a) or 335(b) in connection with its
Manufacture of any Drug Product; (b) neither Contractor nor any Contractor
official or employee has been convicted of a felony under Federal law for
conduct relating to the development or approval, including the process for
development or approval, of any drug, product, NDA, abbreviated NDA or IND; and
(c) no Contractor official or employee has been convicted of a felony under
United States law for conduct otherwise relating to the regulation of any drug
substance or drug product under the FD&C Act.

        8.4 YEAR 2000 COMPLIANCE. Contractor represents and warrants that it has
in place a program designed to ensure that it will be Year 2000 Compliant (as
defined below) or that its failure to be Year 2000 Compliant will not materially
affect its performance under this Agreement. For purposes of this Section 8.4,
"Year 2000 Compliant" means computer systems used in connection with the
performance of work under this Agreement shall operate and function without (i)
any failure of such computer systems properly to record, store, process,
calculate or present calendar dates falling on and after (and if applicable,
spans of time including) January 1, 2000 as a result of the occurrence, or use
of data consisting of, such dates; (ii) any failure of such computer systems to
calculate any information dependent on or relating to dates on or after January
1, 2000 in the same manner, and with the same functionality, data integrity and
performance, as such computer system records, stores, processes, calculates and
presents calendar dates on or before December 31, 1999, or information dependent
on or relating to such dates; or (iii) any loss of functionality or performance
with respect to the introduction of records or processing of data containing
dates falling on or after January 1, 2000.

        8.5 PCYC WARRANTIES. PCYC warrants that (a) it has the right to give
Contractor any information provided by PCYC hereunder, and that Contractor has
the right to use such information for the Manufacture of the Drug Product for
any Regulatory Authority-approved use under this Agreement, and (b) as of the
Effective Date, it has no actual knowledge of any (i) valid United States
patents in force that would be infringed by the practice of the rights granted
under the licenses to Contractor contained in Section 11.1 of this Agreement, or
(ii) proprietary rights of third parties which would be violated by Contractor's
performance hereunder. PCYC

                                       29
<PAGE>   30
further warrants that the API provided to Contractor hereunder will (1) conform
to the API Specifications, and (2) not be adulterated or misbranded by PCYC
within the meaning of the FD&C Act. The warranties set forth in this Section 8.5
are exclusive and in lieu of all other warranties, whether written or oral, or
implied or statutory.

                                    ARTICLE 9

                                INDEMNIFICATION.

        9.1 INDEMNIFICATION BY CONTRACTOR. Subject to PCYC's compliance with
Section 9.3, Contractor shall indemnify, defend and hold harmless PCYC and its
directors, officers, employees and agents from all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including reasonable attorneys' fees) or disbursements of any kind and nature
whatsoever arising out of property damage or personal injury (including without
limitation death) of third parties (collectively, "Claims"), only if such Claims
arise solely from any: (a) breach by Contractor of any of its obligations under
this Agreement including without limitation any of its warranties and
representations hereunder, (b) negligent acts or omissions or willful misconduct
of Contractor or its employees or agents, and/or (c) infringement of any third
party patents or other proprietary rights by Contractor's manufacturing
processes (i) not specific to a Drug Product, or (ii) specific to a Drug
Product, but not approved in writing by PCYC for use in the Manufacture of such
Drug Product hereunder.

        9.2 INDEMNIFICATION BY PCYC. Subject to Contractor's compliance with
Section 9.3, PCYC shall indemnify, defend and hold harmless Contractor and its
directors, officers, employees and agents from all Claims that arise from any:
(a) breach by PCYC of any of its obligations under this Agreement including
without limitation any of its warranties and representations hereunder, (b)
personal injury caused by adverse reaction to the formula of a Drug Product,
and/or (c) the promotion, labeling, marketing, distribution, use or sale of any
Drug Product, but only to the extent that such liability is not covered by
Contractor's indemnification obligations under Section 9.1.

        9.3 INDEMNIFICATION PROCEDURES. A Party (the "Indemnitee") which intends
to claim indemnification under this Article 9 shall promptly notify the other
Party (the "Indemnitor") in writing of any action, claim or other matter in
respect of which the Indemnitee or any of its Affiliates, or any of their
respective directors, officers, employees or agents, intend to claim such
indemnification; provided, however, the failure to provide such notice within a
reasonable period of time shall not relieve the Indemnitor of any of its
obligations hereunder except to the extent the Indemnitor is prejudiced by such
failure. The Indemnitee shall permit, and shall cause its Affiliates, and their
respective directors, officers, employees and agents to permit, the Indemnitor
at its discretion to settle any such action, claim or other matter, and the
Indemnitee agrees to the complete control of such defense or settlement by the
Indemnitor. Notwithstanding the foregoing, the Indemnitor shall not enter into
any settlement that would adversely affect the Indemnitee's rights hereunder, or
impose any obligations on the Indemnitee in addition to those set forth herein
in order for it to exercise such rights, without Indemnitee's prior written
consent, which shall not be unreasonably withheld or delayed. No such action,
claim or other matter shall be settled without the prior written consent of the
Indemnitor, which shall not be unreasonably withheld or delayed. The Indemnitor
shall not be responsible for any attorneys' fees or other

                                       30
<PAGE>   31

costs incurred other than as provided herein. The Indemnitee, its Affiliates,
and their respective directors, officers, employees and agents shall cooperate
fully with the Indemnitor and its legal representatives in the investigation and
defense of any action, claim or other matter covered by the indemnification
obligations of this Article 9. The Indemnitee shall have the right, but not the
obligation, to be represented in such defense by counsel of its own selection
and at its own expense.

