Document:

APPENDIX A
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                         DEFINITIONS AND RULES OF USAGE

                             Part I: Rules of Usage
                             ----------------------

     The terms defined below have the meanings set forth below for all purposes,
and such  meanings are equally  applicable to both the singular and plural forms
of the terms defined.  "Include",  "includes" and "including" shall be deemed to
be followed by "without  limitation" whether or not they are in fact followed by
such words or words of like import.  "Writing",  "written" and comparable  terms
refer to printing, typing, lithography and other means of reproducing words in a
visible form. Any instrument, agreement or Applicable Law defined or referred to
below  or in any  instrument  that is  governed  by  this  Appendix  means  such
instrument,  agreement or Applicable Law as from time to time amended,  modified
or supplemented,  including (in the case of instruments or agreements) by waiver
or  consent,  (in the case of the  Participation  Agreement)  by  succession  of
comparable successor Applicable Laws and includes (in the case of instruments or
agreements)  references to all attachments thereto and instruments or agreements
incorporated  therein.  References to a Person are, unless the context otherwise
requires,  also to its successors and permitted assigns.  Any term defined below
by reference to any  instrument,  agreement or  Applicable  Law has such meaning
whether  or not such  instrument,  agreement  or  Applicable  Law is in  effect.
"Hereof",  "herein",  "hereunder"  and  comparable  terms  refer  to the  entire
instrument  or agreement in which such terms are used and not to any  particular
article, section or other subdivision thereof or attachment thereto.  References
to any gender include, unless the context otherwise requires,  references to all
genders,  and references to the singular  include,  unless the context otherwise
requires, references to the plural and vice versa. "Shall" and "will" have equal
force and effect. References in an instrument to "Article", "Section" or another
subdivision or to an attachment are, unless the context otherwise  requires,  to
an article, section or subdivision of or an attachment to such instrument.

                              Part II: Definitions
                              --------------------
     "Accounts" means all of Lessee's now owned or hereafter acquired or arising
accounts,  and any  other  rights to  payment  for the sale or lease of goods or
rendition of services, whether or not they have been earned by performance.

     "Adjusted  Coverage  Ratio"  means,  with  respect to any trailing 12 month
period,  the ratio of Guarantor's  EBITDA (as determined in accordance with GAAP
on a  consolidated  basis)  plus  Scheduled  Payment to  Interest  Expense  plus
Scheduled Payment.

     "Adjusted Net Earnings from Operations"  means,  with respect to any period
of time,  Guarantor's  net income on a  consolidated  basis after  provision for
income taxes,  if any, for such period of time, as determined in accordance with
GAAP and reported on Guarantor's financial statements for such period, excluding
any and all of the  following  included  in such  net  income:  (a) gain or loss
arising from the sale of any capital  assets;  (b) gain or loss arising from any
write-up or non-cash charge from the write-down, respectively, in the book value
of any asset; (c)

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earnings  of any  corporation,  substantially  all the assets of which have been
acquired  by  Guarantor  in any  manner,  to the extent  realized  by such other
corporation  prior to the date of  acquisition;  (d)  earnings  of any  business
entity in which  Guarantor  has an  ownership  interest  unless (and only to the
extent) such earnings shall actually have been received by Guarantor in the form
of cash  distributions;  (e) earnings of any Person to which assets of Guarantor
shall have been sold,  transferred or disposed of, or into which Guarantor shall
have been merged,  or which has been a party with Guarantor to any consolidation
or other forms of  reorganization,  prior to the date of such  transaction;  (f)
non-cash  gain or non-cash loss arising from the  acquisition  of debt or equity
securities  of  Guarantor  or  from  cancellation  or  forgiveness  of  Debt  of
Guarantor;  and (g) non-cash  gain or non-cash  loss arising from  extraordinary
items,  as determined in accordance  with GAAP, or from any other  non-recurring
transaction.

     "Adjustment  Date" means a day  occurring  not more than 6 months after the
Basic Term  Commencement  Date selected by Lessee and as to which 15 days' prior
notice shall have been given by Lessee to each Owner Participant.

     "Advisor" means Capstar Partners, LLC.

     "Affiliate"  of any  Person  means  any  other  Person  which  directly  or
indirectly through one or more intermediaries  controls, or is controlled by, or
is under common control with such Person.

     "After-Tax  Basis"  means,  with  respect to any payment to an  Indemnified
Person, on the basis that such payment shall be increased by an amount such that
the total of such payment and such amount shall, after reduction by the total of
all Taxes (the "Gross-Up Taxes") required to be paid by such Indemnified  Person
in respect of the receipt or accrual of such amount and after  consideration  of
any current Tax savings  realized by such Indemnified  Person (without  limiting
the provisions of Section 7.01(c) of the Participation  Agreement, as determined
in the sole  discretion of the  Indemnified  Person) by reason of the payment or
accrual  of such  payment  or the  costs or  expenses  that  such  payment  is a
reimbursement  for, be equal to the payment  otherwise  required.  If any amount
required to be paid on an After-Tax Basis hereunder results in the imposition of
Taxes upon an  Indemnified  Person for any period  other than the period  during
which  such  underlying  payment  is made (as a result  of a  reduction  in loss
carryovers  or credits,  or  otherwise),  then such Taxes at the time so imposed
shall be  considered  Gross-Up  Taxes  for  which  Lessee  shall  indemnify  the
Indemnified Person on an After-Tax Basis upon written demand therefor.

     "Applicable Laws" means all applicable treaties,  laws, regulations,  rules
and ordinances  (including  applicable  Environmental  Laws), and all judgments,
decrees,  injunctions,  writs  and  orders  of any  court,  arbitrator  or other
Governmental Authority.

     "Applicable  Rate"  means,  for any day, the rate of interest in effect for
such day as publicly  announced  from time to time by Bank of America,  N.A., in
New York, New York, (or, if Bank of America, N.A. does not announce such rate of
interest,  the comparable rate of interest announced by a financial  institution
selected by a Majority in  Interest  of the Owner  Participants),  as its "prime
rate" (the "prime rate" being a rate set by Bank of America, N.A. based upon

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various  factors  including  Bank of America,  N.A.'s costs and desired  return,
general economic conditions and other factors,  and is used as a reference point
for pricing some loans,  which may be priced at, above,  or below such announced
rate).  Any change in the prime rate  announced by Bank of America,  N.A.  shall
take  effect at the  opening  of  business  on the day  specified  in the public
announcement of such change.

     "Applicable  Specifications" has the meaning defined in Section 6.02 of the
Lease.

     "Appraisal" means the appraisal by the Appraiser of the Equipment delivered
on the Closing Date pursuant to Section 3.01(e) of the Participation Agreement.

     "Appraisal  Procedure"  means the following  procedure for  determining the
Fair Market  Rental Value or the Fair Market Sales Value of the Equipment or any
element of PPE Collateral (herein, the "Subject Property"):

          (i) At either Lessee's or Lessor's request, as the case may be, Lessor
     and Lessee shall negotiate in good faith to determine the Fair Market Sales
     Value and Fair Market Rental Value of the Subject  Property  within 45 days
     after such request has been given. If after such 45-day period,  Lessor and
     Lessee are unable to agree upon a  determination  of the Fair Market  Sales
     Value or Fair  Market  Rental  Value,  as the case may be,  of the  Subject
     Property,  the Fair Market Sales Value or Fair Market Rental Value,  as the
     case may be, shall be determined in accordance with the appraisal procedure
     set forth in this  definition.  If either  party  shall have given  written
     notice to the other  requesting  determination  of such Fair  Market  Sales
     Value or Fair Market Rental Value by such appraisal procedure,  the parties
     shall  consult  for the  purpose  of  appointing  a  qualified  independent
     appraiser by mutual agreement.  If no such appraiser is appointed within 20
     days after such notice is given,  such  determinations  shall be made by an
     independent  appraiser  selected  by two  appraisers  one of whom  shall be
     selected by Lessee and the other of whom shall be selected by Lessor,  both
     selections to be made within ten days after the end of such 20-day  period.
     If Lessor or Lessee  fails to  appoint  an  appraiser  within  such  10-day
     period,  no other  appraiser  shall be appointed and the appraisal shall be
     made  solely  by  the  appraiser  appointed  by  the  other  party.  If the
     appraisers  selected  by Lessor and Lessee  cannot  agree,  within ten days
     after  the  latter of the two  appraisers  have  been  selected,  upon such
     independent appraiser,  such independent appraiser shall be selected by the
     American  Arbitration  Association  (or any  successor  organization)  in a
     timely  manner  so that the  American  Arbitration  Association  is able to
     select  an  independent  appraiser  sufficiently  early to  facilitate  the
     determination  of the Fair Market  Sales  Value or the Fair  Market  Rental
     Value,  as the case may be,  within  the  applicable  time  period for such
     determination, if any, provided in the Operative Documents.

          (ii) The  determination  of the  appraiser  selected  pursuant  to the
     selection  process described in clause (i) above shall be final and binding
     upon the parties.

          (iii) The appraiser shall be provided with, and instructed to appraise
     in accordance with, the definitions of all terms appearing in the Operative
     Documents and

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     having  a  bearing  on  the  determinations  subject to  appraisal  and  in
     accordance with customary appraisal procedures.

          (iv) The fees and expenses of each appraiser shall  be shared  equally
     by  Lessor and Lessee,  unless such appraisals  are conducted  pursuant  to
     Article XIV of the Lease, or Lessee shall have not consummated its purchase
     or renewal option  pursuant to Article XVI of the Lease, in which event the
     cost  thereof shall be paid by Lessee.

     "Appraiser" means American Appraisal Associates.

     "Assigned  Warranties" has the meaning  specified in Section 6.06(a) of the
Lease.

     "Authorized Officer" means, with respect to any Person, the President,  any
Vice President,  the Treasurer or any Assistant Treasurer,  or any other officer
of any Person duly authorized by appropriate  corporate or partnership action to
execute  any  Operative  Document,  and with  respect to the Owner  Trustee,  an
officer in its Corporate Trust Department.

     "BA Loan Agreement" means the Second Amended and Restated Loan and Security
Agreement  dated as of June 15,  2000  among the  Financial  Institutions  named
therein, Bank of America, N.A., as Agent, Lessee and Guarantor.

     "Basic Rent" means,  without  duplication,  the rent designated as such and
which is payable  pursuant to Section  3.01(b) of the Lease and Section 3 of the
Lease Supplement.

     "Basic Term" means, for the Equipment,  the period  commencing on the Basic
Term Commencement Date for the Equipment and ending on the Basic Term Expiration
Date,  or on such  earlier date as is specified by the terms of the Lease or the
Lease Supplement.

     "Basic  Term  Commencement  Date"  means the Basic Term  Commencement  Date
specified in the Lease Supplement.

     "Basic Term Expiration Date" means the Basic Term Expiration Date specified
in the Lease Supplement.

     "Bill of Sale" means,  with respect to the Equipment,  the warranty bill of
sale described in Section 3.01(d)(v) of the Participation  Agreement,  dated the
Closing Date.

     "Business Day" means any day other than a Saturday,  Sunday or other day on
which banks are  authorized  or  required to be closed in New York,  New York or
Hartford, Connecticut.

     "Claim"  has the meaning  specified  in Section  6.01 of the  Participation
Agreement.

     "Closing  Date" means the date on which the  transactions  contemplated  by
Article II of the  Participation  Agreement  shall be  consummated  and shall be
specified in a notice by Lessee to the Owner Trustee and the Owner  Participants
pursuant to Section 2.04 of the Participation Agreement.

<PAGE>

     "Closing  Notice"  has the  meaning  specified  in  Section  2.04(b) of the
Participation Agreement.

     "Code"  means the Internal  Revenue  Code of 1986,  as amended from time to
time.

     "Collateral" means PPE Collateral and Working Capital Collateral.

     "Collateral Agent" means Bank of America,  N.A. or any successor Collateral
Agent pursuant to the Intercreditor Agreement.

     "Commitment"  means the Commitment of an Owner  Participant,  as defined in
Section 2.01 of the Participation Agreement.

     "Commitment  Percentage"  with respect to an Owner  Participant  equals the
percentage  set forth opposite such Owner  Participant's  name on Schedule II of
the Participation Agreement.

     "Competitor"  means  any  Person  or  entity  which  competes  in a direct,
significant  or material  way with Lessee or Guarantor  in the  disposable  food
service products business or any person or entity which  manufactures  equipment
used in such business.

     "Component"  means any component of the  Equipment  listed on Schedule I to
the Lease  Supplement  and any  substitutions  therefor  and any  modifications,
accessions or additions thereto permitted under the Lease.

     "Consolidated Net Income" means, with respect to any person for any period,
the  aggregate  of the Net Income of such person and its  Subsidiaries  for such
period, on a consolidated basis, determined in accordance with GAAP .

     "Contractual  Obligation"  means, with respect to any Person, any provision
of any security issued by such Person or of any contract,  agreement,  letter of
credit, indenture,  mortgage,  document or undertaking to which such Person is a
party or by which it or any of its property is bound.

     "Debt"  means,  without  duplication,  any  indebtedness,  capital  leases,
synthetic  leases  or  obligation  created,   issued,   guaranteed  directly  or
indirectly, by way of any agreement to purchase or otherwise to provide funds to
be  available  for  payment,  incurred or assumed for money  borrowed or for the
deferred purchase price of property,  other than accounts payable arising in the
ordinary  course of Lessee's or Guarantor's  business on terms  customary in the
trade.

     "Designated Value" means, with respect to any Component,  the dollar amount
listed next to such Component under the heading "Designated Value" in Schedule I
to the applicable Lease Supplement.

     "Disqualified  Stock" means any Equity  Interest which, by its terms (or by
the  terms of any  security  into  which it is  convertible  or for  which it is
exchangeable),  or upon the  happening of any event,  matures or is  mandatorily
redeemable, pursuant to a sinking fund obligation or

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otherwise,  or is redeemable at the option of the holder thereof, in whole or in
part, on or prior to the Scheduled Expiration Date.

     "Document Date" means June 1, 2000.

     "Documentary  Conventions"  has the  meaning set forth in Part III of these
Definitions and Rules of Usage.

     "Dollars" mean the lawful currency of the United States of America.

     "Early Buy-Out  Option" means the purchase option pursuant to Section 16.01
of the Lease.

     "EBITDA"  means,  with  respect  to any  period  of time,  the total of the
following for Guarantor as determined in accordance  with GAAP,  each calculated
for such period of time:  Adjusted Net Earnings  from  Operations  plus,  to the
extent included in the calculation of Adjusted Net Earnings from Operations, the
sum of (a) income tax expense; (b) interest expense paid or payable in cash, net
of cash interest income;  (c) amortization and depreciation  expense;  (d) other
non-cash  charges;  and (e) if EBITDA is being determined in connection with the
incurrence  of Debt  permitted  under clause (h) of the  definition of Permitted
Debt and the proceeds of such Debt will be used to finance an  acquisition  of a
business,  the Adjusted Net Earnings from  Operations of such acquired  business
for such period,  plus the amounts  described  in clauses (a),  (b), (c) and (d)
above with respect to such acquired business.

     "EBO Date" means the date specified in Section 4 of the Lease Supplement.

     "EBO Payment Date" means each of the EBO Payment  Amount dates set forth in
Schedule III-A to the Lease Supplement.

     "EBO Payment Amount" means for any EBO Payment Date an amount determined by
multiplying the Lessor's Cost of the Equipment by the Lessee EBO Factor for such
date as the same may be adjusted from time to time in accordance  with the terms
of the  Operative  Documents,  all as  shown  on  Schedule  III-A  to the  Lease
Supplement.

     "EH&S" has the meaning specified in Section 17.02 of the Lease.

     "EH&S  Letter"  means a letter dated the Closing Date from Lessee to Lessor
and the Owner Participants regarding certain EH&S liabilities.

     "EH&S Program" has the meaning specified in Section 17.02 of the Lease.

     "Environmental  Claim"  means any  administrative,  regulatory  or judicial
suit,  proceeding,  action,  judgment,  demand, claim, lien, penalty,  notice of
non-compliance  or violation,  or  investigation  or proceeding  arising out of,
relating in any way to, or based on any Spill, any Environmental Law, any permit
issued under such law, or the use, exposure, storage,  transportation,  Spill or
other  discharge by Lessee of Hazardous  Substances at any Site or involving the
Equipment or any item of equipment which is PPE Collateral.

<PAGE>

     "Environmental  Laws" means all applicable  Federal,  state and local laws,
rules  and   regulations,   orders,   judgments  and  decrees  and  other  legal
requirements  relating to pollution or the  regulation  and  protection of human
health,  safety,  occupational  safety,  the  environment or natural  resources,
including,  but  not  limited  to,  the  Comprehensive  Environmental  Response,
Compensation  and Liability Act of 1980, as amended (42  U.S.C.ss.9601 et seq.);
the  Hazardous  Material  Transportation  Act, as amended (49  U.S.C.ss.  180 et
seq.); the Resource  Conservation and Recovery Act, as amended (42 U.S.C.ss.6901
et seq.);  the Toxic  Substance  Control Act, as amended (42  U.S.C.ss.  7401 et
seq.);  the Clean Air Act, as amended  (42  U.S.C.ss.740  et seq.);  the Federal
Water  Pollution  Control  Act,  as amended  (33  U.S.C.ss.  1251 et seq.);  the
Occupational  Safety and Health Act, as amended (29 U.S.C.ss.  651 et seq.); the
Safe Drinking Water Act, as amended (42  U.S.C.ss.300f et seq.); and their state
and local counterparts or equivalents and any transfer of ownership notification
or approval statute.

     "Environmental   Permits"  means  any  Governmental   Actions  required  by
Environmental Laws.

     "Equipment"  means  all  equipment  subject  to the  Lease  and  the  Lease
Supplement from time to time in accordance with the terms thereof, including all
Components.

     "Equity Interests" means capital stock or warrants, options or other rights
to acquire  capital stock (but  excluding any debt security which is convertible
into, or exchangeable for, capital stock).

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time, and the rules and regulations promulgated thereunder.

     "ERISA  Affiliate" means any trade or business that together with Lessee or
Guarantor,  is treated as a single  employer  under Section 414(b) or (c) of the
Code or solely for purposes of Section 302 of ERISA and Section 412 of the Code,
is treated as a single employer under Section 414 of the Code.

     "Event of Loss"  means any of the  following  events,  with  respect to the
Equipment:  (a) the  loss or  theft  of the  Equipment  to the  extent  that the
Equipment  is not  recovered  within 30 days of such event or, if  earlier,  the
expiration  of the Term with  respect to the  Equipment,  unless the location of
such  property  is known  and  Lessee is  diligently  pursuing  recovery  of the
Equipment within 90 days of such event or, if earlier,  the Scheduled Expiration
Date with  respect to the  Equipment),  (b) the  destruction  of or  irreparable
damage to the  Equipment,  or damage to the  Equipment  to such  extent as shall
render repair of the Equipment  uneconomical to Lessee,  in Lessee's  reasonable
judgment,  (c)  the  condemnation  or  confiscation  of  the  Equipment  by,  or
forfeiture thereof to, any Governmental Authority, (d) requisition of use of the
Equipment  for a period in excess of 6 months  or,  if  earlier,  the  Scheduled
Expiration  Date, (e) any damage to the Equipment  which results in an insurance
settlement on the basis of an actual or  constructive  total loss,  (f) any Site
Event of Loss  (as  defined  in the Site  Sublease),  or (g) the  recall  of the
Equipment by the  manufacturer  of the Equipment  without prompt  replacement or
repair of the Equipment.

<PAGE>

     "Fair Market Rental Value" means, as to the Equipment or any element of PPE
Collateral,  the fair  market  rental  value,  in-place,  in-use,  that would be
obtained in an arm's-length  transaction  between an informed and willing lessee
and an informed and willing lessor, in either case under no compulsion to lease,
for the lease of the  Equipment  or any  element  of PPE  Collateral,  assuming,
except for  purposes of Article  XIV of the Lease,  that the  provisions  of the
Lease shall have been complied with in all respects;  provided, that such amount
shall not include the value attributable to any Severable Modification.

     "Fair Market Sales Value" means,  as to the Equipment or any element of PPE
Collateral,  the fair market sales value, in-place,  in-use, of the Equipment or
any  element  of PPE  Collateral  that  would  be  obtained  in an  arm's-length
transaction  between an informed  and  willing  buyer/user  and an informed  and
willing seller,  under no compulsion,  respectively,  to buy or sell,  assuming,
except for  purposes  of Section  8.02 and  Article  XIV of the Lease,  that the
provisions of the Lease shall have been complied with in all respects; provided,
that such amount shall not include the value of any Severable Modification.

     "Fiscal Year" means Lessee's fiscal year for financial accounting purposes.
The current Fiscal Year of Lessee will end on September 24, 2000.

