10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended December 31, 2003 or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 1-9860

BARR PHARMACEUTICALS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	42-1612474
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. - Employer Identification No.)

Two Quaker Road, P. O. Box 2900, Pomona, New York 10970-0519

(Address of principal executive offices)

845-362-1100

(Registrant’s telephone number)

Barr Laboratories, Inc.

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [  ]

Number of shares of common stock outstanding as of February 10, 2004: 67,328,885

TABLE OF CONTENTS

		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statements of Cash Flows
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT 2.2: ASSET PURCHASE AGREEMENT
EXHIBIT 10.1: NON-QUALIFIED DEFERRED COMPENSATION
EXHIBIT 31.1: CERTIFICATION
EXHIBIT 31.2: CERTIFICATION
EXHIBIT 32.0: CERTIFICATION

BARR PHARMACEUTICALS, INC.

INDEX TO FORM 10-Q

			Page
			Number
Part I	Financial Information
Item 1.	Consolidated Financial Statements
		Consolidated Balance Sheets as of December 31, 2003 (unaudited) and June 30, 2003		1
		Consolidated Statements of Operations (unaudited) for the three and six months ended December 31, 2003 and 2002		2
		Consolidated Statements of Cash Flows (unaudited) for the six months ended December 31, 2003 and 2002		3
		Notes to Consolidated Financial Statements (unaudited)		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			35
Item 4.	Controls and Procedures			36
Part II	Other Information
Item 1.	Legal Proceedings			37
Item 4.	Submission of Matters to a Vote of Security Holders			39
Item 6.	Exhibits and Reports on Form 8-K			40
	Signatures			41

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Barr Pharmaceuticals, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)

					December 31,
					2003			June 30,
					(unaudited)			2003
				Assets
Current assets:
	Cash and cash equivalents				$	452,838		$	367,142
	Marketable securities					45,378			31,682
	Accounts receivable, net (including receivables from related parties of $1,920 at December 31, 2003 and $2,398 at June 30, 2003)					201,347			221,652
	Other receivables					7,131			31,136
	Inventories					152,135			163,926
	Deferred income taxes					27,375			27,375
	Prepaid expenses					15,724			6,873
			Total current assets			901,928			849,786
Property, plant and equipment, net of accumulated depreciation of $100,048 and $100,314, respectively						224,949			223,516
Deferred income taxes						5,480			5,589
Marketable securities						6,700			15,055
Other intangible assets						43,657			45,949
Goodwill						14,118			14,118
Other assets						16,486			26,924
			Total assets		$	1,213,318		$	1,180,937
		Liabilities and Shareholders’ Equity
Current liabilities:
	Accounts payable				$	97,636		$	188,852
	Accrued liabilities (including accrued liabilities to related parties of $140 at December 31, 2003 and $648 at June 30, 2003)					99,662			66,109
	Current portion of long-term debt					7,029			7,029
	Current portion of capital lease obligations					1,486			1,481
	Income taxes payable					3,121			11,316
			Total current liabilities			208,934			274,787
Long-term debt						24,400			30,629
Long-term capital lease obligations						2,951			3,398
Other liabilities						6,145			4,128
Commitments & Contingencies
Shareholders’ equity:
	Preferred stock $1 par value per share; authorized 2,000,000; none issued					—			—
	Common stock $.01 par value per share; authorized 200,000,000; issued 67,556,427 and 67,066,196, respectively					676			671
	Additional paid-in capital					355,106			326,001
	Retained earnings					615,814			542,210
	Accumulated other comprehensive loss					—			(179	)
						971,596			868,703
	Treasury stock, at cost - 280,398 shares					(708	)		(708	)
			Total shareholders’ equity			970,888			867,995
			Total liabilities and shareholders’ equity		$	1,213,318		$	1,180,937

See accompanying notes to the consolidated financial statements.

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Barr Pharmaceuticals, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

		Three Months Ended				Six Months Ended
		December 31,				December 31,
		2003		2002		2003		2002
Revenues:
	Product sales (including sales to related parties of $2,759 and $2,443 for the three months ended December 31, 2003 and 2002, and $4,862 and $5,312 for the six months ended December 31, 2003 and 2002, respectively)	$	369,862	$	207,667	$	678,622	$	426,383
	Development and other revenue		4,262		1,368		6,213		3,080
Total revenues			374,124		209,035		684,835		429,463
Costs and expenses:
	Cost of sales (including amounts paid to related parties of $144 and $262 for the three months ended December 31, 2003 and 2002, and $336 and $650 for the six months ended December 31, 2003 and 2002, respectively)		207,722		94,872		368,623		205,791
	Selling, general and administrative		53,961		33,089		119,502		64,401
	Research and development		63,093		22,445		86,559		43,583
Earnings from operations			49,348		58,629		110,151		115,688
Proceeds from patent challenge settlement			—		8,562		—		17,125
Interest income			1,381		1,684		2,641		3,181
Interest expense			661		473		1,500		921
Other expense			889		280		947		246
Earnings before income taxes			49,179		68,122		110,345		134,827
Income tax expense			14,110		25,375		36,741		50,223
Net earnings		$	35,069	$	42,747	$	73,604	$	84,604
Earnings per common share - basic		$	0.52	$	0.65	$	1.10	$	1.29
Earnings per common share - diluted		$	0.49	$	0.62	$	1.04	$	1.24
Weighted average shares			67,204		65,883		67,064		65,749
Weighted average shares - diluted			71,040		68,554		70,795		68,418

See accompanying notes to the consolidated financial statements.

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Barr Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2003 and 2002
(in thousands of dollars)
(unaudited)

				2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net earnings			$	73,604		$	84,604
	Adjustments to reconcile net earnings to net cash provided by operating activities:
			Depreciation and amortization		15,143			10,422
			Provision for losses on loans to Natural Biologics		15,729			—
			Write-off of intangible asset		—			1,330
			Loss (gain) on disposal of property, plant & equipment		7,126			(457	)
			Loss on investments		780			250
			Other, net		53			(36	)
	Tax benefit of stock incentive plans				14,491			10,018
	Write-off of acquired in-process research and development				35,600			—
	Changes in assets and liabilities:
		(Increase) decrease in:
			Accounts receivable and other receivables, net		44,630			6,860
			Inventories		11,791			66,360
			Prepaid expenses		(4,269	)		(593	)
			Other assets		(1,710	)		(3,823	)
		Increase (decrease) in:
			Accounts payable, accrued liabilities and other liabilities		(61,255	)		(78,682	)
			Income taxes payable		(8,195	)		21,383
		Net cash provided by operating activities			143,518			117,636
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property, plant and equipment				(20,844	)		(35,930	)
	Proceeds from sale of property, plant and equipment				68			2,947
	Acquisition				(35,600	)		—
	Investment in venture funds				(3,480	)		—
	Loans to Natural Biologics				(1,321	)		(4,384	)
	Purchases of marketable securities, net				(4,300	)		(9,400	)
		Net cash used in investing activities			(65,477	)		(46,767	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Principal payments on long-term debt and capital leases				(6,964	)		(3,803	)
	Proceeds from exercise of stock options and employee stock purchases				14,619			6,722
		Net cash provided by financing activities			7,655			2,919
		Increase in cash and cash equivalents			85,696			73,788
Cash and cash equivalents at beginning of period					367,142			331,257
Cash and cash equivalents at end of period				$	452,838		$	405,045
SUPPLEMENTAL CASH FLOW DATA:
	Cash paid during the period:
		Interest, net of portion capitalized		$	1,556		$	895
		Income taxes		$	27,731		$	18,822
	Non-cash transactions
		Equipment under capital lease		$	293		$	—

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BARR PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars, except per share amounts)
(unaudited)

1.	Description of Business
	Barr Pharmaceuticals, Inc., a Delaware corporation (“Barr” or the “Company”), was formed in December 2003, in connection with the reincorporation of Barr Laboratories, Inc., a New York corporation (“Barr-NY”). The reincorporation was approved by Barr-NY’s Board of Directors and the holders of a majority of Barr-NY’s outstanding shares of common stock, voting in person or by proxy, at its Annual Meeting of Shareholders held on October 23, 2003. The reincorporation was accomplished by the merger of Barr-NY into the Company, with the Company as the surviving entity. Prior to the merger, Barr-NY contributed its principal operating assets to Barr Laboratories, Inc., a newly formed, wholly-owned subsidiary incorporated in Delaware. Barr Pharmaceuticals, Inc. and its subsidiaries are engaged in the development, manufacture and marketing of generic and proprietary pharmaceuticals.
	As a result of the reincorporation, each share of common stock of Barr Laboratories, Inc. was automatically converted into one share of common stock of Barr Pharmaceuticals, Inc.
2.	Basis of Presentation and Principles of Consolidation
	The unaudited consolidated financial statements of Barr Pharmaceuticals, Inc. and its subsidiaries are prepared in conformity with accounting principles generally accepted in the United States. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended June 30, 2003, included in the annual report on Form 10-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on August 26, 2003, as amended by Form 10-K/A thereto filed by the Company with the SEC on August 29, 2003. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated. Management believes that, along with the following information, the disclosures are adequate to make the information presented herein not misleading. Certain prior year amounts have been reclassified to conform to the current presentation. The results of operations for the three and six months ended December 31, 2003, may not be indicative of the results to be expected for the fiscal year ending June 30, 2004.

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3.	Estimates and Critical Accounting Policies
	The methods, estimates and judgments the Company uses in applying the accounting policies most critical to its financial statements have a significant impact on its reported results. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of the Company’s financial condition and results, and/or that require the Company to make its most difficult and subjective judgments. Based on this definition, the Company’s most critical policies are the following: (1) provisions for estimated sales returns and allowances (Note 5); (2) accrual of inventory reserves (Note 9); (3) deferred taxes; (4) accrual for litigation (Note 16); (5) accrual for self-insurance reserve (Note 16); and (6) the assessment of recoverability of goodwill and other intangible assets. The Company also has other key accounting policies, including policies for revenue recognition. The Company believes that these other policies either do not generally require it to make estimates and judgments that are as difficult or as subjective as the six listed above, or are less likely to have a material impact on its reported results of operations for a given period. Although the Company believes that its estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results may differ significantly from the Company’s estimates and its estimates could be different using different assumptions or conditions.
4.	Acquisition of Endeavor Pharmaceuticals, Inc.
	On November 20, 2003, the Company completed the acquisition of substantially all of the assets of Endeavor Pharmaceuticals, Inc. (“Endeavor”). The Company acquired Endeavor to broaden its line of hormone therapy and other female healthcare products. In the transaction, Barr acquired the currently pending New Drug Application and intellectual property related to Endeavor’s Enjuvia™ synthetic conjugated estrogens product and two other female healthcare products in early-stage development.
	The total purchase price, including transaction costs of $517, was $35,600 and was allocated to acquired in-process research and development. This amount was written-off as research and development expense upon acquisition because the acquired products, which had not received FDA approval, were incomplete and had no alternative future use.
	The operating results of Endeavor are included in the Company’s consolidated financial statements subsequent to the November 20, 2003 acquisition date.
5.	Accounts Receivable
	Accounts receivable are presented net of allowances related to provisions for product returns, rebates, chargebacks and other sales allowances of $142,633 at December 31, 2003 and $136,059 at June 30, 2003.

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6.

Stock-Based Compensation

The Company has three stock-based employee compensation plans, two stock-based non-employee director compensation plans and an employee stock purchase plan. The Company accounts for these plans under the intrinsic value method described in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. The Company, applying the intrinsic value method, has not recorded stock-based employee compensation cost in net earnings. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to its stock-based employee compensation.

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2003		2002		2003		2002
Net earnings, as reported	$	35,069	$	42,747	$	73,604	$	84,604
Add:
Stock-based employee compensation expense included in reported net earnings, net of related tax effects		—		—		—		—
Deduct:
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		3,606		1,641		6,339		3,068
Pro forma net earnings	$	31,463	$	41,106	$	67,265	$	81,536
Earnings per share:
Basic - as reported	$	0.52	$	0.65	$	1.10	$	1.29
Basic - pro forma	$	0.47	$	0.62	$	1.00	$	1.24
Diluted - as reported	$	0.49	$	0.62	$	1.04	$	1.24
Diluted - pro forma	$	0.44	$	0.60	$	0.95	$	1.19

7.

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51” (“FIN 46”). A revised interpretation of FIN 46 (“FIN 46 – R”) was issued in December 2003. The objective of FIN 46-R is to provide guidance on how to identify a variable interest entity (“VIE”) and to determine when the assets, liabilities, noncontrolling interests, and results of operations of a VIE need to be included in a company’s consolidated financial statements. A company that will absorb a majority of the VIE’s expected losses and/or receive a majority of the VIE’s expected residual returns, if they occur, is known as the “primary beneficiary.” A primary beneficiary of a VIE will need to consolidate the VIE if the company’s interest in the VIE is such that the company will absorb a majority of the VIE’s expected losses and/or receive a majority of the VIE’s

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	expected residual returns, if they occur. FIN 46-R requires additional disclosures by primary beneficiaries and other significant variable interest holders. FIN 46-R is effective no later than the end of the first reporting period that ends after March 15, 2004, except for those variable interest entities that are considered to be special-purpose entities, for which the effective date is no later than the end of the first reporting period that ends after December 31, 2003. The Company does not expect the adoption of FIN 46-R to have a material effect on the Company’s financial statements.
8.	Other Receivables
	Other receivables consist primarily of amounts due from a development agreement with the U.S. Department of Defense and a development agreement related to the Company’s vaginal ring products.
9.	Inventories
	Inventories consist of the following:

		December 31,		June 30,
		2003		2003
Raw materials and supplies		$	73,019	$	60,075
Work-in-process			16,582		18,561
Finished goods			62,534		85,290
	Total	$	152,135	$	163,926

	Inventories are presented net of reserves of $15,558 and $13,201 at December 31, 2003 and June 30, 2003, respectively. The Company’s distributed version of Ciprofloxacin, purchased as a finished product from Bayer, accounted for approximately $24,667 and $48,300 of finished goods inventory as of December 31, 2003 and June 30, 2003, respectively.
10.	Related Parties
	Dr. Bernard C. Sherman
	During the three months ended December 31, 2003 and 2002, the Company purchased $1,379 and $1,766, respectively, of bulk pharmaceutical material from companies affiliated with Dr. Bernard C. Sherman, the Company’s largest shareholder and a director until October 24, 2002. For the six months ended December 31, 2003 and 2002, such purchases were $2,805 and $2,678, respectively. In addition, during the three months ended December 31, 2003 and 2002, the Company sold $2,759 and $2,443, respectively, of its pharmaceutical products and bulk pharmaceutical materials to companies owned by Dr. Sherman. For the six months ended December 31, 2003 and 2002, such sales were $4,862

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	and $5,312, respectively. As of December 31, 2003 and June 30, 2003, the Company’s accounts receivable included $1,920 and $2,398, respectively, due from such companies.
	During fiscal 1996, the Company also entered into an agreement (the “Fluoxetine Agreement”) with Apotex Inc., a company controlled by Dr. Sherman, to share litigation and related costs in connection with the Company’s Fluoxetine patent challenge. For the three months ended December 31, 2003 and 2002, the Company recorded $344 and $195, respectively, in connection with the Fluoxetine Agreement, as a reduction to operating expenses. For the six months ended December 31, 2003 and 2002, the Company recorded $617 and $330, respectively, in connection with the Fluoxetine Agreement, as a reduction to operating expenses. For the three months ended December 31, 2003 and 2002, the Company recorded $144 and $262, respectively, in connection with the Fluoxetine Agreement, as cost of sales related to this agreement. For the six months ended December 31, 2003 and 2002, the Company recorded $336 and $650, respectively, in connection with the Fluoxetine Agreement, as cost of sales.
	As of December 31, 2003 and June 30, 2003, the Company’s accrued liabilities included $140 and $648, respectively, related to transactions with these entities owned by Dr. Sherman.
11.	Other Intangible Assets
	Intangible assets, excluding goodwill, consist of the following:

	December 31,			June 30,
	2003			2003
Product and related licenses	$	27,150		$	26,800
Product rights and related intangibles		22,046			22,046
		49,196			48,846
Less: accumulated amortization		(5,539	)		(2,897	)
Other intangible assets, net	$	43,657		$	45,949

Estimated amortization expense on these assets is as follows:

Year Ending
June 30,
2004	$	5,304
2005		5,323
2006		5,323
2007		5,323
2008		5,323

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	The product and related licenses have a weighted-average useful life of approximately 10 years and product rights and related intangibles have a weighted-average useful life of approximately 9 years.
12.	Long-Term Debt
	The Company has a $40,000 revolving credit facility that expires on February 27, 2005. As of December 31, 2003, there was approximately $32,875 available to the Company under this facility after the issuance of a $7,125 letter of credit in support of outstanding premiums on the Company’s product liability insurance (see Note 16).
13.	Earnings Per Share
	The following is a reconciliation of the numerators and denominators used to calculate earnings per common share (“EPS”) in the consolidated statements of operations:

	Three				Six
	Months Ended				Months Ended
	December 31,				December 31,
(in thousands, except per share amounts)	2003		2002		2003		2002
Earnings per common share - basic:
Net earnings (numerator)	$	35,069	$	42,747	$	73,604	$	84,604
Weighted average shares (denominator)		67,204		65,883		67,064		65,749
Net earnings	$	0.52	$	0.65	$	1.10	$	1.29
Earnings per common share - diluted:
Net earnings (numerator)	$	35,069	$	42,747	$	73,604	$	84,604
Weighted average shares		67,204		65,883		67,064		65,749
Effect of dilutive options and warrants		3,836		2,661		3,731		2,669
Weighted average shares - diluted (denominator)		71,040		68,544		70,795		68,418
Net earnings	$	0.49	$	0.62	$	1.04	$	1.24

The number of stock options outstanding that were not included in the calculation of diluted earnings because their effect is antidilutive was immaterial.

On February 18, 2003, the Company’s Board of Directors declared a 3-for-2 stock split effected in the form of a 50% stock dividend. Approximately 22.2 million additional shares of common stock were distributed on March 17, 2003 to shareholders of record at the close of business on February 28, 2003. All applicable prior period share and per share amounts have been adjusted for the stock split.

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14.	Comprehensive Income
	Comprehensive income is defined as the total change in shareholders’ equity during the period other than from transactions with shareholders. For the Company, comprehensive income is comprised of net income and the net changes in unrealized gains and losses on securities classified for SFAS No. 115 purposes as “available for sale.” Total comprehensive income for the three months ended December 31, 2003 and 2002 was $35,225 and $42,558, respectively, and for the six months ended December 31, 2003 and 2002 was $73,783 and $84,360, respectively.
15.	Deferred Compensation Plan
	In October 2003, the Board of Directors approved the Barr Laboratories, Inc. Non-Qualified Deferred Compensation Plan (the “Plan”) that was adopted effective November 1, 2003. The Plan provides for certain executives to defer all or a portion of their salary or bonus for a particular calendar year. In addition, the Company will make a matching contribution subject to certain limitations defined in the Plan. The matching contribution, as well as the employee deferral, are invested in the Plan as directed by the participant, and are payable on the terms and subject to the conditions provided in the Plan.
16.	Commitments and Contingencies
	Leases
	The Company is party to various leases which relate to the rental of office facilities and equipment. The Company believes it will be able to extend such leases, if necessary. The table below shows the future minimum rental payments, exclusive of taxes, insurance and other costs, under noncancellable long-term leases.