                                   ARTICLE 10

                                   INSURANCE.

        10.1 PCYC INSURANCE. During the period in which Contractor is
Manufacturing Drug Products, PCYC shall at all times maintain general liability
(including product liability) insurance coverage at its own expense in full
force and effect. Pharmacyclics shall maintain insurance coverage of at least
[***] with an insurance carrier with an A.M. Bests rating of A:VII or higher.
Contractor may request reasonable proof of the existence and maintenance of this
insurance coverage at any time. Such insurance shall not be terminated or
reduced without providing Contractor or PCYC, as the case may be, with at least
thirty (30) days advance written notice.

        10.2 CONTRACTOR INSURANCE. During the period in which Contractor is
making the Drug Product, Contractor shall at all times maintain general
liability (including product liability) insurance coverage at its own expense in
full force and effect. Contractor shall maintain insurance coverage of at least
[***] with an insurance carrier with an A.M. Bests rating of A:VII or higher.
Such insurance shall not be terminated or reduced without providing Contractor
or PCYC, as the case may be, with at least thirty (30) days advance written
notice. PCYC may request reasonable proof of the existence and maintenance of
this insurance coverage at any time.

                                   ARTICLE 11

                     INTELLECTUAL PROPERTY; LICENSE GRANTS.

        11.1 LICENSE GRANT BY PCYC. During the term of this Agreement, and
subject to the terms and conditions of this Agreement, PCYC hereby grants to
Contractor a nonexclusive, royalty-free license, without the right to
sublicense, under the Licensed Technology, for the sole purpose of Manufacturing
Drug Products for PCYC as provided herein. Notwithstanding any other provision
in this Agreement to the contrary, this license shall not be assigned or
transferred by Contractor except to an Affiliate without the prior written
consent of PCYC, provided that any such assignment or transfer shall be
consistent with all terms and conditions of this Agreement.

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       31
<PAGE>   32

        11.2 LICENSE GRANT BY CONTRACTOR.

               11.2.1 During the term of this Agreement, and subject to the
terms and conditions of this Agreement, Contractor hereby grants to PCYC an
exclusive, royalty-free license, with the right to sublicense, under the
Manufacturing Technology, for the sole purpose of Manufacturing and having
Manufactured Drug Products for use and sale in the applicable Territories. For
clarity, nothing in this Section 11.2.1 shall prevent Contractor from using the
Manufacturing Technology in connection with the Manufacture of Products other
than Drug Products.

               11.2.2 During the term of this Agreement, and subject to the
terms and conditions of this Agreement, Contractor hereby grants to PCYC an
nonexclusive, royalty-free license, with the right to sublicense, under the
Background Technology, for the sole purpose of using, selling, offering for sale
or importing (but not Manufacturing or having Manufactured) Drug Products in the
applicable Territories.

               11.2.3 The only Drug Products to which the licenses granted under
this Section 11.2 shall apply are those Drug Products for which the Parties have
entered into a Drug Product Appendix pursuant to Section 2.4.

        11.3 OWNERSHIP OF INVENTIONS AND IMPROVEMENTS.

               11.3.1 All IP, whether made solely by or on behalf of a Party or
jointly by or on behalf of both Parties, that pertains solely to the
manufacture, use or sale of (a) a Drug Product, (b) a pharmaceutical product
with substantially similar chemical composition to a Drug Product or (c) an
improvement to a Drug Product, shall be owned solely by PCYC (such IP to be
deemed "PCYC IP"). Contractor shall take all necessary actions to perfect PCYC's
title to the PCYC IP, including without limitation executing all necessary
instruments of assignment.

               11.3.2 Any and all IP that is created by or on behalf of
Contractor that is not jointly invented with PCYC and that relates to
generally-applicable methods of pharmaceutical Manufacturing shall be owned
solely by Contractor (such IP to be deemed "Contractor IP"). PCYC shall take all
necessary actions to perfect Contractor's title to the Contractor IP, including
without limitation executing all necessary instruments of assignment.

               11.3.3 Any IP made solely by or on behalf of a Party that is not
PCYC IP or Contractor IP shall be owned by such Party. Any IP made jointly by or
on behalf of Contractor and PCYC that is not PCYC IP or Contractor IP shall be
owned jointly by the Parties.

               11.3.4 IP shall be deemed to be the Confidential Information of
the Party owning such IP.

               11.3.5 Each Party shall promptly provide the other Party with a
copy of any formal invention disclosure document that relates to IP.