     "Fonda" means The Fonda Group, Inc., a Delaware corporation.

     "GAAP" means generally accepted  accounting  principles set forth from time
to time in the opinions and  pronouncements  of the Accounting  Principles Board
and the American  Institute of Certified  Public  Accountants  and statements or
pronouncements  of the Financial  Accounting  Standards  Board (or agencies with
similar functions or comparable stature and authority within the U.S. accounting
profession).

     "Governmental  Action"  means  all  authorizations,   consents,  approvals,
waivers, exceptions, variances, franchises, permits and licenses of, and filings
and declarations with, Governmental Authorities.

     "Governmental Authority" means any Federal, state, local or foreign (which,
for the  avoidance of doubt,  includes any territory or possession of the United
States) governmental Person,  authority or agency, court, regulatory commission,
stock  exchange  or  other  body and any  arbitrator,  whether  governmental  or
private.

     "Gross-Up  Taxes" has the meaning  specified in the definition of After-Tax
Basis.

     "Guarantee"  means the Guarantee  dated as of the Closing Date by Guarantor
in favor of Owner  Trustee  and each Owner  Participant  in respect of  Lessee's
obligations under the Lease and the other Operative Documents.

     "Guarantor" means Sweetheart Holdings Inc., a Delaware corporation.

     "Guarantor's Special Counsel" means Kramer Levin Naftalis & Frankel LLP, as
special counsel to Guarantor.

<PAGE>

     "Hazardous  Substances" means any waste,  pollutant,  hazardous  substance,
toxic substance,  hazardous waste, special waste, petroleum or petroleum-derived
substance or waste,  friable asbestos in any form or condition,  polychlorinated
biphenyls ("PCBs"),  or any hazardous constituent of any such substance or waste
regulated under any Environmental Law.

     "Implicit  Interest  Rate" means that  interest  rate  which,  if used as a
discount rate, would cause the present value as of the Closing Date of all Basic
Rent payable up to the Basic Term  Expiration Date with respect to the Equipment
to equal the aggregate Lessor's Cost of such Equipment.

     "Indemnified  Person"  means  Trust  Company,  Owner  Trustee,  each  Owner
Participant,  and  their  respective  successors,   assigns,  agents,  officers,
directors and employees.

     "Index  Rate" as of any date of  determination  means the rate equal to the
yield on the benchmark 5-year U.S. Treasury Note.

     "Inspector"  shall have the meaning  given such term in Section  8.01(e) of
the Lease.

     "Intercreditor  Agreement"  means the  Intercreditor  Agreement dated as of
June 15, 2000,  among Owner  Trustee and Bank of America,  N.A., as Credit Agent
and Collateral Agent (as defined therein).

     "Interest Expense" means, for any period, all interest accrued by Guarantor
in accordance  with GAAP with respect to its Debt on a consolidated  basis plus,
in connection  with the incurrence of any Debt permitted under clause (h) of the
definition of Permitted Debt, the interest which would have accrued on such Debt
if such Debt had been incurred at the beginning of such period.

     "Inventory"  means  all  of  Lessee's  now  owned  and  hereafter  acquired
inventory,  goods and merchandise,  wherever located,  to be furnished under any
contract  of  service  or held  for  sale or  lease,  all  returned  goods,  raw
materials, other materials and supplies of any kind, nature or description which
are or might be  consumed in Lessee's  business or used in  connection  with the
packing, shipping, advertising,  selling or finishing of such goods, merchandise
and such other personal property,  and all documents of title or other documents
representing them.

     "Landlord's  Waiver" with respect to any material real  property  leased by
Lessee, as lessee, means the landlord's waiver granted in favor of Lessor.

     "Lease" or "Lease  Agreement"  means the Lease Agreement dated the Document
Date between the Owner Trustee and Lessee,  together  with the Lease  Supplement
and any and all Lease  Supplements  that Lessor and Lessee may from time to time
enter into pursuant to such Lease Agreement and the Participation Agreement.

     "Lease  Default" means an event or condition  that, with notice or lapse of
time or both, would become a Lease Event of Default.

<PAGE>

     "Lease  Event of  Default"  means a Lease  Event of  Default  as defined in
Article XIII of the Lease.

     "Lease  Supplement"  means the Lease  Supplement to be entered into between
Lessor and Lessee on the Closing Date, including the Schedules attached thereto,
in  respect  of the  Equipment  identified  in such  Lease  Supplement,  and any
subsequent  Lease  Supplement  entered into in accordance  with the terms of the
Lease.

     "Lessee" means Sweetheart Cup Company Inc., a Delaware corporation.

     "Lessee  Basic Rent Factor" means with respect to any Rent Payment Date the
percentage set forth on Schedule II-A to the Lease Supplement for such date.

     "Lessee EBO Factor"  means,  with  respect to each EBO  Payment  Date,  the
applicable percentage set forth on Schedule III-A to the Lease Supplement.

     "Lessee Person" means Lessee,  any Affiliate  thereof,  or any other Person
(other than Lessor, each Owner Participant or any Person claiming through either
such Person,  other than  pursuant to the Lease) who acquires  possession of the
Equipment during the Term.

     "Lessee SLV Factor"  means with respect to any  Stipulated  Loss Value Date
the  applicable  percentage  determined  pursuant  to  Section  5 of  the  Lease
Supplement.

     "Lessee's  Special  Counsel"  means Kramer Levin Naftalis & Frankel LLP, as
special counsel to Lessee.

     "Lessor"  means Owner  Trustee  acting in its capacity as trustee under the
Trust Agreement and not in its individual capacity.

     "Lessor   Lien"  has  the  meaning   specified   in  Section  5.01  of  the
Participation Agreement.

     "Lessor's Cost" means, with respect to the Equipment,  the amount listed in
Section 1.(b) of the Lease Supplement.

     "Lien"  means  any lien,  mortgage,  deed of  trust,  encumbrance,  pledge,
charge, lease, easement,  servitude, right of others or security interest of any
kind or any interests  similar to the foregoing,  including those existing under
any conditional sales or other title retention agreement.

     "Lily Cup Credit Facility" means the term and revolving  credit  facilities
agreement,  dated as of June 15,  1998  among  Lily Cups,  Inc.,  the  financial
institutions party thereto and General Electric Capital Canada Inc., as lender.

     "Limited  Use  Property"  shall  have the  meaning  set  forth  in  Revenue
Procedure 76-30.

     "Majority  in  Interest  of  Owner  Participants"  means  as of any date of
determination,  the holders of Owner Certificates representing at least 50.1% of
the aggregate  beneficial  interest in the Trust Estate represented by all Owner
Certificates outstanding as of such date, including at

<PAGE>

least  three such  holders,  if there  shall be more than five  holders of Owner
Certificates, or at least two such holders, if there shall be either three, four
or five holders of Owner  Certificates.  For purposes of the preceding sentence,
any holder of an Owner  Certificate  and all Affiliates of such holder that also
hold an Owner  Certificate  shall be counted as only one holder. In the event of
any  determination  that  affects  only  one  Owner   Participant,   such  Owner
Participant shall have the sole authority to make such determination.

     "Material Adverse Effect" means, with respect to any Person, a material and
adverse effect upon (i) the business,  operations, assets or financial condition
of such  Person and its  Subsidiaries  (taken as a whole) or (ii) the ability of
such Person to perform its respective  obligations under the Operative Documents
to which it is a party in any material respect or (iii) the ability of any other
Person party to any Operative  Document to enforce in any material  respect such
Operative Document with respect to such Person.

     "Material Default" means a Lease Default under Section 13.01(a),  (b), (c),
or (i) of the Lease and any Lease Event of Default.

     "Modification" means any modification,  alteration, addition or improvement
to the Equipment or any Component thereof.

     "Moody's" means Moody's Investor Services, Inc.

     "Mortgage"  means with respect to a Site,  the mortgages or deeds of trust,
dated the Document  Date,  given by Lessee or Guarantor,  as the case may be, in
favor of Lessor and relating to such Site.

     "Net  Income" of any person  means the net income (or loss) of such person,
determined in accordance with GAAP.

     "Nonseverable  Modification"  means,  with  respect to the  Equipment,  any
Modification  to the  Equipment or any  Component of the  Equipment  that (i) is
required by law or  insurance  requirements,  (ii) is otherwise  required  under
Article  VI of the Lease or (iii)  cannot be  readily  removed  without  causing
material  damage to the Equipment or such  Component  thereof or  diminishing by
more than a de  minimis  amount  the fair  market or  expected  residual  value,
remaining  economic  useful life or utility the Equipment would have had if such
Modification  had not been made,  assuming  that it had been  maintained  in the
condition required by the Lease.

     "Officer's  Certificate"  means as to any corporation,  a certificate of an
Authorized  Officer  executed on behalf of such corporation and, as to any other
entity,  a certificate  of any  individual  generally  authorized to execute and
deliver contracts on behalf of such entity.

     "Operative  Documents" means the documents listed in Section 3.01(d) of the
Participation Agreement and the Security Documents.

<PAGE>

     "Organic  Document" means,  with respect to any Person,  the certificate or
articles of incorporation, by-laws, articles of organization and regulations and
operating agreement and other organizational  documents, as applicable,  of such
Person.

     "Original  Participant"  means the  corporation  or financial  institutions
whose names appear in Schedule A to the Participation Agreement.

     "Original  Participation"  has the meaning specified in Section 4.08 of the
Trust Agreement.

     "Overdue Rate" means the Applicable  Rate plus 2% per annum, or such lesser
maximum rate as is permitted by law.

     "Overdue  Rent" means all unpaid  Basic Rent  payable  with  respect to the
Equipment on any Rent Payment Date occurring before such date.

     "Owner  Certificate"  means the certificate in the form of Exhibit A to the
Trust Agreement evidencing each Owner Participant's Percentage Interest.

     "Owner Participant" means each of General Electric Capital  Corporation,  a
New  York   corporation,   MDFC  Equipment  Leasing   Corporation,   a  Delaware
corporation,  Dana Lease Finance  Corporation,  a Delaware  corporation,  FINOVA
Capital Corporation, a Delaware corporation,  General Foods Credit Investors No.
3 Corporation,  a Delaware  corporation,  and Transamerica  Equipment  Financial
Services Corporation, a Delaware corporation.

     "Owner Participant's Basic Rent Percentage" means with respect to any Owner
Participant for any Rent Payment Date the percentages set forth on Schedule II-B
to the Lease Supplement for such Owner Participant corresponding to such date.

     "Owner Participant's EBO Amount Percentage" means with respect to any Owner
Participant  for any EBO Payment Date the applicable  EBO Amount  Percentage set
forth on Schedule III-B to the Lease Supplement for such Owner Participant.

     "Owner  Participant's EBO Price Percentage" means with respect to any Owner
Participant  for any EBO Payment Date the  applicable  EBO Price  Percentage set
forth on Schedule III-B to the Lease Supplement for such Owner Participant.

     "Owner Participant's Economics" means with respect to the investment by any
Owner Participant in the Equipment,  such Owner  Participant's (i) net after-tax
book yield (computed  using the multiple  investment  sinking fund method),  and
(ii)  aggregate  after-tax  cash  flow,  each  of  clauses  (i) and  (ii)  being
calculated  both for the period from the Closing Date to the EBO Date  (assuming
that Lessee  elects to purchase  pursuant to Section 16.01 of the Lease) and for
the period from the  Closing  Date to the end of the Basic Term  (assuming  that
Lessee does not elect to purchase  pursuant to Section 16.01 of the Lease),  and
each as  computed  on the basis of the same  economic  and tax  assumptions  and
methodology (including constraints) utilized by such

<PAGE>

Owner  Participant in calculating  the Basic Rent and Stipulated Loss Values for
the Equipment as stated in the Lease Supplement.

     "Owner  Participant's  Percentage Interest" means with respect to any Owner
Participant  its  percentage  interest  in the Trust  Estate as set forth on its
Owner  Certificate and the register  maintained by the Owner Trustee pursuant to
the Trust Agreement.

     "Owner Participant's SLV Amount Percentage" means with respect to any Owner
Participant  for any  Stipulated  Loss  Value Date the  percentage  set forth on
Schedule IV to the Lease Supplement for such Owner Participant  corresponding to
such date.

     "Owner Participants' Special Counsel" means Thelen Reid & Priest LLP.

     "Owner Participants' Tax Counsel" means Thelen Reid & Priest LLP.

     "Owner  Trustee" means State Street Bank and Trust Company of  Connecticut,
National  Association,  not in its  individual  capacity,  but solely as trustee
under the Trust Agreement.

     "Owner  Trustee  Office"  means the office  set forth in  Schedule I to the
Participation Agreement for the Owner Trustee.

     "Owner  Trustee Parent  Guaranty"  means the guarantee of State Street Bank
and Trust Company, a Massachusetts corporation.

     "Owner Trustee's Special Counsel" means Shipman & Goodwin LLP.

     "Parent Pledge  Agreement"  means the Parent Pledge  Agreement  dated as of
June 15, 2000 between the  Guarantor  and Bank of America,  N.A.,  as Collateral
Agent.

     "Parent Security Agreement" means the Security Agreement dated the Document
Date among Sweetheart Holdings Inc., the Designated  Depository  Institution and
Owner Trustee.

     "Participation Agreement" means the Participation Agreement dated as of the
Document Date among Lessee, Guarantor, Owner Trustee and the Owner Participants.

     "Patent Security Agreement" means the Patent Security Agreement dated as of
the Document Date between Lessee and Owner Trustee.

     "PBGC" means the Pension Benefit  Guaranty  Corporation or any Governmental
Authority succeeding to the functions thereof.

     "Pension  Plan" means a pension  plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which Lessee or Guarantor sponsors,  maintains,  or
to which it makes, is making, or is obligated to make  contributions,  or in the
case of a  Multi-employer  Plan has made  contributions  at any time  during the
immediately preceding 5 plan years.

<PAGE>

     "Permitted  Contest" means  appropriate  proceedings  being  conducted in a
reasonable  manner  and in  good  faith  that  does  not  adversely  affect  any
Indemnified Person in any material respect (but only so long as such proceedings
do not  involve (A) any  material  risk of the sale,  forfeiture  or loss of the
Equipment or any interest therein,  (B) the imposition of any criminal liability
on any  Indemnified  Person or (C) any material  risk of the  imposition  of any
other  liability not  indemnified  against by Lessee pursuant to Section 6.01 of
the  Participation  Agreement  and which does not  extend  beyond the end of the
Basic Term (or Renewal Term, if applicable),  or the earlier  termination of the
Lease) and for which  appropriate  reserves are  maintained in  accordance  with
GAAP.

     "Permitted Debt" means:

          (a) indebtedness  incurred by Lessee or Guarantor in respect of the BA
     Loan Agreement;

          (b) without  duplication,  the maximum committed amount of loans to be
     made  under  the  BA  Loan  Agreement,  plus  any  term  loans  outstanding
     thereunder,  and after a merger with Fonda, the aggregate maximum committed
     amount  under  the BA Loan  Agreement,  plus  any  term  loans  outstanding
     thereunder,  plus the aggregate  maximum  committed  amount under currently
     existing revolving credit facilities of Fonda on a combined basis;

          (c) convertible subordinated notes in an aggregate principal amount of
     $5,000,000  issued  by  Lessee  in  connection  with  the  purchase  of the
     outstanding capital stock of Sherwood Industries, Inc.;

          (d)  all  indebtedness  of  Lessee,  Guarantor  and  Fonda  and  their
     respective Subsidiaries existing on the Closing Date;

          (e) the refinancing, renewal, replacement,  extension, substitution or
     refunding  of the Lily Cup Credit  Facility  up to an  aggregate  principal
     amount of $20,000,000;

          (f) Debt  which is  recourse  solely  to (i) newly  acquired  property
     financed with the incurrence of such Debt, (ii) any Unrestricted Subsidiary
     or (iii) the tangible assets of Sherwood, and not in any such case recourse
     to any other property of or to the general  credit of Lessee,  Guarantor or
     any Subsidiary other than an Unrestricted Subsidiary;

          (g) an aggregate of $25,000,000 in principal amount of additional Debt
     outstanding  at any time  incurred by Lessee or  Guarantor  or any of their
     respective Subsidiaries after the Closing Date;

          (h) other Debt incurred by Lessee if, at the time of such  incurrence,
     Lessee  has,  on a  trailing  12 month  basis  (determined  quarterly),  an
     Adjusted  Coverage  Ratio of no less than 1.9:1  (increasing  to 2:1 on and
     after October 1, 2001);

<PAGE>

          (i)  the  incurrence  of  intercompany   Debt  between  or  among  the
     Guarantor, Lessee or any of their respective Subsidiaries after the Closing
     Date; and

          (j) any refinancing, renewal, replacement,  extension, substitution or
     refunding of any of the  foregoing,  provided that no such  refinancing  or
     renewal shall (i) increase the  principal  amount of such Debt to an amount
     greater than the sum of (x) the principal  amount of such Debt  immediately
     prior to such  refinancing  or renewal plus (y) the unused  commitment,  if
     any, with respect to the Debt being refinanced or renewed immediately prior
     to such  refinancing or renewal or (ii) with respect to any  refinancing or
     renewal other than of Debt under clauses (a) or (b) above,  add guarantors,
     obligors or security from that which applied to such Debt being  refinanced
     or renewed,  and all other terms of such  refinancing or renewal  including
     terms of subordination, are no more restrictive or less favorable to Lessee
     or Guarantor, as applicable,  than previously existing with respect to such
     Debt.

     "Permitted  Encumbrances" means the Liens permitted on the Collateral shown
on Schedule VII to the Participation Agreement.

     "Permitted Investment" means (i) United States Government Securities,  (ii)
time deposits and  certificates  of deposit of any commercial  bank organized in
the United  States  having  capital and surplus in excess of  $100,000,000  or a
commercial  bank organized  under the laws of any other country that is a member
of the OECD having total assets in excess of $100,000,000,  in either case, with
a  maturity  date not more  than one year  from the date of  acquisition,  (iii)
repurchase  obligations  with a term  of not  more  than 7 days  for  underlying
securities of the types described in clause (i) above entered into with any bank
meeting  the  qualifications   specified  in  clause  (ii)  above,  (iv)  direct
obligations issued by any state of the United States of America or any political
subdivision  of any such state or any public  instrumentality  thereof  maturing
within  90 days  after  the  date of  acquisition  thereof  and,  at the time of
acquisition, having one of the two highest ratings obtainable from either S&P or
Moody's  (or,  if at any time  neither  S&P nor  Moody's  shall be  rating  such
obligations,   then  from  such  other  nationally  recognized  rating  services
acceptable to the Collateral  Agent),  (v) commercial paper issued by the parent
corporation of any commercial bank organized in the United States having capital
and surplus in excess of  $100,000,000  or a commercial bank organized under the
laws of any other  country  that is a member of the OECD having  total assets in
excess of $100,000,000,  and commercial paper issued by others having one of the
two highest  ratings  obtainable  from either S&P or Moody's (or, if at any time
neither S&P nor Moody's shall be rating such  obligations,  then from such other
nationally recognized rating services acceptable to the Collateral Agent) and in
each case maturing within one year after the date of acquisition, (vi) overnight
bank deposits and bankers'  acceptances at any commercial  bank organized in the
United  States  having  capital  and  surplus  in  excess of  $100,000,000  or a
commercial  bank organized  under the laws of any other country that is a member
of the OECD  having  total  assets  in excess of  $100,000,000,  (vii)  deposits
available  for  withdrawal  on demand with a  commercial  bank  organized in the
United  States  having  capital  and  surplus  in  excess  of  $50,000,000  or a
commercial  bank organized  under the laws of any other country that is a member
of the OECD having total assets in excess of $50,000,000 and

<PAGE>

(viii)  investments  in money  market  funds  substantially  all of whose assets
comprise securities of the types described in clauses (i) through (vii).

     "Permitted Liens" means, with respect to the Equipment,  (i) the respective
rights and interests of Lessee,  the Owner Participant and Lessor as provided in
the  Operative  Documents;  (ii) Lessor  Liens;  (iii) Liens for taxes of Lessee
either not yet due or which are subject to a Permitted Contest; (iv) mechanics',
workmen's,  repairmen's,  employees',  carriers',  warehousemen's  or other like
Liens  arising in the  ordinary  course of  business  of  Lessee,  which are not
overdue  for more than 30 days or are subject to a  Permitted  Contest;  and (v)
Liens which arise out of  judgments  or awards  against  Lessee with  respect to
which (A) at the time an appeal or  proceeding  for  review is being  diligently
prosecuted in good faith,  (B) there shall have been secured a stay of execution
pending such appeal or proceeding for review, (C) during such proceedings, there
is not, and such proceedings do not involve any risk of the sale,  forfeiture or
loss of the Equipment,  any part thereof or interest  therein,  (D)  appropriate
reserves are  maintained  in  accordance  with GAAP,  and (E) if such Liens have
specifically  attached to the Equipment or portion  thereof or the Trust Estate,
Lessee or Guarantor has provided Lessor or the Owner  Participant with security,
reasonably satisfactory to the Owner Participant, in the amount of such claims.