	Fiscal Year Ending June 30,
	2004		2005		2006		2007		2008		Thereafter
Operating leases	$	1,697	$	2,675	$	2,102	$	2,049	$	2,120	$	15,019
Capital leases		2,110		1,825		1,628		792		140		—
Minimum lease payments	$	3,807	$	4,500	$	3,730	$	2,841	$	2,260	$	15,019

Business Development Venture

In fiscal 2002, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Natural Biologics, the raw material supplier for the Company’s generic equine-based conjugated estrogens product for which the Company filed an Abbreviated New Drug Application (“ANDA”) with the U.S. Food and Drug Administration (“FDA”)

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in June 2003. The Company also entered into a Development, Manufacturing and Distribution Agreement with Natural Biologics which could obligate the Company to make milestone payments totaling an additional $35,000 to Natural Biologics based on achieving certain legal and product approval milestones, including FDA approval of a generic product. The Company believes that the raw material is pharmaceutically equivalent to raw material used to produce Wyeth’s Premarin^®.

Natural Biologics is a defendant in a trade secret lawsuit brought by Wyeth. In September 2003, the U.S. District Court for the District of Minnesota determined that Natural Biologics had misappropriated Wyeth’s trade secrets and enjoined Natural Biologics from further involvement in the equine-based raw material business. Unless the ruling is reversed on appeal, the Company will be prohibited from using Natural Biologics’ raw material in its pending ANDA filed with the FDA. Natural Biologics has appealed the District Court’s ruling.

As of December 31, 2003 and June 30, 2003, the Company had loaned Natural Biologics approximately $15,729 and $14,408, respectively, including accrued interest, under the Loan Agreement, and has included such amounts in other assets on its consolidated balance sheets. Under the terms of the Loan Agreement, the loans mature on June 3, 2007, are collateralized by a security interest in inventory and certain other assets of Natural Biologics and bear interest at the applicable federal rate as defined by the Loan Agreement (3.50% at December 31, 2003).

Due to the unfavorable decision of the District Court and its anticipated negative effects on Natural Biologics’ operations, as well as the uncertainty surrounding the timing and outcome of any appeal, the Company has established a full valuation allowance against the loan amount and included the allowance in other assets on its consolidated balance sheet and recorded a charge to selling, general and administrative expense.

Funding of Employee Savings Plan

On September 23, 2003, the Company committed to make an irrevocable minimum aggregate contribution of $11,000 to the Barr Laboratories, Inc. Savings and Retirement Plan for the fiscal year ending June 30, 2004. The Company has funded $6,418 of the contribution commitment and has recorded an asset and a matching liability equal to the remaining contribution commitment.

Employment Agreements

The Company has entered into employment agreements with certain key employees. These agreements terminate, upon notice of the parties, at various dates through 2006.

Investments in Venture Funds

NewSpring Ventures

On November 1, 2003, the Company entered into a Limited Partnership Agreement (the “NewSpring Agreement”) with NewSpring Ventures, L.P. (“NewSpring”), a Small

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Business Investment Corporation with $136,000 in committed capital as of December 31, 2003, that provides venture capital to development stage companies. The fund’s general partner, Progress Capital II, L.P., controls the day-to-day operations and investment decisions of NewSpring. The Company has committed up to $15,000 to NewSpring for investments in healthcare companies. At closing, the Company contributed $1,500, or 10% of its total commitment, to NewSpring. The Company’s remaining commitment is subject to call upon ten days notice from NewSpring at any time prior to the expiration of the NewSpring Agreement on August 18, 2009.

At December 31, 2003, the Company had a 2.7% limited partnership interest in NewSpring and accounts for this investment using the equity method. Accordingly, the Company’s investment in NewSpring has been recorded in other assets, and changes in the investment equal to the Company’s proportionate share of the fund’s income or loss are reflected in other expense on the consolidated statement of operations.

Commerce Health Ventures

On November 25, 2003, the Company entered into an Agreement of Limited Partnership (the “Commerce Health Agreement”) with Commerce Health Ventures, L.P. (“Commerce Health”), a Delaware limited partnership with $20,200 in committed capital as of December 31, 2003, that will provide venture capital to development stage companies in the healthcare industry. The fund’s general partner, BioHealth Capital, L.P., controls the day-to-day operations and investment decisions of Commerce Health. The Company has committed up to $10,000 to Commerce Health, and under the terms of the Commerce Health Agreement, could become obligated to commit an additional $5,000 if Commerce Health obtains additional capital commitments from other limited partners. At closing, the Company contributed $1,980 to Commerce Health. The Company’s remaining commitment is subject to call upon ten days notice from Commerce Health during the existence of the venture, which is expected to have a ten-year life.

At December 31, 2003, the Company had a 49.5% limited partnership interest in Commerce Health and accounts for this investment using the equity method. Accordingly, the Company’s investment in Commerce Health has been recorded in other assets, and changes in the investment equal to the Company’s proportionate share of the fund’s income or loss are reflected in other expense on the consolidated statement of operations.

Product Liability Insurance

The Company is insured for $15,000 in potential product liability claims under a finite risk insurance arrangement (the “Arrangement”) with a third-party insurer. In exchange for $15,000 in product liability coverage over a five-year term expiring on September 30, 2007, the Arrangement provides for the Company to pay approximately $14,250 in four equal annual installments of $3,563. Included in the initial installment payment was an insurer’s margin of approximately $1,050, which is being amortized over the five-year term. At any six-month interval, the Company may, at its option, cancel the Arrangement. In addition, at the earlier of termination or expiry, the Company is eligible for a return of all amounts paid to the insurer, less the insurer’s margin and amounts paid for any incurred claims. After termination or expiry of the policy, the Company will be solely liable for any

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incurred but not reported (“IBNR”) or unsettled claims under the policy. The Company is recording the payments, net of the insurer’s margin, as deposits included in other assets.

The Company is self-insured for potential product liability claims between $15,000 and $25,000. The Company has purchased traditional third-party insurance that will provide coverage for claims between $25,000 and $40,000. For claims between $40,000 and $50,000, the Company has purchased additional third-party insurance that provides for the Company to share 20% of all claims paid under the policy by the insurer.

Simultaneously with entering into the Arrangement, the Company exercised the extended reporting period under its previous insurance policy that provides $10,000 of product liability coverage of unlimited duration for product liability claims on products sold from September 10, 1987 to September 30, 2002. Additionally, in connection with its merger with Duramed, the Company purchased a supplemental extended reporting policy under Duramed’s prior insurance policy that provides $10,000 of product liability coverage for an unlimited duration for product liability claims on products sold by Duramed between October 1, 1985 and October 24, 2001.

In connection with acquisition transactions, the Company typically purchases a supplemental extended reporting period policy under the acquired company’s prior insurance policy. The Company purchased such coverage in connection with the Endeavor asset acquisition (see Note 4).

Because the Company is self-insured for a portion of its potential product liability claims, it has established a self-insurance reserve. As of December 31, 2003 and June 30, 2003 the Company included $2,173 and $1,333, respectively, in other liabilities for its estimate of potential product liability claims and expenses. The cost of the ultimate disposition of both existing and potential claims may differ from these reserve amounts.

Selling, general and administrative expenses include approximately $420 and $500 for the three months ended December 31, 2003 and 2002, respectively, and approximately $840 and $500 for the six months ended December 31, 2003 and 2002, respectively, related to changes in the accrual for both reported and potential product liability claims and expenses.

The Company is from time-to-time a defendant in product liability actions. If the Company incurs defense costs and liabilities in excess of the Company’s self-insurance reserve that are not otherwise covered by insurance, it could have a material adverse effect on the Company’s consolidated financial statements.

Indemnity Provisions

From time-to-time, in the normal course of business, the Company agrees to indemnify its suppliers and customers concerning product liability and other matters.

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Class Action Lawsuits

Ciprofloxacin (Cipro^®)

To date the Company has been named as co-defendants with Bayer Corporation, The Rugby Group, Inc. and others in approximately 38 class action complaints filed in state and federal courts by direct and indirect purchasers of Ciprofloxacin (Cipro^®) from 1997 to the present. The complaints allege that the 1997 Bayer-Barr patent litigation settlement agreement was anti-competitive and violated federal antitrust laws and/or state antitrust and consumer protection laws. A prior investigation of this agreement by the Texas Attorney General’s Office on behalf of a group of state Attorneys General was closed without further action in December 2001.

The lawsuits include nine consolidated in California state court, one in Kansas state court, one in Wisconsin state court, one in Florida state court, and two consolidated in New York state court, with the remainder of the actions pending in the United States District Court for the Eastern District of New York for coordinated or consolidated pre-trial proceedings (the “MDL Case”). Fact discovery in the MDL Case has been completed and the parties are proceeding with expert discovery, to be followed by summary judgment briefing. The direct purchaser and indirect purchaser plaintiffs also have filed motions for class certification in the MDL Case, but briefing is not complete and the Court has indicated that it will defer ruling on the motions at the present time. The state court actions remain in a relatively preliminary stage generally, tracked to follow the MDL Case, although defendants have filed dispositive motions and plaintiffs have moved for class certification in certain of the cases.

On May 20, 2003, the District Court entered an order in the MDL Case holding that the Barr-Bayer settlement did not constitute a per se violation of the antitrust laws and restricting the scope of the legal theories the plaintiffs could pursue in the case.

On September 19, 2003, the Circuit Court for the County of Milwaukee dismissed the Wisconsin state class action for failure to state a claim for relief under Wisconsin law. On October 17, 2003, the Supreme Court of the State of New York for New York County dismissed the consolidated New York state class action for failure to state a claim upon which relief could be granted and denied the plaintiffs’ motion for class certification. The Wisconsin Circuit Court’s decision and the New York Supreme Court’s decision do not affect the federal class actions currently pending in the U.S. District Court for the Eastern District of New York or the state class actions currently pending in other state courts.

The Company believes that its agreement with Bayer Corporation reflects a valid settlement to a patent suit and cannot form the basis of an antitrust claim. Although it is not possible to forecast the outcome of these matters, the Company intends to vigorously defend itself. The Company anticipates that these matters may take several years to resolve, but an adverse judgment in any of the pending cases could have a material adverse impact on the Company’s consolidated financial statements.

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Tamoxifen

To date approximately 31 consumer or third-party payor class action complaints have been filed in state and federal courts against Zeneca, Inc., AstraZeneca Pharmaceuticals L.P. and the Company alleging, among other things, that the 1993 settlement of patent litigation between Zeneca, Inc. and the Company violated the antitrust laws, insulated Zeneca, Inc. and the Company from generic competition and enabled Zeneca, Inc. and the Company to charge artificially inflated prices for Tamoxifen citrate. A prior investigation of this agreement by the U.S. Department of Justice was closed without further action.

The Judicial Panel on Multidistrict Litigation has transferred these cases to the United States District Court for the Eastern District of New York for pretrial proceedings. On May 19, 2003, the District Court entered judgment dismissing the cases for failure to state a viable antitrust claim. Plaintiffs have appealed the District Court’s decision to the United States Court of Appeals for the Second Circuit.

The Company believes that its agreement with Zeneca reflects a valid settlement to a patent suit and cannot form the basis of an antitrust claim. Although it is not possible to predict the outcome of this matter, the Company intends to vigorously defend itself. It is anticipated that this matter may take several years to resolve, but an adverse judgment could have a material adverse impact on the Company’s consolidated financial statements.

Invamed, Inc./Apothecon, Inc.

In February 1998, Invamed, Inc. and Apothecon, Inc., both of which have since been acquired by Geneva Pharmaceuticals, Inc., which is a subsidiary of Novartis AG, named the Company and several others as defendants in lawsuits filed in the United States District Court for the Southern District of New York, charging that the Company unlawfully blocked access to the raw material source for Warfarin Sodium. The two actions have been consolidated. On May 10, 2002, the District Court granted summary judgment in the Company’s favor on all antitrust claims in the case, but found that the plaintiffs could proceed to trial on their allegations that the Company interfered with an alleged raw material supply contract between Invamed and the Company’s raw material supplier. Invamed and Apothecon have appealed the District Court’s decision to the United States Court of Appeals for the Second Circuit. Trial on the merits has been stayed pending the outcome of the appeal.

The Company believes that the suits filed by Invamed and Apothecon are without merit and intends to vigorously defend its position, but an adverse judgment could have a material adverse impact on the Company’s consolidated financial statements.

Desogestrel/Ethinyl Estradiol Suit

In May 2000, the Company filed an ANDA seeking approval from the FDA to market the tablet combination of desogestrel/ethinyl estradiol tablets and ethinyl estradiol tablets, the generic equivalent of Organon Inc.’s Mircette^® oral contraceptive regimen. The Company notified Bio-Technology General Corp. (“BTG”), the owner of the patent for the Mircette

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product, pursuant to the provisions of the Hatch-Waxman Act and BTG filed a patent infringement action in the United States District Court for the District of New Jersey seeking to prevent the Company from marketing the tablet combination. In December 2001, the United States District Court for the District of New Jersey granted summary judgment in favor of the Company, finding that its product did not infringe the patent at issue in the case. BTG appealed the District Court’s decision. In April 2002, the Company launched its Kariva^® product, the generic version of Mircette. In April 2003, the U.S. Court of Appeals for the Federal Circuit reversed the District Court’s decision granting summary judgment in the Company’s favor and remanded the case to the District Court for further proceedings.

In July 2003, BTG (now Savient) filed an amended complaint adding Organon (Ireland) Ltd. and Organon USA as plaintiffs and adding the Company as a defendant. The amended complaint seeks damages and enhanced damages based upon willful infringement. The Company believes that it has not infringed BTG’s patent and continues to manufacture and market Kariva. If BTG and Organon are successful, the Company could be liable for damages for patent infringement, which could have a material adverse effect on its consolidated financial statements.

Termination of Solvay Co-Marketing Relationship

On March 31, 2002, the Company gave notice of its intention to terminate, as of June 30, 2002, its relationship with Solvay Pharmaceuticals, Inc. which covered the joint promotion of the Company’s Cenestin tablets and Solvay’s Prometrium^® capsules. Solvay has disputed the Company’s right to terminate the relationship and claims it is entitled to substantial damages and has notified the Company that it has demanded arbitration of this matter. The arbitration hearing was held in January 2004. Post-hearing briefs are due in March and April and an oral argument has been scheduled for May. The Company believes its actions are well founded but if the Company is incorrect, an adverse decision in the matter could have a material adverse impact on the Company’s consolidated financial statements.

Lemelson

In November 2001, the Lemelson Medical, Education & Research Foundation (“Lemelson Foundation”) filed an action in the United States District Court for the District of Arizona alleging patent infringement against many defendants, including the Company, involving “machine vision” or “computer image analysis.” In March 2002, the court stayed the proceedings, pending the resolution of another suit (the “Symbol” case) that involves the same patents, but does not involve the Company. On January 23, 2004, the District Court issued a decision in the Symbol case holding the Lemelson patents to be invalid and unenforceable. The Lemelson Foundation has announced that it intends to appeal the decision in the Symbol case to the United States Court of Appeals for the Federal Circuit.

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Nortrel 7/7/7 Product Recall

On July 9, 2003, the Company initiated a recall of three lots of its Nortrel 7/7/7 oral contraceptive product after receiving two customer complaints that the tablets that had been dispensed to them were misconfigured. The Company has since received reports of pregnancies from approximately 25 women who claim to have taken the product, nine of whom have requested compensation from the Company. The Company is in the process of investigating whether these women have taken affected product and whether their pregnancies are related to use of affected product. The Company anticipates that one or more of these women will commence formal legal actions against it. The Company does not have sufficient information at this time to evaluate the likelihood of success in these matters. However, an unfavorable outcome in one or more of these matters could have a material adverse effect on the Company’s consolidated financial statements.

PPA Litigation

The Company is a defendant in three personal injury product liability lawsuits involving phenylproanolamine (“PPA”). All three cases are in their initial stages. The Company believes it has strong defenses to all three cases and intends to vigorously defend against them. However, an unfavorable outcome could have a material adverse effect on the Company’s consolidated financial statements.

MPA Litigation

The Company has been named as a defendant in at least 18 personal injury product liability cases brought against the Company and other manufacturers by plaintiffs claiming that they suffered injuries resulting from the use of medroxyprogesterone acetate (“MPA”) in conjunction with Premarin or other hormone therapy products. These cases are in a preliminary stage and the Company does not know whether any of these individuals took an MPA product manufactured by the Company. The Company intends to vigorously defend itself against these cases. However, an unfavorable outcome could have a material adverse effect on the Company’s consolidated financial statements.

Texas HRT Cases

The Company’s wholly owned Duramed subsidiary has been named, along with several other pharmaceutical manufacturers, as a defendant in seven cases originally brought in Texas state court alleging personal injuries to more than 70 plaintiffs from the use of hormone replacement therapy (“HRT”) products, including Premarin, Prempro, Estratest and Estrace. None of the complaints in these cases specifically alleges that any of the plaintiffs took any products manufactured by Duramed. The cases have been removed to the United States District Court for the Eastern District of Texas and the United States District Court for the Southern District of Texas, and are expected to be transferred to the

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United States District Court for the Eastern District of Arkansas for coordinated or consolidated pretrial proceedings. The Company intends to vigorously defend itself against these cases. However, an unfavorable outcome could have a material adverse effect on the Company’s consolidated financial statements.

Medicaid Reimbursement Cases

The Company has been named as a defendant in separate actions brought by the Commonwealth of Massachusetts; the County of Suffolk, New York; the County of Rockland, New York; and Westchester County, New York against numerous pharmaceutical manufacturers. The action seeks to recover damages and other relief for alleged overcharges for prescription medications paid for by Medicaid. The Company believes that it has not engaged in any improper conduct and intends to vigorously defend itself against the cases. However, an unfavorable outcome could have a material adverse effect on the Company’s consolidated financial statements.

Other Litigation

As of December 31, 2003, the Company was involved with other lawsuits incidental to its business, including patent infringement actions and personal injury claims. Management of the Company, based on the advice of legal counsel, believes that the ultimate disposition of such other lawsuits will not have a material adverse effect on the Company’s consolidated financial statements.

Administrative Matters

FTC Investigation Regarding Settlement of Ciprofloxacin Patent Litigation

On June 30, 1999, the Company received a civil investigative demand (“CID”) and a subpoena from the FTC seeking documents and data relating to the January 1997 agreements resolving the patent litigation involving ciprofloxacin hydrochloride. The CID was limited to a request for information and did not allege any wrongdoing. The FTC is investigating whether the Company, through the settlement and supply agreements, has engaged in activities in violation of the antitrust laws. The Company continues to cooperate with the FTC in this investigation.

On August 17, 2001, the Oregon Attorney General’s Office, as liaison on behalf of a group of state Attorneys General, served the Company with a CID relating to its investigation of the Company’s settlement of the Tamoxifen patent challenge with AstraZeneca. The investigative demand requested the production of certain information and documents. The Company is cooperating with the Attorney General’s office in its investigation.

The Company believes that the patent challenge settlements being investigated represent a pro-consumer and pro-competitive outcome to the patent challenge cases. An investigation of the Tamoxifen settlement by the U.S. Department of Justice and an investigation of the Ciprofloxacin settlement by the Texas Attorney General’s Office on behalf of other state Attorneys General already have been satisfactorily resolved without further action and the Company expects these investigations to be satisfactorily resolved, as well. However,

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consideration of these matters could take considerable time, and any adverse judgment could have a material adverse impact on the Company’s consolidated financial statements.