        11.4 PREPARATION OF PATENT APPLICATIONS. The Party owning any IP shall
have the worldwide right to control the drafting, filing, prosecution,
maintenance and enforcement of patents covering the inventions relating to such
IP, including decisions about the countries in which to file patent
applications. Responsibility for patents covering jointly owned IP shall be

                                       32
<PAGE>   33

decided by the Parties, in good faith, on a case-by-case basis. Patent costs
associated with the patent activities described in this Section shall be borne
by the sole owner or shared equally by the Parties for jointly owned IP. Each
Party will cooperate with the other Party in the filing and prosecution of
patent applications. Such cooperation will include, but not be limited to,
furnishing supporting data and affidavits for the prosecution of patent
applications and completing and signing forms needed for the prosecution,
assignment and maintenance of patent applications.

        11.5 DISCLOSURE OF CONFIDENTIAL INFORMATION. The protection of each
Party's Confidential Information is described in Article 14. Any disclosure of
information by one Party to the other under the provisions of this Article 11
shall be treated as the disclosing Party's Confidential Information under this
Agreement, subject to Section 11.3.4. It shall be the responsibility of the
Party preparing a patent application to obtain the written permission of the
other Party to use or disclose the other Party's Confidential Information in the
patent application before the application is filed and for other disclosures
made during the prosecution of the patent application.

        11.6 LICENSE TO PCYC UPON EXPIRATION OR TERMINATION.

               11.6.1 Upon the termination of this Agreement by PCYC for
Contractor's breach hereunder pursuant to Section 12.2.2, Contractor
automatically shall be deemed to have granted to PCYC a worldwide,
non-exclusive, royalty-free, fully paid-up, perpetual, irrevocable license, with
a right to sublicense, under the Manufacturing Technology to Manufacture and
have Manufactured the Drug Product(s) that is (are) the subject of such
termination.

               11.6.2 Upon the expiration of this Agreement pursuant to Section
12.1 or termination of this Agreement other than pursuant to Section 12.2.2 or
12.2.3, Contractor automatically shall be deemed to have granted to PCYC the
option to obtain a worldwide, non-exclusive, royalty-bearing, perpetual,
irrevocable license, with a right to sublicense, under the Manufacturing
Technology to Manufacture and have Manufactured the Drug Product(s) that is
(are) the subject of such expiration or termination. Upon Contractor's receipt
of written notice from PCYC that it is exercising such option, the Parties
promptly shall meet to negotiate in good faith the commercially reasonable terms
for such license.

                                   ARTICLE 12

                       TERM AND TERMINATION OF AGREEMENT.

        12.1 TERM.

               12.1.1 This Agreement shall commence upon the Effective Date and,
unless terminated sooner in accordance with the terms and conditions provided
for herein, shall remain in full force and effect with respect to each Drug
Product to be Manufactured hereunder until the date which is three (3) years
from the date of Regulatory Approval of such Drug Product by the FDA (the
"Initial Term"). Thereafter, this Agreement will automatically renew with
respect to such Drug Product for successive two (2) year terms, subject to
Section 12.2 and Article 13, unless either Party provides one (1) year written
notice to the other Party prior to the expiration

                                       33
<PAGE>   34

of the then-current term that the Agreement shall not be renewed with respect to
such Drug Product.

               12.1.2 Solely with respect to the Initial Drug Product, the
Initial Term shall expire upon (a) the date which is three (3) years from the
date of Regulatory Approval of such Drug Product by the FDA, if such approval is
received on or before December 31, 2001; or (b) the date which is two (2) years
from the date of Regulatory Approval of such Drug Product by the FDA, if such
approval is received after December 31, 2001.

        12.2 TERMINATION.

               12.2.1 PCYC may terminate this Agreement, in whole or with
respect to one or more Drug Products, at any time at least six (6) months prior
to Regulatory Approval in the first Regulatory Jurisdiction for such Drug
Product; provided that PCYC gives Contractor six (6) months prior written
notice. Contractor may not voluntarily terminate this Agreement until expiration
of the Initial Term specified in Section 12.1, except pursuant to Sections
12.2.2 or 12.2.3 or Article 13. PCYC shall reimburse Contractor for all
non-cancelable, out-of-pocket costs reasonably incurred by Contractor in
performance of its obligations hereunder prior to the effective date of
termination under this Section 12.2.1.

               12.2.2 Either Party may terminate this Agreement upon sixty (60)
days prior written notice in the event of a material breach of this Agreement by
the other Party which is not cured by the breaching Party within such sixty (60)
day period. At the option of the non-breaching Party, such termination may be
with respect to the entire Agreement, or only with respect to the Drug Product
which is the subject of such material breach. A Material Supply Breach shall be
deemed to be a breach of a material term of this Agreement. In the event that a
Material Supply Breach occurs more than twice during any consecutive twelve (12)
month period, PCYC shall have the right to terminate this Agreement pursuant to
this Section 12.2.2, either with respect to the Drug Product(s) that is the
subject of such Material Supply Breach or in its entirety, effective upon giving
Contractor written notice thereof, and without being required to provide
Contractor the cure period described in the first sentence of this Section
12.2.2.