     "Person"  shall  mean  any  individual,  corporation,   partnership,  joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

     "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which Lessee or Guarantor  sponsors or maintains or to which Lessee or Guarantor
makes, is making or is obligated to make  contributions and includes any Pension
Plan.

     "Pledge  Agreement"  means the Pledge  Agreement  dated as of June 15, 2000
between Lessee and Collateral Agent.

     "PPE  Collateral"  means all Secured  Sale/Leaseback  Collateral and Credit
Agreement  Term  Loan  Equipment  Collateral  as  defined  in the  Intercreditor
Agreement  to the  extent a lien  therein is created  pursuant  to the  Security
Documents.

     "Qualifying Bid" has the meaning specified in Section 7.03 of the Lease.

     "Reasonable  Basis"  means a basis  satisfying  the  criteria  set forth in
American Bar Association Formal Opinion 85-352.

     "Related  Indemnitee"  means,  in respect of any  Indemnified  Person,  any
directors,  officers,  employees,  servants,  attorneys  and  agents,  it  being
understood  that the Owner  Trustee (in its  individual  capacity  and its trust
capacity) and each Owner  Participant  are Related  Indemnitees of each other to
the extent such Owner Participant directs the actions of Owner Trustee.

     "Renewal Notice" shall have the meaning given such term in Section 16.03 of
the Lease.

<PAGE>

     "Renewal Option" shall have the meaning given such term in Section 16.03 of
the Lease.

     "Renewal  Term" shall have the meaning  given such term in Section 16.03 of
the Lease.

     "Renewal  Term Basic Rent" means the rent  designated  as such and which is
payable pursuant to Section  3.01(b)(iii) of the Lease as determined pursuant to
Section 16.03 of the Lease.

     "Rent" means the Basic Rent, Renewal Term Basic Rent and Supplemental Rent.

     "Rent Payment Date" means, with respect to the Equipment,  any of the dates
specified  in Schedule  II-A of such Lease  Supplement  and if a Renewal Term is
entered  into  pursuant  to  Section  16.03 of the  Lease,  with  respect to the
Equipment set forth in the Lease  Supplement,  any of the dates specified in the
relevant schedule to such Lease Supplement.

     "Responsible  Officer" means, with respect to a Person, the chief executive
officer,  the president,  the treasurer,  the assistant  treasurer,  or any vice
president thereof,  or, when used with respect to the Owner Trustee,  shall mean
an officer in its corporate trust administration department.

     "Scheduled Expiration Date" means, with respect to the Equipment,  the last
day of the Term applicable to the Equipment.

     "Scheduled Payment" means, for any 12 month period, the amount set forth on
Schedule VI to the Participation Agreement.

     "S&P" means Standard & Poor's  Ratings  Group,  a division of  McGraw-Hill,
Inc.

     "Secured  Obligations"  means all obligations of Lessee and Guarantor under
the Operative Documents; provided, however, that in no event shall Owner Trustee
be  entitled  to  receive  in excess of  $165,000,000,  in the  aggregate,  from
realization upon the Collateral under the Security Documents.

     "Security  Agreement" means the Security  Agreement dated the Document Date
among Lessee, the Designated Depository Institution and Owner Trustee.

     "Security  Documents"  means  each of the  Mortgages,  Security  Agreement,
Parent  Security  Agreement,  Patent  Security  Agreement,   Trademark  Security
Agreement,  Landlord's  Waivers,  Parent Pledge Agreement,  Pledge Agreement and
Intercreditor Agreement.

     "Senior Subordinated Note Indenture" means the Indenture dated as of August
30, 1993, by and among Cup Acquisition, U.S. Trust Company of Texas, as trustee,
and SHI Holdings Company, L.L.C., as Guarantor, and as thereafter amended.

     "Senior Subordinated Notes" means the 10 1/2% Senior Subordinated Notes due
2003 issued pursuant to the Senior Subordinated Note Indenture.

<PAGE>

     "Severable Modification" means any Modification which is not a Nonseverable
Modification.

     "Sherwood" means Sherwood Industries, Inc., a Connecticut corporation.

     "Site" means (i) with respect to Equipment  each of Lessee's  manufacturing
facilities located in Chicago,  Illinois,  Owings Mills,  Maryland,  and Dallas,
Texas,  and any location which  subsequently  becomes a Site pursuant to Section
6.04(a)(iii) of the Lease and (ii) with respect to the PPE  Collateral,  each of
Lessee's   manufacturing   facilities  located  in  Somerville,   Massachusetts;
Springfield,  Missouri;  Manchester,  New Hampshire;  Augusta, Georgia; Conyers,
Georgia;  and Dallas,  Texas, in each case consisting of the land, buildings and
related site improvements.

     "Site Lease" means each Site Lease, dated the Document Date, between Lessee
or Guarantor as ground lessor, and Lessor as ground lessee,  with respect to the
Sites  listed in clause (i) of the  definition  of "Site"  and any ground  lease
entered into pursuant to Section 6.04(a)(iii) of the Lease.

     "Site  Sublease" means the sublease by Lessor to Lessee of the Sites leased
under the Site Leases.

     "Special Local  Counsel"  means (i) with respect to Illinois,  Katz Randall
Weinberg & Richmond, (ii) with respect to Maryland,  Venable, Baetjer and Howard
LLP,  (iii) with  respect to Texas,  Andrews & Kurth LLP,  (iv) with  respect to
Georgia,  Powell,   Goldstein,   Frazer  &  Murphy  LLP,  (v)  with  respect  to
Massachusetts,  Sherin and Lodgen LLP, (vi) with respect to Missouri, Bryan Cave
LLP, and (vii) with respect to New Hampshire, Devine, Millimet & Branch.

     "Spill" has the meaning defined in Section 10.01 of the Lease.

     "Stipulated Loss Value" means, as of any Stipulated Loss Value Date through
and including the last day of the Basic Term  applicable  to the  Equipment,  an
amount  determined by multiplying  the Lessor's Cost for the Equipment by Lessee
SLV Factor opposite such Stipulated Loss Value Date, as the same may be adjusted
from  time to time in  accordance  with the  terms of the  Operative  Documents.
Stipulated  Loss Value as of any date  includes  Basic Rent or Renewal  Rent, as
applicable,  otherwise  payable  on such date and  reflects  any  prepayment  or
deferral of Basic Rent as of such date, as set forth on Schedule IV to the Lease
Supplement.

     "Stipulated  Loss Value Date"  means any of the monthly  dates set forth on
Schedule IV to the Lease Supplement.

     "Subsidiary"  means,  with  respect  to any  Person,  (i) a  corporation  a
majority  of whose  voting  securities  at any time is at such time  directly or
indirectly  owned or  controlled  by such Person or (ii) any other Person (other
than a corporation) in which such Person, or one or more  subsidiaries  thereof,
at such time directly or indirectly has at least a majority  ownership  interest
and the power to direct  the  policies,  management  and  affairs  thereof.  For
purposes of this

<PAGE>

definition, any directors' qualifying shares shall be disregarded in determining
the ownership of a subsidiary.

     "Supplemental  Rent" means payments of Stipulated  Loss Value,  Fair Market
Sales Value,  EBO Price,  indemnities,  any damages for breach of any covenants,
representations, warranties or agreements therein and any and all other amounts,
liabilities  and  obligations  other than Basic Rent and Renewal Term Basic Rent
that Lessee is obligated to pay under any Operative Document.

     "Tangible   Net  Worth"  means   shareholder's   equity   determined  on  a
consolidated basis under generally accepted accounting principles,  less the sum
of  all  unamortized  debt  discount  expense,   unamortized  deferred  charges,
goodwill,  patents,  trademarks,  service marks, tradenames,  anticipated future
benefits of tax loss carry forwards,  copyrights,  organization  and development
expenses and other intangible assets and similar items.

     "Tax" means any fee  (including,  but not limited to, any license,  filing,
recording,  documentary and registration  fee), tax (including,  but not limited
to,  any  gross  receipts,  gross  or net  income,  franchise,  doing  business,
occupational,  sales, use, property,  ad valorem,  value-added,  excise or stamp
tax), levy, impost, duty, assessment,  withholding or other charge of any nature
whatsoever,  together with any  penalties,  fines,  additions to tax or interest
relating  thereto,  which  may  be  imposed  by any  Federal,  State,  or  local
government  or political  subdivision  thereof or taxing  authority of or in the
United States of America,  or by any government or taxing authority of or in any
territory, possession or commonwealth of the United States of America, or by any
government  or  taxing  authority  of  or  in  any  other  country,  or  by  any
international taxing authority.

     "Tax  Assumption  Change" has the meaning  specified in Section 9.04 of the
Participation Agreement.

     "Tax Indemnity Agreement" means each of the Tax Indemnity Agreements,  each
dated as of the Document Date between Lessee and an Owner Participant.

     "Technical  Expert"  means an  independent  mechanical  engineer (or if not
independent,  a mechanical  engineer  reasonably  acceptable to Lessor) with not
less than five  years  experience  in the  design,  use,  operation,  repair and
improvement of automated  manufacturing  equipment  used in the disposable  food
products business.

     "Term" means the Basic Term and, if applicable, the Renewal Term applicable
to the Equipment.

     "Termination Date" has the meaning defined in Section 7.01 of the Lease.

     "Trademark Security Agreement" means the Trademark Security Agreement dated
as of the Document Date between Lessee and Owner Trustee.

<PAGE>

     "Transaction  Expenses"  means all reasonable  fees,  costs and expenses of
documenting  and  closing the  transactions  contemplated  by the  Participation
Agreement  on the  Closing  Date,  including  but not  limited  to (i)  document
preparation  and  distribution  costs;  (ii) the fees and  expenses  of  outside
counsel  for  Lessee  and the  Owner  Participants  (subject  to  caps,  if any,
previously  agreed  upon);  (iii) the  initial  fees and  expenses  of the Owner
Trustee and its counsel;  (iv) the fees and expenses of the  Appraiser;  and (v)
the  fees  and  expenses  of  Advisor;  (vi)  Owner  Participant's   reasonable,
out-of-pocket expenses, including, without limitation, third-party computer time
shared charges;  and (vii) the fees and expenses of environmental  and valuation
technical consultants (subject to caps, if any, previously agreed upon).

     "Transactions"  means the  transactions  and  activities  referred to in or
contemplated by the Operative Documents.

     "Trust  Agreement"  means the Trust Agreement dated as of the Document Date
between the Owner Participant and Owner Trustee.

     "Trust  Company" means State Street Bank and Trust Company of  Connecticut,
National Association, a national banking association.

     "Trust  Estate"  has the  meaning  specified  in  Article  II of the  Trust
Agreement.

     "Trustee" means the Owner Trustee.

     "UCC" means the Uniform Commercial Code of the applicable jurisdiction.

     "Unrestricted  Subsidiary"  means (1) any Subsidiary of Guarantor or Lessee
(a) which at the time of determination  shall be an Unrestricted  Subsidiary (as
designated by the Board of Directors of Guarantor or Lessee as provided  below),
and (b) all the Debt of which  shall be without  recourse to  Guarantor  and its
Subsidiaries  other  than its  Unrestricted  Subsidiaries  and their  respective
assets,  and shall not be guaranteed by any such person,  and (2) any Subsidiary
of an Unrestricted  Subsidiary;  provided,  that  notwithstanding  clause (1)(b)
above,  Guarantor or a Subsidiary of Guarantor may guarantee,  endorse, agree to
provide funds for the payment or maintenance of, or otherwise become directly or
indirectly liable with respect to, Debt of an Unrestricted  Subsidiary  pursuant
to Section 5.10 hereof and any such Guarantee, endorsement or agreement shall be
deemed an  incurrence  of Debt by Guarantor for purposes of Section 5.09 hereof.
The Board of Directors of Guarantor or Lessee may designate  any newly  acquired
or  newly  formed  Subsidiary  to  be an  Unrestricted  Subsidiary  unless  such
Subsidiary  owns any capital stock of, or owns or holds any Lien on any property
of,  Guarantor  or any  Subsidiary  of  Guarantor  which is not an  Unrestricted
Subsidiary.  Any such  designation  by the Board of  Directors  of  Guarantor or
Lessee  shall be  evidenced  to the Owner  Trustee by filing  with the Trustee a
certified  copy of the  resolution  of the Board of  Directors  of  Guarantor or
Lessee giving effect to such designation and an Officers' Certificate certifying
that such designation complied with the foregoing conditions.

     "U.S." or "United  States"  shall mean the United  States of  America,  its
territories and possessions.

<PAGE>

     "Working Capital  Collateral"  means all Credit Agreement  Collateral other
than Credit Agreement Term Loan Equipment Collateral and Excluded Sale/Leaseback
Assets as defined in the Intercreditor Agreement to the extent a lien therein is
created pursuant to the Security Documents.

                        Part III: Documentary Conventions
                        ---------------------------------

     With respect to an instrument or agreement that states in substance that it
is  governed  by the  Documentary  Conventions,  except  as  expressly  provided
therein, the following meanings shall apply:

          (a) Survival.  The  representations,  warranties and agreements of the
     parties  contained  or provided  for in such  instrument  and the  parties'
     obligations  under any and all  thereof  shall  survive the  execution  and
     delivery  of such  instrument,  the  execution  and  delivery  of the other
     Operative  Documents,  any disposition of any interest in any Equipment and
     the  expiration or other  termination of any other  Operative  Document and
     shall be and continue in effect notwithstanding the fact that any party may
     waive  compliance  with any  other  term,  provision  or  condition  of any
     Operative Document.

          (b) Payment on Business Days. If any payment under such  instrument is
     required to be made on a day other than a Business Day, the date of payment
     shall be extended to the next Business Day without additional  interest for
     such extension period.

          (c) Notices.  Subject to paragraph (k) below,  all notices,  consents,
     directions,  approvals,  instructions,  requests  and other  communications
     required or  permitted by the terms of such  instrument  to be given to any
     Person shall be in writing,  and any such notice  shall become  effective 5
     Business Days after being  deposited in the United States mails,  certified
     or registered,  with  appropriate  postage prepaid for first class air mail
     or, if delivered  by hand or courier  service or in the form of a telecopy,
     when received by the person to whom addressed, and shall be directed to the
     address or  telecopy  number of such  Person set forth in Schedule I to the
     Participation Agreement. From time to time any party to such instrument may
     designate  a  new  address  or  telecopy  number  for  purposes  of  notice
     thereunder by notice to each of the other parties  thereto,  effective when
     received.

          (d)  Severability.  Any  provision  of such  instrument  that shall be
     prohibited  or  unenforceable  in  any  jurisdiction   shall,  as  to  such
     jurisdiction,   be  ineffective  to  the  extent  of  such  prohibition  or
     unenforceability  without invalidating the remaining provisions thereof and
     any such  prohibition or  unenforceability  in any  jurisdiction  shall not
     invalidate   or  render   unenforceable   such   provision   in  any  other
     jurisdiction.  To the extent  permitted by  Applicable  Law, the parties to
     such  instrument  thereby  waive  any  provision  of law that  renders  any
     provision thereof prohibited or unenforceable in any respect.

          (e) Entire Agreement, Amendment and Waiver. Such instrument,  together
     with the  other  applicable  Operative  Documents  constitutes  the  entire
     agreement of the

<PAGE>

     parties  thereto with respect to the subject  matter thereof and supersedes
     all oral and all prior written agreements and  understandings  with respect
     to such  subject  matter.  Neither  such  instrument  nor any of the  terms
     thereof  may be  terminated,  amended,  supplemented,  waived  or  modified
     orally,  but only by an instrument  in writing  signed by the party against
     which the enforcement of the termination,  amendment, supplement, waiver or
     modification  shall  be  sought.  No  failure  or  delay  of any  party  in
     exercising  any power or right  under such  instrument  shall  operate as a
     waiver thereof,  nor shall any single or partial exercise of any such right
     or power, or any abandonment or  discontinuance  of steps to enforce such a
     right or power,  preclude  any other or  further  exercise  thereof  or the
     exercise of any other right or power.

          (f) Amendment  affecting the Lease or Lessee.  Neither such instrument
     nor any of the terms  thereof  may be  terminated,  amended,  supplemented,
     waived or modified in any manner  affecting the Lease or Lessee without the
     prior written consent of the Guarantor.

          (g) Table of Contents:  Headings.  The table of contents,  if any, and
     headings, if any, of the various articles,  sections and other subdivisions
     of such  instrument  are for  convenience  of reference  only and shall not
     modify, define or limit any of the terms or provisions of such instrument.

          (h) Parties in Interest:  Limitation on Rights of Others. The terms of
     such  instrument  shall be binding  upon,  and inure to the benefit of, the
     parties thereto and their permitted successors and assigns. Nothing in such
     instrument,  whether  express or implied,  shall be  construed  to give any
     Person (other than the parties thereto and their  permitted  successors and
     assigns and as expressly  provided  therein) any legal or equitable  right,
     remedy or claim under or in respect of such  instrument  or any  covenants,
     conditions or provisions contained therein.

          (i) Method of Payment. All amounts required to be paid by any party to
     such  instrument  to any  other  party,  either  thereunder  or  under  any
     Operative  Document,  shall  be paid in such  freely  transferable  coin or
     currency of the United  States of America as at the time of payment,  shall
     be legal  tender  for the  payment  of public and  private  debts,  by wire
     transfer,  or other acceptable method of payments of immediately  available
     funds  to  the  account  of  the  payee  set  forth  in  Schedule  I to the
     Participation  Agreement  or to such  other  account  located in the United
     States as such payee may specify by notice to the other parties.

          (j)  Counterparts.  Such  instrument  may be  executed  by the parties
     thereto  in  separate  counterparts,  each of which  when so  executed  and
     delivered shall be an original,  but all such  counterparts  shall together
     constitute but one and the same  instrument.  All signatures need not be on
     the same counterpart.