FTC Request for Information Regarding Settlement of Estrostep and FmHrt Patent Litigation and Related Transactions

On December 16, 2003, the Company and Galen (Chemicals) Limited received letters from the FTC’s Bureau of Competition requesting that the Company and Galen voluntarily provide certain information concerning the Company’s proposed acquisition of the U.S. and Canadian rights to Galen’s Loestrin^® and Loestrin^® FE oral contraceptive products and the proposed settlement of pending patent litigation regarding Norethindrone Acetate / Ethinyl Estradiol (Estrostep^®) and Norethindrone Acetate / Ethinyl Estradiol (Estrostep FE^®) and Norethindrone Acetate / Estradiol (FemHRT^®). The letter also requests information concerning the proposed option for Galen to acquire an exclusive license to the Company’s generic version of Galen’s Ovcon^® 35 oral contraceptive.

The FTC specifically stated that its letter should not be viewed as an accusation by the Commission or its staff of any wrongdoing. The Company believes that the proposed transactions are lawful and proper and intends to cooperate fully with the request. The Company anticipates that these transactions will close before the end of March 2004.

The FTC’s Bureau of Competition previously reviewed the proposed transactions under the Hart-Scott-Rodino Act. On October 24, 2003, the Hart-Scott-Rodino waiting period expired, permitting the parties to close the transactions.

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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

(dollars in thousands)

Forward-Looking Statements

The following sections contain a number of forward-looking statements. To the extent that any statements made in this report contain information that is not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by their use of words such as “expects,” “plans,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates” and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include:

• the difficulty in predicting the timing and outcome of legal proceedings, including patent-related matters such as patent challenge settlements and patent infringement cases;

• the difficulty of predicting the timing of U.S. Food and Drug Administration, or FDA, approvals;

• court and FDA decisions on exclusivity periods;

• the ability of competitors to extend exclusivity periods for their products;

• the success of our product development activities;

• market and customer acceptance and demand for our pharmaceutical products;

• our dependence on revenues from significant customers;

• reimbursement policies of third party payors;

• our dependence on revenues from significant products;

• the use of estimates in the preparation of our financial statements;

• the impact of competitive products and pricing;

• the ability to develop and launch new products on a timely basis;

• the availability of raw materials;

• the availability of any product we purchase and sell as a distributor;

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• our mix of product sales between manufactured products, which typically have higher margins, and distributed products, which typically have lower margins, during any given period;

• the regulatory environment;

• our exposure to product liability and other lawsuits and contingencies;

• the increasing cost of insurance and the availability of product liability insurance coverage;

• our timely and successful completion of strategic initiatives, including integrating companies and products we acquire and implementing new enterprise resource planning systems;

• fluctuations in operating results, including the effects on such results from spending for research and development, sales and marketing activities and patent challenge activities; and

• other risks detailed from time-to-time in our filings with the Securities and Exchange Commission.

Reincorporation Merger and Corporate Restructuring

Barr Pharmaceuticals, Inc., a Delaware corporation (“Barr” or the “Company”), was formed in December 2003 in connection with the reincorporation of Barr Laboratories, Inc., a New York corporation (“Barr-NY”). The reincorporation was accomplished by the merger of
Barr-NY into the Company, with the Company as the surviving entity. Prior to the merger, Barr-NY contributed its principal operating assets to Barr Laboratories, Inc., a newly formed, wholly-owned subsidiary incorporated in Delaware.

Critical Accounting Policies

The methods, estimates and judgments we use in applying the accounting policies most critical to our financial statements have a significant impact on our reported results. The Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of our financial condition and results, and/or require us to make our most difficult and subjective judgments. Based on this definition, our most critical policies are the following: (1) provisions for estimated sales returns and allowances; (2) accrual of inventory reserves; (3) deferred taxes; (4) accrual for litigation; (5) accrual for self-insurance reserve; and (6) the assessment of recoverability of goodwill and other intangible assets. We also have other key accounting policies, including policies for revenue recognition. We believe that these other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective as the six listed above, or are less likely to have a material impact on our reported results of operations for a given period. Although we believe that our estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results may differ significantly from our estimates and our estimates could be different using different assumptions or conditions.

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Sales Returns and Allowances

When we recognize revenue from the sale of our pharmaceutical products, we simultaneously record estimates for product returns, rebates, chargebacks and other sales allowances. These estimates serve to reduce our reported product sales. In addition, as discussed in detail below, we may record allowances for shelf-stock adjustments when the conditions are appropriate. We base our estimates for sales allowances such as product returns, rebates and chargebacks on a variety of factors, including the actual return experience of that product or similar products, rebate agreements for each product, and estimated sales by our wholesale customers to other third parties who have contracts with us. Actual experience associated with any of these items may differ materially from our estimates. We review the factors that influence our estimates and, if necessary, make adjustments when we believe actual product returns, credits and other allowances may differ from established reserves.

We often issue credits to customers for inventory remaining on their shelves following a decrease in the market price of a generic pharmaceutical product. These credits, commonly referred to in the pharmaceutical industry as “shelf-stock adjustments,” can then be used by customers to offset future amounts owing to us. The shelf-stock adjustment is intended to reduce a customer’s inventory cost to better reflect current market prices and is often used by us to maintain our long-term customer relationships. The determination to grant a shelf-stock credit to a customer following a price decrease is usually at our discretion rather than contractually required. We record allowances for shelf-stock adjustments at the time we sell products that we believe will be subject to a price decrease or when market conditions indicate that a shelf-stock adjustment is necessary to facilitate the sell-through of our product. When determining whether to record an amount for a shelf-stock adjustment, we analyze several variables including the estimated launch date of a competing product, the estimated decline in market price and estimated levels of inventory held by the customer at the time of the decrease in market price. As a result, a shelf-stock reserve depends on a product’s unique facts and circumstances. We regularly monitor these and other factors for our significant products and evaluate and adjust, if applicable, our reserves and estimates as additional information becomes available.

Accounts receivable are presented net of allowances related to the above provisions of $142,633 at December 31, 2003 and $136,059 at June 30, 2003.

Inventory Reserves

We establish reserves for our inventory to reflect situations in which the cost of the inventory is not expected to be recovered. We regularly review our inventory for products close to expiration and therefore not expected to be sold, for products that have reached their expiration date and for products that are not expected to be saleable based on our quality assurance and control standards. The reserve for these products is equal to all or a portion of the cost of the inventory based on the specific facts and circumstances. In evaluating whether inventory is properly stated at the lower of cost or market, we consider such factors as the amount of product inventory on hand, estimated time required to sell such inventory, remaining shelf life and current and expected market conditions, including levels of competition. We monitor inventory levels, expiration dates and market conditions on a regular basis. We record provisions for inventory reserves as part of cost of sales.

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Inventories are presented net of reserves of $15,558 at December 31, 2003 and $13,201 at June 30, 2003.

Deferred Taxes

Income taxes are accounted for under Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided for the portion of deferred tax assets which are “more-likely-than-not” to be unrealized. The recoverability of deferred tax assets is dependent upon our assessment of whether it is more-likely-than-not that sufficient future taxable income will be generated in the relevant tax jurisdiction to utilize the deferred tax asset. We review our internal sales forecasts and pre-tax earnings estimates to make our assessment about the utilization of deferred tax assets. In the event we determine that future taxable income will not be sufficient to utilize the deferred tax asset, we will record a valuation allowance. If that assessment changes, we would record a benefit on the consolidated statement of operations.

Deferred income taxes are presented net of a valuation allowance of $6,147 at December 31, 2003 and June 30, 2003.

Litigation

We are subject to litigation in the ordinary course of business and also to certain other contingencies (see Note 16 to the consolidated financial statements). Legal fees and other expenses related to litigation and contingencies are recorded as incurred. Additionally, we assess, in consultation with counsel, the need to record a liability for litigation and contingencies on a case-by-case basis. Reserves are recorded when we, in consultation with counsel, determine that a loss related to a matter is both probable and reasonably estimable.

Self-Insurance Reserve

We are primarily self-insured for potential product liability claims on products sold on or after September 30, 2002. We maintain a self-insurance reserve, which provides an estimate of our potential product liability claims. We develop this estimate by assessing, on a case by case basis, our exposure from claims that have been reported and by making an estimate of the future cost of incurred but not reported (“IBNR”) claims. In assessing the amounts to record for each reported claim, with the assistance of counsel and insurance consultants, we consider the nature and amount of the claim, our prior experience with similar claims, and whether the amount expected to be paid on a claim is both probable and reasonably estimable. In determining the allowance for the cost of IBNR claims, management considers a variety of factors including historical claims. In determining the allowance for the estimated future cost of IBNR claims as of June 30, 2003 and December 31, 2003, we utilized projections of our estimated losses as determined by an independent actuary. The costs of the ultimate disposition of both existing and IBNR claims may differ from our reserve amounts.

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As of December 31, 2003 and June 30, 2003 we included $2,173 and $1,333, respectively, in other liabilities for our estimate of potential claims and expenses. Selling, general and administrative expenses included approximately $420 and $500 for the three months ended December 31, 2003 and 2002, respectively, and approximately $840 and $500 for the six months ended December 31, 2003 and 2002, respectively, related to changes in the accrual for both reported and potential product liability claims.

Goodwill and Other Intangible Assets

In connection with acquisitions, we determine the amounts assigned to goodwill and other intangibles based on purchase price allocations. These allocations, including an assessment of the estimated useful lives of intangible assets, have been performed by qualified independent appraisers using generally accepted valuation methodologies. The valuation of intangible assets is generally based on the estimated future cash flows related to those assets, while the value assigned to goodwill is the residual of the purchase price over the fair value of all identifiable assets acquired and liabilities assumed. Useful lives are determined based on the expected future period of benefit of the asset, which considers various characteristics of the asset, including projected cash flows. As required by SFAS No. 142, “Goodwill and Other Intangible Assets,” we review goodwill for impairment annually or more frequently if impairment indicators arise.

As a result of our June 2002 purchase of certain assets and the assumption of certain liabilities of Enhance Pharmaceuticals, Inc. (the “Enhance Purchase”), we have included $14,118 of goodwill on our balance sheet as of December 31, 2003 and June 30, 2003.

As a result of the Enhance Purchase, our June 2003 acquisition of four products from Wyeth and payments made for certain product licenses, we have included $43,657 and $45,949 as other intangible assets, net of accumulated amortization, on our balance sheet as of December 31, 2003 and June 30, 2003, respectively (see Note 11 to the consolidated financial statements).

Results of Operations

Comparison of the Three Months Ended December 31, 2003 and December 31, 2002

Revenues — Overview

Total revenues for the three months ended December 31, 2003 were $374,124, an increase of 79% from $209,035 for the three months ended December 31, 2002. The increase was the result of a 78% increase in product sales from $207,667 for the three months ended December 31, 2002 to $369,862 for the three months ended December 31, 2003. In addition, development and other revenue increased 212% from $1,368 for the three months ended December 31, 2002 to $4,262 for the three months ended December 31, 2003.

Revenues — Product Sales

Increased product sales were due to the launch of our distributed version of Ciprofloxacin and increased sales of our generic and proprietary products, partially offset by decreased sales of Tamoxifen.

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On June 9, 2003, we began distributing Ciprofloxacin hydrochloride pursuant to a license from Bayer. For the three months ended December 31, 2003, we recorded Ciprofloxacin sales of $145,419. In September 2003, we signed an amended supply agreement with Bayer that enables us to continue to distribute Ciprofloxacin during and after Bayer’s period of pediatric exclusivity, which ends on June 9, 2004. We share one-half of our profits from the sale of Ciprofloxacin, as defined, with Aventis, the contractual successor to our joint venture partner in the Cipro patent challenge case. Upon the expiration of Bayer’s period of pediatric exclusivity, we expect several other competing Ciprofloxacin products to be launched which will significantly lower our sales of Ciprofloxacin in the second-half of fiscal 2004 as compared to the first six months.

As expected, Tamoxifen sales decreased $33,507, or 92%, from $36,549 for the three months ended December 31, 2002 to $3,042 for the three months ended December 31, 2003. During the quarter ended December 31, 2002, we distributed Tamoxifen inventory previously purchased from AstraZeneca. We began selling our manufactured Tamoxifen product when AstraZeneca’s pediatric exclusivity for Nolvadex ended on February 20, 2003. At the same time, several other competitors launched generic Tamoxifen products, causing the price to decline and causing us to lose market share.

Sales of our generic products increased $34,788 or 23% from $154,248 during the three months ended December 31, 2002 to $189,036 during the three months ended December 31, 2003, led by higher sales of our generic oral contraceptives. Sales of our generic oral contraceptives increased $27,574 or 39% from $70,958 during the three months ended December 31, 2002 to $98,532 during the three months ended December 31, 2003. The increase in sales of our generic oral contraceptives reflects increasing market shares for existing products and sales of seven new oral contraceptive products launched since December 31, 2002, including the December 2003 launch of Tri-Sprintec^® (a generic equivalent of Ortho-McNeil Pharmaceutical’s Ortho Tri-Cyclen^® oral contraceptive). Sales of our other generic products increased $7,214 or 9% from $83,290 during the three months ended December 31, 2002 to $90,504 during the three months ended December 31, 2003. The increase in sales of our other generic products was primarily due to sales of our Mirtazapine Orally Disintegrating Tablet (the generic equivalent of Organon, Inc.’s Remeron^® Soltab™), which we launched in December 2003, and sales of Claravis^® (a generic equivalent of Roche Pharmaceutical’s Accutane^®), which we launched in May 2003. Partially offsetting these increases were lower sales of our Dextro salt combo product (a generic equivalent of Shire Richwood, Inc.’s Adderall^®), which experienced lower prices and market share as the result of competing generic products.

Sales of our proprietary products increased $15,495 or 92%, from $16,870 for the three months ended December 31, 2002 to $32,365 for the three months ended December 31, 2003. This increase was primarily due to sales of the four products purchased from Wyeth in June 2003; revenues recognized from SEASONALE^®, our extended-cycle oral contraceptive; and from increased sales of Cenestin, our plant-derived conjugated estrogen product. Sales of Cenestin increased approximately 13% from $12,616 for the three months ended December 31, 2002 to $14,245 for the three months ended December 31, 2003. The increase in Cenestin sales was driven in part by a price increase as well as by customer buying patterns. Based on current pricing and prescription data, as reported by IMS, the Company estimates fiscal 2004 Cenestin sales of approximately $40,000 to $45,000.

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In September 2003, we received final FDA approval for our SEASONALE extended cycle oral contraceptive and began shipping the product in October. During the quarter ended December 31, 2003 we shipped approximately $15,000 of SEASONALE to our customers, some of which was recognized in this quarter and some of which has been deferred. We recognized approximately $2,500 in product sales, based in part on a review of quarterly SEASONALE prescription data obtained from IMS. We expect that continued growth in SEASONALE prescriptions will allow us to recognize the remaining deferred revenue by the end of fiscal 2004.

Cost of Sales

Cost of sales increased 119% from $94,872 for the three months ended December 31, 2002 to $207,722 for the three months ended December 31, 2003, primarily due to increased product sales.

As a percentage of product sales, cost of sales increased from 46% for the three months ended December 31, 2002 to 56% for the three months ended December 31, 2003. The increase in cost of sales, as a percentage of product sales, translated into lower margins in the current period compared to the prior period. The decline in margins was expected and was primarily caused by an increase in the percentage of sales of Ciprofloxacin, which as a distributed product has a higher cost of sales and a lower margin than our other products. In addition, our margins in the current period were adversely impacted by a $4,000 pre-tax charge related to a write-down of fixed assets in our Pomona, New York and Cincinnati, Ohio manufacturing facilities primarily related to renovations to these facilities and to changes in the estimated useful lives of certain building improvements.

Selling, General and Administrative Expense

Selling, general and administrative expenses increased 63% from $33,089 for the three months ended December 31, 2002 to $53,961 for the three months ended December 31, 2003. The increase was primarily due to substantial increases in our marketing and selling expenses for proprietary products, including higher costs associated with the March 2003 expansion of our Women’s Healthcare Sales Force from 132 to 250 and marketing costs for SEASONALE. The remainder of the increase was primarily due to (1) increased legal costs that include patent challenge activities, class action lawsuits and other matters, and (2) higher administrative costs including higher facility, headcount and insurance costs to support the Company’s growth.

Research and Development

Research and development expenses increased 181% from $22,445 for the three months ended December 31, 2002 to $63,093 for the three months ended December 31, 2003. The increase was primarily due to $35,600 of in-process research and development costs that were written-off in connection with our purchase of substantially all the assets of Endeavor Pharmaceuticals, Inc. in November 2003. Also contributing to the increase was a pre-tax charge of approximately $2,200 related to a write-down of certain fixed assets in our Pomona, New York research center. The increase also reflected higher costs associated with increased product development activities, including raw material purchases and headcount and related costs as well as increased third party product development costs.

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Proceeds from Patent Challenge Settlement

For the three months ended December 31, 2002, proceeds from patent challenge settlement represent amounts earned under the terms of the supply agreement entered into with Bayer to settle our patent challenge litigation regarding Bayer’s Cipro antibiotic. Under the terms of the supply agreement, Bayer, at its option, was required to either allow us to purchase Cipro from it at a predetermined discount or to make quarterly cash payments to us. Until June 2003, Bayer elected to make payments to us rather than supply us with Cipro. Accordingly, we recognized proceeds from patent challenge settlements of $8,562 and $0 for the three months ended December 31, 2002 and 2003, respectively.

Income Taxes

Our income tax provision for the three months ended December 31, 2002 reflected a 37.3% effective tax rate on pre-tax income, compared to 28.7% for the three months ended December 31, 2003. The tax rate for the quarter was favorably impacted by a tax benefit of $3,900 related to: (1) completion of several tax audits, and (2) Internal Revenue Service approval of a change in our method of computing certain tax credits. This change in method is expected to slightly lower our tax rate in future periods. Excluding this benefit, our effective tax rate for the quarter was 36.7%. We expect this rate to continue for the remainder of fiscal 2004.

Comparison of the Six Months Ended December 31, 2003 and December 31, 2002

Revenues — Overview

Total revenues for the six months ended December 31, 2003 were $684,835, an increase of 59% from $429,463 for the six months ended December 31, 2002. The increase was the result of a 59% increase in product sales from $426,383 for the six months ended December 31, 2002 to $678,622 for the six months ended December 31, 2003. In addition, development and other revenue increased 102% from $3,080 for the six months ended December 31, 2002 to $6,213 for the six months ended December 31, 2003.

Revenues — Product Sales

Increased products sales were due to the launch of our distributed version of Ciprofloxacin and increased sales of our generic and proprietary products, partially offset by decreased sales of Tamoxifen.

On June 9, 2003, we began distributing Ciprofloxacin hydrochloride pursuant to a license from Bayer. For the six months ended December 31, 2003, we recorded Ciprofloxacin sales of $260,165.

Tamoxifen sales continued their expected decline, as discussed in detail under the quarterly comparison above, decreasing $106,324, or 95%, from $112,512 for the six months ended December 31, 2002 to $6,188 for the six months ended December 31, 2003.

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Sales of our generic products increased $68,039 or 24% from $281,487 during the six months ended December 31, 2002 to $349,526 during the six months ended December 31, 2003 as the result of increased sales of our generic oral contraceptives, which were partially offset by decreased sales of our other generic products. Sales of our generic oral contraceptives increased $72,656 or 64% from $114,102 during the six months ended December 31, 2002 to $186,758 during the six months ended December 31, 2003. The increase in sales of our generic oral contraceptives reflects increasing market shares for existing products and sales of seven new oral contraceptive products launched since December 31, 2002, including the December 2003 launch of Tri-Sprintec. Sales of our other generic products decreased $4,617 or 3% from $167,385 for the six months ended December 31, 2002 to $162,768 for the six months ended December 31, 2003. This decrease was primarily due to lower sales of our Dextro salt combo product, which experienced lower prices and market share as the result of competing generic products, and lower sales of Warfarin sodium, which we believe can be attributed to customer buying patterns. Partially offsetting these decreases were sales of Claravis, which we launched in May 2003 and sales of our Mirtazipine Orally Disintegrating Tablet, which we launched in December 2003.