               12.2.3 This Agreement may be terminated by either Party by giving
the other Party written notice thereof in the event that such other Party makes
a general assignment for the benefit of its creditors, or proceedings or a case
are commenced in any court of competent jurisdiction by or against such Party
seeking (a) such Party's reorganization, liquidation, dissolution, arrangement
or winding-up, or the composition or readjustment of its debts, (b) the
appointment of a receiver or trustee for or over such Party's property or (c)
similar relief in respect of such Party under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debt, and
such proceedings or case shall continue undismissed, or an order with respect to
the foregoing shall be entered and continue unstated, for a period of more than
thirty (30) days.

        12.3 ACCRUED OBLIGATIONS. Termination of this Agreement for any reason
shall not relieve any Party of any obligations accruing prior to such
termination.

                                       34
<PAGE>   35

        12.4 CONSEQUENCES OF TERMINATION.

               12.4.1 Upon termination of this Agreement under Section 12.2,
except for termination for Contractor's material breach:

                      (a) PCYC agrees to purchase, and Contractor agrees to
sell, any Units of Drug Product Manufactured by Contractor and held by
Contractor against the requirements of a binding Purchase Order on the effective
date of termination at the price set forth in Section 4.1, and subject to PCYC's
acceptance of such Drug Product pursuant to Section 5.2.

                      (b) At the request of PCYC, Contractor shall fulfill any
outstanding binding Purchase Orders for Drug Product using, at Contractor's
option, materials on hand or on order by Contractor for such Purchase Order, in
accordance with the terms of this Agreement. In such event, such Drug Product
shall be purchased by PCYC at the price set forth in Section 4.1, subject to
PCYC's acceptance of such Drug Product pursuant to Section 5.2. Alternatively,
PCYC agrees to purchase any raw materials and components which have been ordered
by Contractor pursuant to a non-cancelable order and unutilized for such
Purchase Order, at cost.

               12.4.2 Upon any termination or expiration of this Agreement,
Contractor shall return to PCYC all API and other PCYC Components currently in
inventory that are not being used as set forth in Section 12.4.1.

               12.4.3 If this Agreement is terminated only with respect to one
or more Drug Product(s) and not in its entirety, then this Section 12.4.1 shall
apply only with respect to such Drug Product(s).

        12.5 SURVIVAL. Upon any expiration or termination of this Agreement, the
obligations of the Parties under Sections 4.4, 6.3.1, 6.3.3, 6.4, 6.6.5(b), 12.4
and 12.5, and Articles 7, 9, 11, 14 and 15 hereof shall survive such expiration
or termination.

                                   ARTICLE 13

                              FORCE MAJEURE EVENTS.

        If, by any reason of impediment such as Acts of God, war, rebellion,
tumult, riot, civil commotion, insurrection, political disturbance, strike,
lock-out, fire, flood, interruption of transportation, embargo, shortages of raw
materials, or any other cause or event of a similar nature affecting either
Party over which such Party has had no control (a "Force Majeure Event"), such
Party cannot perform its obligations hereunder, it shall have the right to
postpone the performance of such obligation for the duration of such Force
Majeure Event. The Parties shall use all reasonable efforts to avoid or overcome
the causes affecting performance, and the Party whose performance is affected by
such Force Majeure Event shall fulfill all outstanding obligations as soon as
possible. The affected Party shall give facsimile notice to the other Party of
the occurrence of such impediment and its anticipated duration and shall
subsequently notify the other Party as quickly as possible of the cessation of
said cause or event. In the event that a Force Majeure Event results in
Contractor's failure to perform under this Agreement such that, but for such
Force Majeure Event, such failure to perform would be deemed a "Material Supply
Breach," PCYC shall have the right to terminate this Agreement on one hundred
twenty (120)

                                       35
<PAGE>   36
days written notice, either in its entirety or solely with respect to those Drug
Products that are affected by such Force Majeure Event. This Section 13.1 shall
not apply to any payment obligation hereunder.

                                   ARTICLE 14

                                CONFIDENTIALITY.

        14.1 CONFIDENTIALITY AND EXCEPTIONS. Except as set forth below, all
information disclosed by one Party (the "Disclosing Party") to the other Party
(the "Receiving Party") pursuant to this Agreement shall be deemed to be the
Disclosing Party's "Confidential Information." Confidential Information shall
include, but not be limited to, information relating to the structure of an API,
any know-how relating to the Manufacture of any Drug Product, the Manufacturing
Documents and the Manufacturing cost and other financial arrangements made
pursuant to this Agreement. Each Party agrees that it will take the same steps
to protect the confidentiality of the other Party's Confidential Information as
it takes to protect its own proprietary and confidential information, which
shall in no event be less than reasonable steps. Each Party, and its employees
and agents shall protect and keep confidential and shall not use, publish or
otherwise disclose to any third party, except as permitted by this Agreement, or
with the other Party's written consent, the other Party's Confidential
Information. For the purposes of this Agreement, Confidential Information shall
not include such information that:

               14.1.1 was already known to the Receiving Party at the time of
disclosure by the other Disclosing Party; other than under an obligation of
confidentiality; or

               14.1.2 was generally available to the public or was otherwise
part of the public domain at the time of disclosure or became generally
available to the public or otherwise part of the public domain after disclosure
other than through any act or omission of the Receiving Party in breach of this
Agreement; or

               14.1.3 was lawfully disclosed to the Receiving Party, other than
under an obligation of confidentiality, by a third party who had no obligation
not to disclose such information to others; or

               14.1.4 was independently developed by or for the Receiving Party
without the aid, application or use of the other Party's Confidential
Information by persons who did not have access to such Confidential Information;
or

               14.1.5 was disclosed to a third party by the Disclosing Party
without an obligation of confidentiality.

        14.2 AUTHORIZED DISCLOSURE.

               14.2.1 Each Party may disclose Confidential Information hereunder
to the extent such disclosure is reasonably necessary for prosecuting or
defending litigation, complying with applicable government regulations or
conducting preclinical or clinical trials, provided that if a Party is required
by law or regulation to make any such disclosure of the other Party's
Confidential Information it will, except where impracticable for necessary
disclosures, for

                                       36
<PAGE>   37
example in the event of medical emergency, give reasonable advance notice to the
other Party of such disclosure requirement and will use its best efforts assist
such other Party to secure a protective order or confidential treatment of such
Confidential Information required to be disclosed.

               14.2.2 Neither Party shall disclose Confidential Information of
the other Party in any patent filings without the prior written consent of the
disclosing Party.

        14.3 CONFIDENTIALITY AND PUBLICITY. The Parties agree that, except as
may otherwise be required by applicable laws, regulations, rules, or orders,
including without limitation the rules and regulations promulgated by the United
States Securities and Exchange Commission, and except as may be authorized in
Section 14.2, no information concerning this Agreement and the transactions
contemplated herein shall be made public by either Party without the prior
written consent of the other. The Parties agree that the public announcement of
the execution of this Agreement shall be by one or more press releases mutually
agreed to by the Parties. A failure of a Party to return a draft of a press
release with its proposed amendments or modifications to such press release to
the other Party within two (2) days of such Party's receipt of such press
release shall be deemed as such Party's approval of such press release as
received by such Party. Each Party agrees that it shall cooperate fully and in a
timely manner with the other with respect to all disclosures to the Securities
and Exchange Commission and any other governmental and regulatory agencies,
including requests for confidential treatment of Confidential Information of
either Party included in any such disclosure.

        14.4 SURVIVAL OF CONFIDENTIALITY. All obligations of confidentiality and
non-use imposed upon the Parties under this Agreement shall continue
indefinitely until such time as the information that is subject to such
obligations no longer comprises Confidential Information under one of the
exceptions set forth in Section 14.1.1 through Section 14.1.5.

                                   ARTICLE 15

                                 MISCELLANEOUS.

        15.1 NOTICES. All notices, requests and other communications provided
for herein shall be given or made in writing and shall be deemed to have been
duly given if (a) delivered by hand, (b) mailed by certified mail, return
receipt requested, or (c) delivered by a recognized courier service, or (d)
transmitted by facsimile and confirmed by overnight delivery of a hard copy,
with appropriate documentation of delivery, to the intended recipient and, in
the case of mail or courier service, at the following address:

               PCYC:

               Pharmacyclics, Inc.
               Vice President, Chemical Operations
               995 E. Arques Avenue
               Sunnyvale, California 94086-4521
               Fax:  (408) 774-0340

                                       37
<PAGE>   38

               with a copy to:

               Legal Department
               995 E. Arques Avenue
               Sunnyvale, California 94086-4521
               Fax:  (408) 774-0340

               CONTRACTOR:

               Cook Imaging Corporation,
               d.b.a. Cook Pharmaceutical Solutions
               927 South Curry Pike
               Bloomington, Indiana  47403
               Phone:  812-333-0887
               Attn: Alisa Wright
               Fax:  (812) 332-3079

               Sommer & Barnard
               4000 Bank One Tower
               Indianapolis, Indiana 46204
               Attn:  Erick D. Ponader
               Phone:  317-630-4000
               Fax:  (317) 236-9802

        or, as to any Party, at such other address as shall be designated by
such Party in a written notice to the other Party. All such communications shall
be deemed to have been duly given when hand delivered, or mailed, in each case
given or addressed as aforesaid.

        15.2 LIMITATION OF LIABILITY. Under no circumstances shall either Party
be liable to the other Party for any collateral, special, consequential or other
damages, losses, or expenses (INCLUDING BUT NOT LIMITED TO THE COST OF COVER),
in connection with or by reason of the Manufacture, delivery, use or sale of any
Drug Product Manufactured by Contractor hereunder, whether such claims are
founded in tort or contract, except as otherwise expressly stated herein. The
foregoing limitation of liability shall not apply with respect to third party
claims. Any claim by either Party for breach or default under this Agreement,
other than third party claims, shall be brought within two (2) years after the
cause of action accrued or shall be deemed waived, subject to any applicable
tolling laws or provisions.