          (k) GOVERNING LAW. SUCH  INSTRUMENT  SHALL IN ALL RESPECTS BE GOVERNED
     BY, AND CONSTRUED IN ACCORDANCE WITH,
<PAGE>

     THE LAWS (EXCLUDING PRINCIPLES OF CONFLICT OF LAWS OTHER THAN ss. 5-1401 OF
     THE  GENERAL  OBLIGATION  LAW)  OF THE  STATE  OF NEW  YORK  APPLICABLE  TO
     AGREEMENTS MADE AND TO BE PERFORMED  ENTIRELY WITHIN SUCH STATE,  INCLUDING
     ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

          (l) Jurisdiction,  Court  Proceedings.  Any suit, action or proceeding
     against  any party to such  instrument  arising  out of or  relating to any
     Operative Document, any Transaction or any judgment entered by any court in
     respect of any thereof may be brought in the Supreme  Court of the State of
     New York, County of New York or in the United States District Court for the
     Southern  District of New York as any party  hereto in its sole  discretion
     may  elect,  and  each  such  party  thereby  submits  to the  nonexclusive
     jurisdiction  of such  courts for the  purpose of any such suit,  action or
     proceeding.  To the extent that  service of process by mail is permitted by
     Applicable  Law,  each such party  irrevocably  consents  to the service of
     process  in any such  suit,  action  or  proceeding  in such  courts by the
     mailing of such process by registered or certified mail,  postage  prepaid,
     at its address for notices provided for above.  Each such party irrevocably
     agrees not to assert any objection  which it may ever have to the laying of
     venue of any such suit,  action or  proceeding  in the Supreme Court of the
     State of New York,  County  of New York or in the  United  States  District
     Court for the  Southern  District of New York,  and any claim that any such
     suit, action or proceeding brought in any such court has been brought in an
     inconvenient  forum. TO THE EXTENT  PERMITTED BY APPLICABLE LAWS, EACH SUCH
     PARTY  WAIVES  ANY  RIGHT  TO A TRIAL  BY JURY IN ANY  JUDICIAL  PROCEEDING
     INVOLVING ANY CLAIM UNDER SUCH INSTRUMENT.<PAGE>

                                  EXHIBIT 10.37

               AMENDED AND RESTATED PURCHASE AND LICENSE AGREEMENT

         This Amended and Restated Purchase and License Agreement (the
"Agreement") is made and entered into as of January 25, 1999, and is effective
as of October 1, 1998, by and between Dura Pharmaceuticals, Inc. ("Dura"), a
Delaware corporation, DJ Pharma, Inc., a Delaware corporation ("DJ Pharma") and
Dura (Bermuda) Trading Company LTD., a Bermuda corporation ("Dura Bermuda")
(solely with respect to the Keftab Products (as hereinafter defined)) with
reference to the following facts:

                                    RECITALS

         A. WHEREAS Dura, Dura Bermuda and DJ Pharma are executing this
Agreement for the purpose of amending and restating in its entirety that certain
Purchase and License Agreement by and between the parties hereto dated October
1, 1998;

         B. WHEREAS, Dura markets a line of drugs under the trademark "Rondec"
("Rondec Products") whose active ingredients are primarily carbinoxamine maleate
and pseudoephedrine hydrochloride, which products are set forth on Exhibit "A"
attached hereto and incorporated herein by this reference, and which Rondec
Products were acquired from Abbott Laboratories ("Abbott") pursuant to that
certain Purchase Agreement between Abbott Laboratories, Ross Products Division
and Dura, dated June 14, 1995 (the "Abbott Purchase Agreement") and that certain
Supply Agreement between Abbott and Dura, dated June 14, 1995 (the "Abbott
Supply Agreement");

         C. WHEREAS, Dura produces certain cough, cold and allergy products
marketed by Dura under the CCA Trademarks (as hereinafter defined) (the "CCA
Products"), and Dura Bermuda has certain license rights with respect to products
sold by Dura under the trademark "Keftab" (the "Keftab Products"), which
products are set forth, together with the CCA Products, on Exhibit "B" attached
hereto and incorporated herein by this reference;

         D. WHEREAS, DJ Pharma wishes to acquire certain licensing rights to the
Rondec Products and CCA Products and sublicensing rights with respect to the
Keftab Products through December 31, 2002 (the "Licensing Term") and upon the
expiration of such period to, if permitted pursuant and subject to the terms and
conditions set forth in this Agreement, (i) acquire all of Dura's assets,
rights, title and interests relating to the Rondec Products in the "Rondec
Territory," which includes the continental U.S., Hawaii, Alaska and all U.S.
military bases wherever located and specifically excludes territories,
commonwealths (including Puerto Rico) and possessions of the U.S., and to
assume, other than payment obligations under Section 5.1 of the Abbott Purchase
Agreement, all of Dura's rights and obligations under the Abbott Purchase
Agreement and the Abbott Supply Agreement (as hereinafter defined) pursuant to
an Assignment and Assumption Agreement in the form attached hereto as Exhibit
"C" and incorporated herein by this reference (the "Assignment"), (ii) acquire
all of Dura's assets, rights, title and interests relating to the CCA Products
and the CCA Trademarks, and (iii) assume and acquire all of Dura Bermuda's
assets, rights, title, interests and obligations related to the Keftab Products
(the

                                      -1-
<PAGE>

"Keftab Rights"), including the Keftab trademark set forth on Exhibit "D"
attached hereto and incorporated herein by this reference (the "Keftab
Trademark") under that certain Licensing Agreement, as amended (the "Licensing
Agreement") and that certain Manufacturing Agreement, as amended (the
"Manufacturing Agreement"), each of which is by and between Eli Lilly and
Company, an Indiana corporation ("Lilly") and Dura, dated August 21, 1996,
pursuant to the Assignment; and

         E. WHEREAS, Dura and Dura Bermuda wish to sell or assign their
respective assets, rights, title, interests and obligations to DJ Pharma, as the
case may be;

         NOW, THEREFORE, in consideration of the foregoing premises, the
respective representations, warranties, covenants and agreements set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:

1.       LICENSING AND PURCHASING ARRANGEMENTS WITH RESPECT TO RONDEC PRODUCTS,
CCA PRODUCTS AND KEFTAB PRODUCTS

         1.1 RIGHTS GRANTED; DISCLOSURE OF KNOW-HOW WITH RESPECT TO THE RONDEC
PRODUCTS AND CCA PRODUCTS DURING LICENSING PERIOD (AS HEREINAFTER DEFINED). For
a period commencing as of the date of the Closing (as hereinafter defined) and
expiring upon the earlier of (i) a termination of this Agreement by Dura
pursuant to Section 6 below due to a breach or default by DJ Pharma and (ii) the
end of the Licensing Term (the "Licensing Period"), Dura hereby grants the
following rights and discloses the following Know-How (as hereinafter defined)
to DJ Pharma upon the following terms with respect to the Rondec Products and
CCA Products:

                  (a) LICENSE OF KNOW-HOW AND REGULATORY APPROVALS WITH RESPECT
TO RONDEC PRODUCTS AND CCA PRODUCTS. Subject to the terms and conditions
contained in this Agreement, Dura, as of the Closing and through the Licensing
Period, hereby grants to DJ Pharma an exclusive license (except as set forth in
Section 1.1 (d) hereof, exclusive even as to Dura) under the Know-How (as
hereinafter defined) and Regulatory Approvals (as hereinafter defined), to use,
market, distribute, promote, offer for sale and sell the Rondec Products in the
Rondec Territory and the CCA Products worldwide (the "CCA Territory"). DJ Pharma
accepts all the obligations set forth in this Agreement and agrees to use the
Know-How and Regulatory Approvals only in connection with the manufacture, sale,
distribution, offering for sale, and promotion of the Rondec Products in the
Rondec Territory and the CCA Products in the CCA Territory, only for so long as
the licenses granted in this Section 1.1(a) remain in effect.

                  For purposes of this Agreement, "Know-How" shall mean all
proprietary technical and clinical information, data and know-how relating to
the Rondec Products and the CCA Products, whether or not patentable, owned or
licensed by Dura with the right to grant sublicenses as of the Closing or
acquired during the Licensing Period by either party or their affiliates (with
the right to have or disclose). Know-How shall include, without limitation, all
processes, formulas, discoveries, information and inventions whether relating to
biological, chemical, pharmacological, toxicological, pharmaceutical, physical
and analytical safety, quality control and clinical data, including, without
limitation, phase IV clinical study data. Know-How shall also include relevant
medical information relating to any of the Rondec Products or CCA Products (such
as customer questions, responses thereto and adverse drug event (ADE) history)

                                      -2-
<PAGE>

in Dura's possession. The term Know-How, however, shall not include (a) any
know-how, processes, information and data which is, as of the Closing or later
becomes, generally available to the public or (b) any general manufacturing
know-how not reasonably required by DJ Pharma to exercise the rights granted
under this Agreement to the Rondec Products or CCA Products.

                  For purposes of this Agreement, "Regulatory Approvals" shall
mean all authorizations by the appropriate domestic governmental regulatory
authorities which are required for the marketing, promotion, pricing,
distribution and sale of the Rondec Products in the Rondec Territory and the CCA
Products in the CCA Territory, each of which are owned by Dura.

         (b) LICENSE OF TRADEMARKS. Subject to the terms and conditions
contained in this Agreement, Dura, as of the Closing and through the end of the
Licensing Period, hereby grants to DJ Pharma an exclusive license (exclusive
even as to Dura) to use the trademarks associated with the Rondec Products and
CCA Products, as set forth on Exhibit "D" attached hereto and incorporated
herein by this reference (the "Rondec Trademarks" and the "CCA Trademarks",
respectively) only in connection with the manufacture, sale, distribution,
offering for sale, and promotion of the Rondec Products in the Rondec Territory
and the CCA Products in the CCA Territory. DJ Pharma accepts all the obligations
set forth in this Agreement and agrees to use the Rondec Trademarks in the
Rondec Territory and the CCA Trademarks in the CCA Territory, only for so long
as the license granted under this Section 1.1(b) remains in effect.

         (c) SUBLICENSING. Prior to the expiration of the Licensing Period, DJ
Pharma shall not sublicense or assign any of the rights granted to it under this
Section 1.1, without the prior written consent of Dura, which consent may be
provided or withheld in Dura's sole discretion.

         (d) RETAINED RIGHTS. Notwithstanding the licenses granted to DJ Pharma
under this Section 1.1, after the Closing and through the end of the Licensing
Period (except as otherwise indicated), Dura shall retain ownership of all
rights to (a) the current NDC numbers it uses for each of the Rondec Products
and CCA Products (retained (to the extent required by applicable laws and
regulations) through and after the Second Closing (as defined below)), (b) the
real and personal property (including, without limitation, all equipment) and
general manufacturing know-how used by Dura in manufacturing the Rondec Products
or CCA Products (either before, during or after the Licensing Period) other than
Know-How (retained through and after the Second Closing), (c) all accounts
receivable from sales of the Rondec Products and CCA Products by or on behalf of
Dura prior to the Closing, and (d) all inventories of the Rondec Products or CCA
Products that have not otherwise been purchased by DJ Pharma pursuant to the
Dura Supply Agreement. In addition, Dura retains ownership of and the right to
use the Know-How to manufacture Rondec Products and CCA Products for DJ Pharma
under the Dura Supply Agreement until the end of the Licensing Period.

         (e) DURA SUPPLY AGREEMENT. By the date of Closing (as hereinafter
defined), Dura, Dura Bermuda, and DJ Pharma shall enter into a Dura Supply
Agreement (the "Dura Supply Agreement") which shall set forth the respective
rights and obligations of the parties regarding Rondec Products and CCA Products
to be supplied by Dura for DJ Pharma pursuant to the terms of the Dura Supply
Agreement.

                                      -3-
<PAGE>

         (f) PROMOTION, MARKETING AND SALE OF PRODUCTS.

                  (i) REFERRALS. As of the Closing and through the Licensing
Period, Dura shall refer to DJ Pharma any sales inquiry received from a third
party in the Rondec Territory with respect to the Rondec Products or from a
third party in the CCA Territory with respect to the CCA Products.

                  (ii) MATERIALS AND PROMOTIONAL CLAIMS. For so long as the
Rondec Products are sold in the Rondec Territory and the CCA Products are sold
in the CCA Territory and prior to the expiration of the Licensing Period, DJ
Pharma shall not distribute any written materials or make any promotional claims
regarding the Rondec Products or the CCA Products, respectively, unless such
written materials or promotional claims have first been reviewed and approved by
Dura, such approval not to be unreasonably withheld. Dura agrees to provide DJ
Pharma with its approval or rejection of such written materials and promotional
claims within thirty (30) days of receipt by Dura. Notwithstanding the
foregoing, DJ Pharma at all times shall be solely responsible for complying with
all applicable laws and regulations in its promotion and marketing of the Rondec
Products and CCA Products.

         (g) USE OF TRADEMARKS. Prior to the expiration of the Licensing Period,
DJ Pharma agrees to use the Rondec Trademarks only in connection with the Rondec
Products and the CCA Trademarks only in connection with the CCA Products and in
the manner and style which shall have the prior written approval of Dura, which
shall not be unreasonably withheld. DJ Pharma shall submit to Dura samples of
all commercial material containing any of the Rondec Trademarks or CCA
Trademarks. Dura, within thirty (30) days of its receipt of such materials,
shall have the right to reasonably comment on the usage of the Rondec Trademarks
or CCA Trademarks in such materials and DJ Pharma, at its own cost and expense,
will promptly correct any improper usage of the Rondec Trademarks or CCA
Trademarks. Prior to the time Dura assigns such Rondec Trademarks or CCA
Trademarks to DJ Pharma pursuant to this Agreement, DJ Pharma agrees not to
claim or to assert any right of ownership in or to such Rondec Trademarks or CCA
Trademarks or the goodwill associated therewith and shall take no action
intended to destroy, damage or materially impair in any way the ownership or
rights of Dura in and to such Rondec Trademarks or CCA Trademarks. Prior to the
time Dura assigns such CCA Trademarks or Rondec Trademarks to DJ Pharma pursuant
to this Agreement, DJ Pharma shall not register anywhere in the world in its own
name or on behalf of any other person or entity, any trademark, trade dress,
brands, labeling, designs or other indicia of ownership identical to, or
confusingly similar to, the Rondec Trademarks or CCA Trademarks, and shall not
associate the Rondec Trademarks or CCA Trademarks with any articles other than
the Rondec Products or CCA Products, respectively and shall, at the request of
Dura, do all such acts and things and execute all such documents as Dura shall
in its reasonable discretion consider necessary or proper to register or
maintain the registration of the Rondec Trademarks and CCA Trademarks in the
Rondec Territory or any country of the CCA Territory, respectively. Should usage
of the Rondec Trademarks or CCA Trademarks in any country vest title thereto in
DJ Pharma prior to the time Dura assigns the Rondec Trademarks or CCA
Trademarks, respectively, pursuant to Section 1.3(a) hereof, then DJ Pharma
shall, at Dura's request, immediately assign and transfer such title to Dura.

         (h) QUALITY CONTROL. DJ Pharma will not permit the quality of the
Rondec Products or CCA Products to deteriorate while such Products are in its
possession so as to

                                      -4-
<PAGE>

adversely affect the goodwill associated with the Rondec Trademarks or CCA
Trademarks, respectively. DJ Pharma shall, upon request of Dura, from time to
time furnish Dura, without charge, specifications and samples of Rondec Products
or CCA Products for quality review by Dura. Dura or an authorized representative
thereof shall have the right, at all reasonable times, to inspect the finished
goods in relation to which the Rondec Trademarks or CCA Trademarks are to be
used, as part of appropriate quality control.

                  (i) INFRINGEMENT OF TRADEMARKS. In the event that, during the
term of the license granted to DJ Pharma under Section 1.1 hereof, either DJ
Pharma or Dura learn that any of the Rondec Trademarks or CCA Trademarks is
being infringed in any territory by any other party, it shall promptly notify
the other of such infringement. In such event both DJ Pharma and Dura shall have
the right, but not the obligation to act jointly to terminate any such third
party infringement, including, without limitation, prosecuting a lawsuit or
other legal proceeding at both Dura's and DJ Pharma's joint expense to be shared
equally between Dura and DJ Pharma. Any recovery received as a result of such
joint action to terminate an infringement of the Rondec Trademarks or CCA
Trademarks, less the reimbursement of each Dura and DJ Pharma for the
out-of-pocket expenses incurred in taking, joining and prosecuting such action,
shall be shared equally between Dura and DJ Pharma. In the event either DJ
Pharma or Dura elects to not take any action to terminate such third party
infringement (the "Non-Acting Party") within sixty (60) days following notice
from the other of a claim of infringement, such other party (the "Acting Party")
shall have the right, but not the obligation, to act to terminate any such third
party infringement, including, without limitation, prosecuting a lawsuit or
other legal proceeding, at the Acting Party's own expense; and the Acting Party
may retain any recovery it may receive as a result of its actions to terminate
such infringement. Notwithstanding the foregoing, the Non-Acting Party shall
fully cooperate with the Acting Party in any action the Acting Party takes to
terminate such infringement and, to the extent the Acting Party recovers damages
from such third party, through settlement or otherwise, the Non-Acting Party
shall be reimbursed by the Acting Party for all reasonable expenses, if any,
incurred in connection therewith.

         1.2 RIGHTS GRANTED WITH RESPECT TO THE KEFTAB PRODUCTS FOR THE
LICENSING PERIOD. For the duration of the Licensing Period and subject to the
terms and conditions set forth in this Agreement and the Licensing Agreement,
except as set forth in Section 1.2(b) hereof, Dura Bermuda hereby exclusively
(even as to Dura Bermuda) sublicenses to DJ Pharma the Keftab Rights under the
Licensing Agreement in the fifty (50) states and the District of Columbia
comprising the United States (the "Keftab Territory"). In addition to the terms
and conditions set forth in the Licensing Agreement with respect to the Keftab
Products, DJ Pharma agrees to the following terms with respect to its use of the
Keftab Products during the Licensing Period:

         (a) SUBLICENSING. Prior to the expiration of the Licensing Period, DJ
Pharma shall not assign or sublicense any of the rights granted to it under this
Section 1.2, without the prior written consent of Dura Bermuda, which consent
may be provided or withheld in Dura Bermuda's sole discretion.

         (b) RETAINED RIGHTS. Notwithstanding the licenses granted to DJ Pharma
under this Section 1.2, after the Closing and through the end of the Licensing
Period (except as otherwise indicated), Dura Bermuda shall retain ownership of
all rights to (a) the current NDC numbers it uses for each of the Keftab
Products (retained (to the extent required by applicable laws and regulations)
through and after the Second Closing), (b) all accounts receivable from

                                      -5-
<PAGE>

sales of the Keftab Products by or on behalf of Dura Bermuda prior to the
Closing, and (c) all inventories of the Keftab Products that have not otherwise
been purchased by DJ Pharma pursuant to the Dura Supply Agreement.

         (c) REFERRALS. As of the Closing and through the Licensing Period, Dura
and Dura Bermuda shall refer to DJ Pharma any sales inquiry received from a
third party in the Keftab Territory with respect to the Keftab Products.

         (d) MATERIALS AND PROMOTIONAL CLAIMS. For so long as the Keftab
Products are sold in the Keftab Territory and prior to the expiration of the
Licensing Period, DJ Pharma shall not distribute any written materials or make
any promotional claims regarding the Keftab Products, unless such written
materials or promotional claims have first been reviewed and approved by Dura
Bermuda, such approval not to be unreasonably withheld. Dura Bermuda agrees to
provide DJ Pharma with its approval or rejection of such written materials and
promotional claims within thirty (30) days of receipt by Dura Bermuda.
Notwithstanding the foregoing, DJ Pharma at all times shall be solely
responsible for complying with all applicable laws and regulations in its
promotion and marketing of the Keftab Products.

         (e) QUALITY CONTROL. DJ Pharma will not permit the quality of the
Keftab Products to deteriorate while such Products are in its possession so as
to adversely affect the goodwill associated with the Keftab Trademark. DJ Pharma
shall, upon request of Dura Bermuda, from time to time furnish Dura Bermuda,
without charge, specifications and samples of Keftab Products for quality review
by Dura Bermuda. Dura Bermuda or an authorized representative thereof shall have
the right, at all reasonable times, to inspect the finished goods in relation to
which the Keftab Trademark is to be used, as part of appropriate quality
control.

         (f) DURA SUPPLY AGREEMENT. By the date of Closing, Dura, Dura Bermuda,
and DJ Pharma shall enter into the Dura Supply Agreement.

         (g) USE OF TRADEMARKS. Prior to the expiration of the Licensing Period,
DJ Pharma agrees to use the Keftab Trademark only in connection with the Keftab
Products and in the manner and style which shall have the prior written approval
of Dura Bermuda, which shall not be unreasonably withheld. DJ Pharma shall
submit to Dura Bermuda samples of all commercial material intended for use by DJ
Pharma containing the Keftab Trademark. Dura Bermuda, within thirty (30) days of
its receipt of such materials, shall have the right to reasonably comment on the
usage of the Keftab Trademark in such materials and DJ Pharma, at its own cost
and expense, will promptly correct any improper usage of the Keftab Trademark .
Prior to the time Dura Bermuda assigns such Keftab Trademark to DJ Pharma
pursuant to Section 1.4 of this Agreement, DJ Pharma agrees not to claim or to
assert any right of ownership in or to such Keftab Trademark or the goodwill
associated therewith and shall take no action which may destroy, damage or
materially impair in any way the ownership or rights of Dura in and to such
Keftab Trademark. DJ Pharma shall not register at anytime anywhere in the world,
except in the Keftab Territory pursuant to the terms of the Licensing Agreement
following assignment of the Keftab Trademark under this Agreement, in its own
name or on behalf of any other person or entity, any trademark, trade dress,
brands, labeling, designs or other indicia of ownership identical to, or
confusingly similar to, the Keftab Trademark. Prior to the time Dura Bermuda
assigns such Keftab Trademark to DJ Pharma pursuant to this Agreement, DJ Pharma
shall not associate the Keftab Trademark with any articles other than the Keftab
Products and

                                      -6-
<PAGE>

shall, at the request of Dura Bermuda, do all such acts and things and execute
all such documents as Dura Bermuda shall in its reasonable discretion consider
necessary or proper to register or maintain the registration of the Keftab
Trademark in the Keftab Territory. Should usage of the Keftab Trademark in any
country vest title thereto in DJ Pharma prior to the time Dura Bermuda assigns
the Keftab Trademark pursuant to this Agreement, then DJ Pharma shall, at Dura
Bermuda's request, immediately assign and transfer such title to Dura Bermuda.
Upon Dura Bermuda's assignment of Keftab Trademark to DJ Pharma pursuant to this
Agreement, DJ Pharma understands and agrees that its use of the Keftab Trademark
will be subject to the terms and conditions of the Licensing Agreement.