Sales of our proprietary products increased $30,359 or 94% from $32,384 during the six months ended December 31, 2002 to $62,743 during the six months ended December 31, 2003. This increase was primarily due to sales of the four products we purchased from Wyeth in June 2003, and from increased sales of Cenestin. Sales of Cenestin increased approximately 26% from $22,875 for the six months ended December 31, 2002 to $28,906 for the six months ended December 31, 2003. The increase in Cenestin sales was driven in part by price increases and by customer buying patterns.

Cost of Sales

Cost of sales increased 79% from $205,791 for the six months ended December 31, 2002 to $368,623 for the six months ended December 31, 2003, primarily due to increased product sales.

As a percentage of product sales, cost of sales increased from 48% for the six months ended December 31, 2002 to 54% for the six months ended December 31, 2003. The increase in cost of sales, as a percentage of product sales, translated into lower margins in the current period compared to the prior period. The decline in margins was expected and was primarily caused by an increase in the percentage of sales of Ciprofloxacin, which as a distributed product has a higher cost of sales and a lower margin than our other products. In addition, our margins in the current period were adversely impacted by a $4,000 pre-tax charge discussed in the quarterly comparison above.

Selling, General and Administrative Expense

Selling, general and administrative expenses increased 86% from $64,401 for the six months ended December 31, 2002 to $119,502 for the six months ended December 31, 2003. The increase was due in part to the $15,729 valuation allowance we established in September 2003 for our loans to Natural Biologics, LLC, the raw material supplier for our generic equine-based conjugated estrogens product, as the result of an unfavorable court decision rendered in September 2003 (see Note 16 to the consolidated financial statements). We also substantially increased our marketing and selling expenses for proprietary products, including higher costs associated with the March 2003 expansion of our Women’s Healthcare Sales Force from 132 to

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250 and marketing costs for SEASONALE. The remainder of the increase was primarily due to (1) increased legal costs that include patent challenge activities, class action lawsuits and other matters, (2) higher administrative costs including higher facility, headcount and insurance costs to support the Company’s growth, and (3) higher costs associated with business development activities.

Research and Development

Research and development expenses increased 99% from $43,583 for the six months ended December 31, 2002 to $86,559 for the six months ended December 31, 2003. The increase was primarily due to $35,600 of in-process research and development costs that were written-off in connection with our purchase of substantially all the assets of Endeavor Pharmaceuticals, Inc. in November 2003. Also contributing to the increase was a pre-tax charge of approximately $2,200 related to a write-down of certain fixed assets in our Pomona, New York research center. The increase also reflected higher costs associated with increased product development activities, including raw material purchases, and headcount and related costs as well as increased third party product development costs.

Proceeds from Patent Challenge Settlement

For the six months ended December 31, 2002, proceeds from patent challenge settlement represent amounts earned under the terms of the supply agreement entered into with Bayer to settle our patent challenge litigation regarding Bayer’s Cipro antibiotic, as discussed in the quarterly comparison above. We recognized proceeds from patent challenge settlements of $17,125 and $0 for the six months ended December 31, 2002 and 2003, respectively.

Income Taxes

Our income tax provision for the six months ended December 31, 2002 reflected a 37.3% effective tax rate on pre-tax income, compared to 33.3% for the six months ended December 31, 2003. The tax rate for the six months ended December 31, 2003 was favorably impacted by a tax benefit of $3,700 related to: (1) completion of several tax audits, and (2) the Internal Revenue Service’s approval of a change in our method of computing certain tax credits. This change in method is expected to slightly lower our tax rate in future periods. Excluding this benefit, our effective tax rate for the quarter was 36.7%. We expect this rate to continue for the remainder of fiscal 2004.

Liquidity and Capital Resources

Our cash and cash equivalents balance increased $85,696, or 23%, from $367,142 at June 30, 2003, to $452,838 at December 31, 2003. In addition, our marketable securities increased $5,341 from $46,737 at June 30, 2003 to $52,078 at December 31, 2003. Our primary source of cash is funds from operations, and our primary uses of cash include funding our capital expenditures and investing in business development activities.

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Operating Activities

Cash provided by operating activities was $143,518 for the six months ended December 31, 2003. Our operating cash was generated principally by our net earnings after taxes, adjusted for a $35,600 in-process research and development charge and non-cash charges including depreciation.

Working capital, defined as current assets (excluding cash and cash equivalents) less current liabilities, increased by $32,299. Contributing to our higher working capital was a significant decline in our accounts payable, which more than offset declines in our accounts receivable and inventory. Each of these items were impacted significantly by our purchases and sales of Ciprofloxacin. For example, accounts receivable declined $20,305 from June 30, 2003 to December 31, 2003, despite an increase in sales, primarily because we launched Ciprofloxacin in mid-June 2003. By June 30, 2003, we had not collected any of the receivables associated with the sales from our Ciprofloxacin launch. Inventories declined $11,791 from June 30, 2003 to December 31, 2003, primarily due to a $23,633 decline in Ciprofloxacin inventory balances and results from our strong Ciprofloxacin product sales during the first-half of the year. This decline was somewhat offset by a $12,944 increase in our raw material inventory. Our accounts payable declined $91,216, reflecting a reduction in amounts due to Bayer due to the timing of payments for our Ciprofloxacin purchases.

We expect cash flows in fiscal 2004 to be favorably impacted by approximately $11,000 as a result of the continued utilization of federal and state net operating losses incurred by Duramed Pharmaceuticals, Inc. prior to our merger in October 2001. The annual limitation on the amount of the pre-merger net operating loss that may be deducted is governed by Section 382 of the Internal Revenue Code.

Investing Activities

Over the past few years, we have significantly expanded our production, laboratory, warehouse and distribution capacity in our facilities. This expansion program is designed to help ensure that we have the facilities necessary to meet the expected future growth of the Company.

During the six months ended December 31, 2003, we invested $20,844 in capital assets and expect that our capital investments will continue at a level of between $50,000 and $70,000 annually for the next few years. Our estimate reflects lower spending on our facility expansions as those programs are completed and a significant investment in a new enterprise resource planning system.

While we believe we can fund our capital requirements using cash derived from operations, given the large scale and extended nature of some of the planned expenditures, we may consider financing a portion of our projects. We believe we have the capital structure and cash flow to complete any such financing.

In fiscal 2002, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Natural Biologics, LLC (“Natural Biologics”) the raw material supplier for our generic equine-based conjugated estrogens product for which we filed an Abbreviated New Drug Application (“ANDA”) with the FDA in June 2003. Under the terms of the Loan Agreement, we may

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provide additional loans to Natural Biologics of $7,009 in fiscal 2004 and $2,773 in fiscal 2005. Whether we provide these loans depends on the successful outcome of Natural Biologics’ appeal of a September 2003 decision of the United States District Court for the District of Minnesota finding that Natural Biologics had misappropriated certain trade secrets from Wyeth. Unless the decision is reversed on appeal, we will be prohibited from using Natural Biologics’ raw material in our ANDA filed with the FDA.

As of December 31, 2003, we have invested $48,700 in market auction debt securities that are readily convertible into cash at par value with maturity dates ranging from January 6, 2004 to August 3, 2005. We may continue to invest in extended maturity securities based on operating needs and strategic opportunities.

Our current royalty obligation to the SEASONALE patent-holder is based on a percentage of net profits, as defined, and continues for as long as we sell SEASONALE. However, our license agreement gives us the option, at any time prior to September, 2004, to pay $20,000 in lieu of the royalty. If we exercise that option, all future royalty obligations to the patent-holder would be extinguished. We continue to evaluate whether we intend to exercise our option to make this payment.

As part of our continuing efforts to identify new products, new technologies and licensing opportunities, during the second quarter of fiscal 2004 we made investments, as a limited partner, in two separate venture capital funds.

On November 1, 2003, we entered into a Limited Partnership Agreement (the “NewSpring Agreement”) with NewSpring Ventures, L.P. (“NewSpring”), a Small Business Investment Corporation with $136,000 in committed capital as of December 31, 2003, that provides venture capital to development stage companies. The fund’s general partner, Progress Capital II, L.P., controls the day-to-day operations and investment decisions of NewSpring. We have committed up to $15,000 to NewSpring for investments in healthcare companies. At closing, we contributed $1,500, or 10% of our total commitment, to NewSpring. Our remaining commitment is subject to call upon ten days notice from NewSpring at any time prior to the expiration of the NewSpring Agreement on August 18, 2009.

On November 25, 2003, we entered into an Agreement of Limited Partnership (the “Commerce Health Agreement”) with Commerce Health Ventures, L.P. (“Commerce Health”), a Delaware limited partnership with $20,200 in committed capital as of December 31, 2003, that will provide venture capital to development stage companies in the healthcare industry. The fund’s general partner, BioHealth Capital, L.P., controls the day-to-day operations and investment decisions of Commerce Health. We have committed up to $10,000 to Commerce Health, and under the terms of the Commerce Health Agreement, we could become obligated to commit an additional $5,000 if Commerce Health obtains additional capital commitments from other limited partners. At closing, we contributed $1,980 to Commerce Health. Our remaining commitment is subject to call upon ten days notice from Commerce Health during the existence of the venture, which is expected to have a ten-year life.

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Financing Activities

Debt balances decreased by approximately $6,671 during the six months ended December 31, 2003 due to principal repayments. Scheduled principal repayments on our existing debt will be $8,515 during the next twelve months. We have a $40,000 revolving credit facility that expires on February 27, 2005. We currently have approximately $32,875 available under this facility due to the issuance of a $7,125 letter of credit in support of outstanding premiums on our product liability insurance, as discussed below.

There are outstanding warrants to purchase 1,125,000 shares of our common stock at $20.89 per share and 1,125,000 shares at $25.33, all of which expire in March 2004. Since the exercise price for the warrants is substantially below the current market price, it is anticipated that these warrants will be exercised prior to their expiration. A portion of the warrants have a “cashless” exercise feature which would reduce the amount of cash that we would receive, and would also reduce the number of shares to be issued upon exercise. We may permit the warrant holders to elect a 100% cashless exercise, which would eliminate all cash proceeds but also further reduce the number of shares we would issue. If all of the warrants are exercised, we also expect to derive a tax related cash benefit of approximately $30,000 to $50,000. The actual benefit we derive will depend on the market price of our stock on the date the warrants are exercised.

Product Liability Insurance

We are insured under a finite risk insurance arrangement (the “Arrangement”) with a third party insurer. In exchange for $15,000 in product liability coverage over a five-year term, the Arrangement provides for us to pay approximately $14,250 in four equal annual installments of $3,563. Included in the initial payment was an insurer’s margin of approximately $1,050, which is being amortized over the five-year term. At any six-month interval, we may, at our option, cancel the Arrangement. In addition, at the earlier of termination or expiry, we are eligible for a return of all amounts paid to the insurer, less the insurer’s margin and amounts paid for any incurred claims. After termination or expiry of the policy, we will be solely liable for any IBNR or unsettled claims under the policy. We are recording the payments, net of the insurer’s margin, as deposits included in other assets. See Note 16 to the consolidated financial statements for a full description of our product liability insurance coverage.

Funding of Employee Savings Plan

On September 23, 2003, we committed to make a minimum aggregate contribution of $11,000 to the Barr Laboratories, Inc. Savings and Retirement Plan for the fiscal year ending June 30, 2004. We have funded $6,418 of the contribution commitment and have recorded an asset and a matching liability equal to the remaining contribution commitment.

Strategic Transactions

To expand our business opportunities, we have increased our business development activities and continue to evaluate and enter into various strategic collaborations or acquisitions, including those described below.

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Letters of Intent with Galen (Chemicals) Limited

On September 10, 2003, we signed a letter of intent to acquire from Galen (Chemicals) Limited (“Galen”) the exclusive marketing rights in the United States and Canada for Loestrin^® and Loestrin^® Fe oral contraceptive products. The proposed transaction would also include a settlement of pending litigation between ourselves and Galen regarding Galen’s FemHRT^® hormone therapy and Estrostep^® oral contraceptive products that would allow us to launch generic versions of those products six months prior to patent expiry.

Under the terms of the letter of intent, for $45,000 we would acquire from Galen the exclusive rights to manufacture and market Loestrin products in the United States and Canada. Also under the letter of intent, Galen would grant us a non-exclusive license to launch a generic version of FemHRT six months prior to patent expiry. Galen would also grant us a non-exclusive license to launch a generic version of Estrostep six months prior to patent expiry. Finally, we would receive an exclusive royalty-bearing license to develop certain oral contraceptives under a patent owned by Galen.

On September 10, 2003, we signed a separate letter of intent which provides for us to grant Galen an option to acquire an exclusive license for our generic version of Galen’s Ovcon® 35 oral contraceptive for which we have a pending ANDA. Under the terms of the option agreement, we would grant Galen an option to acquire an exclusive license under Barr’s ANDA for Ovcon 35, which is currently pending at the FDA. Within 30 days of FDA approval of our ANDA for Ovcon, Galen would have the right to exercise its option. If Galen exercises its option, it would be granted a five-year exclusive license under our ANDA to sell the product. At the end of the five-year term, we would grant Galen a non-exclusive license to continue selling the product. In consideration of this transaction, Galen would pay us $1,000 at the time of the grant of the option and $19,000 at the time the exclusive license agreement is signed.

The transactions with Galen are subject to the negotiation of definitive agreements, completion of due diligence procedures and other conditions, including the final approval by our and Galen’s Boards of Directors. On December 16, 2003, we received a letter from the Federal Trade Commissions’ (the “FTC”) Bureau of Competition requesting that we, together with Galen, voluntarily provide certain information concerning our proposed transactions. We believe that the proposed transactions are lawful and proper and intend to cooperate fully with the request. We anticipate that these transactions will close before the end of March 2004.

Letter of Intent to Acquire Plan B^® Emergency Oral Contraceptive

During October 2003, we signed a letter of intent to acquire Women’s Capital Corporation (“WCC”), a privately held company, and its emergency oral contraceptive, Plan B^®, for approximately $22,000, including cash payments of $13,000 plus the assumption of approximately $9,000 in liabilities. Approximately $6,500 of the cash payment will be due on the closing date, with the remaining $6,500 in the form of a promissory note, with interest, due four years from the closing date. In addition, nearly all of the assumed liabilities are expected to be paid-off at the time of the closing. This transaction is subject to certain conditions, including the negotiation of definitive agreements and approval of the shareholders of WCC. We expect to close our transaction with WCC in February 2004.

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Other Strategic Transactions

In addition to the transactions described above, we are currently evaluating other strategic transactions, ranging from product development and license agreements to asset or corporate acquisitions. The costs to evaluate these opportunities may be significant, even if a transaction is not completed, and could negatively impact our earnings in a given quarter. In addition, completed transactions may require cash payments and could result in charges for items such as the write off of in-process research and development costs. The timing of potential transactions, the amounts required to complete potential transactions and any charges that may result from potential transactions are difficult to predict.

Merger-Related Costs

On October 24, 2001, we completed our merger with Duramed. In connection with the transaction, we incurred approximately $31,449 in direct transaction costs such as legal and accounting costs, costs associated with facility and product rationalization and severance costs. As of December 31, 2003, all of the direct transaction costs and involuntary termination benefits had been paid and charged against the liability leaving a remaining liability of approximately $467 related to facility costs.

We believe that our current cash balances, cash flows from operations and borrowing capacity, including unused amounts under our $40,000 revolving credit facility, will be adequate to fund our operations and to capitalize on certain strategic opportunities as they arise. To the extent that additional capital resources are required, we believe that such capital may be raised by additional bank borrowings, debt or equity offerings or other means.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, other than operating leases in the normal course of business.

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51” (“FIN 46”). A revised interpretation of FIN 46 (“FIN 46 – R”) was issued in December 2003. The objective of FIN 46-R is to provide guidance on how to identify a variable interest entity (“VIE”) and to determine when the assets, liabilities, noncontrolling interests, and results of operations of a VIE need to be included in a company’s consolidated financial statements. A company that will absorb a majority of the VIE’s expected losses and/or receive a majority of the VIE’s expected residual returns, if they occur, is known as the “primary beneficiary.” A primary beneficiary of a VIE will need to consolidate the VIE if the company’s interest in the VIE is such that the company will absorb a majority of the VIE’s expected losses and/or receive a majority of the entity’s expected residual returns, if they occur. FIN 46-R requires additional disclosures by primary beneficiaries and other significant variable interest holders. FIN 46-R is effective no

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later than the end of the first reporting period that ends after March 15, 2004, except for those variable interest entities that are considered to be special-purpose entities, for which the effective date is no later than the end of the first reporting period that ends after December 31, 2003. We do not expect the adoption of FIN 46-R to have a material effect on our financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk for a change in interest rates relates primarily to our investment portfolio of approximately $504,916 and debt instruments of approximately $35,866. We do not use derivative financial instruments.

Our investment portfolio consists of cash and cash equivalents and market auction debt securities classified as “available for sale.” The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we maintain our portfolio in a variety of high credit quality debt securities, including U.S. government, state and local government and corporate obligations, certificates of deposit and money market funds. Approximately 91% of our portfolio matures in less than three months. The carrying value of the investment portfolio approximates the market value at December 31, 2003 and the value at maturity. Because our investments consist of cash equivalents and market auction debt securities, a hypothetical 100 basis point change in interest rates is not likely to have a material effect on our consolidated financial statements.

Approximately 61% of our debt instruments at December 31, 2003 are subject to fixed interest rates and principal payments. The related note purchase agreements permit us to prepay these notes prior to their scheduled maturity, but may require us to pay a prepayment fee based on market rates at the time of prepayment and the note rates. The remaining 39% of debt instruments are primarily subject to variable interest rates based on the prime rate or LIBOR and have fixed principal payments. The fair value of all debt instruments was approximately $33,000 at December 31, 2003. In addition, borrowings under our $40,000 unsecured revolving credit facility (the “Revolver”) with Bank of America, N.A., bear interest at a variable rate based on the prime rate, the Federal Funds rate or LIBOR. As of December 31, 2003, there was approximately $32,875 available under this facility due to the issuance of a $7,125 letter of credit in support of our finite risk insurance program. We do not believe that any market risk inherent in our debt instruments is likely to have a material effect on our consolidated financial statements.

As of December 31, 2003, we had approximately $14,000 of variable rate debt outstanding. A hypothetical 100 basis point increase in interest rates, based on the December 31, 2003 balance, would reduce our annual net income by approximately $94. Any future gains or losses may differ materially from this hypothetical amount based on the timing and amount of actual interest rate changes and the actual term loan balance.

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Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.

At the conclusion of the period ended December 31, 2003, we carried out an evaluation, under the supervision and with the participation of our management, including the Chairman and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chairman and Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in alerting them in a timely manner to information relating to Barr and its consolidated subsidiaries required to be disclosed in this report.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Patent Challenge Litigation

Estradiol; Estradiol and Norgestimate Tablets (Prefest®)

In August 2003, we filed an ANDA seeking approval from the FDA to market certain estradiol; estradiol and norgestimate tablets, 1 mg; 1 mg and 0.09 mg, the generic equivalent of King Pharmaceutical’s (“King”) Prefest® hormone therapy product. We notified King and patent assignee Jencap Research Ltd. (“Jencap”) of that filing pursuant to the provisions of the Hatch-Waxman Act on October 9, 2003. On November 26, 2003, King and Jencap filed a patent infringement action in the United States District Court for the Southern District of New York, seeking to prevent us from marketing estradiol; estradiol and norgestimate tablets until after the expiration of two U.S. patents, the last of which is alleged to expire in 2012. We have answered the complaint, but discovery has not yet commenced.