        15.3 INDEPENDENT CONTRACTOR. Nothing herein shall create any
association, partnership, joint venture or the relation of principal and agent
between the Parties hereto, it being understood that Contractor is Manufacturing
Drug Product as an independent contractor, and neither Party shall have the
authority to bind the other or the others' representatives in any way. Nothing
in this Agreement shall constitute Contractor as an employee, agent, or general
representative of PCYC.

                                       38
<PAGE>   39

        15.4 AMENDMENTS. No provision of this Agreement or of the Project Plans,
Regulatory Plans or Drug Product Appendices attached hereto may be modified or
supplemented except by an instrument in writing signed by Contractor and PCYC.

        15.5 WAIVER. No failure on the part of either Party to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.

        15.6 HEADINGS. The section headings appearing herein are included solely
for convenience of reference and are not intended to affect the interpretation
of any provision of this Agreement.

        15.7 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and assigns;
provided, however, that neither Party shall assign any of its rights and
obligations hereunder except (a) as incident to the merger, consolidation,
reorganization, or acquisition of stock or assets affecting substantially all of
the assets or actual voting control of the assigning Party or the business unit
to which this Agreement substantially relates; (b) to an Affiliate owned by the
assigning Party or its parent company, or (c) with the prior written consent of
the other Party, such consent not to be unreasonably withheld. Any assignment
not in conformance with this Section shall be null, void and of no legal effect.

        15.8 COMPLETE AGREEMENT. This Agreement, together with the Purchase
Plans, Development Plans, Project Plans, Regulatory Plans, and Drug Product
Appendices hereto, which are hereby incorporated into and shall form part of
this Agreement, represents the complete Agreement between the Parties hereto as
to all matters covered hereby or thereby, and supersedes any prior agreements or
understanding (oral or written) between the Parties regarding the subject matter
hereof.

        15.9 SEVERABILITY. If, for any reason, any provision of this Agreement
shall be deemed by a court of competent jurisdiction to be illegal, invalid or
unenforceable, the validity, legality or enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired, and
such provision shall be modified to the minimum extent necessary to make such
provision consistent with applicable law, and in its modified form such
provision shall be enforceable and enforced.

        15.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, as such laws apply to
contracts entered into by and between residents of, and to be performed entirely
within, the State of Delaware.

        15.11 DISPUTE RESOLUTION. Both Parties agree that, in the event of a
dispute relating to this Agreement, they are prepared to explore resolution of
the dispute through negotiation or alternative dispute resolution techniques
before pursuing litigation. No lawsuit may be commenced unless a Party gives the
other Party fifteen (15) days prior notice of its intent to

                                       39
<PAGE>   40

initiate litigation; provided, however, that no such notice shall be required in
connection with an action by a Party to the extent such action seeks injunctive
relief.

        15.12 COUNTERPARTS. This Agreement may be executed in counterparts with
the same force and effect as if each of the signatories had executed the same
instrument.

        15.13 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not be
construed against either Party, regardless of which Party is deemed to have
drafted the provision at issue.

                                       40
<PAGE>   41
        IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed and delivered as of the Effective Date.

COOK IMAGING CORPORATION                   PHARMACYCLICS, INC.

DBA COOK PHARMACEUTICAL SOLUTIONS

By: /s/ Alisa K. Wright                    By: /s/ Richard Miller
    ------------------------------------      ----------------------------------

Name: Alisa K. Wright                      Name: Richard Miller
      ----------------------------------         -------------------------------

Title: Vice President, Business Affairs   Title: President and CEO
       ---------------------------------         -------------------------------

                                       41
<PAGE>   42
                                  SCHEDULE 1.14

                             DRUG PRODUCT APPENDICES

                                       42
<PAGE>   43
                           [***] DRUG PRODUCT APPENDIX

EFFECTIVE/REVISION DATE: ______________

                                TABLE OF CONTENTS

                                      [***]

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       43
<PAGE>   44
                                      [***]

*Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with
the Commission pursuant to Rule 24b-2.

                                       44
<PAGE>   45
                                 CHANGE CONTROL

Proposals to amend this Drug Product Appendix may be made by either Party at any
time. Changes must be communicated and justified in writing and mutually agreed
to by both Parties before they become effective. A written instrument and the
procedure documenting changes to this Drug Product Appendix shall be promptly
developed.

                                       45
<PAGE>   46
                     MASTER DEVELOPMENT AND SUPPLY AGREEMENT

                               PHARMACYCLICS, INC.