     (h) INFRINGEMENT OF TRADEMARKS. In the event that, during the term of
the license granted to DJ Pharma under Section 1.2 hereof, either DJ Pharma
or Dura Bermuda learn that the Keftab Trademark is being infringed in any
territory by any other party, it shall promptly notify the other of such
infringement. In such event both DJ Pharma and Dura Bermuda shall have the
right, but not the obligation to act jointly to terminate any such third
party infringement, including, without limitation, prosecuting a lawsuit or
other legal proceeding at both Dura Bermuda's and DJ Pharma's joint expense
to be shared equally between Dura Bermuda and DJ Pharma. Any recovery
received as a result of such joint action to terminate an infringement of the
Keftab Trademark, less the reimbursement of each Dura Bermuda and DJ Pharma
for the out-of-pocket expenses incurred in taking, joining and prosecuting
such action, shall be shared equally between Dura Bermuda and DJ Pharma. In
the event either DJ Pharma or Dura Bermuda elects to not take any action to
terminate such third party infringement (the "Non-Acting Entity") within
sixty (60) days following notice from the other of a claim of infringement,
such other party (the "Acting Entity") shall have the right, but not the
obligation, to act to terminate any such third party infringement, including,
without limitation, prosecuting a lawsuit or other legal proceeding, at the
Acting Entity's own expense; and the Acting Entity may retain any recovery it
may receive as a result of its actions to terminate such infringement.
Notwithstanding the foregoing, the Non-Acting Entity shall fully cooperate
with the Acting Entity in any action the Acting Entity takes to terminate
such infringement and, to the extent the Acting Entity recovers damages from
such third party, through settlement or otherwise, the Non-Acting Entity
shall be reimbursed by the Acting Entity for all reasonable expenses, if any,
incurred in connection therewith.

     1.3 PURCHASE AND SALE OF THE RONDEC PURCHASED ASSETS (AS HEREINAFTER
DEFINED) AND THE CCA PURCHASED ASSETS (AS HEREINAFTER DEFINED).

     (a) UPON EXPIRATION OF THE LICENSING PERIOD. Subject to the terms and
conditions of this Agreement, at the expiration of the Licensing Term, (x) Dura
shall, without further consideration (except as otherwise set forth herein),
transfer, assign and deliver to DJ Pharma the following assets of Dura relating
to each of the Rondec Products in the Rondec Territory (the "Rondec Purchased
Assets") and to each of the CCA Products in the CCA Territory (the "CCA
Purchased Assets") and (y) DJ Pharma shall additionally have a fully-paid,
irrevocable license and right under the rights granted in Section 1.1 above:

                  (i) TRADEMARKS. All of the Rondec Trademarks and CCA
Trademarks.

                                      -7-
<PAGE>

                  (ii) REGULATORY HISTORY. A copy of all documents pertaining to
the Rondec Products' and CCA Products' regulatory history including any existing
correspondence with the FDA.

                  (iii) FORMULATIONS. All formulations including copies of all
documentation for the Rondec Products and CCA Products and the medical
information set forth in Exhibit "E" attached hereto and incorporated herein by
this reference.

                  (iv) MANUFACTURING INFORMATION; BOOKS AND RECORDS. Copies of
all relevant manufacturing information and technology for the Rondec Products
and CCA Products including, but not limited to, suppliers, production costs and
specifications. Copies of all files and records of Dura specifically relating to
the Rondec Products and CCA Products, whether in hard copy or magnetic form
including without limitation, all research and development files, including,
without limitation, FDA and other governmental agency or instrumentality files
pertaining to the Rondec Products, CCA Products or registrations thereto, market
studies, copies of consumer complaint files, response letters, adverse event
reports, manufacturing worksheets, copies of manufacturing quality records and
assurance information, packaging information, sales histories, files, reports,
operating records and quality control histories with respect to the Rondec
Products and CCA Products.

                  (v) MARKETING INFORMATION. All marketing and sales material
and information for the Rondec Products, CCA Products and all copyrights and
moral rights thereto.

                  (vi) TRADEMARK LICENSES. The Rondec Products, the CCA
Products, the Rondec Trademarks and the CCA Trademarks on the existing
respective Rondec and CCA inventory packaging, except for the trade names Dura
and Dura Pharmaceuticals, Inc., which DJ Pharma acquires from Dura under this
Section 1 and the right to continue to use such Rondec Trademarks, CCA
Trademarks and other information on Rondec Product and CCA Product labels as
used thereon by Dura prior to the Second Closing, until DJ Pharma files
appropriate drug listings with the FDA which include representative labeling,
but no later than one hundred eighty (180) days from the Second Closing or such
period of time permitted by applicable law.

                  (vii) KNOW-HOW AND REGULATORY APPROVALS. All of the Know-How
and Regulatory Approvals as set forth in Section 1.1(a) hereof.

                  (viii) OTHER RIGHTS. All other intellectual property,
proprietary or other rights owned by Dura solely with respect to the Rondec
Products or CCA Products, including without limitation such intellectual
property set forth on Exhibit "D" attached hereto and incorporated herein by
this reference.

     (b) EXCLUDED ASSETS. Notwithstanding the foregoing, Dura is not selling,
and DJ Pharma is not purchasing, pursuant to this Agreement any tangible or
intangible assets, properties or rights of Dura not expressly included in the
Rondec Purchased Assets or CCA Purchased Assets. Except for the Rondec
Trademarks and CCA Trademarks set forth in Section 1.3 hereof, DJ Pharma is
not purchasing or licensing any rights to the trade names Dura or Dura
Pharmaceuticals, Inc. or any logo associated with them.

                                      -8-
<PAGE>

         1.4 ASSIGNMENT AND ASSUMPTION OF LICENSE AGREEMENT WITH RESPECT TO
KEFTAB PRODUCTS UPON EXPIRATION OF LICENSING PERIOD. Subject to the terms and
conditions of this Agreement and the Assignment, at the expiration of the
Licensing Term, (i) Dura Bermuda shall without further consideration (except as
otherwise provided herein), transfer, assign and deliver to DJ Pharma the Keftab
Rights and (ii) DJ Pharma shall additionally have a fully-paid, irrevocable
license and right under the Keftab Rights.

2.       PAYMENTS

         2.1 FOR PURCHASE AND LICENSING RIGHTS WITH RESPECT TO THE PRODUCTS. In
consideration for the purchase and licensing rights as set forth in Section 1
hereof, DJ Pharma shall (i) issue to Dura or Dura Bermuda, as the case may be,
the Subordinated Product Acquisition Notes (as hereinafter defined) and (ii) pay
to Dura with respect to the Rondec Products and CCA Products and to Dura Bermuda
with respect to the Keftab Rights the following licensing fees during the
Licensing Period:

         (a)      for * (as hereinafter defined) * (as hereinafter defined) of
                  the Products during such *;

         (b)      for * (as hereinafter defined) * during such *;

         (c)      * during each * in the *;

         (d)      * during each * in the *; and

         (e)      * during each * in the * and the *.

Notwithstanding the foregoing, in no event shall payment under Sections
2.1(a)-(e) hereof exceed the following maximum aggregate payments (all of which
are exclusive of the costs of inventory and product supply under the Dura Supply
Agreement) during the respective calendar year: (i) nineteen million five
hundred thousand dollars ($19,500,000) with respect to the 1999 calendar year
(the "First Year Maximum Payment") (ii) sixteen million dollars ($16,000,000)
with respect to the 2000 calendar year (the "Second Year Maximum Payment"),
(iii) nine million five hundred thousand dollars ($9,500,000) with respect to
the 2001 calendar year (the "Third Year Maximum Payment"), and (iv) eight
million dollars ($8,000,000) with respect to the 2002 calendar year (the "Fourth
Year Maximum Payment"). Notwithstanding the foregoing, in no event shall the
First Year Maximum Payment, Second Year Maximum Payment, Third Year Maximum
Payment, or Fourth Year Maximum Payment (collectively, the " Maximum Payments")
in any way impact or lessen any other obligations of DJ Pharma to Dura,
including, without limitation, continuing obligations under the Dura Supply
Agreement.

                                      -9-

* Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
the Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

<PAGE>

For purposes of this Agreement: (A) a "Contract Quarter" shall mean each quarter
in the Contract Year commencing October 1, 1998 and ending September 30, 1999;
(B) the first "Contract Year" shall mean the period of twelve (12) consecutive
months commencing on October 1, 1998, and each subsequent Contract Year shall
begin on the respective anniversary thereof; and (C) "Net Sales" shall mean (i)
the gross amount of sales invoiced to third parties by DJ Pharma less the
reasonable and customary accrual-basis deductions from such gross amounts
including: (a) normal and customary trade and quantity discounts, allowances and
credits actually allowed or paid; (b) credits or allowances given or made for
return of previously sold products; (c) sales or excise taxes, as adjusted for
rebates and refunds; and (d) chargeback payments and rebates granted to managed
health care organizations, employer groups or to federal, state and local
governments, their agencies, purchasers and reimbursers or to trade customers,
including, but not limited to, wholesalers and chain and pharmacy buying groups,
which are specifically identified to the sale of the Products by DJ Pharma. All
amounts under this Section shall be determined from the books and records of DJ
Pharma which shall be maintained in accordance with GAAP.

         2.2 REDUCTION OF PAYMENTS. Each monthly payment due under Section 2.1
of this Agreement for each Rondec Product, CCA Product and Keftab Product sold
by DJ Pharma during such month shall be reduced by the unit Supply Price (as
defined in the Dura Supply Agreement) multiplied by the number of units of each
such Product sold by DJ Pharma during such month (such reduced amount defined
herein as the "Net Royalty Payments").

         2.3 PAYMENTS. For each calendar month in which DJ Pharma is obligated
to make payments to Dura with respect to sales pursuant to Section 2.1 hereof,
DJ Pharma shall, within thirty (30) days following the close of each such
calendar month, furnish to Dura a written report for the calendar month showing
(i) the number of units of each Rondec Product, CCA Product or Keftab Product,
as the case may be, sold by DJ Pharma during such calendar month, (ii) the Net
Sales of Rondec Products, CCA Products and Keftab Products sold by DJ Pharma
during such calendar month, and (iii) the amounts payable under this Section 2
for such calendar month. Simultaneously with the submission of the written
report, DJ Pharma shall pay to Dura , for the account of DJ Pharma, a sum equal
to the aggregate amount due for such calendar month calculated in accordance
with this Agreement. Payments due hereunder shall be paid by wire transfer to a
bank account as designated from time to time by Dura.

         2.4 MAINTENANCE OF RECORDS BY DJ PHARMA; AUDITS.

     (a) RECORDKEEPING BY DJ PHARMA. DJ Pharma shall keep accurate books and
accounts of record in connection with the sale by DJ Pharma of the Products
in sufficient detail to (i) permit accurate determination of all figures
necessary for verification of payments or refunds required to be paid
hereunder and (ii) verify compliance with Section 2.6 hereof. Records
pursuant to this Section 2.4(a) shall be maintained for a period of three (3)
years after the end of the year in which they were generated.

     (b) AUDIT BY DURA. Dura, through an independent certified public
accountant, shall have the right to access such books and records of DJ
Pharma one time per year unless permitted more frequently pursuant to this
Section 2.4(b): (a) to verify the accuracy of the reports and all payments or
refunds made hereunder and (b) to verify compliance with the provisions of
Section 2.6 hereof. Notwithstanding the foregoing should an audit by Dura
pursuant to this

                                      -10-
<PAGE>

Section 2.4(b) show a Material Underpayment (as hereinafter defined) by DJ
Pharma, Dura shall be permitted to conduct audits pursuant to this Section
2.4(b) as many times in any year as Dura may deem reasonably necessary. Dura's
right to have such books and records examined shall survive termination or
expiration of this Agreement for a period of six months following such
termination or expiration.

     (c) UNDERPAYMENTS/OVERPAYMENTS. If such independent certified public
accountant's report shows any underpayment, DJ Pharma shall remit to Dura
within thirty (30) days after DJ Pharma's receipt of such report (i) the
amount of such underpayment to Dura and (ii) if such underpayment to Dura
exceeds five percent (5%) of the total amount owed for the calendar year then
being audited ("Material Underpayment"), the reasonable fees and expenses of
such independent certified public accountant performing the audit. Any
overpayments, less the reasonable fees and expenses of such independent
certified public accountant, shall be fully creditable against amounts
payable in subsequent payment periods, if any. If no amounts are payable in
subsequent periods, Dura shall credit any overpayments, less the reasonable
fees and expenses of such independent certified public accounting firm, to
principal outstanding under the Subordinated Product Acquisition Notes.

         (d) ADDITIONAL AUDIT REQUIREMENTS UNDER THE LICENSING AGREEMENT. In
addition to the audit requirements set forth above, DJ Pharma understands and
agrees that with respect to the Keftab Products it shall also be subject to
audit by Lilly and such other audit requirements as set forth in the Licensing
Agreement.

     2.5 TAXES AND WITHHOLDING. All taxes, assessments and fees of any nature
levied or incurred on account of any payments from DJ Pharma to Dura accruing
under this Agreement, by national, state or local governments, will be assumed
and paid by DJ Pharma, except taxes levied thereon as income to Dura, and if
such taxes are required to be withheld by DJ Pharma they will be deducted from
payments due to Dura and will be timely paid by DJ Pharma to the proper taxing
authority for the account of Dura, and a receipt or other proof of payment
therefor secured and sent to Dura as soon as practicable.

     2.6 TIMING OF SALES. DJ Pharma agrees that it shall not, by any artifice,
or unreasonable action or omission cause sales of any of the Rondec Products,
CCA Products or Keftab Products to occur later than they would otherwise have
occurred. Such actions or acts of omission may include, without limitation,
announcing or implementing changes in the price of the Products in such a way as
to delay the filling of orders from one Contract Quarter or Contract Year to the
next. If DJ Pharma has taken any such actions or committed any such act of
omission then for all purposes of payment of amounts under Section 2 hereof such
sales shall be treated as if made during the period they would have been made
were it not for the act or omission on the part of DJ Pharma.

     2.7 ADJUSTMENT OF PAYMENTS RELATED TO RONDEC PRODUCTS OR CCA PRODUCTS. In
the event of the occurrence of an FDA/DJ Pharma Event (as hereinafter defined)
at any time up to and through December 31, 2006, DJ Pharma's future payment
obligations to Dura or Dura Bermuda as of the FDA/DJ Pharma Restriction Date (as
hereinafter defined) shall be adjusted as follows:

                                      -11-
<PAGE>

     (a) AGGREGATE RESTRICTED PRODUCT PAYMENTS EXCEED ADJUSTED NET SALES
AMOUNT. In the event that the Aggregate Restricted Product Payments (as
hereinafter defined) for a Restricted Rondec Product(as hereinafter defined)
or Restricted CCA Product (as hereinafter defined), as the case may be,
exceed twenty-five percent (25%) of the total Net Sales by DJ Pharma of such
Restricted Rondec Product or Restricted CCA Product (the "Adjusted Net Sales
Amount") as of the FDA/DJ Pharma Restriction Date up to the amount by which
the Aggregate Restricted Product Payments exceed the Adjusted Net Sales
Amount, then DJ Pharma (i) may reduce all Net Royalty Payments not yet due
for the Products as of the FDA/DJ Pharma Restriction Date up to the amount by
which the Aggregate Restricted Product Payments exceed the Adjusted Net Sales
Amount and (ii) may reduce the Rondec/CCA Subordinated Product Acquisition
Note (as hereinafter defined) up to the lesser of (x) the product of the
principal outstanding under such Rondec/CCA Subordinated Product Acquisition
Note as of the FDA/DJ Pharma Restriction Date (such principal to be
determined assuming all payments under the Rondec/CCA Subordinated Product
Acquisition Note have been made on a timely basis) multiplied by the ration
of Net Sales of the respective Restricted Rondec Products or Restricted CCA
Products, as the case may be, for the twelve (12) months immediately
preceding the FDA/DJ Pharma Restriction Date to total Net Sales of the Rondec
Products and CCA Products for the twelve (12) months immediately preceding
the FDA/DJ Pharma Restriction Date (the "OTC Product Ratio") and (y) the
product of eight million dollars ($8,000,000,000) multiplied by the OTC
Product Ratio.

     (b) ADJUSTED NET SALES EXCEED AGGREGATE RESTRICTED PRODUCT PAYMENT.

                  (i) DURING PERIOD COMMENCING AS OF THE CLOSING AND ENDING AS
OF DECEMBER 31, 2003. In the event that at any time in the period commencing as
of the Closing and ending December 31, 2003, the Adjusted Net Sales Amount
exceeds the Aggregate Restricted Products Payments, then DJ Pharma's payment
obligations under the Rondec/CCA Subordinated Product Acquisition Note may be
reduced by an amount equal to the lesser of (x) the product of the principal
outstanding under such Rondec/CCA Subordinated Product Acquisition Note as of
the FDA/DJ Pharma Restriction Date (such principal to be determined assuming all
payments under the Rondec/CCA Subordinated Product Acquisition Note have been
made on a timely basis) multiplied by the OTC Product Ratio and (y) the product
of eight million dollars ($8,000,000) multiplied by the OTC Product Ratio.

                  (ii) DURING PERIOD COMMENCING AS OF JANUARY 1, 2004 AND ENDING
AS OF DECEMBER 31, 2006. In the event that at any time in the period commencing
January 1, 2004 and ending December 31, 2006, the Adjusted Net Sales Amount
exceeds the Aggregate Restricted Products Payments, then DJ Pharma's payment
obligations under the Rondec/CCA Subordinated Product Acquisition Note shall be
reduced by an amount equal to the result of (i) the product of the OTC Product
Ration multiplied by the lesser of (x) the principal amount due under the
Rondec/CCA Subordinated CCA Subordinated Product Acquisition Note (such of to be
determined assuming all payments under the Rondec/CCA Subordinated Product
Acquisition Note have been made on a timely basis) and (y) $8,000,000 minus (ii)
the amount by which the Adjusted Net Sales Amount exceeds the Aggregate
Restricted Product Payments.

     (c) ADJUSTMENT TO MAXIMUM PAYMENTS. In addition to the adjustments set
forth in Sections 2.7 (a) and (b) hereof, the Future Maximum Payments (as
hereinafter defined) will be reduced by an amount equal to the Future Maximum
Payments in effect for the respective

                                      -12-
<PAGE>

period multiplied by the ratio of Net Sales of the respective Restricted Rondec
Products or Restricted CCA Products, as the case may be, for the twelve (12)
months immediately preceding the FDA/DJ Pharma Restriction Date to total Net
Sales of the Products for the twelve (12) months immediately preceding the
FDA/DJ Pharma Restriction Date. Any reduction in Future Maximum Payments will
reduce the Maximum Payment for any remaining period ratably based upon the
Maximum Payment for such period immediately prior to such reduction. In the
event of an adjustment of payments pursuant to this Section 2.7 the right, title
and interest to the respective Restricted Rondec Product or the respective
Restricted CCA Product shall immediately vest in Dura and DJ Pharma shall have
no further right, title or interest with respect to such Restricted Rondec
Product or Restricted CCA Product. In addition, DJ Pharma shall immediately
return all documentation and CCA Purchased Assets or Rondec Purchased Assets
related to the respective Restricted Rondec Product or Restricted CCA Product.

Attached as Exhibit H are examples of the calculations set forth in Sections 2.7
(a)-(c) above, based on select hypothetical scenarios.

For purposes of this Section 2.7 the " Aggregate Restricted Product Payments"
shall equal the product of (i) the result of (a) the Net Sales of a Restricted
Rondec Product or Restricted CCA Product for the twelve (12) months immediately
preceding the FDA/DJ Pharma Restriction Date divided by (b) the total Net Sales
of the Rondec Products and CCA Products for the twelve (12) months immediately
preceding the FDA/DJ Pharma Restriction Date multiplied by (ii) the lesser of
(x) forty percent (40%) of the total Net Royalty Payments made for the Products
as of the FDA/DJ Pharma Restriction Date and (y) forty percent (40%) of the
Maximum Payments as of the FDA/DJ Pharma Restriction Date.

For purposes of this Section 2.7 an " FDA/DJ Pharma Event " shall be deemed to
have occurred at such time as the FDA shall have issued a final determination or
action (the "Final FDA Determination") which is not subject to modification,
reversal, or appeal as a result of any contest by DJ Pharma undertaken at DJ
Pharma's sole discretion, or other governmental review as a result of any such
action by DJ Pharma, and which (a) requires DJ Pharma to file a New Drug
Application ("NDA") in order to continue selling a Rondec Product or CCA
Product, or (b) results in DJ Pharma being unable to sell any of the Rondec
Products or CCA Products pursuant to FDA rules and regulations as prescription
products, or (c) results in the over-the counter marketing of any product
considered by the FDA to possess substantially similar dosage strengths,
ingredients, combination of ingredients, and label claims, including without
limitation all indications for use, as a Restricted Rondec Product or Restricted
CCA Product. Any of the Rondec Products or CCA Products impacted as set forth in
subsections (a)-(c) of this paragraph by the Final FDA Determination are defined
herein as the "Restricted Rondec Products" and "Restricted CCA Products",
respectively.

For purposes of this Section 2.7 the " FDA/DJ Pharma Restriction Date " shall
be, except as set forth herein, the date upon which Dura receives from DJ Pharma
notice (the "DJ Pharma Notice") of the occurrence of any or all of the foregoing
events. With respect to the requirement that DJ Pharma file an NDA as set forth
in subsection (a) of the foregoing paragraph, the "FDA/DJ Pharma Restriction
Date shall be on the later of the date of the DJ Pharma Notice and the date as
of which the NDA is required to be filed.