We believe that we were the first to file a paragraph IV certification for the product. If so, we may be eligible for 180 days of generic exclusivity, depending on a variety of factors.

Norethindrone Acetate / Ethinyl Estradiol (Estrostep^®) and Norethindrone Acetate / Ethinyl Estradiol (Estrostep FE^®)

We previously disclosed these cases in our annual report on Form 10-K for the year ended June 30, 2003 as filed with the SEC on August 26, 2003 and as amended on August 29, 2003. We continue to negotiate the settlement agreements with Galen (Chemicals) Limited. We anticipate that these transactions will close before the end of March 2004. Please see “Administrative Matters” in Note 16 to the consolidated financial statements.

Norethindrone Acetate / Estradiol (FemHRT^®)

We previously disclosed this case in our annual report on Form 10-K for the year ended June 30, 2003 as filed with the SEC on August 26, 2003 and as amended on August 29, 2003. We continue to negotiate the settlement agreements with Galen (Chemicals) Limited. We anticipate that these transactions will close before the end of March 2004. Please see “Administrative Matters” in Note 16 to the consolidated financial statements.

Administrative Matters

FTC Request for Information Regarding Settlement of Estrostep and FemHRT Patent Litigation and Related Transactions

On December 16, 2003, we and Galen (Chemicals) Limited received letters from the FTC’s Bureau of Competition requesting that we voluntarily provide certain information concerning our

37

proposed acquisition of the U.S. and Canadian rights to Galen’s Loestrin(R) and Loestrin(R) FE oral contraceptive products and the proposed settlement of pending patent litigation regarding Norethindrone Acetate / Ethinyl Estradiol (Estrostep^®) and Norethindrone Acetate / Ethinyl Estradiol (Estrostep FE^®) and Norethindrone Acetate / Estradiol (FemHRT^®). The letter also requests information concerning the proposed option for Galen to acquire an exclusive license to our generic version of Galen’s Ovcon^® 35 oral contraceptive. The FTC specifically stated that its letter should not be viewed as an accusation by the Commission or its staff of any wrongdoing. We believe that the proposed transactions are lawful and proper and intend to cooperate fully with the request. We are currently unable to determine the impact, if any, that the FTC’s request would have on the closing of the proposed transactions. We anticipate that these transactions will close before the end of March 2004.

The FTC’s Bureau of Competition previously reviewed the proposed transactions under the Hart-Scott-Rodino Act. On October 24, 2003, the Hart-Scott-Rodino waiting period expired, permitting the parties to close the transactions.

Other Matters

As of December 31, 2003, we were involved with other lawsuits incidental to our business, including patent infringement actions and personal injury claims. Based on the advice of legal counsel, we believe that the ultimate disposition of such other lawsuits will not have a material adverse effect on our consolidated financial statements.

38

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders of Barr Laboratories, Inc. was held on October 23, 2003 at The Plaza Hotel in New York City. Of the 66,992,993 shares entitled to vote, 61,226,533 shares were represented at the meeting by proxy or present in person. The meeting was held for the following purposes:

1. To elect nine directors. All nine nominees were elected based on the following votes cast:

For	Shares
Carole S. Ben-Maimon		37,654,835
Paul M. Bisaro		37,612,660
Harold N. Chefitz		53,817,847
Bruce L. Downey		37,610,794
Richard R. Frankovic		54,913,795
James S. Gilmore, III		54,062,601
Jacob M. Kay		55,068,402
Peter R. Seaver		54,063,098
George P. Stephan		53,807,337

2. To consider a proposal to approve the reincorporation of Barr Laboratories, Inc. in the state of Delaware. The proposal was approved based on the following votes cast:

	Shares
For		50,679,707
Against		3,293,248
Abstained		33,652
Broker non-votes*		7,219,926

3. To consider a proposal to approve an increase in the number of authorized shares of the common stock from 100,000,000 to 200,000,000 shares. The proposal was approved based on the following votes cast:

	Shares
For		58,018,179
Against		3,140,780
Abstained		67,574

* For certain types of “non-routine” proposals, such as Proposal 2, brokers do not have the discretionary authority to vote their clients’ shares, and therefore they must refrain from voting on such proposals in the absence of instructions from their clients.

39

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits.

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of December 31, 2003, between Barr Laboratories, Inc. and Barr Pharmaceuticals, Inc. (1)
2.2	Asset Purchase Agreement dated November 20, 2003 between Endeavor Pharmaceuticals, Inc., as seller, and Barr Laboratories, Inc., as buyer.
3.1	Amended and Restated Certificate of Incorporation of Barr Pharmaceuticals, Inc. (1)
3.2	By-Laws of Barr Pharmaceuticals, Inc. (1)
10.1	Barr Laboratories, Inc. Non-Qualified Deferred Compensation Plan, dated November 1, 2003.
31.1	Certification of Bruce L. Downey pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of William T. McKee pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.0	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(1)	Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant’s Current Report on Form 8-K on January 6, 2004 and incorporated herein by reference.

(b) We filed the following reports on Form 8-K in the quarter ended December 31, 2003.

Report Date	Item Reported
October 8, 2003	Amendment to the Company’s Definitive Proxy Statement as filed on September 26, 2003.

40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BARR PHARMACEUTICALS, INC.
Dated: February 11, 2004	/s/ William T. McKee
	William T. McKee
	Chief Financial Officer
	(Principal Financial Officer and
	Principal Accounting Officer)