                                       AND

                            COOK IMAGING CORPORATION
                                     D.B.A.
                          COOK PHARMACEUTICAL SOLUTIONS

                                 MARCH 20, 2000

<PAGE>   47
<TABLE>
<S>                                                                                         <C>
ARTICLE 1      DEFINITIONS...................................................................1

        1.1    "Active Pharmaceutical Ingredient" or "API"...................................1

        1.2    "Affiliate"...................................................................1

        1.3    "Annual Forecast".............................................................1

        1.4    "API Specifications"..........................................................1

        1.5    "Background Technology".......................................................2

        1.6    "Batch".......................................................................2

        1.7    "Calendar Year"...............................................................2

        1.8    "Components"..................................................................2

        1.9    "Component Specifications"....................................................2

        1.10   "Contractor's Capacity".......................................................2

        1.11   "Contractor Components".......................................................2

        1.12   "Current Good Manufacturing Practices" or "cGMP"..............................2

        1.13   "Development Plan"............................................................2

        1.14   "Drug Product"................................................................3

        1.15   "Drug Product Appendix".......................................................3

        1.16   "Drug Product Specifications".................................................3

        1.17   "Facility"....................................................................3

        1.18   "FDA".........................................................................3

        1.19   "FD&C Act"....................................................................3

        1.20   "Identification Testing Standards"............................................3

        1.21   "IND".........................................................................3

        1.22   "Initial Drug Product"........................................................3

        1.23   "Initial Drug Product Appendix"...............................................3

        1.24   "IP"..........................................................................3

        1.25   "Licensed Technology".........................................................3

        1.26   "Manufacture" or "Manufacturing"..............................................4

        1.27   "Manufacturing Technology"....................................................4

        1.28   "Master Batch Record".........................................................4

        1.29   "Material Supply Breach"......................................................4

        1.30   "Minimum Order Commitment"....................................................4

        1.31   "NDA".........................................................................4

        1.32   "Packaging Specifications"....................................................4
</TABLE>

<PAGE>   48
<TABLE>
<S>                                                                                         <C>
        1.33   "PCYC Components".............................................................4

        1.34   "Primary Source Contract Requirements"........................................5

        1.35   "Project Plan"................................................................5

        1.36   "Purchase Orders".............................................................5

        1.37   "Purchase Plan"...............................................................5

        1.38   "Purchase Price"..............................................................5

        1.39   "QC Sample"...................................................................5

        1.40   "Regulatory Approval".........................................................5

        1.41   "Regulatory Authority"........................................................5

        1.42   "Regulatory Jurisdiction".....................................................5

        1.43   "Regulatory Plan".............................................................5

        1.44   "Released Executed Batch Record"..............................................5

        1.45   "Secondary Source"............................................................6

        1.46   "Secondary Source Contract Requirements"......................................6

        1.47   "Territories".................................................................6

        1.48   "Testing Standards and Procedures"............................................6

        1.49   "Unit"........................................................................6

ARTICLE 2 DEVELOPMENT AND MANUFACTURING PLANS ...............................................6

        2.1    Development Plan..............................................................6

        2.2    Project Plan..................................................................7

        2.3    Regulatory Plan...............................................................7

        2.4    Drug Product Appendices.......................................................8

        2.5    Amendment of Plans and Drug Product Appendices................................8

        2.6    No Amendment of Agreement.....................................................8

        2.7    Effect of Termination Under Sections 2.1.3(c) or 2.4..........................8

ARTICLE 3 PURCHASE AND SUPPLY OF DRUG PRODUCT; FORECASTS ....................................9

        3.1    Agreement to Purchase and Supply..............................................9

        3.2    Supply of Components..........................................................9

        3.3    Forecasts....................................................................10

        3.4    Purchase Orders..............................................................14

        3.5    Amendment or Cancellation of Purchase Order..................................15

        3.6    Testing of Batches by Contractor.............................................15

        3.7    Secondary Sources............................................................16
</TABLE>

<PAGE>   49
<TABLE>
<S>                                                                                         <C>
        3.8    Contractor's Facility........................................................17