                                      -13-
<PAGE>

For purposes of this Section 2.7 " Future Maximum Payments" shall equal the sum
of (i) the result of (a) Maximum Payments for the calendar year including the
FDA/DJ Pharma Restriction Date minus (b) any Net Royalty Payments paid or due
for the calendar year including the FDA/DJ Pharma Restriction Date plus (ii) all
Maximum Payments due for all of the calendar years remaining in the Licensing
Period which immediately follow the calendar year which includes the FDA/DJ
Pharma Restriction Date; in each case after giving effect to any previous
adjustment in Maximum Payments pursuant to this Section 2.7 or Section 7.2(h).

3.   CLOSING AND SECOND CLOSING

     3.1 TIME AND PLACE OF THE CLOSING. The closing shall occur on January 25,
1999 (the "Closing"), and all such transactions shall be effective as of 8:00
a.m. pacific standard time on January 25, 1999.

     3.2 ACTIONS TO BE TAKEN AT THE CLOSING. At the Closing, the following
actions shall be deemed to have occurred simultaneously and shall be effective
as of 8:00 a.m. pacific standard time on January 25, 1999:

     (a) Except as otherwise indicated, at the Closing, Dura and Dura Bermuda
(where applicable) shall deliver to DJ Pharma the following:

                  (i) an executed original of this Agreement;

                  (ii) an executed original of the Dura Supply Agreement;

                  (iii) executed originals of all investment documents related
to that certain DJ Pharma, Inc. Stockholders Agreement by and among DJ Pharma,
the Investors (as defined therein) and the Existing Stockholders (as defined
therein), dated January 25, 1998 (collectively, the "Investment Documents");

                  (iv) payment by Dura for shares of DJ Pharma Series A
Preferred Stock pursuant to the Purchase Agreement (as hereinafter defined) in
the amount of $3,575,000;

                  (v) Termination Statements on Forms UCC-2 (California) and
UCC-3 (Delaware) by Dura and Dura Bermuda in connection with Dura or Dura
Bermuda's security interests in the Products pursuant to the DJ Pharma Security
Agreements; and

                  (vi) such other documents as may be required or necessary to
fully effectuate the transactions contemplated herein.

     (b) At the Closing (except as otherwise indicated below), DJ Pharma
shall deliver to Dura and to Dura Bermuda (where applicable) the following:

                  (i) an executed original of this Agreement;

                  (ii) an executed original of the Dura Supply Agreement;

                  (iii) an executed original of the $12,000,000 Subordinated
Note (the "Rondec/CCA Subordinated Product Acquisition Note", and of the
$8,000,000 Subordinated

                                      -14-
<PAGE>

Note (the "Rondec/CCA Subordinated Product Acquisition Note", which together
with the Keftab Subordinated Product Acquisition Note is collectively referred
to herein as the "Subordinated Product Acquisition Notes"), both of which are
attached hereto as Exhibit F and incorporated herein by this reference;

                  (iv) an executed original of the $5,000,000 Subordinated Note
(the "Subordinated Note") attached hereto as Exhibit G and incorporated herein
by this reference;

                  (v) executed originals of the Investment Documents;

                  (vi) Certificate of Incorporation and By-Laws of DJ Pharma
certified as of the date of Closing;

                  (vii) full payment of fees to Dura (up to an amount not to
exceed one hundred fifty thousand dollars ($150,000)) as set forth in Section 7A
of that certain Purchasers Agreement by and among DJ Pharma and the Purchasers
(as defined therein), dated January 25, 1998 (the "Purchase Agreement"), as set
forth on an estimated statement provided by Dura to DJ Pharma as of the Closing.
In connection with the foregoing, DJ Pharma understands and agrees that such
amount may be increased following final computations by Dura of such costs and
DJ Pharma agrees to pay such increased amount (up to an aggregate amount of
$150,000 under this Section 3.2 (b)(vii) promptly following Dura's submission to
DJ Pharma of such final computation; and

                  (viii) full payment of all outstanding obligations due and
payable pursuant to section 2.2 of the Extension Agreement by and between Dura
and DJ Pharma; and

                  (ix) such other documents as may be required or necessary to
fully effectuate the transactions contemplated herein.

     (c) At the Closing, each party shall provide to the other party copies,
certified (as appropriate) by the Secretary, Assistant Secretary or other
appropriate officer of the party, of resolutions of the party's Board of
Directors authorizing the execution, delivery and performance of this
Agreement and all other agreements, documents and instruments relating
hereto, and the consummation of the transactions contemplated hereby.

     (d) Effective as of the Closing the following documents and all exhibits
thereto shall be deemed terminated and of no further force and effect:

                  (i) that certain $23,762,922 Note issued by DJ Pharma to Dura
and the Security Agreement between the parties hereto, each dated October 1,
1998;

                  (ii) the Amended and Restated Investor Rights Agreement by and
between DJ Pharma and Dura, dated October 1, 1998;

                  (iii) the Security Agreements by and between DJ Pharma and
Dura, dated July 28, 1998 and October 1, 1998 (the " DJ Pharma Security
Agreements ");

                  (iv) the Commitment Letter by and between Dura and DJ Pharma
and all exhibits thereto;

                                      -15-
<PAGE>

                  (v) the Stock Purchase Warrant, dated July 28, 1998, issued by
DJ Pharma to Dura;

                  (vi) the $5,000,000 Convertible Secured Promissory Note, dated
July 28, 1998, issued by DJ Pharma to Dura;

                  (vii) the Assignment of the Abbott Purchase Agreement and
Abbott Supply Agreement; and

                  (viii) the Extension Agreement by and between Dura, Dura
Bermuda and DJ Pharma, dated December 31, 1998.

     3.3 TIME AND PLACE OF THE SECOND CLOSING. The closing of the transfer of
the rights and obligations of Dura in and to the Rondec Products and CCA
Products and Dura and/or Dura Bermuda in and to the Keftab Products (the "Second
Closing") shall occur on January 1, 2003 (or at such other date as may be
mutually agreed upon by the parties), and all such transactions shall be
effective as of the close of business on the date of the Second Closing.

     3.4 ACTIONS TO BE TAKEN AT THE SECOND CLOSING. At the Second Closing, the
parties shall deliver to each other an executed original of an assignment of the
Abbott Purchase Agreement, the Abbott Supply Agreement, the Licensing Agreement
and the Manufacturing Agreement to be assigned in the form of the Assignment and
such other assignments or documents as may be required or necessary to fully
effectuate the transactions contemplated herein.

     3.5 NOTIFICATION CONCERNING TRANSFER OF PRODUCTS AND RIGHTS. Promptly after
the Second Closing, DJ Pharma will, to the extent required by applicable laws
and regulations, notify customers of the Products that DJ Pharma has purchased
the Rondec Products, the CCA Products, and has licensed the Keftab Rights.

     3.6 CONDITIONS TO CLOSINGS.

     (a) DJ PHARMA CONDITIONS TO CLOSINGS. The representations and warranties
of Dura and Dura Bermuda contained in this Agreement will in all material
respects be true as of the date of the Closing and the Second Closing with
the same effect as though made at the respective closing; and Dura and Dura
Bermuda will have delivered to DJ Pharma a certificate, dated as of the
respective closing thereof and signed by its President or a Vice President,
to such effect.

     (b) DURA AND DURA BERMUDA CONDITIONS TO CLOSINGS. The representations
and warranties of DJ Pharma contained in this Agreement will in all material
respects be true as of the Closing and the Second Closing with the same
effect as though made at the respective closing; and DJ Pharma will have
delivered to Dura and Dura Bermuda a certificate, dated as of the respective
closing thereof and signed by its President or a Vice President, to such
effect.

4.   INDEMNIFICATION

     4.1 INDEMNIFICATION.

                                      -16-
<PAGE>

     (a) Dura and Dura Bermuda shall indemnify, defend and hold DJ Pharma and
its directors, officers, employees, agents and representatives (collectively
the "DJ Pharma Parties") harmless from and against any and all costs, losses,
claims, liabilities, fines, penalties, damages and expenses, court costs, and
reasonable fees and disbursements of counsel, consultants and expert
witnesses (including interest which may be imposed in connection with any of
the foregoing) (collectively, "Damages") incurred or suffered by the DJ
Pharma Parties excluding incidental or consequential damages suffered or
incurred by the DJ Pharma Parties directly (as opposed to incidental or
consequential Damages suffered or incurred by third parties who are, in turn,
seeking the same from the DJ Pharma Parties, which shall be covered by the
indemnity set forth herein) as a consequence of:

                  (i) any breach of any representation or warranty made by Dura
or Dura Bermuda in this Agreement, provided that notice of a claim based upon
any such breach is received by Dura or Dura Bermuda prior to the expiration of
such representation and warranty pursuant to Section 11.9;

                  (ii) any failure to perform duly and punctually any covenant,
agreement or undertaking on the part of Dura or Dura Bermuda contained in this
Agreement;

                  (iii) any material misrepresentation in or material omission
from any agreement, instrument or document delivered by Dura or Dura Bermuda
pursuant to the terms of this Agreement;

                  (iv) any activity conducted or liability incurred by Dura or
Dura Bermuda in respect to the marketing, sale, and distribution of the Products
prior to the Closing; provided, however, that such indemnity shall not apply to
the extent such liability results from any act or omission by DJ Pharma, under
that certain Co-Promotion Agreement between the parties hereto, dated July 28,
1998, or otherwise; or

                  (v) any other liability of Dura not specifically assumed by DJ
Pharma pursuant to this Agreement.

     (b) The DJ Pharma Parties shall indemnify, defend and hold Dura and Dura
Bermuda, and each of their respective directors, officers, employees, agents and
representatives (collectively the "Dura Parties") harmless from and against any
and all Damages incurred or suffered by the Dura Parties (excluding incidental
or consequential Damages suffered or incurred by Dura directly (as opposed to
incidental or consequential Damages suffered or incurred by third parties who
are, in turn, seeking the same from Dura, which shall be covered by the
indemnity set forth herein) as a consequence of:

                  (i) any breach of any representation or warranty made by DJ
Pharma in this Agreement, provided that notice of a claim based upon any such
breach is received by DJ Pharma prior to the expiration of such representation
and warranty pursuant to Section 11.9;

                  (ii) any failure to perform duly and punctually any covenant,
agreement or undertaking on the part of DJ Pharma contained in this Agreement;

                                      -17-
<PAGE>

                  (iii) any material misrepresentation in or material omission
from any agreement, instrument or document delivered by DJ Pharma pursuant to
the terms of this Agreement; or

                  (iv) any and all liabilities and obligations relating to the
CCA Products, the Rondec Products and the Keftab Products or Rights which are
hereby expressly assumed by DJ Pharma as set forth in Section 8.3 hereof.

     4.2 NOTICE AND OPPORTUNITY TO DEFEND. Promptly after receipt by a party
hereto of notice of any claim which could give rise to a right to
indemnification pursuant to Section 4.1, such party (the "Indemnified Party")
shall give the other party (the "Indemnifying Party") written notice describing
the claim in reasonable detail. The failure of an Indemnified Party to give
notice in the manner provided herein shall not relieve the Indemnifying Party of
its obligations under this Section , except to the extent that such failure to
give notice materially prejudices the Indemnifying Party's ability to defend
such claim. The Indemnifying Party shall have the right, at its option, to
compromise or defend, at its own expense and by its own counsel, any such matter
involving the asserted liability of the party seeking such indemnification. If
the Indemnifying Party shall undertake to compromise or defend any such asserted
liability, it shall promptly (and in any event not less than ten (10) days after
receipt of the Indemnified Party's original notice) notify the Indemnified Party
in writing of its intention to do so, and the Indemnified Party agrees to
cooperate fully with the Indemnifying Party and its counsel in the compromise or
defense against any such asserted liability. All reasonable costs and expenses
incurred in connection with such cooperation shall be borne by the Indemnifying
Party. If the Indemnifying Party elects not to compromise or defend the asserted
liability, fails to notify the Indemnified Party of its election to compromise
or defend as herein provided, fails to admit its obligation to indemnify under
this Agreement with respect to the claim, or, if in the reasonable opinion of
the Indemnified Party, the claim could result in the Indemnified Party becoming
subject to injunctive relief or relief other than the payment of money damages
that could materially adversely affect the ongoing business of the Indemnified
Party in any manner, the Indemnified Party shall have the right, at its option,
to pay, compromise or defend such asserted liability by its own counsel and its
reasonable costs and expenses shall be included as part of the indemnification
obligation of the Indemnifying Party hereunder. Notwithstanding the foregoing,
neither the Indemnifying Party nor the Indemnified Party may settle or
compromise any claim over the objection of the other; provided, however, that
consent to settlement or compromise shall not be unreasonably withheld. In any
event, the Indemnified Party and the Indemnifying Party may participate, at
their own expense, in the defense of such asserted liability. If the
Indemnifying Party chooses to defend any claim, the Indemnified Party shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense. Notwithstanding
anything to the contrary in this Section 4.2, the party conducting the defense
of a claim shall (a) keep the other party informed on a reasonable and timely
basis as to the status of the defense of such claim (but only to the extent such
other party is not participating jointly in the defense of such claim), and (b)
conduct the defense of such claim in a prudent manner, and the Indemnifying
Party shall not cease to defend, settle or otherwise dispose of any claim
without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld).

                                      -18-
<PAGE>

     4.3 INDEMNIFICATION PAYMENT OBLIGATION. No Indemnifying Party will have any
obligations under Sections 4.l(a) or 4.1(b) until the cumulative aggregate
amount of Damages incurred or suffered by the Indemnified Party which the
Indemnifying Party is otherwise subject to under this Agreement exceeds $100,000
at which time the entire cumulative aggregate amount of such Damages shall be
covered. The provisions of this Section 4.3 shall not limit or otherwise affect
the obligations of any Indemnifying Party under any other Section of this
Agreement.

     4.4 INDEMNIFICATION PAYMENT; ADJUSTMENTS. The amount of any Damages for
which indemnification is provided under this Section 4 shall be reduced to take
account of any net tax benefit and shall be increased to take account of any net
tax detriment arising from the incurrence or payment of any such Damages or from
the receipt of any such indemnification payment and shall be reduced by the
insurance proceeds received and any other amount recovered, if any, by the
Indemnified Party with respect to any Damages; provided, however, that an
Indemnified Party shall not be subject to an obligation to pursue an insurance
claim relating to any Damages for which indemnification is sought hereunder if
pursuing such claim is reasonably likely to result in increased premiums or
materially and adversely affect a party's insurability. If any Indemnified Party
shall have received any payment pursuant to this Section 4 with respect to any
Damages and shall subsequently have received insurance proceeds or other amounts
with respect to such Damages, then such Indemnified Party shall pay to the
Indemnifying Party an amount equal to the difference (if any) between (i) the
sum of the amount of those insurance proceeds or other amounts received and the
amount of the payment by such Indemnifying Party pursuant to this Section 4 with
respect to such Damages and (ii) the amount necessary to fully and completely
indemnify and hold harmless such Indemnified Party from and against such
Damages; provided, however, in no event will such Indemnified Party have any
obligation pursuant to this sentence to pay to such Indemnifying Party an amount
greater than the amount of the payment by such Indemnifying Party pursuant to
this Section 4 with respect to such Damages.

     4.5 INDEMNIFICATION PAYMENT. Upon the final determination of liability and
the amount of the indemnification payment under this Section 4, the appropriate
party shall pay to the other, as the case may be, within ten (10) business days
after such determination, the amount of any claim for indemnification made
hereunder.

     4.6 INSURANCE. DJ Pharma shall obtain and maintain at all times during the
term of this Agreement, Commercial General Liability Insurance, including
Products Liability Insurance, with reputable and financially secure insurance
carriers to cover its indemnification obligations under this Section 4, with
limits of not less than one million dollars ($1,000,000) per occurrence and in
the aggregate for general liability insurance and ten million dollars
($10,000,000) per occurrence and in the aggregate for products liability
insurance. DJ Pharma shall provide Dura with a Certificate of Insurance
evidencing this coverage within fifteen (15) days after the Closing. Such
products liability insurance policy shall name Dura as an additional insured and
DJ Pharma shall use its commercially reasonable efforts to ensure that such
insurance policy contains a provision requiring thirty (30) day advance notice
to Dura in the event of its cancellation or termination. During the Licensing
Period, Dura and Dura Bermuda shall each maintain insurance with third parties
sufficient to cover its obligations under Section 4.

5.       DISPUTE RESOLUTION

                                      -19-
<PAGE>

     5.1 GOOD FAITH DISCUSSION; ADR PROCESS. Except as set forth in Section 10,
the parties shall attempt to resolve through good faith discussions any dispute
which arises under this Agreement. If they are unable to resolve the dispute
within thirty (30) calendar days after delivery of written notice of the dispute
from one party to the other, either party may seek to resolve it by initiating
an Alternative Dispute Resolution Arbitration ("ADR") in which the American
Arbitration Association (the "AAA") shall select the neutral ("Neutral") as
provided herein. Notwithstanding the foregoing, the parties hereto may seek
legal channels other than ADR to the extent necessary to enforce the terms of
Section 10 herein. The ADR shall be conducted in accordance with the Commercial
Arbitration Rules of the AAA, except as otherwise provided below.

     5.2 ADR ISSUES: SELECTION OF NEUTRAL. An ADR shall be initiated by a party
by sending written notice thereof to the other party and the AAA, which notice
shall state the issues to be resolved. Within ten (10) business days after
receipt of such notice, the other party may, by sending written notice to the
initiating party and the AAA, add issues to be resolved. Within twenty (20)
business days after the date of the original ADR notice, the AAA shall nominate
to the parties at least five (5) qualified nominees from the AAA's Panel of
distinguished Neutrals. The parties shall have five (5) business days after the
receipt of such nominations to agree on a Neutral or, failing to agree, to
rank-order their preferences with the most preferred being given the lowest
number, and mail the rank-order to the AAA. The AAA shall notify the parties of
their selection. If all nominees are unacceptable to a party, the procedure
shall be repeated and, if the parties cannot select a neutral the second time,
the AAA shall select the Neutral.

     5.3 NEUTRAL WITH SPECIAL EXPERTISE. In the event of a dispute between the
parties relating to the calculation of any commissions or the amount of other
consideration payable under this Agreement (including, without limitation, the
results of any audit conducted on behalf of a party pursuant to this Agreement),
then, in addition to the procedure set forth in Section 5.2 above, the Neutral
shall be a partner or full member of an internationally recognized certified
public accounting firm which is not an auditing firm for either party and has
not provided material services to either party during the last two (2) year
period prior to the date of ADR initiation.

     5.4 ADR HEARING. The Neutral shall hold a hearing to resolve the issues
within one hundred twenty (120) business days after selection in San Diego,
California. Each party may be represented by counsel. Prior to the hearing the
parties shall be entitled to engage in discovery under procedures of the Federal
Rules of Civil Procedure; PROVIDED, HOWEVER, that a party may not submit more
than fifty (50) written interrogatories or take more than four (4) depositions.
There shall not be any, and the Neutral shall not permit, any discovery within
thirty (30) days of the hearing. The Neutral shall have sole discretion
regarding the admissibility of evidence and conduct of the hearing. At least
five (5) business days prior to the hearing, each party shall submit to the
other party and the Neutral a copy of all exhibits on which such party intends
to rely at the hearing, a pre-hearing brief (up to 5 pages), and a proposed
disposition of the dispute (up to 5 pages). The proposed disposition shall be
limited to proposed rulings and remedies on each issue, and shall contain no
argument on or analysis of the facts or issues; PROVIDED, HOWEVER, that the
parties will not present proposed monetary remedies. Within five (5) business
days after close of the hearing, each party may submit a post-hearing brief (up
to 5 pages) to the Neutral.

                                      -20-
<PAGE>

     5.5 ADR RULING; FEES AND EXPENSES. The Neutral shall render a disposition
on the proposed rulings as expeditiously as possible after the hearing, but not
later than fifteen (15) business days after the conclusion of the hearing. The
Neutral shall rule on each issue and shall adopt in its entirety the proposed
ruling of one of the parties on each issue. In the circumstance where the
Neutral rules for a party on a claim in the form of a claim for monetary
damages, the parties will then submit a proposed remedy within ten (10) days of
notice of the ruling. The proposed remedy may be accompanied by a brief in
support of the remedy not to exceed five (5) pages. The Neutral will rule on and
adopt one of the proposed remedies within ten (10) days of their submission. The
Neutral's disposition shall be final and not appealable, except that either
party shall have the right to appeal such disposition on the basis it was
affected by fraud or bad faith in connection with the ADR proceedings. A
judgement on the Neutral's disposition may be entered in any court having
jurisdiction over the parties. The prevailing party shall be entitled to recover
from the non-prevailing party the reasonable fees and expenses of the Neutral,
as well as the standard charges of the AAA for its assistance.