41 EX-2.2 3 y93708exv2w2.txt EXHIBIT 2.2: ASSET PURCHASE AGREEMENT EXECUTION COPY EXHIBIT 2.2 ASSET PURCHASE AGREEMENT BETWEEN BARR LABORATORIES, INC. AND ENDEAVOR PHARMACEUTICALS, INC. NOVEMBER 20, 2003 TABLE OF CONTENTS 1. Definitions................................................................................ 1 2. Basic Transaction.......................................................................... 9 (a) Purchase and Sale of Assets...................................................... 9 (b) Assumption of Liabilities........................................................ 9 (c) Purchase Price................................................................... 9 (d) Closing.......................................................................... 9 (e) Deliveries at Closing............................................................ 10 (f) Allocation....................................................................... 10 (g) Product Liability Insurance...................................................... 10 3. Seller's Representations and Warranties.................................................... 10 (a) Organization of Seller........................................................... 10 (b) Authorization of Transaction..................................................... 11 (c) No Conflicts; No Bankruptcy...................................................... 11 (d) Brokers' Fees.................................................................... 12 (e) Title to Assets; Sufficiency of Assets........................................... 12 (f) Financial Statements............................................................. 12 (g) Events Subsequent to Most Recent Fiscal Month End................................ 12 (h) Undisclosed Liabilities.......................................................... 14 (i) Legal Compliance................................................................. 14 (j) Tax Matters...................................................................... 15 (k) Intellectual Property............................................................ 15 (l) Contracts........................................................................ 18 (m) Powers of Attorney............................................................... 19 (n) Insurance........................................................................ 19 (o) Product Liability................................................................ 19 (p) Real Property Used in the Business............................................... 19 (q) Suppliers........................................................................ 19 (r) Regulatory Matters............................................................... 19 (s) Affiliate Transactions........................................................... 20 (t) Product Safety................................................................... 20 (u) Disclosure....................................................................... 20 4. Buyer's Representations and Warranties..................................................... 20 (a) Organization of Buyer............................................................ 20 (b) Authorization of Transaction..................................................... 21 (c) No Conflict...................................................................... 21 (d) Brokers' Fees.................................................................... 21 5. Pre-Closing Covenants...................................................................... 21 (a) General.......................................................................... 21 (b) Notices and Consents............................................................. 21 (c) Operation of Business............................................................ 21 (d) Preservation of Business......................................................... 22 (e) Full Access...................................................................... 22 (f) Notice of Developments........................................................... 22 (g) Exclusivity...................................................................... 22 (h) Confidentiality.................................................................. 22 ii (i) Product Liability Insurance...................................................... 23 6. Conditions to Obligation to Close.......................................................... 23 (a) Conditions to Buyer's Obligation................................................. 23 (b) Conditions to Seller's Obligation................................................ 24 7. Termination................................................................................ 25 (a) Termination of Agreement......................................................... 25 (b) Effect of Termination............................................................ 26 8. Remedies for Breaches of This Agreement.................................................... 26 (a) Survival of Representations and Warranties....................................... 26 (b) Indemnification Provisions for Buyer's Benefit................................... 26 (c) Limitations to Indemnification Obligation........................................ 27 (d) Indemnification Provisions for Seller's Benefit.................................. 27 (e) Procedures....................................................................... 28 (f) Manner of Payment................................................................ 29 (g) Instructions to Escrow Agent..................................................... 29 (h) Matters Involving Third Parties.................................................. 29 (i) Reduction for Insurance.......................................................... 30 (j) Exclusive Remedy................................................................. 30 (k) No Consequential Damages......................................................... 30 9. Post-Closing Covenants..................................................................... 31 (a) General.......................................................................... 31 (b) Registrations; Record Keeping; NDC Numbers....................................... 31 (c) Litigation Support............................................................... 31 (d) Transition....................................................................... 31 (e) Use of Seller's Labeling and NDC................................................. 31 (f) Confidentiality.................................................................. 31 (g) Covenant Not to Compete.......................................................... 32 (h) Employee Termination and Payment................................................. 33 (i) Products Liability Insurance..................................................... 33 (j) Additional Contracts............................................................. 33 (k) Directors' and Officers' Insurance............................................... 33 (l) Documentation of Expenses........................................................ 33 10. Miscellaneous.............................................................................. 33 (a) Press Releases and Public Announcements.......................................... 33 (b) No Third-Party Beneficiaries..................................................... 34 (c) Entire Agreement................................................................. 34 (d) Succession and Assignment........................................................ 34 (e) Counterparts..................................................................... 34 (f) Headings......................................................................... 34 (g) Notices.......................................................................... 34 (h) Governing Law.................................................................... 35 (i) Amendments and Waivers........................................................... 35 (j) Severability..................................................................... 35 (k) Expenses......................................................................... 35 (l) Construction..................................................................... 36 (m) Incorporation of Annexes, Exhibits and the Disclosure Schedule................... 36 iii (n) Specific Performance............................................................. 36 (o) Arbitration...................................................................... 36 Exhibit I - Escrow Agreement Exhibit II - Assignment and Assumption Agreement Exhibit III - Bill of Sale Exhibit IV - Financial Statements Exhibit V - Legal Opinion Exhibit VI - NDA Transfer Letter Exhibit VII - Press Release Exhibit VIII - Transitional Services Agreement Annex A - Assumed Contracts Annex B - Claims Annex C - Contracts Annex D - Certain Activities and Events Annex E - NDAs and INDs Annex F - Stay Agreements Annex G - Severance and Stay Bonus Payments Annex H - Tangible Personal Property Annex I - Business Intellectual Property Annex J - Product Liability Insurance The Exhibits and Annexes listed above are omitted from this filing with the Commission. The registrant agrees to furnish supplementally to the Commission a copy of any omitted Exhibit or Annex upon the Commission's request. iv ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of November 20, 2003, by and between Barr Laboratories, Inc., a New York corporation ("Buyer") and Endeavor Pharmaceuticals, Inc., a Delaware corporation ("Seller"). Each of Buyer and Seller are sometimes referred to herein individually as a "Party" and collectively as the "Parties." WHEREAS, Seller is engaged in the business of research and development of pharmaceutical Products (as defined below) based on proprietary combinations of hormones, alone or in combination with other compounds, for application in health care (the "Business"); and WHEREAS, Seller desires to sell the Business and substantially all of its assets, including the Products, and Buyer desires to purchase the Business and substantially all of the assets of Seller, including, without limitation, the Products, in return for cash and the assumption of certain liabilities by Buyer relating to such Products and other assets from and after the Closing Date upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows. 1. Definitions. As used in this Agreement, including the Exhibits, Annexes and the Disclosure Schedule, the following capitalized terms shall have the respective meanings ascribed to them below: "AAA" has the meaning set forth in Section 10(o)(i) below. "AAI" means, collectively, aaiPharma, Inc., AAI International Inc. and their respective Affiliates. "Acquired Assets" means all of Seller's right, title, and interest in and to all of the assets owned by Seller or used by Seller in the Business, including, without limitation, all of Seller's right, title and interest in and to (a) the Products, (b) each NDA and IND relating to the Products (including all rights of reference to support such NDA), (c) the Marketing Materials, (d) the Business Intellectual Property, (e) the Contracts set forth on Annex A, as amended from time to time pursuant to the terms of this Agreement, (f) the Claims of Seller, (g) the Permits, (h) the Inventory and (i) the Records; provided, that notwithstanding the above, the Acquired Assets shall not include the Excluded Assets. "Acquisition Proposal" has the meaning set forth in Section 5(g) below. "Additional Contracts" has the meaning set forth in Section 9(j) below. "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. "Affiliated Group" means any affiliated group within the meaning of Code Section 1504(a) or any similar group defined under a similar provision of state, local, or foreign law. "Agreement" has the meaning set forth in the preface above. "Assumed Liabilities" means all Liabilities of Seller from and after the Closing relating solely to the Acquired Assets, other than the Contracts, and the following Liabilities of Seller related to the Business: (a) all Liabilities of Seller arising from and after the Closing relating to the Business under the Contracts set forth on Annex A attached hereto, as amended from time to time pursuant to the terms of this Agreement; (b) any product liability arising from and after the Closing with respect to the Products; (c) all obligations from and after the Closing with respect to regulatory matters regarding the Business, (d) all Liabilities from and after the Closing arising in connection with any Intellectual Property infringement claim with respect to the Products or Business Intellectual Property and (e) all Liabilities arising in connection with the sale, marketing, distribution, promotion and advertising of any Products following the Closing; provided, that notwithstanding the above, the Assumed Liabilities shall not include the Excluded Liabilities. "Bankruptcy and Equity Exception" has the meaning set forth in Section 3(b) below. "Basis" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that reasonably forms or reasonably could form the basis for any specified consequence. "Basket" has the meaning set forth in Section 8(c)(i) below. "Bonus Escrow Account" has the meaning set forth in Section 2(c)(iii) below. "Business" has the meaning set forth in the preface above. "Business Intellectual Property" has the meaning set forth in Section 3(k)(i) below. "Buyer" has the meaning set forth in the preface above. "Buyer Indemnified Party" and "Buyer Indemnified Parties" have the meanings set forth in Section 8(b) below. "Cash" means cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements. "Claims" means the claims, deposits, prepayments, refunds, causes of action, choices in action, rights of recovery, rights of set off, and rights of recoupment (including any such item relating to the payment of Taxes) relating to the Business and the Acquired Assets (excluding those pertaining solely to the Excluded Assets and those arising under this Agreement or any other agreement or arrangement contemplated herein), including, without limitation, those set forth on Annex B attached hereto. "Closing" has the meaning set forth in Section 2(d) below. "Closing Date" has the meaning set forth in Section 2(d) below. "COBRA" means Part 6 of Subtitle B of Title I of ERISA, Code Section 4980B, and any similar state law. "Code" means the Internal Revenue Code of 1986, as amended. "Company Group" has the meaning set forth in Section 5(g) below. 2 "Competing Product" has the meaning set forth in Section 9(g)(i) below. "Confidential Information" means any information concerning the Business or the Acquired Assets that is not already generally available to the public. "Contracts" means the agreements, contracts, instruments, Liens, purchase orders, licenses, sublicenses, supply agreements, development agreements, insurance agreements and other arrangements and commitments, to which Seller is a party or by which it is bound or to which any of its assets is subject (including any rights thereunder and amendments thereto through the date hereof), but excluding (a) those pertaining solely to the Excluded Assets and the Excluded Liabilities, the Leases, the Employment Agreements and the Stay Agreements and (b) this Agreement and any other agreement or arrangement contemplated herein. A list of the material Contracts is set forth on Annex C attached hereto. "Counter Notice" has the meaning set forth in Section 8(e)(ii) below. "Damages" has the meaning set forth in Section 8(b) below. "Delivering Party" has the meaning set forth in Section 8(e)(i) below. "Deposit Amount" means the earnest money deposits of (a) $250,000 paid by Buyer to Seller on October 6, 2003 and (b) $500,000 paid by Buyer to Seller on October 24, 2003. "Disclosure Schedule" means the disclosure schedule accompanying this Agreement and delivered by Seller to Buyer on the date hereof. The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in Section 3. "Disposition Bonus" has the meaning given to such term in the Stay Agreements. "Dispute" has the meaning set forth in Section 10(o)(i) below. "Employee Benefit Plan" means any "employee benefit plan" (as such term is defined in ERISA Section 3(3)) and any other employee benefit plan, program or arrangement of any kind, at any time maintained, sponsored or contributed to by Seller or any ERISA Affiliate or with respect to which Seller or any ERISA Affiliate has any Liability. "Employment Agreements" means the Employment Agreements between Seller and each of the Officers dated as of May 3, 2002, as amended. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means any entity that, with Seller, is considered a single employer under Code Section 414. "Escrow Agent" has the meaning set forth in Section 2(c)(ii) below. "Escrow Agreement" has the meaning set forth in Section 2(c)(ii) below. "Excluded Assets" means (a) Seller's corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of Seller as a corporation, (b) any assets, contracts or records related to or maintained in connection with any Employee Benefit Plan, 3 (c) Seller's Cash (including the $1,000,000 held by Seller in a separate account pursuant to Section 9.8 of the OLG Agreement), (d) the Real Property, (e) the Tangible Personal Property and (f) any of the rights of Seller under this Agreement and any other agreement or arrangement contemplated herein. "Excluded Liabilities" means any and all Liabilities relating to or arising out of the conduct of the Business prior to the Closing, and any other Liabilities of Seller or any of its Affiliates, whether or not related to the Business, that are not Assumed Liabilities, including, without limitation, (a) any Liability arising out of or relating to, directly or indirectly, clinical trials conducted by Seller prior to the Closing and any infringement, misappropriation or violation by Seller of the Intellectual Property right of any other Person prior to the Closing, (b) any Liability (i) arising prior to the Closing under, or incurred as a result of an action taken prior to the Closing by any party to, any of the Contracts set forth on Annex A attached hereto, as amended from time to time pursuant to the terms of this Agreement or (ii) arising under, or incurred prior to or following the Closing as a result of any action taken by any party to, any Contract (other than the Contracts set forth on Annex A attached hereto, as amended from time to time pursuant to the terms of this Agreement), including, without limitation, Liabilities under the Securities Payment Agreement with AAI, (c) any Liability related to the Inventory arising prior to the Closing, (d) any Liability of Seller for Taxes (with respect to the Acquired Assets or otherwise), including, without limitation, any Liability of Seller for the unpaid Taxes of any Person under Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract or otherwise, but excluding any Taxes that are Assumed Liabilities, (e) any Liability of Seller under any bulk transfer law of any jurisdiction, under any common law doctrine of de facto merger or successor liability, or otherwise by operation of law, (f) any obligation of Seller to indemnify any Person by reason of the fact that such Person was a director, officer, employee, or agent of Seller and was serving at the request of Seller as a partner, trustee, director, officer, employee, or agent of another entity (whether such indemnification is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such indemnification is pursuant to any statute, charter document, bylaw, agreement, or otherwise), (g) any Liability of Seller for costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, (h) any Liability of Seller or any ERISA Affiliate arising under or in connection with or related to any Employee Benefit Plan, including, without limitation, any Liability arising under COBRA or Title IV of ERISA, (i) any Liability of Seller to employees or former employees of Seller, including, without limitation, the obligations to pay the Disposition Bonuses, Stay Bonuses and Severance Benefits under the Stay Agreements and the Employment Agreements, (j) any Liability of Seller to any stockholder or holder of any rights or options to subscribe for or to purchase any shares of the Seller's capital stock pursuant to any shareholder agreement, stock option plan or warrant agreement; (k) any Liability of Seller arising under the Leases, and (l) any Liability or obligation of Seller under this Agreement or any other agreement or arrangement contemplated herein. "FDA" means the United States Food and Drug Administration, and any successor agency or entity thereto that may be established hereafter. "Financial Statements" has the meaning set forth in Section 3(f) below. "Foreign Authorities" has the meaning set forth in Section 3(r)(i) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time, consistently applied. "Governmental Entity" means any federal, state, local or foreign governmental or regulatory authority, agency, commission, body or other governmental entity. "IND" means an investigational new drug application. 4 "Indemnification Claim Amount" has the meaning set forth in Section 8(e)(i) below. "Indemnification Claim" has the meaning set forth in Section 8(e)(i) below. "Indemnification Notice" has the meaning set forth in Section 8(e)(i) below. "Indemnified Party" has the meaning set forth in Section 8(h)(i) below. "Indemnifying Party" has the meaning set forth in Section 8(h)(i) below. "Indemnity Escrow Account" has the meaning set forth in Section 2(c)(ii) below. "Indemnity Escrow Amount" has the meaning set forth in Section 2(c)(ii) below. "In-Licensed Intellectual Property" has the meaning set forth in Section 3(k)(v) below. "Intellectual Property" means all of the following in any jurisdiction throughout the world: (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade names, corporate names, Internet domain names and rights in telephone numbers, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes, standard operating procedures and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (e) all computer software (including, without limitation, source and object code and all documentation), data and databases, other than commercially available off-the-shelf software purchased or licensed, (f) all advertising and promotional materials, (g) all other proprietary and industrial rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium). "Inventory" means all raw materials and supplies owned by Seller. "Knowledge" or "aware" means, when used in reference to any Party to this Agreement, the actual knowledge of the directors, officers and key employees of such Party. "Leases" means leases and all other arrangements pursuant to which Seller has rights to the Leased Real Property. "Leased Real Property" means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interest in real property held by Seller. "Liability" means any liability or obligation of whatever kind or nature (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes. "Lien" means any mortgage, pledge, lien, encumbrance, charge, or other security interest other than (a) liens for Taxes not yet due and payable, (b) purchase money liens and liens securing rental 5 payments under capital lease arrangements, and (c) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. "Marketing Materials" means all rights of Seller in and to the promotional materials in physical form and camera-ready artwork used or held for use in the Business. "Material Adverse Effect" or "Material Adverse Change" means any change, development or effect that has been or would reasonably be expected to be materially adverse to the Business or the Acquired Assets as owned or operated by Seller during the four (4) month period immediately preceding January 1, 2003, taken as a whole, or on the ability of Seller to consummate timely the transactions contemplated hereby; provided, however, that activities and events set forth on Annex D shall not, individually or in the aggregate, constitute a Material Adverse Effect or Material Adverse Change. "Most Recent Balance Sheet" has the meaning set forth in Section 3(f) below. "Most Recent Fiscal Month End" has the meaning set forth in Section 3(f) below. "NDA" means each of Seller's new drug applications for Enjuvia tablets (in 0.3, 0.45, 0.625 and 1.25 mg dosage strengths) in draft or on file with the FDA and described on Annex E attached hereto, including reference to the drug master files, and any and all amendments and supplements thereto. "NDC" has the meaning set forth in Section 9(b)(ii) below. "New Product Liability Insurance" has the meaning set forth in Section 9(i). "Officers" mean the following officers of Seller: R. Forrest Waldon, Esq., Chairman, Chief Executive Officer and President; Thomas W. Leonard, Vice President and Chief Scientific Officer; Stephen F. Rizzo, Vice President and Chief Financial Officer; Christopher Smith, Vice President of Regulatory Affairs and Quality Assurance; Richard F. Moldin, Vice President of Manufacturing and Business Development; Parris J. Sanz, Esq., Vice President, General Counsel and Secretary; and Kathleen M. Milligan, Vice President, Marketing and Sales. "OLG Agreement" means the Supply Agreement, dated November 1, 2000, between Seller and Organics/LaGrange, Inc., an Illinois corporation, as amended. "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "Owned Real Property" means land, together with all buildings, structures, improvements or fixtures located thereon, and all easements and other rights and interests appurtenant thereto, owned by Seller and used or intended to be used in, or otherwise related to, the Business. "Party" has the meaning set forth in the preface above. "Permits" means the franchises, approvals, permits, licenses, orders, registrations, certificates, variances, and similar rights obtained from Governmental Entities relating to the Acquired Assets and all applications therefor currently pending. "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity, or a Governmental Entity. 6 "Proceeding" has the meaning set forth in Section 3(i)(i) below. "Product Liability Insurance" has the meaning set forth in Section 5(i) below. "Products" means all pharmaceutical product candidates at any stage of research or development based on combinations of hormones, alone or in combination with other compounds, including without limitation, Enjuvia(TM), Projuvia(TM) and Juviand(TM). "Purchase Price" has the meaning set forth in Section 2(c) below. "Real Property" has the meaning set forth in Section 3(p) below. "Receiving Party" has the meaning set forth in Section 8(e)(ii) below. "Records" means the files (including all electronic data files), documents, correspondence, lists, drawings and specifications, creative materials, marketing plans, studies, reports, and other printed or written materials of the Business (in whatever form or medium), including, without limitation, (i) all clinical or pre-clinical scientific studies and data relating to the Products, (ii) all files and data packages that are part of each IND and NDA and all correspondence with any Governmental Entity related to each IND and NDA (including information on clinical and pre-clinical studies and adverse event reports), (iii) all correspondence with any Governmental Entity related to the use of the Products (including any information on clinical and pre-clinical studies, adverse events, written contact regulatory reports and formal minutes with any Governmental Entity to the extent Seller normally retains such records and minutes in the ordinary course of its regulatory activities), (iv) any and all rights of reference to any files (including any drug master files) cited in each IND and NDA, (v) all other documents relating to each IND and NDA or to the subject matter of each IND and NDA and (vi) all financial books, records, statements or reports of Seller to the extent such items relate to the Acquired Assets. "Registered Business Intellectual Property" has the meaning set forth in Section 3(k)(iv) below. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Securities Payment Agreement" means the Securities Payment Agreement between Seller and AAI dated March 25, 2003. "Seller" has the meaning set forth in the preface above. "Seller Indemnified Party" and "Seller Indemnified Parties" have the meanings set forth in Section 8(d) below. "Severance Benefits" means the applicable severance benefits payable (i) to R. Forrest Waldon pursuant to Section 7 of his Employment Agreement and (ii) to the other Officers pursuant to Section 6(b) of their respective Employment Agreements. "Solvent" means, with respect to any Person on a particular date, that on such date (a) the fair market value of the assets of such Person is greater than the total amount of Liabilities (including contingent Liabilities) of such Person, (b) the present realizable value of the assets of such Person is greater than the amount that will be required to pay the probable Liabilities of such Person on its debts as 7 they become absolute and matured, and (c) such Person is able to realize upon its assets and pay its debts and other Liabilities, including contingent obligations, as they mature. "Stay Agreements" means (a) the Stay Agreements between Seller and each of the individuals listed on Annex F attached hereto, (b) the amendments to the Employment Agreements dated as of (i) September 19, 2003 and October 27, 2003, for each of R. Forrest Waldon, Thomas W. Leonard and Stephen F. Rizzo, (ii) September 19, 2003 and November 12, 2003, for Kathleen Milligan, and (iii) September 19, 2003 for each other Officer. "Stay Bonus" has the meaning given to such term in the Stay Agreements. "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association, or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof or (b) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons owns a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entity's gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation). The term "Subsidiary" shall include all Subsidiaries of such Subsidiary. "Tangible Personal Property" means all tangible personal property used in or held for use in the Business listed on Annex H (such as rights of Seller in and to its furniture, fixtures and equipment), other than the Inventory and the Marketing Materials. "Tax" or "Taxes" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner, including any interest, penalty, or addition thereto, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the Tax Liability of any other Person. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Third Party Acquisition" has the meaning set forth in Section 5(g) below. "Third Party Claim" has the meaning set forth in Section 8(h)(i) below. "Transitional Services Agreement" means the Transitional Services Agreement dated as of the Closing Date, made by and between Buyer and Seller, substantially in the form attached hereto as Exhibit VIII. 8 2. Basic Transaction. (a) Purchase and Sale of Assets. On and subject to the terms and conditions of this Agreement, Buyer shall purchase from Seller, and Seller shall sell, transfer, assign, convey, and deliver to Buyer, all of Seller's rights, title and interests in and to the Acquired Assets at the Closing free and clear of all Liens, other than the Liens set forth in Section 3(e) of the Disclosure Schedule, for the consideration specified below in this Section 2. (b) Assumption of Liabilities. On and subject to the terms and conditions of this Agreement, Buyer shall assume and become responsible for all of the Assumed Liabilities at the Closing. Buyer will not assume or have any responsibility, however, with respect to any Excluded Liabilities. (c) Purchase Price. On and subject to the terms and conditions of this Agreement, in consideration for the Acquired Assets and the Business, Buyer has paid to Seller the Deposit Amount and, at the Closing, Buyer shall pay to Seller or to Melon Bank (or such other Person mutually selected by the Parties) as escrow agent (the "Escrow Agent"), as set forth below, in cash or other immediately available funds, the following amounts (such Deposit Amount, together with the following amounts, collectively, the "Purchase Price"): (i) to Seller, the sum of $30,250,000; (ii) to the Escrow Agent for deposit in an account (the "Indemnity Escrow Account") established by the Escrow Agent pursuant to the Escrow Agreement substantially in the form attached hereto as Exhibit I (the "Escrow Agreement"), the sum of $2,000,000 (the "Indemnity Escrow Amount") which shall be available to satisfy any amount owed by Seller pursuant to Section 8 below and which shall be paid in accordance with the terms of this Agreement and the Escrow Agreement; (iii) to the Escrow Agent for deposit in an account (the "Bonus Escrow Account"), the sum of $1,533,195, which amount shall be paid to Seller in accordance with the terms of this Agreement, the Transitional Services Agreement and the Escrow Agreement, to satisfy Seller's obligation to pay Severance Benefits and Stay Bonuses to the individuals and in the amounts set forth on Annex G; provided, that to the extent that Seller's obligation to pay such Severance Benefits and Stay Bonuses is ultimately determined to be less than $1,533,195 pursuant to the terms of the Stay Agreements and Employment Agreements, the difference between such actual amount and $1,533,195 shall be distributed to Buyer in accordance with the Escrow Agreement; (iv) to Seller, $350,000 for actual payments made by Seller for operating expenses of the Business from October 26, 2003, through the earlier of November 26, 2003 and the Closing (as evidenced by written documentation to be provided by Seller to Buyer after the Closing); provided, that if such actual payments are less than $350,000, the remainder of such $350,000 amount shall be retained by Seller as part of its retainer pursuant to Section 2.3 of the Transitional Services Agreement; provided further, that such remainder, if any, shall be treated by the Parties as a reduction to the Purchase Price; and (v) to Seller, the sum of $130,000, to pay Seller's extended reporting period on its directors' and officers' insurance policy for a period of at least three (3) years. (d) Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis LLP, in New York, New York commencing at 10:00 a.m. local time on the first business day following the satisfaction or waiver (by the Party required or 9 entitled to waive) of all conditions to the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the Parties may mutually determine (the "Closing Date"). (e) Deliveries at Closing. At the Closing, (i) Seller will deliver to Buyer the various certificates, instruments, and documents referred to in Section 6(a) below; (ii) Buyer will deliver to Seller the various certificates, instruments, and documents referred to in Section 6(b) below; (iii) Seller will execute, acknowledge (if appropriate), and deliver to Buyer (A) an Assignment and Assumption Agreement in the form attached hereto as Exhibit II, (B) a Bill of Sale in the form attached hereto as Exhibit III, and (C) such other instruments of sale, transfer, conveyance, and assignment as Buyer and its counsel reasonably may request; (iv) Buyer will execute, acknowledge (if appropriate), and deliver to Seller (A) an Assignment and Assumption Agreement in the form attached hereto as Exhibit II and (B) such other instruments of assumption as Seller and its counsel reasonably may request and (v) Buyer will make the payments required by Section 2(c). (f) Allocation. Buyer shall prepare an allocation of the Purchase Price (and all other capitalized costs) among the Acquired Assets in accordance with Code Section 1060 and the Treasury regulations thereunder (and any similar provision of state, local or foreign law, as appropriate), which allocation shall be binding upon Seller. Buyer shall deliver such allocation to Seller within ninety (90) days after the Closing Date. Buyer and Seller and their Affiliates shall report, act and file all Tax Returns (including, but not limited to, Internal Revenue Service Form 8594) in all respects and for all purposes consistent with such allocation prepared by Buyer. Seller shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as Buyer may reasonably request to allow the Parties to prepare such allocation. Neither Buyer nor Seller shall take any position (whether in audits, Tax Returns or otherwise) that is inconsistent with such allocation unless required to do so by applicable law. (g) Product Liability Insurance. In addition to the payments set forth in Section 2(c), on and subject to the terms and conditions of this Agreement, Buyer shall pay to Seller at the Closing $70,000 in cash or other immediately available funds to be used by Seller to obtain the five (5) year Extended Reporting Period Endorsement pursuant to the terms and conditions set forth in Section V.1c of the Products Liability Insurance. 3. Seller's Representations and Warranties. Seller represents and warrants to Buyer that the statements contained in this Section 3 are true, correct and complete as of the date hereof and will be correct and complete as of the Closing Date (as though then made and as though the Closing Date were substituted for the date of this Agreement throughout Section 3 other than with respect to representations and warranties that speak of a specific date), except, with respect to any representation or warranty, as otherwise set forth in the particular section of the Disclosure Schedule that corresponds to such representation or warranty; it being understood that the disclosure in any such section of the Disclosure Schedule shall qualify other representations and warranties contained in this Section 3 only to the extent that it is apparent from a reading of such disclosure that it also qualifies such other sections. (a) Organization of Seller. (i) Seller is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation with full corporate power and authority to own or lease its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is conducted by it. The copies of the charter documents of Seller, as amended to date, and the bylaws of Seller, as amended to date, and heretofore delivered to Buyer's counsel, are complete and correct copies of the same, and no 10 amendments thereto are pending. Seller is qualified to do business as a foreign corporation in each jurisdiction in which such qualification is necessary to the operation of the Business as currently conducted by Seller, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. (ii) Except as set forth in Section 3(a)(ii) of the Disclosure Schedule, none of the Business is conducted and none of the Acquired Assets are owned or held by, any Affiliates of Seller; it being understood that the Business is conducted by officers and directors of Seller. (iii) Seller does not have any Subsidiaries. (b) Authorization of Transaction. Seller has full power and authority to execute and deliver this Agreement and each agreement, document and instrument to be executed and delivered by it pursuant to or contemplated by this Agreement and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and each such other agreement, document and instrument by Seller has been duly authorized by all necessary corporate action of Seller, including, without limitation, by the affirmative vote of holders of at least 66-2/3% of the outstanding shares of Preferred Stock of Seller, and no other action on the part of Seller is required to authorize the same. This Agreement and each agreement, document and instrument to be executed and delivered by Seller pursuant to or as contemplated by this Agreement constitute, or when executed and delivered by Seller will constitute, (assuming, in each case, the execution and delivery of such agreement, document or instrument by Buyer, if applicable) the valid and legally binding obligations of Seller, enforceable against Seller in accordance with their respective terms and conditions, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and subject to the rules of law and public policy governing (and all limitations on) specific performance, injunctive relief, indemnification and other equitable remedies (the "Bankruptcy and Equity Exception"). (c) No Conflicts; No Bankruptcy. Except as set forth in Section 3(c) of the Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in Section 2 above), will (i) violate in any material respect, any statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Entity to which Seller is, or its assets or properties are, subject, (ii) contravene, conflict with or result in a material breach or violation of any provision of the charter or bylaws of Seller, each as amended to date, (iii) materially conflict with, result in a material breach of, constitute a material default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material Contract set forth on Annex C, other than such notices and/or consents as are required to assign the Acquired Assets to Buyer as set forth in Section 3(c) of the Disclosure Schedule or (iv) result in the imposition of any Lien upon any of the Acquired Assets. Except as set forth in Section 3(c) of the Disclosure Schedule, Seller does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Entity or any other Person in order for the Parties to consummate the transactions contemplated by this Agreement (including the assignments and assumptions referred to in Section 2 above) other than with respect to those that have been obtained or will be obtained prior to Closing. For the avoidance of doubt, for the purposes of the representations and warranties in this Section 3(c), the Acquired Assets shall not include the Additional Contracts, if any. There is no proceeding pending or, to the Knowledge of Seller, threatened against Seller that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with the transactions contemplated by this Agreement. Seller was Solvent before, and will be Solvent after, the consummation of the transactions contemplated hereby. No order has been entered or petition presented by Seller for the winding up, insolvency, liquidation, or bankruptcy of Seller. 11 (d) Brokers' Fees. Other than the fees and expenses of Bear, Stearns & Co. as set forth in the Disclosure Schedule, which Seller shall pay at Closing, the fees and expenses of Seller's attorneys and accountants, and the Stay Bonuses and the Disposition Bonuses, which Seller will pay in accordance with the terms of this Agreement, the Escrow Agreement, the Stay Agreements and Employment Agreements, Seller has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Buyer could become liable or obligated. (e) Title to Assets; Sufficiency of Assets. (i) Seller has good and marketable title to the Acquired Assets, including an enforceable right, with the ability to freely use and transfer, to the intangible portion of the Acquired Assets, including those listed on Annex I, free and clear of all Liens or restrictions on transfer, except as set forth in Section 3(e)(i) of the Disclosure Schedule, and Seller has and will convey at the Closing good and marketable title to all of its personal property, tangible and intangible, included in the Acquired Assets, free and clear of all Liens. (ii) The Acquired Assets and the Excluded Assets are all of the assets used or held for use in the Business as currently operated by Seller or owned or possessed by Seller and the Acquired Assets constitute all of the assets, goodwill, properties and rights of every nature, kind and description, whether tangible or intangible, real or personal, necessary for or material to the operation of the Business as it was conducted during the four (4) month period immediately preceding January 1, 2003 and as of the date of the Most Recent Balance Sheet, except as provided on Annex D attached hereto. (f) Financial Statements. Attached hereto as Exhibit IV (unless otherwise specified below) are the following financial statements (collectively the "Financial Statements"): (i) the audited balance sheets of Seller as of December 31, 2001 and December 31, 2002, and the related statements of operations, stockholders deficit and cash flows for the fiscal years ended December 31, 2000, December 31, 2001 and December 31, 2002; and (ii) the unaudited balance sheet of Seller (the "Most Recent Balance Sheet") as of October 31, 2003 (the "Most Recent Fiscal Month End") and the related statements of operations and cash flows of Seller for the ten (10) months ended October 31, 2003. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, are correct and complete, are consistent with the books and records of Seller (which books and records are correct and complete), and present fairly the financial condition of Seller as of such dates and the results of operations of Seller for such periods in all material respects, subject, in the case of any unaudited Financial Statements, to year-end audit adjustments, absence of footnotes and other presentation items. (g) Events Subsequent to Most Recent Fiscal Month End. Except as set forth on Annex D attached hereto, since January 1, 2003, there has not been any Material Adverse Change and Seller has conducted its business only in the Ordinary Course of Business. Without limiting the generality of the foregoing, except as set forth in the appropriate subsection of Section 3(g) of the Disclosure Schedule, since the Most Recent Fiscal Month End: (i) Seller has not sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than in the Ordinary Course of Business for fair consideration; (ii) Seller has not entered into any Contract (or series of related Contracts) either involving more than $25,000 or outside the Ordinary Course of Business; 12 (iii) no Person (including Seller) has accelerated, terminated, modified, or canceled any material Contract (or series of related Contracts); (iv) Seller has not made or committed to make any capital expenditures (or series thereof) involving more than $25,000; (v) Seller has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans and acquisitions) involving more than $25,000; (vi) Seller has not issued any note, bond or other debt security, or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation either involving more than $10,000 singly or $50,000 in the aggregate; (vii) Seller has not made any loan to, or entered into any other transaction with, any of its directors, officers and employees outside of the Ordinary Course of Business, other than the Stay Agreements; (viii) Seller has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement other than the Stay Agreements; (ix) Seller has not granted any increase in the base compensation of any of its directors, officers and employees outside of the Ordinary Course of Business; (x) Seller has not adopted, amended, modified, or terminated any Employee Benefit Plan; (xi) Seller has not made any other change in employment terms for any of its directors, officers and employees outside of the Ordinary Course of Business other than the Stay Agreements; (xii) Seller has not made any loans or advances of money; (xiii) Seller has not imposed or permitted to exist any Lien upon any of the Acquired Assets; (xiv) Seller has not delayed or postponed the payment of accounts payable or other Liabilities outside the Ordinary Course of Business; (xv) Seller has not canceled, compromised, waived, or released any right or claim (or series of related rights and claims) involving more than $25,000; (xvi) Seller has not transferred, assigned, or granted any license or sublicense of any rights under or with respect to any Intellectual Property relating to the Business or the Acquired Assets; (xvii) Seller has not licensed any Intellectual Property relating to the Business or the Acquired Assets from any third party; 13 (xviii) Seller has not failed to take any commercially reasonable action to maintain, renew, or protect the Business Intellectual Property at the federal level in the United States of America; (xix) Seller has not experienced any material damage, destruction, or loss (whether or not covered by insurance) affecting any of the Acquired Assets or the Business; (xx) there has not been any other material occurrence, event, incident, action, failure to act, or transaction outside the Ordinary Course of Business involving Seller, other than the negotiations with Buyer with respect to the transactions contemplated hereunder; (xxi) there has not been any material change in the kind and amount of insurance maintained by Seller; (xxii) to Seller's Knowledge, there has not been any material increase or notice thereof in the cost of raw materials used by Seller; (xxiii) Seller has not discharged a material Liability or Lien; (xxiv) there has not been any material change in the manner of keeping books, accounts, records, accounting methods or practices used by Seller; (xxv) Seller has not disclosed any Confidential Information of Seller to any Person that is not an officer, director or employee of Seller, except in the Ordinary Course of Business and pursuant to written agreements obligating the recipient to maintain the confidentiality thereof; and (xxvi) Seller has not committed to do any of the foregoing. (h) Undisclosed Liabilities. Seller does not have any Liability (and there is no Basis for any present or, to the Knowledge of Seller, future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against Seller giving rise to any Liability), except for (i) Liabilities set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) and (ii) Liabilities which have arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law on the part of Seller). (i) Legal Compliance. (i) Each of Seller and, to Seller's Knowledge, its predecessors and Affiliates, has complied with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder and including, without limitation, the Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1 et seq. and all such laws relating to the import, export, storage, handling treatment and/or disposal of or otherwise relating to animals and biologic materials (including transgenic animals and materials)) of all Governmental Entities, except where the failure to comply would not have a Material Adverse Effect, and, to Seller's Knowledge, no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice (a "Proceeding") has been filed or commenced against any of them alleging any failure to so comply. (ii) Seller holds the Permits and the Permits are all material permits, licenses, certificates, accreditations and other authorizations of all Governmental Entities required for the 14 conduct of the Business and the ownership of the Acquired Assets as currently conducted and owned by Seller, and Section 3(i)(ii) of the Disclosure Schedule sets forth a list of the Permits. No notices have been received by Seller alleging the failure to hold any permit, license, certificate, accreditation or other authorization of any Governmental Entity. Seller is in material compliance with all terms and conditions of all Permits. (j) Tax Matters. (i) Seller has timely filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. All Taxes owed by Seller (whether or not shown or required to be shown on any Tax Return) have been paid. Seller is not currently the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where Seller does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Liens on any of the Acquired Assets that arose in connection with any failure (or alleged failure) to pay any Tax. (ii) Seller has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party, and all Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed. (iii) Seller does not expect any Governmental Entity to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax Liability of Seller either (A) claimed or raised by any Governmental Entity in writing or (B) as to which Seller and the directors and officers (and employees responsible for Tax matters) of Seller has any Knowledge based upon personal contact with any agent of such Governmental Entity. (iv) Seller has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (v) Seller is not a party to any Tax allocation or sharing agreement that could result in any Liability to Buyer. Seller (A) has not been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was Seller) and (B) has no Liability for the Taxes of any Person under Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise that could result in any Liability to Buyer. (vi) Seller has provided to Buyer the tax basis of each Acquired Asset and the dollar amount of all Assumed Liabilities. (k) Intellectual Property. (i) Except as set forth in Section 3(k)(i) of the Disclosure Schedule, Seller owns all right, title and interest in and to all Intellectual Property listed on Annex I attached hereto (the "Business Intellectual Property"). The Business Intellectual Property and In-Licensed Intellectual Property constitute all Intellectual Property necessary for or material to the operation of the Business in the manner conducted by Seller during the four (4) month period immediately preceding January 1, 2003, except as set forth in Section 3(k)(i) of the Disclosure Schedule. Each item of Business Intellectual Property and In-Licensed Intellectual Property owned or used by Seller immediately prior to the Closing will be owned or available for use by Buyer on identical 15 terms and conditions immediately subsequent to the Closing, assuming, in each case, the execution and delivery by each Party and other Person identified in Section 3(c) of the Disclosure Schedule, as necessary, of each agreement, document or instrument required by any Governmental Entity or other Persons identified in Section 3(c) of the Disclosure Schedule to effect the transfer of such Business Intellectual Property or In-Licensed Intellectual Property from Seller to Buyer. Except as set forth in Section 3(k)(i) of the Disclosure Schedule, Seller has taken commercially reasonable actions to maintain and protect all current federal registrations or applications pertaining to any of the Business Intellectual Property necessary for the operation of the Business in the manner conducted by Seller during the four (4) month period immediately preceding January 1, 2003 and has filed the foreign registrations or applications pertaining to the Business Intellectual Property listed on Annex I. (ii) Seller follows reasonable commercial practices to protect its proprietary and Confidential Information, including requiring its employees, consultants and agents (in accordance with reasonable commercial practice) to be bound in writing by obligations of confidentiality and non-disclosure, and requiring its employees, consultants and agents (in accordance with reasonable commercial practice) to assign to it any and all inventions and discoveries and other Intellectual Property conceived, reduced to practice, developed or discovered by such employees, consultants and/or agents made within the scope of, and during their employment (to the extent permitted by law) pursuant to written agreements executed by each such employee, consultant or agent, and only disclosing proprietary and confidential information to third parties pursuant to written confidentiality and non-disclosure agreements, except where the failure to protect Seller's proprietary or Confidential Information would not have or be reasonably expected to have a Material Adverse Effect. (iii) To Seller's Knowledge, after reasonable investigation, the conduct of the Business by Seller has not and as of the Closing Date, will not interfere with, infringe upon, misappropriate, or otherwise come into conflict with any Intellectual Property rights of any third parties, and Seller, except as set forth in Section 3(k)(iii) of the Disclosure Schedule, has never received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or other conflict (including any claim or written notice that Seller must license or refrain from using any Intellectual Property rights of any Person) and Seller is not aware of any Basis for the same. Except as set forth in Section 3(k)(iii) of the Disclosure Schedule, to the Knowledge of Seller, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Business Intellectual Property, and no licensee or sublicensee of Seller has provided Seller with any information of any of the foregoing by such licensee or sublicensee in connection with such licensee's or sublicensee's practice of any Business Intellectual Property licensed or sublicensed to it by Seller (iv) Annex I attached hereto identifies each patent, trademark or copyright registration that has been issued to Seller with respect to any of the Business Intellectual Property and each pending patent, trademark or copyright application or registration that Seller has made with respect to any of the Business Intellectual Property (collectively, the "Registered Business Intellectual Property"). Section 3(k)(iv) of the Disclosure Schedule identifies each license, sublicense and agreement that Seller has granted to any third party with respect to any of the Business Intellectual Property. Seller has made available to Buyer correct and complete copies of all such patents, registrations, patent, trademark and copyright applications, licenses, sublicenses and agreements (as amended to date) and has made available to Buyer correct and complete copies of all other material written documentation evidencing ownership and prosecution (if applicable) of each such item. Annex I attached hereto also identifies each material unregistered trademark, material unregistered service mark, trade name, corporate name or Internet domain 16 name, computer software item (other than commercially available off-the-shelf software purchased or licensed) and each material unregistered copyright used by Seller in connection with the Business. Except as otherwise set forth in Section 3(k)(iv) of the Disclosure Schedule, with respect to each item of the Business Intellectual Property, including the Registered Business Intellectual Property, identified on Annex I: (A) Seller owns and possesses all right, title, and interest in and to the item, free and clear of any Lien, license, or, to Seller's Knowledge, other restriction or limitation regarding use or disclosure, except as provided in the terms of the applicable application, registration, license, sublicense or agreement; (B) the item is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; (C) Seller has paid the registration, maintenance and renewal fees (if applicable) related to the Business Intellectual Property and the Registered Business Intellectual Property as indicated on Annex I attached hereto; (D) to Seller's Knowledge, no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or is threatened which challenges the legality, validity, enforceability, use, or ownership of the item, other than Proceedings by the United States Patent and Trademark Office (and corresponding foreign bodies) with respect to the prosecution of the patent and trademark applications; (E) Seller has never agreed to indemnify any Person for or against any interference, infringement, misappropriation, or other conflict with respect to the item; and (F) to Seller's Knowledge, after reasonable investigation, no loss or expiration of the item is threatened, pending, or reasonably foreseeable, except for patents expiring at the end of their statutory terms (and not as a result of any act or omission by Seller, including without limitation, a failure by Seller to pay any required maintenance fees). (v) Section 3(k)(v) of the Disclosure Schedule identifies each item of Intellectual Property that any third party owns and that Seller uses or holds for use in the Business as currently conducted and pursuant to license, sublicense, agreement, or permission (the "In-Licensed Intellectual Property"). Seller has delivered to Buyer correct and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date) and represents that, to Seller's Knowledge, there are no blocking patent rights or similar intellectual property rights owned or controlled by any Affiliate of the Seller, affecting the manufacture, distribution, marketing or sale of the Products or that has a Material Adverse Effect on the Business. With respect to each item of In-Licensed Intellectual Property, Seller has not granted any sublicense or similar right with respect to the license, sublicense, agreement, or permission. With respect to each item of In-Licensed Intellectual Property: (A) to Seller's Knowledge, after reasonable investigation, the license, sublicense, agreement, or permission covering the item is valid, binding, enforceable, and in full force and effect; 17 (B) to Seller's Knowledge, after reasonable investigation, the license, sublicense, agreement, or permission will continue to be valid, binding, enforceable, and in full force and effect on identical terms following consummation of the transactions contemplated hereby, assuming, in each case, the execution and delivery by each Party and other Person identified in Section 3(c) of the Disclosure Schedule, as necessary, of each agreement, document or instrument required by any Governmental Entity or other Persons identified in Section 3(c) of the Disclosure Schedule to effect the transfer of such In-Licensed Intellectual Property from Seller to Buyer; (C) to Seller's Knowledge, after reasonable investigation, no party to the license, sublicense, agreement, or permission is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration thereunder; (D) Seller has not repudiated any provision of any license, sublicense, agreement, or permission and, to Seller's Knowledge, after reasonable investigation, no other party to such license, sublicense, agreement, or permission has repudiated any provision thereof; (E) to Seller's Knowledge, after reasonable investigation, the underlying item of Intellectual Property is not subject to any outstanding attachment, injunction, judgment, order, decree, ruling, or charge; and (vi) Seller has complied in all material respects with and is presently in compliance in all material respects with all foreign, federal, state, local, governmental (including, but not limited to, the FDA, the Federal Trade Commission and State Attorneys General), administrative or regulatory laws, regulations, guidelines and rules applicable to any Business Intellectual Property and the conduct of the Business and Seller shall take all steps reasonably necessary to ensure such compliance until the Closing. (l) Contracts. Seller has delivered or made available to Buyer a correct and complete copy of each Contract (as amended to date) set forth on Annex C attached hereto. Except as set forth in Section 3(l) of the Disclosure Schedule, the Contracts set forth on Annex C attached hereto constitute all of the contracts and agreements (other than the Leases, the Employment Agreements, the Stay Agreements and the agreements pertaining solely to the Excluded Assets or the Excluded Liabilities) necessary for or material to the operation of the Business in substantially the same manner as operated by Seller during the four (4) month period immediately preceding January 1, 2003. Except as set forth in Section 3(l) of the Disclosure Schedule, with respect to each Contract set forth on Annex C attached hereto: (i) such Contract is valid, binding upon and enforceable against Seller and, to Seller's Knowledge, the other parties thereto and in full force and effect; (ii) such Contract (but only to the extent it is also listed on Annex A attached as of the date hereof and is not an Additional Contract) will continue, to Seller's Knowledge, to be valid, binding upon and enforceable against the parties thereto (other than Seller) and in full force and effect on identical terms following the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in Section 2 above) to the same extent as immediately prior to the Closing, assuming in each case, the execution and delivery of each consent required pursuant to Section 3(c), as set forth in Section 3(c) of the Disclosure Schedule; (iii) neither Seller nor, to Seller's Knowledge, after reasonable investigation, any other party is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under such Contract; and (iv) neither Seller nor, to Seller's Knowledge, any other party has repudiated any provision of any Contract or provided the other party with any default notice. 