ARTICLE 4 PURCHASE PRICE AND PAYMENT .......................................................17

        4.1    Purchase Price...............................................................17

        4.2    Payment......................................................................18

        4.3    Additional Payments..........................................................18

        4.4    Records......................................................................19

        4.5    Artwork......................................................................19

ARTICLE 5 DELIVERY AND ACCEPTANCE OF DRUG PRODUCT ..........................................19

        5.1    Quality Control Sample of Drug Product.......................................19

        5.2    Acceptance and Rejection of Drug Product.....................................20

        5.3    Replacement Batches..........................................................21

        5.4    Destruction of Drug Product..................................................21

        5.5    Delivery of Drug Product.....................................................21

        5.6    PCYC Component Non-Conformity................................................21

ARTICLE 6 QUALITY ASSURANCE; REGULATORY ....................................................22

        6.1    Master Batch Record..........................................................22

        6.2    Audits.......................................................................22

        6.3    Regulatory Matters; Records..................................................23

        6.4    Drug Master File.............................................................25

        6.5    Stability Testing............................................................25

        6.6    Changes in Manufacture.......................................................25

        6.7    Emergency Access.............................................................27

        6.8    Compliance with Laws.........................................................27

ARTICLE 7 COMPLAINTS; RECALLS ..............................................................28

        7.1    Complaints and Adverse Reactions.............................................28

        7.2    Drug Product Defects.........................................................29

        7.3    Recalls......................................................................29

ARTICLE 8 REPRESENTATIONS AND WARRANTIES ...................................................29

        8.1    Mutual Representations and Warranties........................................29

        8.2    Contractor Warranties........................................................30

        8.3    No Debarment or Convictions..................................................30

        8.4    Year 2000 Compliance.........................................................30

        8.5    PCYC Warranties..............................................................30
</TABLE>

<PAGE>   50

<TABLE>
<S>                                                                                         <C>
ARTICLE 9 INDEMNIFICATION ..................................................................31

        9.1    Indemnification by Contractor................................................31

        9.2    Indemnification by PCYC......................................................31

        9.3    Indemnification Procedures...................................................31

ARTICLE 10 INSURANCE .......................................................................32

        10.1   PCYC Insurance...............................................................32

        10.2   Contractor Insurance.........................................................32

ARTICLE 11 INTELLECTUAL PROPERTY; LICENSE GRANTS ...........................................32

        11.1   License Grant by PCYC........................................................32

        11.2   License Grant by Contractor..................................................32

        11.3   Ownership of Inventions and Improvements.....................................33

        11.4   Preparation of Patent Applications...........................................33

        11.5   Disclosure of Confidential Information.......................................34

        11.6   License to PCYC Upon Expiration or Termination...............................34

ARTICLE 12 TERM AND TERMINATION OF AGREEMENT ...............................................34

        12.1   Term.........................................................................34

        12.2   Termination..................................................................35

        12.3   Accrued Obligations..........................................................35

        12.4   Consequences of Termination..................................................35

        12.5   Survival.....................................................................36

ARTICLE 13 FORCE MAJEURE EVENTS ............................................................36

ARTICLE 14 CONFIDENTIALITY .................................................................37

        14.1   Confidentiality and Exceptions...............................................37

        14.2   Authorized Disclosure........................................................37

        14.3   Confidentiality and Publicity................................................38

        14.4   Survival of Confidentiality..................................................38

ARTICLE 15 MISCELLANEOUS ...................................................................38

        15.1   Notices......................................................................38

        15.2   Limitation of Liability......................................................39

        15.3   Independent Contractor.......................................................39

        15.4   Amendments...................................................................39

        15.5   Waiver.......................................................................40

        15.6   Headings.....................................................................40
</TABLE>

<PAGE>   51

<TABLE>
<S>                                                                                         <C>
        15.7   Assignment...................................................................40

        15.8   Complete Agreement...........................................................40

        15.9   Severability.................................................................40

        15.10  Governing Law................................................................40

        15.11  Dispute Resolution...........................................................40

        15.12  Counterparts.................................................................40

        15.13  Ambiguities..................................................................41

SCHEDULE 1.14...............................................................................43
</TABLE><PAGE>   1

                                  EXHIBIT 10.40

                                 AMENDMENT NO. 4

                         TO PHARMCHEM LABORATORIES, INC.

                            1992 DIRECTOR OPTION PLAN

        This Amendment No. 4 (the "Amendment") to the PharmChem Laboratories,
Inc. 1992 Director Option Plan, as heretofore amended (the "Plan"), is made
effective as of the 18th day of February, 2000 by the Administrator of the Plan
pursuant to Section 11(a) of the Plan. All capitalized terms used herein and not
otherwise defined herein shall have the meanings given them in the Plan.

                                    AMENDMENT

        The Plan is hereby amended as follows:

        1. The number of "5,000" in Sections 4(b)(ii) and 4 (b)(iii) of the Plan
is hereby changed to the number "10,000".

        2. The references to "five (5) years" in Sections 4(b)(v) (A) and
4(b)(vi)(A) of the Plan are hereby changed to "ten (10) years".

        3. The second sentence of Section 6 of the Plan is hereby amended to
read as follows:

                "It shall continue in effect through March 31, 2004 unless
                sooner terminated under Section 11 of the Plan."

        4. The references to "its five (5) year term" in Sections 8(c), 8(d),
8(e) (i) and 8(e)(ii) of the Plan are hereby changed to "its ten (10) year
term".

        5. Section 11(b) of the Plan is hereby amended to read as follows:

                "(b) Effect of Amendment or Termination. Any such amendment or
                termination of the Plan made without the consent of the Optionee
                shall not affect Options already granted and such Options shall
                remain in full force and effect as if this Plan had not been
                amended or terminated."

        IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above by the Administrator of the Plan, which Administrator
consists of the Outside Directors of the Company.

                                                  /s/ Richard D. Irwin
                                        ----------------------------------------
                                                  Richard D. Irwin

                                                 /s/ Donald R. Stroben
                                        ----------------------------------------
                                                 Donald R. Stroben

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00009-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00009-of-00352.parquet"}]]