6.       TERMINATION OF AGREEMENT

     6.1 TERMINATION FOR CAUSE - BOTH PARTIES. Notwithstanding anything to the
contrary in this Agreement, this Agreement may be terminated prior to the Second
Closing by written notice at any time prior to the Second Closing:

         (a) by Dura or Dura Bermuda for material breach by DJ Pharma or by DJ
Pharma for material breach by Dura or Dura Bermuda, which breach remains uncured
for thirty (30) days in the case of nonpayment of any amount due and unless
otherwise set forth herein, ninety (90) days for all other breaches, each
measured from the date written notice of such breach is given to the breaching
party or, if such breach is not susceptible of cure within such ninety (90) day
period and the breaching party uses diligent good faith efforts to cure such
breach, for one hundred eighty (180) days after written notice to the breaching
party. Notwithstanding the foregoing, in the event of a payment default by DJ
Pharma as a result of Financial Hardship (as hereinafter defined) at any one
time during the term of this Agreement, DJ Pharma shall be afforded the
opportunity to cure such payment default (as well as any other payment default
occurring within 150 days thereafter) for a period of one hundred fifty (150)
days following written notice by Dura to DJ Pharma of the initial payment
breach, provided that the following conditions have been met:

                  (i) DJ Pharma has not previously breached any payment
requirements under this Agreement;

                  (ii) During such 150 day cure period DJ Pharma uses diligent
good faith efforts to cure such breach;

                  (iii) any nonpayment breaches or events warranting termination
under this Agreement which occur during such 150 day cure period shall be cured
by the expiration of such 150 day cure period (or earlier if the applicable cure
period described in this Section 6 expires earlier than the 150 day cure
period);

                                      -21-
<PAGE>

                  (iv) During such 150 day cure period DJ Pharma does not make
any payments to any other third parties which are other than (x) in the ordinary
course of business or (y) senior to DJ Pharma's payment obligations to Dura ;

                  (v) At the commencement of such cure period DJ Pharma provides
Dura with financial documentation to Dura's satisfaction documenting cash and
access to borrowings below five hundred thousand dollars ($500,000) ("Financial
Hardship"); and

                  (vi) upon termination of such cure period, DJ Pharma agrees to
pay Dura all outstanding amounts due plus interest accrued as of the date the
amounts became overdue at a rate equal to the Prime Rate in effect at the time
of default (as published by the Wall Street Journal) plus six percent (6%) per
annum (or the highest amount allowed by law, if such lawful amount is lower than
the foregoing).

         (b) by Dura or Dura Bermuda or by DJ Pharma immediately upon the filing
or institution of bankruptcy, reorganization, liquidation or receivership
proceedings, or upon an assignment of a substantial portion of the assets for
the benefit of creditors by the other party, or in the event a receiver or
custodian is appointed for such party's business, or if a substantial portion of
such party's business is subject to attachment or similar process; provided,
however, in the case of any involuntary bankruptcy proceeding such right to
terminate shall only become effective if the proceedings are not dismissed
within ninety (90) days after the filing thereof.

     6.2 TERMINATION FOR CAUSE - DURA AND DURA BERMUDA. Prior to Dura's transfer
to DJ Pharma of the Rondec Purchased Assets and the CCA Purchased Assets and
Dura and/or Dura Bermuda's assignment, as the case may be, of the Keftab Rights,
this Agreement may be terminated by Dura and Dura Bermuda, at their option and
discretion, if the Dura Supply Agreement is terminated prior to its natural
expiration due to a material, uncured breach by DJ Pharma.

     6.3 TERMINATION FOR CAUSE - DJ PHARMA. Prior to Dura's transfer to DJ
Pharma of the Rondec Purchased Assets and the CCA Purchased Assets and Dura
and/or Dura Bermuda's assignment of the Keftab Rights, as the case may be, this
Agreement may be terminated by DJ Pharma, at its option and discretion, if the
Dura Supply Agreement is terminated prior to its natural expiration due to a
material, uncured breach by Dura or Dura Bermuda. Notwithstanding the foregoing,
DJ Pharma understands and agrees that while Dura shall use commercially
reasonable efforts to supply Products to DJ Pharma, Dura cannot guarantee
supplies from third party manufacturers and that any failure of third party
manufacturers to supply Products to or on behalf of DJ Pharma shall in no event
result in a right of termination of this Agreement by DJ Pharma.

6.4      EFFECT OF TERMINATION.

         (a) In the event of termination by Dura or Dura Bermuda, DJ Pharma
shall return all Dura documents in its possession within fourteen (14) days of
any such termination.

         (b) In the event of termination by DJ Pharma as a result of a material
breach by Dura or Dura Bermuda, DJ Pharma shall have any and all remedies
available at law or equity.

                                      -22-
<PAGE>

         (c) In the event of termination by Dura or Dura Bermuda as a result of
a material breach by DJ Pharma prior to the expiration of the Licensing Term,
Dura may at its option terminate the purchase and license rights set forth in
Section 1 hereof with respect to the Products. In the event of termination by
Dura or Dura Bermuda at any time as a result of material breach by DJ Pharma,
Dura or Dura Bermuda shall in addition to the remedies set forth in this Section
6.4(c) have any and all remedies available at law or equity; Notwithstanding the
foregoing in the event Dura terminates the purchase and license rights with
respect to the Products following DJ Pharma's failure to cure a payment default
within the 150 day cure period following such default as a result of Financial
Hardship pursuant to Section 6.1(a) hereof, DJ Pharma shall be entitled to apply
the aggregate sum of Net Royalty Payments made to Dura or Dura Bermuda as of the
date of default pursuant to Section 2 hereof as payments of principal only under
the Subordinated Product Acquisition Notes up to the lesser of (x) the amount of
principal outstanding under such Subordinated Product Acquisition Notes and (y)
twenty million dollars ($20,000,000).

         (d) Expiration or termination of this Agreement shall not relieve the
parties of any obligation accruing prior to such expiration or termination.

7.   REPRESENTATIONS, WARRANTIES AND COVENANTS

     7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF DURA WITH RESPECT TO THE
CCA PRODUCTS AND THE RONDEC PRODUCTS. As of the date of this Agreement and as of
the Second Closing, Dura hereby represents, warrants and covenants to DJ Pharma
the following, all with respect to the CCA Products in the CCA Territory and the
Rondec Products in the Rondec Territory (collectively, the "CCA/Rondec
Products") only:

         (a) AUTHORITY. Dura has the necessary corporate power and authority to
enter into and deliver this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by Dura have been duly authorized by Dura. This Agreement constitutes the
legal, valid and binding obligation of Dura, enforceable in accordance with its
terms (except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, or similar laws affecting the rights of creditors
generally or by general principles of equity). Neither the execution, delivery
or performance of this Agreement by Dura, nor the consummation of the
transactions contemplated hereby nor compliance by Dura with the terms and
provisions of this Agreement will result in a violation or breach of any term or
provision of Dura's Certificate of Incorporation or By-laws, or of any statute,
rule or regulation applicable to Dura, nor conflict with or constitute a default
under any agreement to which Dura is a party or to which its assets are subject,
or any instrument, judgment, decree, writ, or other restriction to which Dura is
a party or by which its assets are bound.

         (b) TITLE TO ASSETS, LIENS AND ENCUMBRANCES. Except as set forth in
Schedule 7.1(b) hereof, Dura has good title to the CCA/Rondec Products and the
inventory of Rondec Products and CCA Products and any inventions, know-how,
trade secrets, intellectual property rights and technology necessary to
transfer, assign and deliver the Rondec Purchased Assets and CCA Purchased
Assets and has the right to grant the rights in connection with the CCA/Rondec
Products to DJ Pharma as set forth herein, free and clear of all security
interests, liens, claims, restrictions, royalty obligations and encumbrances
whatsoever other than any of the

                                      -23-
<PAGE>

foregoing which will not interfere with DJ Pharma's rights to manufacture or
have manufactured, distribute, offer for sale, market and sell the CCA/Rondec
Products. Such rights licensed, assigned, transferred or delivered to DJ Pharma
represent all of the rights which Dura owns or has with respect to the
CCA/Rondec Products and constitute all of the rights necessary for DJ Pharma to
market, distribute, offer for sale, promote and sell each of the CCA/Rondec
Products (and manufacture the Rondec Products and CCA Products). Dura is the
non-exclusive licensee of the Rondec Patent in the Rondec Territory and has
exclusive rights to the U.S. trademarks RONDEC-Registered Trademark- and
RONDEC-TR-Registered Trademark- for medicine and pharmaceutical preparations in
the Rondec Territory. No other unrelated party has been granted a license or
other permission to use the trademarks RONDEC-Registered Trademark- and
RONDEC-TR-Registered Trademark- in the Rondec Territory for medicine and
pharmaceutical preparations, and upon the Closing, with the exception of the
supply and manufacture of the Rondec Products under the Abbott Supply Agreement,
DJ Pharma will have the sole right to use the trademarks RONDEC-Registered
Trademark- and RONDEC-TR-Registered Trademark- in the Rondec Territory for
medicine and pharmaceutical preparations. Dura is the sole owner of the CCA
Trademarks. No other party has been granted a license or other permission to use
the CCA Trademarks, and upon the Closing, with the exception of the supply and
manufacture of the CCA Products under the Dura Supply Agreement, DJ Pharma will
have the sole right to use the CCA Trademarks.

         (c) CLAIMS; LITIGATION. Dura is not aware of any claim, suit, action,
arbitration, governmental investigation or other proceeding, nor any order,
decree or judgment pending or in effect, or threatened by, against or relating
to the CCA/Rondec Products, the CCA Trademarks, the Rondec Patent or the
trademark Rondec which if determined adversely would have an adverse effect on
DJ Pharma's rights to manufacture or have manufactured, market, distribute,
offer for sale and sell the CCA/Rondec Products.

         (d) COMPLIANCE WITH LAWS. Dura is currently in compliance with all
laws, ordinances, treaties and governmental rules, orders and regulations
applicable to it with respect to the CCA/Rondec Products, the CCA Trademarks and
the trademarks RONDEC-Registered Trademark- and RONDEC-TR-Registered Trademark-.

         (e) INTELLECTUAL PROPERTY. Exhibit D hereof sets forth a true and
correct list of all material patents, trademarks, service marks, trade names,
copyrights and applications for registration and registrations thereof, owned or
licensed by Dura, and used with respect to the CCA/Rondec Products
(collectively, the "Intellectual Property"). Other than the Intellectual
Property, to the best of Dura's knowledge, there are no patents, trademarks,
service marks, trade names, copyrights, applications for registration or
registrations thereof necessary for manufacture, marketing or sale of CCA
Products or the Rondec Products as currently manufactured, marketed and sold by
Dura. Dura has good and marketable title to, or other legal right to use, the
Intellectual Property, free and clear of any license, royalty arrangement, lien,
claim or encumbrance of any nature whatsoever other than any of the foregoing
which will not interfere with DJ Pharma's rights to manufacture, distribute,
offer for sale, market and sell the CCA/Rondec Products.

         (f) CONTRACTS. Schedule 7.1(f) sets forth a true and complete list of
the entities with whom Dura has contracts as of the Closing relating to the
CCA/Rondec Products, and copies of such contracts or relevant portions of
contracts have been made or will be made available to DJ Pharma for inspection
prior to the Closing. Such contracts constitute the only written contracts,
arrangements, commitments and agreements, currently in force and used by

                                      -24-
<PAGE>

Dura with respect to the manufacture, marketing, distribution, offering for sale
or sale of the Products in the applicable territories. Such contracts are valid
and binding, enforceable by or against Dura in accordance with their respective
terms and are in full force and effect. Neither Dura nor, to Dura's best
knowledge, any other party thereto, is in breach of any provision of or in
default under any term of any such contract, and there exists no condition or
event which after lapse of time or notice (or both) would constitute any such
breach or default or result in any right to accelerate or any loss of rights.

         (g) [Intentionally Omitted.]

         (h) COMPLIANCE WITH CONTRACT OBLIGATIONS. Dura is in compliance and
shall at all times remain in compliance with any and all contract obligations
with DJ Pharma, including without limitation, under this Agreement, the ongoing
covenants and representations herein, any outstanding notes or contracts
currently or hereinafter in effect and with other parties to the extent related
to the subject matter hereof, including, without limitation, obligations under
the Abbott Purchase Agreement or the Abbott Supply Agreement which are not
expressly assumed by DJ Pharma. In the event of a breach of payment terms by
Dura under the Abbott Purchase Agreement or the Abbott Supply Agreement which
results in DJ Pharma's inability to acquire, market and sell the Rondec Products
as contemplated herein, DJ Pharma shall have the right to cure such breach by
making such payment and offsetting it against an equal amount of Net Royalty
Payments for the Products not yet due by DJ Pharma to Dura or under the
Subordinated Product Acquisition Notes.

         (i) ACCESS TO BOOKS AND RECORDS. Subsequent to the Second Closing (for
the Rondec Products and CCA Products), each party agrees that they will grant to
each other and each other's agents reasonable access during normal business
hours upon reasonable notice to any books and records then in their possession
or in the possession of their respective affiliates to the extent of information
contained in such books or records that relates to Dura's operation of the
Rondec Purchased Assets and the CCA Purchased Assets prior to the Second
Closing, and is shown to be needed for tax, operations, regulatory or accounting
purposes.

     7.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF DURA BERMUDA WITH RESPECT
TO THE KEFTAB PRODUCTS. As of the date of this Agreement and as of the Second
Closing, Dura and Dura Bermuda hereby represent, warrant and covenant to DJ
Pharma the following, all with respect to the Keftab Products in the Keftab
Territory only:

         (a) AUTHORITY. Dura Bermuda has the necessary corporate power and
authority to enter into and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Dura Bermuda have been duly authorized by
Dura Bermuda. This Agreement constitutes the legal, valid and binding obligation
of Dura Bermuda, enforceable in accordance with its terms (except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, or
similar laws affecting the rights of creditors generally or by general
principles of equity). Neither the execution, delivery or performance of this
Agreement by Dura Bermuda, nor the consummation of the transactions contemplated
hereby nor compliance by Dura Bermuda with the terms and provisions of this
Agreement will result in a violation or breach of any term or provision of Dura
Bermuda's Certificate of Incorporation and Memorandum of Association of Company
Limited

                                      -25-
<PAGE>

by Shares or Bye-laws, or of any statute, rule or regulation applicable to Dura
Bermuda, nor conflict with or constitute a default under any agreement to which
Dura Bermuda is a party or to which its assets are subject, or any instrument,
judgment, decree, writ, or other restriction to which Dura Bermuda is a party or
by which its assets are bound.

         (b) TITLE TO ASSETS, LIENS AND ENCUMBRANCES. Except as set forth in
Schedule 7.2(b) hereof, Dura Bermuda has good title to the Keftab Products and
any inventions, know-how, trade secrets, intellectual property rights and
technology necessary to assign, transfer and deliver the Keftab Rights, and Dura
Bermuda has the right to grant the rights to the Keftab Products to DJ Pharma as
set forth herein, free and clear of all security interests, liens, claims,
restrictions, royalty obligations and encumbrances whatsoever other than any of
the foregoing which will not interfere with DJ Pharma's rights to manufacture or
have manufactured, market, distribute, offer for sale and sell the Keftab
Products. In connection with Dura's security interest with respect to the Keftab
Products pursuant to the terms of the Dura Bermuda Security Agreement (as
defined in Schedule 7.2(b) hereof), Dura hereby covenants that should Dura
exercise its rights at any time during the Licensing Period with respect to its
security interest in the Keftab Products under the Dura Bermuda Security
Agreement, Dura shall assume all of Dura Bermuda's obligations to DJ Pharma with
respect to the Keftab Products under this Agreement. Notwithstanding the
foregoing, Dura hereby covenants that should the Keftab Rights be transferred to
DJ Pharma pursuant to Section 1.4 hereof, and if as of such time Dura has not
exercised its rights under the Dura Bermuda Security Agreement with respect to
the Keftab Products, Dura shall as of the Second Closing release its security
interest under the Dura Bermuda Security Agreement with respect to the Keftab
Products. Such rights licensed, assigned, delivered or transferred to DJ Pharma
under this Agreement and the Assignment (at Second Closing) represent all of the
rights which Dura Bermuda owns or has with respect to the Keftab Products and
constitute all of the rights necessary for DJ Pharma to market, promote,
distribute, offer for sale, and sell each of the Keftab Products. Dura Bermuda
has the right to grant the rights to the Keftab Rights under the Assignment (by
Second Closing) and to the Keftab Trademark and as set forth under the Licensing
Agreement.

         (c) CLAIMS; LITIGATION. Neither Dura nor Dura Bermuda is aware of any
claim, suit, action, arbitration, governmental investigation or other
proceeding, nor any order, decree or judgment pending or in effect, or
threatened by, against or relating to the Keftab Products or the Keftab
Trademark in the Keftab Territory, which if determined adversely would have an
adverse effect on DJ Pharma's rights to manufacture or have manufactured, market
and sell the Keftab Products.

         (d) COMPLIANCE WITH LAWS. Dura Bermuda is currently in compliance with
all material laws, ordinances, treaties and governmental rules, orders and
regulations applicable to it with respect to the Keftab Products and the Keftab
Trademark.

         (e) INTELLECTUAL PROPERTY. Exhibit D hereof sets forth a true and
correct list of all material patents, trademarks, service marks, trade names,
copyrights and applications for registration and registrations thereof, owned or
licensed by Dura Bermuda subject to the terms of the License Agreement, and used
with respect to the Keftab Products in the Keftab Territory (collectively, the
"Keftab Intellectual Property"). Other than the Keftab Intellectual Property, to
the best of Dura Bermuda's knowledge, there are no material patents, trademarks,
service marks, trade names, copyrights, applications for registration or
registrations thereof necessary for

                                      -26-
<PAGE>

manufacture, marketing or sale of the Keftab Products as currently manufactured,
marketed and sold by Dura Bermuda. Dura Bermuda has good and marketable title
to, or other legal right to use, the Keftab Intellectual Property, free and
clear of any license, royalty arrangement, lien, claim or encumbrance of any
nature whatsoever other than any of the foregoing which will not interfere with
DJ Pharma's rights to manufacture, market, distribute, offer for sale and sell
the Keftab Products.

         (f) CONTRACTS. Schedule 7.2(f) sets forth a true and complete list of
the entities with whom Dura Bermuda has contracts as of Closing relating to the
Keftab Products, and copies of such contracts or relevant portions of contracts
have been made or will be made available to DJ Pharma for inspection prior to
the Closing. Such contracts constitute the only written contracts, arrangements,
commitments and agreements, currently in force and used by Dura Bermuda with
respect to the manufacture, marketing, distribution, offering for sale, or sale
of the Keftab Products in the Keftab Territory. Such contracts are valid and
binding, enforceable by or against Dura Bermuda in accordance with their
respective terms and are in full force and effect. Neither Dura Bermuda nor, to
Dura Bermuda's best knowledge, any other party thereto, is in breach of any
provision of or in default under any term of any such contract, and there exists
no condition or event which after lapse of time or notice (or both) would
constitute any such breach or default or result in any right to accelerate or
any loss of rights.

         (g) INVENTORY. [Intentionally Omitted.]

         (h) COMPLIANCE WITH LICENSING AGREEMENT. Dura Bermuda shall comply from
and after the Closing and through the Second Closing in all respects with the
terms and conditions of the Licensing Agreement and the Manufacturing Agreement.
In the event (a "Keftab Event") (x) a breach by Dura or Dura Bermuda of the
Licensing Agreement or Manufacturing Agreement which is not cured under the
terms of the Licensing Agreement or Manufacturing Agreement, respectively, and
which is not due to any action or omission by DJ Pharma, results in a reversion
of the Keftab Products to Lilly pursuant to the terms of Section 9.1(d)(I) of
the Licensing Agreement or (y) Dura or Dura Bermuda receive during the Licensing
Period any refunds by Lilly which are specifically attributable to the Keftab
Products and are paid by Lilly pursuant to Section 3.5 of the Licensing
Agreement as a result of a breach by Lilly of the Manufacturing Agreement
resulting in DJ Pharma's inability to obtain its required supply of Keftab
Products, the Future Maximum Payments to be made by DJ Pharma pursuant to
Section 2.1 hereof will be reduced to an amount equal to (Net Sales of Rondec
Products and CCA Products for the twelve (12) months immediately preceding the
loss of use of the Keftab products contemplated by this Section 7.2(h) divided
by total Net Sales of Products for the twelve (12) months immediately preceding
the loss of use of the Keftab Products pursuant to this Section 7.2(h)
multiplied by the Future Maximum Payments in effect for the respective period
(the "Adjusted Maximum Payment"). Any reduction in Future Maximum Payments will
reduce the Maximum Payment for any remaining period ratably based upon the
Maximum Payment for such period immediately prior to such reduction. In
addition, DJ Pharma's payment obligations to Dura or Dura Bermuda not yet due
under the Subordinated Product Acquisition Notes and Net Royalty Payments for
the Products not yet due based on the Adjusted Maximum Payments with respect to
the Products may be reduced up to an aggregate maximum of thirty million dollars
($30,000,000), with such reduction applying during the Licensing Period first to
Net Royalty Payments for the Products not yet due and upon termination of the
Licensing Term to

                                      -27-
<PAGE>

principal not yet due under the Subordinated Product Acquisition Notes. For
purposes of applying the foregoing reduction only, the principal balance and
accrued interest of the Subordinated Product Acquisition Notes shall be
recalculated as if the reduction to the principal amount of such Subordinated
Product Acquisition Notes occurred on the date of the Keftab Event. The
foregoing adjustments shall not in any way impact or lessen any other
obligations of DJ Pharma to Dura including, without limitation, continuing
obligations under the Dura Supply Agreement and the Subordinated Notes. Further
upon any adjustments pursuant to this Section 7.2(h), the right, title and
interest to the Keftab Products or Keftab Rights shall immediately vest in Dura
or Dura Bermuda and DJ Pharma shall have no further right, title or interest
with respect to such Keftab Products or Keftab Rights. In addition all
documentation and materials related to the Keftab Products and Keftab Rights
shall be immediately returned by DJ Pharma to Dura Bermuda.

For purposes of this Section 7.2(h) " Future Maximum Payments " shall equal the
sum of (i) the result of (a) Maximum Payments for the calendar year including
the date of a Keftab Event minus (b) any Net Royalty Payments paid or due for
the calendar year including the date of a Keftab Event plus (ii) all Maximum
Payments due for all of the calendar years remaining in the Licensing Period
which immediately follow the calendar year which includes the date of the Keftab
Event; in each case after giving effect to any previous adjustment in Maximum
Payments pursuant to Section 2.7.

         (i) COMPLIANCE WITH DJ PHARMA CONTRACT OBLIGATIONS. Dura Bermuda is in
compliance and shall at all times remain in compliance with any and all contract
obligations with DJ Pharma, including without limitation, under this Agreement,
the ongoing covenants and representations herein, any outstanding notes or
contracts currently or hereinafter in effect.

         (j) ACCESS TO BOOKS AND RECORDS. Subsequent to the Second Closing, each
party agrees that they will grant to each other and each other's agents
reasonable access during normal business hours upon reasonable notice to any
books and records then in their possession or in the possession of their
respective affiliates to the extent of information contained in such books or
records that related to Dura's or Dura Bermuda's operation of the Keftab Rights
or the Keftab Products prior to the Second Closing, respectively and is shown to
be needed for tax, operations, regulatory or accounting purposes.

8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DJ PHARMA. As of the date of
this Agreement and as of the Closing, DJ Pharma hereby represents, warrants and
covenants to Dura as follows:

     8.1 AUTHORITY. DJ Pharma has the necessary corporate power and authority to
enter into and deliver this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by DJ Pharma has been duly authorized by DJ Pharma. This Agreement
constitutes the legal, valid and binding obligation of DJ Pharma, enforceable in
accordance with its terms (except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally or by general principles of equity). Neither the
execution, delivery or performance of this Agreement by DJ Pharma, nor the
consummation of the transactions contemplated hereby nor compliance by DJ Pharma
with the terms and provisions of this Agreement will result in a

                                      -28-
<PAGE>

violation or breach of any term or provision of DJ Pharma's Certificate of
Incorporation or by-laws, or of any statute, rule or regulation applicable to DJ
Pharma, nor conflict with or constitute a default under any agreement to which
DJ Pharma is a party or to which its asserts are subject, or any instrument,
judgment, decree, writ, or other restriction to which DJ Pharma is a party or by
which its assets are bound.

     8.2 COMPLIANCE WITH LAWS. DJ Pharma is in compliance with all governmental
laws, rules and regulations applicable to its business and it shall at all times
comply with all applicable laws regulating its activities under this Agreement.

     8.3 ASSUMPTION OF LIABILITIES AND OBLIGATIONS; COMPLIANCE WITH DURA
CONTRACT OBLIGATIONS. Except as set forth herein, DJ Pharma hereby expressly
assumes all Assumed Liabilities (as defined in the Licensing Agreement) and any
and all other liabilities and obligations relating to the Products, including
without limitation all such liabilities and obligations with respect to the
Products as set forth under the Abbott Purchase Agreement, the Abbott Supply
Agreement, the Licensing Agreement and the Manufacturing Agreement
(collectively, the "Product Agreements"). In this regard, DJ Pharma hereby
assumes and agrees to bear and be responsible for and to perform and satisfy all
responsibilities, duties (including, without limitation, compliance with all
applicable laws and regulations), obligations, claims, Damages, liabilities,
burdens and problems of any nature whatsoever (collectively, the "Obligations")
associated directly or indirectly with DJ Pharma's ownership, Activities or
other use of the Products, from and after the Closing, including, without
limitation, all recalls, rebates, returns, reimbursements, chargebacks, minimum
purchase requirements under the Manufacturing Agreement or Abbott Supply
Agreement, all warranty claims and all product liability claims (without regard
to the nature of the causes of action alleged or theories of recovery asserted)
arising in connection with any of the Products sold or Keftab Rights exercised
on or after the Closing, except for those Obligations, Activities or Damages
with respect to which Dura is providing indemnification pursuant to the
provisions of Section 4 of this Agreement. Notwithstanding the foregoing, DJ
Pharma shall not be liable and does not assume (i) payment obligations under
Sections 3 and 5 of the Licensing Agreement and Abbott Purchase Agreement, (ii)
any obligations under the Product Agreements which do not relate to any of the
Products, (iii) any obligations under the Product Agreements which accrued prior
to October 1, 1998, or (iv) any obligations expressly assumed by Dura under the
Dura Supply Agreement or required in order to fulfill its obligations as a
facilitator of supplies pursuant to the terms of the Dura Supply Agreement. DJ
Pharma is in compliance and shall at all times remain in compliance with any and
all contract obligations, to the extent specified in this Section 8.3 under this
Agreement, the Licensing Agreement, the Manufacturing Agreement, the Abbott
Purchase Agreement, the Abbott Supply Agreement, the Dura Supply Agreement, and
during any time when there is no Senior Indebtedness (as defined in the
Subordinated Product Acquisition Notes), the Subordinated Product Acquisition
Notes, In the event of an event of default under any of the Subordinated Product
Acquisition Notes during such time as there is Senior Indebtedness, Dura or Dura
Bermuda shall have all rights and remedies available at law or equity under the
terms of the Subordinated Product Acquisition Notes, but such default shall not
be considered a default by DJ Pharma under this Agreement.

     8.4 PROMOTIONAL AND MARKETING EFFORTS. DJ Pharma hereby covenants to use
its commercially reasonable efforts to diligently and actively market and
promote the Products

                                      -29-
<PAGE>

during the Licensing Period and hereby agrees to establish and spend the
following minimum sales and marketing budget in connection with the diligent
promotion of such Products (the "Marketing Budget") during the Licensing Period:
(i) From January 1, 1999 to December 31, 2001, the Marketing Budget must equal
or exceed the lesser of (x) the royalty percentage for the respective period as
set forth in Section 2.1 hereof times DJ Pharma's total sales and marketing
budget of ten million three hundred thousand dollars ($10,300,000) for all
products sold and/or marketed by DJ Pharma in the 1999 calendar year and (y) the
royalty percentage for the respective period as set forth in Section 2.1 hereof
times DJ Pharma's actual yearly sales and marketing expenditures for the
respective year (ii) From January 1, 2002 to December 31, 2002 the Marketing
Budget must equal or succeed the lesser of (x) 33.3% of DJ Pharma's total sales
and marketing budget for all products sold and/or marketed by DJ Pharma in the
1999 calendar year and (y) 33.3% of DJ Pharma's actual yearly sales and
marketing expenditures for the respective year.

9. NO IMPLIED WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 7 HEREOF,
NEITHER DURA NOR DURA BERMUDA MAKE ANY REPRESENTATION OR WARRANTY AS TO THE CCA
PRODUCTS, RONDEC PRODUCTS, THE KEFTAB PRODUCTS OR KEFTAB RIGHTS OR THE
MANUFACTURING, MARKETING AND SALE OF SUCH PRODUCTS OR OTHER ACTIVITIES WITH
RESPECT TO SUCH RIGHTS (COLLECTIVELY, THE "ACTIVITIES"), EXPRESS OR IMPLIED,
EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND DURA AND
DURA BERMUDA SPECIFICALLY DISCLAIM ANY AND ALL IMPLIED OR STATUTORY WARRANTIES.
WITHOUT LIMITING THE FOREGOING, DJ PHARMA ACKNOWLEDGES THAT IT HAS NO AND IS NOT
RELYING UPON AN IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR OTHERWISE, OR UPON ANY REPRESENTATION OR WARRANTY WHATSOEVER AS TO
THE PROSPECTS (FINANCIAL, REGULATORY OR OTHERWISE), OR THE VALIDITY OR
LIKELIHOOD OF SUCCESS OF THE ACTIVITIES AFTER THE CLOSING OR THE SECOND CLOSING,
AS APPLICABLE.

10.  CONFIDENTIALITY

     10.1 CONFIDENTIALITY. Each party (the "Receiving Party") recognizes that
certain information of the other Party (the "Disclosing Party") and its
affiliates (or other third party to whom the Disclosing Party has an obligation
of confidentiality) disclosed to the Receiving Party in connection with this
Agreement and the transactions contemplated herein, including without limitation
Know-How, is of proprietary value and is to be considered highly confidential
("Confidential Information"). The Receiving Party and its respective affiliates
agree not to disclose such Confidential Information to others, or use it for the
benefit of others, except to or for those third parties permitted under the
terms of this Agreement who reasonably require same for the purposes hereof and
who are bound to such party by a like obligation as to confidentiality, without
the express written permission of the other party. Notwithstanding the
foregoing, DJ Pharma shall not have any such obligations of confidentiality with
regard to any Rondec Purchased Assets or CCA Purchased Assets or Keftab Rights
after the Closing or Second Closing which is not addressed in any agreements
regarding such Rondec or CCA Purchased Assets or Keftab Rights, as applicable,
nor shall the Receiving Party have any obligation of confidentiality with regard
to information which:

                                      -30-
<PAGE>

         (a) can be demonstrated by written records to have been known to the
Receiving Party at the time of receipt, with the exception of certain
information transferred by Dura or Dura Bermuda to DJ Pharma upon the Second
Closing which will be deemed and shall as of the Second Closing be treated as
Confidential Information by Dura or Dura Bermuda pursuant to the terms of this
Section 10;

         (b) was subsequently otherwise legally acquired by the Receiving Party
from a third party having an independent right to disclose the information;

         (c) which now or later becomes publicly known without breach of this
Agreement by the Receiving Party;

         (d) which is independently developed by employees of the Receiving
Party without the aid, use or application of the Confidential Information; or

         (e) which is required by law, regulation, rule, act, or order of any
governmental authority or agency, to be disclosed by the Receiving Party;
PROVIDED, HOWEVER, that the Receiving Party shall make its best efforts to give
the Disclosing Party sufficient advance notice to permit it to seek a protective
order or other similar order with respect to such Confidential Information and
thereafter discloses only the minimum Confidential Information required to be
disclosed in order to comply.

     The Receiving Party's obligation of confidentiality shall be in force
during the term of this Agreement and any extension hereof, and shall extend for
a period of ten (10) years from the expiration or termination of this Agreement
or any extension thereof.

     10.2 RETURN OF INFORMATION. Upon the termination of this Agreement, DJ
Pharma shall return to Dura all documents and unused promotional materials,
including all copies, which DJ Pharma acquired from Dura or any of its related
entities under this Agreement.

     10.3 EQUITABLE RELIEF. Each Party acknowledges and agrees that breach of
any of the terms of this Section 10 would cause irreparable harm and damage to
the other and that such damage may not be ascertainable in money damages and
that as a result thereof the non-breaching party would be entitled to seek
equitable or injunctive relief restraining any breach or future violation of the
terms contained herein by the breaching party without the necessity of proving
actual damages. Such right to equitable relief is in addition to whatever
remedies either party may be entitled to as a matter of law or equity, including
money damages.

11.  MISCELLANEOUS

     11.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that DJ Pharma may not assign any of its rights,
duties, or obligations hereunder without the prior written consent of Dura,
which consent may be withheld in Dura's sole discretion.

     11.2 NOTICES. All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand, prepaid telex, cable, telegram or facsimile and
confirmed in writing, or mailed first class, postage

                                      -31-
<PAGE>

prepaid, by registered or certified mail, return receipt requested (mailed
notices and notices sent by telex, cable or telegram shall be deemed to have
been given on the date received) as follows:

         If to DURA:                Dura Pharmaceuticals, Inc.
                                    7475 Lusk Boulevard
                                    San Diego, CA 92121
                                    Attention: Office of the General Counsel
                                    Facsimile: (619) 657-0981

         with a copy to:            Brobeck, Phleger & Harrison, LLP
                                    550 West "C" Street, Suite 1300
                                    San Diego, CA 92101-3532
                                    Attention:  Faye H. Russell, Esq.
                                    Facsimile:  (619) 234-3848

         If to DJ PHARMA:           DJ Pharma, Inc.
                                    12730 High Bluff Drive
                                    San Diego, CA  92130
                                    Attention: James W. Newman, President
                                    Facsimile:  (619) 509-8610

         with a copy to:            Pillsbury Madison & Sutro LLP
                                    101 West Broadway, 18th Floor
                                    San Diego, CA  92101
                                    Attention:  David R. Snyder, Esq.
                                    Facsimile:  (619) 236-1995

         If to DURA BERMUDA:        Dura (Bermuda) Trading Company LTD
                                    102 St. James Court
                                    Flatts, Smiths FLO4, Bermuda
                                    Attention: Kevin Insley, President
                                    Facsimile: (441) 292-2224

     11.3 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of California excluding any choice of law
rules which may direct the application of the law of another state.

     11.4 CAPTIONS. All section titles or captions contained in this Agreement,
in any Schedule referred to herein or in any Exhibit annexed hereto, and the
table of contents, if any, to this Agreement are for convenience only, shall not
be deemed a part of this Agreement and shall not affect the meaning or
interpretation of this Agreement.

     11.5 NO THIRD-PARTY RIGHTS. No provision of this Agreement shall be deemed
or construed in any way to result in the creation of any rights or obligation in
any other individual, group, entity, or organization not a party to this
Agreement.

     11.6 NO IMPLIED WAIVERS. No failure on the part of either party to exercise
and no delay in exercising any right, power, remedy or privilege under this
Agreement shall impair,

                                      -32-
<PAGE>

prejudice or constitute a waiver of any such right, power, remedy or privilege
nor shall any such waiver or any single or partial exercise of any such right,
power remedy or privilege preclude any other or further exercise thereof or the
exercise of any other right, power, remedy or privilege. No waiver of either
party of any default, right, power, remedy or privilege shall be effective
unless in writing, nor shall any such waiver operate as a waiver of any other or
the same default, right, power, remedy or privilege respectively on a future
occasion.

     11.7 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended or is to be construed to constitute DJ Pharma, Dura, Dura Bermuda (or
any of their affiliates) as partners or joint venturers or either party as an
employee or agent of the other. Neither party hereto shall have any express or
implied right or authority to assume or create any obligations on behalf of or
in the name of the other party or to bind the other party to any contract,
agreement or undertaking with any other individual, entity, group or
organization, and no conduct of the parties shall be deemed to infer such right.

     11.8 FURTHER ASSURANCE. Each party hereby agrees to duly execute and
deliver, or cause to be duly executed and delivered, such further instruments
and do and cause to be done such further acts and things, including, without
limitation, the filing of such additional assignments, agreements, documents and
instruments, that may be necessary or as the other party hereto may at any time
and from time to time reasonably request in connection with this Agreement or to
carry out more effectively the provisions and purposes hereof or to better
assure and confirm unto such other party its rights and remedies under, this
Agreement.

     11.9 SURVIVAL. The provisions of this Agreement shall survive the closings
and continue in full force and effect in accordance with their terms.

     11.10 AMENDMENTS AND MODIFICATIONS. No amendment, modification, termination
or discharge of any provision of this Agreement, nor consent by DJ Pharma or
Dura to any departure therefrom, shall in any event be effective unless the same
shall be in writing specifically identifying this Agreement and the provision
intended to be amended, modified, terminated or discharged and signed by DJ
Pharma and Dura, and each amendment, modification, termination or discharge
shall be effective only in the specific instance and for the specific purpose
for which given. No provision of this Agreement shall be varied, contradicted or
explained by any other agreement, course of dealing or performance or usage of
trade or any other matter not set forth in an agreement in writing and signed by
DJ Pharma, Dura and Dura Bermuda.

     11.11 SEVERABILITY. If any provision hereof should be held invalid, illegal
or unenforceable in any respect in any jurisdiction, then, to the fullest extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intentions of the parties hereto as nearly as may be possible and (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction.

     11.12 CONSTRUCTION. Except as otherwise provided herein,, references to
Articles, Sections, Schedules and Exhibits are to those contained in this
Agreement. Any Schedules or Exhibits form an integral part of this Agreement and
reference to this Agreement include references thereto. Unless the context
otherwise requires, words importing the singular include

                                      -33-
<PAGE>

the plural and vice versa, words importing the masculine include the feminine,
and words importing persons includes corporations. Headings used herein are for
convenience only and shall not in any way affect the construction of, or be
taken into consideration in interpreting, this Agreement.

     11.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.

     11.14 ENTIRE AGREEMENT. This Agreement, together with any agreements
referenced herein, constitute the entire agreement of DJ Pharma, Dura, and Dura
Bermuda with respect to the subject matter hereof. This Agreement supersedes all
prior or contemporaneous understandings or agreements, whether written or oral,
between DJ Pharma, Dura and Dura Bermuda with respect to such subject matter.

     11.15 FORCE MAJEURE

         (a) EVENTS OF FORCE MAJEURE. Failure of either party to perform its
obligations under this Agreement shall not subject such party to any liability
to the other if such failure is caused by or results from causes beyond the
reasonable control of the affected party such as but not limited to acts of God,
fire, explosion, flood, drought, war, riot, sabotage, embargo, strikes or other
labor trouble, or compliance with any law, order or regulation of any government
entity acting with color of right which is promulgated after the date hereof.

         (b) CONSEQUENCES OF FORCE MAJEURE. Upon occurrence of an event of force
majeure the party affected shall promptly notify the other in writing, setting
forth the details of the occurrence, and make every attempt to resume the
performance of its obligations as soon as practicable after the force majeure
event ceases.

     11.16 SALES TAX. Any and all sales or use taxes payable with respect to the
Rondec and CCA Purchased Assets, the Keftab Rights, and the transactions
contemplated under this Agreement (except for taxes levied thereon as income to
Dura) shall be borne by DJ Pharma. Any and all transfer taxes payable as a
result of the transaction shall be paid by Dura.

     11.17 NO FINDERS FEE. Each party to this Agreement represents and warrants
that no broker or finder has acted for it in connection with this Agreement or
the transactions contemplated by this Agreement and that no broker or finder is
entitled to any brokerage or finders fee or other commission in respect thereof
based in any way on agreements, arrangements or understandings made by it.

     11.18 PUBLICITY. Dura and DJ Pharma agree not to disclose the existence of
this Agreement or use the name of the other in any publicity, press release,
advertising or information which is disseminated to the general public without
the other party's prior written approval, which approval shall not be
unreasonably withheld, unless such disclosure shall be required by applicable
law or regulatory agencies, in which case the other party shall have the
opportunity to review and approve the form of disclosure (such approval not to
be unreasonably withheld).

                                      -34-
<PAGE>

     11.19 ATTORNEYS' FEES. In the event it becomes necessary for either party
(or any of its affiliates) to institute any action at law or in equity against
the other party to enforce its rights under Section 11 hereof, the prevailing
party shall be entitled to recover from the non-prevailing party reasonable
attorneys' fees, court costs and expenses relating to such action.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -35-
<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.

DURA PHARMACEUTICALS, INC.                   DJ PHARMA, INC.

By:     /s/ Michael Borer                    By:      /s/ James W. Newman
        -----------------------------                 --------------------------
Title:  Senior Vice President and CFO        Title:   CEO and President
        -----------------------------                 --------------------------

DURA (BERMUDA) TRADING COMPANY LTD.

By:         /s/ Kevin Insley
        -----------------------------
 Title:    President
        -----------------------------

                     [SIGNATURE PAGE TO AMENDED AND RESTATED
                         PURCHASE AND LICENSE AGREEMENT]

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