18 (m) Powers of Attorney. There are no outstanding powers of attorney executed on behalf of Seller, other than to outside patent counsel and their foreign agents listed in Section 3(m) of the Disclosure Schedule. (n) Insurance. The Acquired Assets are insured to the extent described in the insurance policies disclosed in Section 3(n) of the Disclosure Schedule. Said insurance policies and arrangements are in full force and effect, all premiums currently due with respect thereto have been paid, and Seller is in compliance in all material respects with the terms of such policies. There is no claim by Seller pending under any such policies as to which coverage has been questioned, denied or disputed by the insurer. Each such insurance policy shall continue to be in full force and effect through the date of the Closing. To the Knowledge of Seller, such policies of insurance are of the type and in amounts customarily carried by Persons conducting business similar to that of the Business. (o) Product Liability. Seller does not have any Liability (and there is no Basis for any present or, to the Knowledge of Seller, future Proceeding against Seller giving rise to any Liability) arising out of any personal injury and/or death or damage to property relating to or arising in connection with the Products. The Product Liability Insurance has covered all clinical and pharmacokinetic trials with respect to the Products. (p) Real Property Used in the Business. The Leased Real Property identified in Section 3(p) of the Disclosure Schedule (the "Real Property") comprises all of the real property used or intended to be used in, or otherwise related to, the Business. Seller does not have any Owned Real Property. (q) Suppliers. No material supplier of the Business has indicated that it shall stop, or materially decrease the rate of, supplying materials, products or services to the Business. (r) Regulatory Matters. (i) Seller is in material compliance with all applicable laws, rules and regulations of the United States or any applicable foreign jurisdiction, including of the FDA or similar foreign governmental authority ("Foreign Authorities") with respect to the manufacture, sale, labeling, storing, testing, distribution, promotion and marketing of the Products. Seller has all requisite permits, approvals, registrations, licenses or the like from the FDA or Foreign Authorities to conduct the Business as currently operated by Seller. Seller has previously delivered or made available to Buyer an index of all applications, approvals, registrations, licenses or the like obtained by Seller from the FDA and Foreign Authorities or required from Seller in connection with the conduct of the Business in substantially the same manner as currently conducted by Seller. (ii) Seller has made available to Buyer all written communications and oral communications to the extent reduced to written or other tangible form between Seller and the FDA or Foreign Authorities from the date each NDA was initially filed through the date hereof. Seller shall promptly deliver or make available to Buyer copies of all written communications and information (and records regarding all oral communications reduced to written form), between Seller and the FDA or Foreign Authorities from the date hereof through and after the Closing Date. Seller is not in receipt of notice of, and, to its Knowledge, after reasonable investigation, is not subject to, any adverse inspection, finding of deficiency, finding of non-compliance, compelled or voluntary recall, investigation, penalty for corrective or remedial action or other compliance or enforcement action, in each case relating to the Products or to the facilities in which the Products are manufactured, collected or handled, by the FDA or Foreign Authorities. There are no pending or, to the Knowledge of Seller, threatened, Proceedings or complaints by 19 the FDA or Foreign Authorities which would prohibit or impede the conduct of the Business in substantially the same manner as currently conducted by Seller. (iii) Seller has not made any material false statements on, or material omissions from, the applications, approvals, reports and other submissions to the FDA or Foreign Authorities prepared or maintained to comply with the requirements of the FDA or Foreign Authorities. (iv) Seller has not received any notification, written or oral, that remains unresolved, from Foreign Authorities, the FDA or other Governmental Entities indicating that any Products are misbranded or adulterated as defined in the U.S. Food, Drug & Cosmetic Act, 21 U.S.C. 321, et seq., as amended, and the rules and regulations promulgated thereunder or any similar law, rule or regulation, whether under the jurisdiction of the FDA or any similar Foreign Authority applicable to Seller. (v) Seller has not committed any act, made any statement or failed to make any statement that would breach the FDA's policy with respect to "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities" set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar laws, rules or regulations, whether under the jurisdiction of the FDA or any Foreign Authority, and any amendments or other modifications thereto. Neither Seller nor, to the Knowledge of Seller, any Officer, key employee or agent of Seller has been convicted of any crime or engaged in any conduct that would reasonably be expected to result in (i) debarment under 21 U.S.C. Section 335a or any similar state or foreign law or regulation or (ii) exclusion under 42 U.S.C. Section 1320a-7 or any similar state or foreign law or regulation, and neither Seller nor any such Person has been so debarred or excluded. (s) Affiliate Transactions. Except as set forth in Section 3(s) of the Disclosure Schedule, no officer, director or employee of Seller, or, to Seller's Knowledge after reasonable investigation, shareholder or Affiliate of Seller or any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, is, or has been in the past twelve (12) months, a party to any agreement, contract, arrangement, commitment or transaction with respect to the Acquired Assets or the Business or has any material interest in any Acquired Asset or the Business. (t) Product Safety. Seller has made available to Buyer all material information in Seller's possession regarding the safety, efficacy and toxicity of the Products. (u) Disclosure. The representations and warranties contained in this Section 3 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 3 not misleading. Except for the representations and warranties contained in this Agreement or any certificate or instrument delivered pursuant to this Agreement, Seller makes no other representation or warranty as to any fact or matter, and no Party shall be entitled to rely upon any such other representation or warranty. 4. Buyer's Representations and Warranties. Buyer represents and warrants to Seller that the statements contained in this Section 4 are correct and complete as of the date hereof and will be correct and complete as of the Closing Date (as though then made and as though the Closing Date were substituted for the date of this Agreement throughout Section 4). (a) Organization of Buyer. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation with full power and authority to own 20 or lease its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is conducted by it. (b) Authorization of Transaction. Buyer has full power and authority to execute and deliver this Agreement and each agreement, document and instrument to be executed and delivered by it pursuant to or contemplated by this Agreement and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and each such other agreement, document and instrument by Buyer has been duly authorized by all necessary corporate action of Buyer, and no other action on the part of Buyer is required to authorize the same. This Agreement and each agreement, document and instrument to be executed and delivered by Buyer pursuant to or as contemplated by this Agreement constitute, or when executed and delivered by Buyer will constitute, the valid and legally binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms and conditions, except as the same may be limited by the Bankruptcy and Equity Exception. (c) No Conflict. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in Section 2 above), will (i) violate in any material respect, any statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Entity to which Buyer is, or its assets or properties are, subject, (ii) contravene, conflict with or result in a material breach or violation of any provision of the charter or bylaws of Buyer, each as amended to date, (iii) conflict with, result in a material breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets is subject or (iv) result in the imposition of any Lien upon any of its assets. Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Entity or any other Person in order for the Parties to consummate the transactions contemplated by this Agreement (including the assignments and assumptions referred to in Section 2 above). There is no Proceeding pending, or to the Knowledge of Buyer, threatened against Buyer that challenges, or may have the effect of presenting, delaying, making illegal or otherwise interfering with the transactions contemplated by this Agreement. (d) Brokers' Fees. Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Seller could become liable or obligated. 5. Pre-Closing Covenants. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing. (a) General. Each of the Parties will use its commercially reasonable efforts to take all actions and to do all things reasonably necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the Closing conditions set forth in Section 6 below, which such Party is required to satisfy hereby). (b) Notices and Consents. Seller will give any notices to third parties, and Seller will use its commercially reasonable efforts to obtain any third party consents, set forth in Section 3(c) of the Disclosure Schedule. Each of the Parties will give any notices to, make any filings with, and use its commercially reasonable efforts to obtain any authorizations, consents, and approvals of Governmental Entities in connection with the matters referred to in Section 3(c) and Section 4(c) above. (c) Operation of Business. Except as contemplated by this Agreement, Seller will not engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of 21 Business. Without limiting the generality of the foregoing, Seller will not engage in any practice, take any action, or enter into any transaction of the sort described in Section 3(g) above without Buyer's written consent. (d) Preservation of Business. Seller will use its commercially reasonable efforts to keep the Business substantially intact, including its present operations, physical facilities, working conditions, insurance policies, and relationships with lessors, licensors, suppliers and customers. (e) Full Access. Seller will (and will cause its officers, directors, employees, attorneys, accountants, advisors and other agents to and will use commercially reasonable efforts to cause its Affiliates to) permit representatives of Buyer to have full and complete access, during normal business hours and with reasonable notice to all premises, properties, personnel, books, records (including Tax records), contracts, and documents related to the Business; provided, however, that prior to Closing, Buyer shall not be provided with (i) copies of Seller's formulation data for Enjuvia (which have been provided to Buyer's intellectual property counsel pursuant to the terms of a confidentiality and non-disclosure agreement), or (ii) samples of Enjuvia or analytical methods. (f) Notice of Developments. Each Party will give prompt written notice to the other Party of any material adverse development causing an inaccuracy in or breach of any of its own representations and warranties in Section 3 and Section 4 above. Seller shall have the continuing obligation to supplement promptly and amend the Disclosure Schedule as necessary or appropriate with respect to any matter arising or discovered after the date of this Agreement, which, if existing and known on the date of this Agreement, would have been required to be set forth or described in the Disclosure Schedule. Notwithstanding the foregoing, if Buyer elects to proceed with the Closing, Buyer shall be deemed to have waived the right thereafter to assert any claim hereunder with respect to any matter specifically and accurately disclosed by Seller in such supplemental or amended disclosure. (g) Exclusivity. Seller agrees that it and its representatives, officers, directors, agents, stockholders or Affiliates (all such persons and entities, the "Company Group") shall not, directly or indirectly, initiate, solicit, entertain, negotiate, accept or discuss any proposal or offer (an "Acquisition Proposal") to provide financing to Seller or to acquire all or any significant part of Seller, whether by merger, purchase of stock, purchase of assets, tender offer or otherwise (a "Third Party Acquisition"), or provide any nonpublic information to any third party in connection with an Acquisition Proposal or a Third Party Acquisition, or enter into any agreement, arrangement or understanding requiring Seller to abandon, terminate or fail to consummate the transactions contemplated under this Agreement. Seller shall (i) immediately notify Buyer if any member of the Company Group receives any indication of interest, request for information or offer in respect of an Acquisition Proposal, (ii) communicate to Buyer in reasonable detail the terms of any such indication, request or proposal, and (iii) provide Buyer with copies of all written communications relating to any such indication, request or proposal. Seller represents that no member of the Company Group is party to or bound by any agreement with respect to an Acquisition Proposal or a Third Party Acquisition other than under this Agreement and the members of the Company Group have terminated all discussions with third parties (other than Buyer) regarding Acquisition Proposals or Third Party Acquisitions. Seller shall use its commercially reasonable efforts to cause each other member of the Company Group to comply with the provisions of this Section 5(g). In the event that Seller breaches the provisions of this Section 5(g) and the transactions contemplated hereby are not consummated for any reason (other than as a direct result of a breach of this Agreement by Buyer in the absence of any breach of this Agreement by Seller), Seller shall promptly return $500,000 of the Deposit Amount to Buyer. (h) Confidentiality. The provisions of the Confidential Disclosure Agreement entered into between Barr Laboratories, Inc. and Seller on June 6, 2003, shall continue in full force and effect in 22 accordance with its terms until the Closing, and shall terminate and be of no further force and effect upon the consummation of the transactions contemplated hereby. (i) Product Liability Insurance. On or prior to the Closing Date, Seller shall cause the Product Liability policy described on Annex J attached hereto (the "Product Liability Insurance") to name Buyer as an additional insured with respect thereto, effective as of the Closing, at Buyer's sole cost and expense. 6. Conditions to Obligation to Close. (a) Conditions to Buyer's Obligation. Buyer's obligation to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3 above shall be true and correct at and as of the date hereof and true and correct in all material respects at and as of the Closing Date, except to the extent that such representations and warranties (x) speak as of an earlier date or (y) are qualified by terms such as "material", "Material Adverse Change" and "Material Adverse Effect", in which case such representations and warranties shall, disregarding all qualifications and exceptions contained therein as to the "materiality", "Material Adverse Change" and "Material Adverse Effect", be true and correct in all respects at and as of the Closing Date, except for any inaccuracies which, individually or in the aggregate, are not material or have not had, or would not be reasonably likely to have, a Material Adverse Effect; (ii) Seller shall have performed and complied with all of its covenants hereunder that are required to be performed or complied with prior to the Closing Date in all material respects, except to the extent that such covenants are qualified by terms such as "material" and "Material Adverse Effect", in which case Seller shall have performed and complied with all of such covenants in all respects; (iii) Seller shall have procured all of the third party consents specified in Section 3(c) above; (iv) no Proceeding shall be pending or threatened before any court or Governmental Entity or before any arbitrator involving Seller wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect adversely and materially the right of Buyer to own the Acquired Assets and to operate the Business (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (v) Seller shall have delivered to Buyer a certificate to the effect that each of the conditions specified above in Section 6(a)(i) through (iv) is satisfied in all respects; (vi) Seller shall have delivered to Buyer all authorizations, consents, and approvals of Governmental Entities referred to in Section 3(c) above; (vii) Seller shall have delivered to Buyer forms of assignment of all patents, trademarks, service marks and copyrights and applications for any of the foregoing included in the Registered Business Intellectual Property suitable for recordation in the relevant U.S. or foreign government offices, and shall have taken all actions reasonably necessary to transfer to Buyer any domain name registrations included in the Business Intellectual Property; 23 (viii) Buyer shall have received from Paul, Hastings, Janofsky & Walker LLP, counsel to Seller, an opinion with respect to the matters set forth in Exhibit V attached hereto, which shall be addressed to Buyer, and dated as of the Closing Date. (ix) Each of Seller and the Escrow Agent shall have executed and delivered the Escrow Agreement. (x) There shall not have occurred since the date hereof any event, circumstance or change that has had or would reasonably be expected to have a Material Adverse Effect other than any such event, circumstance or change that was disclosed to Buyer in writing by Seller on the date hereof. (xi) All actions to be taken by Seller in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Buyer; (xii) Seller shall have delivered to Buyer copies of the Certificate of Incorporation of Seller certified on or within seven (7) days before the Closing Date by the Secretary of State of Delaware; (xiii) Buyer shall have been named as an additional insured with respect to the Product Liability Insurance and Seller shall have delivered documentation to that effect in form and substance satisfactory to Buyer; (xiv) Seller shall have delivered to Buyer copies of the certificate of good standing of Seller issued on or within seven (7) days before the Closing Date by the Secretary of State of Delaware; (xv) Seller shall have executed and delivered the Transitional Services Agreement substantially in the form attached hereto as Exhibit VIII; (xvi) Seller shall have delivered to Buyer the audited financial statements of Seller for the year ended December 31, 2002 and unaudited financial statements of Seller for the ten months ended October 31, 2003; and (xvii) Seller shall have delivered to Buyer a certificate of the secretary or an assistant secretary of Seller, dated the Closing Date, in form and substance reasonably satisfactory to Buyer, as to (i) no amendments to the Certificate of Incorporation of Seller since the date of certification contemplated in clause (xiv) above; (ii) the bylaws (or other organizational documents) of Seller; (iii) the resolutions of the board of directors of Seller authorizing the execution, delivery, and performance of this Agreement and the transactions contemplated hereby; and (iv) incumbency and signatures of the officers of Seller executing this Agreement or any other agreement contemplated by this Agreement. Buyer may waive any condition specified in this Section 6(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Seller's Obligation. Seller's obligation to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: 24 (i) the representations and warranties set forth in Section 4 above shall be true and correct at and as of the date hereof and true and correct in all material respects at and as of the Closing Date, except to the extent that such representations and warranties (x) speak as of an earlier date or (y) are qualified by terms such as "material", "Material Adverse Change" and "Material Adverse Effect", in which case such representations and warranties shall, disregarding all qualifications and exceptions contained therein as to the "materiality", "Material Adverse Change" and "Material Adverse Effect", be true and correct in all respects at and as of the Closing Date, except for any inaccuracies which, individually or in the aggregate, are not material or have not had, or would not be reasonably likely to have, a Material Adverse Effect; (ii) Buyer shall have performed and complied with all of its covenants hereunder that are required to be performed and complied with prior to the Closing Date in all material respects, except to the extent that such covenants are qualified by terms such as "material" and "Material Adverse Effect", in which case Buyer shall have performed and complied with all of such covenants in all respects; (iii) no Proceeding shall be pending or threatened before any court or Governmental Entity or before any arbitrator involving Buyer wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (iv) Buyer shall have delivered to Seller a certificate to the effect that each of the conditions specified above in Section 6(b)(i) through (iii) is satisfied in all respects; (v) Buyer and the Escrow Agent shall have executed and delivered the Escrow Agreement; (vi) Buyer shall have executed and delivered the Transitional Services Agreement substantially in the form attached hereto as Exhibit VIII; and (vii) all actions to be taken by Buyer in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Seller. Seller may waive any condition specified in this Section 6(b) if it executes a writing so stating at or prior to the Closing. 7. Termination. (a) Termination of Agreement. Certain of the Parties may terminate this Agreement as provided below: (i) Buyer and Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) Buyer may terminate this Agreement by giving written notice to Seller at any time prior to the Closing (A) in the event Seller has breached any representation, warranty or covenant contained in this Agreement in any material respect, Buyer has notified Seller of the 25 breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach or (B) if the Closing shall not have occurred on or before December 12, 2003 by reason of the failure of any condition precedent under Section 6(a) hereof (unless the failure results primarily from Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and (iii) Seller may terminate this Agreement by giving written notice to Buyer at any time prior to the Closing (A) in the event Buyer has breached any representation, warranty or covenant contained in this Agreement in any material respect, Seller has notified Buyer of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach or (B) if the Closing shall not have occurred on or before December 12, 2003 by reason of the failure of any condition precedent under Section 6(b) hereof (unless the failure results primarily from Seller itself breaching any representation, warranty, or covenant contained in this Agreement). (b) Effect of Termination. In the event of the termination of this Agreement as provided above, this Agreement shall forthwith become void and of no further force and effect, except that the covenants and agreements set forth in the last sentence of Section 5(g) and in Sections 1, 7(b), 10(b), 10(c), 10(e), 10(f), 10(g), 10(h), 10(i), 10(j), 10(k), 10(l), 10(m), 10(n) and 10(o) shall survive such termination indefinitely, and except that nothing in this Section 7(b) shall be deemed to release any Party from any Liability for any breach by such Party of the terms and provisions of this Agreement or to impair the right of any Party to compel specific performance by another Party of its obligations under this Agreement. 8. Remedies for Breaches of This Agreement. (a) Survival of Representations and Warranties. All of the representations and warranties of Seller contained in Section 3 of this Agreement or in any certificate or instrument delivered to Buyer pursuant to this Agreement shall survive the Closing and continue in full force and effect until the twelve (12) month anniversary of the Closing Date. All of the representations and warranties of Buyer contained in Section 4 of this Agreement or in any certificate or instrument delivered pursuant to this Agreement shall survive the Closing and continue in full force and effect until the twelve (12) month anniversary of the Closing Date. (b) Indemnification Provisions for Buyer's Benefit. Subject to the terms and conditions of this Section 8(b), Seller shall indemnify Buyer and each of its officers, directors, agents, and each Person, if any, who controls Buyer within the meaning of the Securities Act (each a "Buyer Indemnified Party" and collectively, the "Buyer Indemnified Parties") in respect of, and hold them harmless against, any and all debts, obligations and other Liabilities, monetary damages, fines, fees, penalties, interest obligations, deficiencies, losses and expenses (including without limitation reasonable amounts paid to enforce the provisions of this Section 8 and amounts paid in settlement, interest, court costs, costs of investigators, reasonable fees and out-of-pocket expenses of attorneys, accountants, financial advisors and other experts, and other reasonable expenses of litigation) (collectively, "Damages") incurred or suffered by any of the foregoing parties resulting from, relating to or constituting: (i) any fraud, misrepresentation or breach of warranty of Seller contained in this Agreement (including any fraud, misrepresentation or breach of warranty deemed to have been made by the delivery of any certificate or instrument delivered pursuant to this Agreement), or any Proceeding asserted or instituted arising out of any matter constituting fraud or a breach of such representations or warranties (including any fraud or breach of any representations or 26 warranties deemed to have been made by the delivery of any certificate or instrument delivered pursuant to this Agreement); (ii) any breach by Seller of any of its covenants under this Agreement; (iii) any Proceeding asserted or instituted against Buyer, or any of its properties or assets, by any third party for damages suffered by such third party by reason of or resulting from (A) any Excluded Liability, (B) the ownership or operation of the Business prior to the Closing or the Excluded Assets, or (C) any actions taken or omitted to be taken by Seller prior to the Closing (other than Assumed Liabilities); (iv) any Excluded Liability or Excluded Asset. (c) Limitations to Indemnification Obligation. Notwithstanding anything to the contrary contained in Section 8(b), Seller shall not have any obligation to indemnify any Buyer Indemnified Party: (i) until the Buyer Indemnified Parties have suffered Damages for which Seller would otherwise have (but for the provisions of this Section 8(c)) an indemnification obligation in excess of $348,650 (the "Basket"), in which case, Seller shall only be liable for all such Damages in excess of the Basket; (ii) for any Damages for which Seller would otherwise have an indemnification obligation, to the extent that Seller has previously indemnified Buyer Indemnified Parties for Damages in the aggregate amount equal to the Indemnity Escrow Amount; (iii) for any Damages incurred as a result of, or arising out of, an inaccurate representation or breach of warranty, or breach or nonperformance of any covenant made by Seller in this Agreement (including any inaccurate representation or breach of any warranty deemed to have been made by delivery of any certificate or instrument pursuant to this Agreement) to the extent that Buyer had Knowledge of the same prior to the Closing Date through the delivery by Seller of the Disclosure Schedule or a supplemental or amended disclosure pursuant to Section 5(f) hereof; or (iv) for any indemnification obligation for which Buyer fails to notify Seller pursuant to Section 8(e) on or prior to the twelve (12) month anniversary of the Closing; provided, however, that the limitations contained in clauses (i) and (ii) above shall not apply to indemnification claims (x) involving fraud, intentional misrepresentation or deliberate or willful material breach and (y) pursuant to Sections 8(b)(iii) and 8(b)(iv) above. (d) Indemnification Provisions for Seller's Benefit. Buyer shall indemnify Seller and each of its officers, directors, agents, and each Person, if any, who controls Seller within the meaning of the Securities Act (each a "Seller Indemnified Party" and collectively, the "Seller Indemnified Parties") in respect of, and hold them harmless against, any and all Damages incurred or suffered by any of the foregoing parties resulting from, relating to or constituting: (i) any fraud, misrepresentation or breach of warranty of Buyer contained in this Agreement (including any fraud, misrepresentation or breach of warranty deemed to have been made by the delivery of any certificate or instrument delivered pursuant to this Agreement), or any Proceeding asserted or instituted arising out of any matter constituting fraud or a breach of 27 such representations or warranties (including any fraud or breach of any representations or warranties deemed to have been made by the delivery of any certificate or instrument delivered pursuant to this Agreement); (ii) any breach by Buyer of any of its covenants under this Agreement; (iii) any Proceeding asserted or instituted against Seller, or any of Seller's properties or assets, by any third party for damages suffered by such third party by reason of or resulting from (A) any Assumed Liability or (B) the ownership or operation of the Acquired Assets or the Business after the Closing including, without limitation, the sale, labeling, storing, testing, distribution, promotion and marketing of any Products after the Closing; (iv) any Assumed Liability; or (v) any Liability of Seller for any Tax that arises due to the nature of the transaction contemplated hereby being structured as an asset sale rather than a stock sale, including, but not limited to, all federal, state and local income taxes, all transfer, documentary, sales, use, stamp, registration and other such taxes, all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with the transfer of the Acquired Assets and the Business and any Liability arising out of or related to Buyer's allocation of the Purchase Price pursuant to Section 2(f). (e) Procedures. (i) Notice. Any Party seeking indemnification under this Agreement (the "Delivering Party") shall deliver notice (each, an "Indemnification Notice") thereof to the other Party with a copy to the Escrow Agent. Such notice shall (A) be signed by an officer of the Delivering Party, (B) shall identify the particular section of this Agreement containing the inaccurate representation, or the warranty or covenant that has been breached or not performed, which gives rise to such indemnification obligation, and (C) specify, in reasonable detail, the nature, underlying facts, and, to the extent determinable at the time of such Indemnification Notice, the dollar amount or a good faith approximation thereof (an "Indemnification Claim Amount") of any claim for indemnification (an "Indemnification Claim") it may have. Each Party may make more than one Indemnification Claim with respect to any underlying state of facts. (ii) Counter Notice. Within thirty (30) calendar days of receipt of an Indemnification Notice, the Party receiving such Notice (the "Receiving Party") shall deliver to the Delivering Party a notice (a "Counter Notice") with a copy to the Escrow Agent, signed by an officer of the Receiving Party, setting forth (A) the Receiving Party's acquiescence to, or rejection of, the Indemnification Claim in its totality, or of its partial acceptance of the Indemnification Claim, (B) specifying that part of the Indemnification Claim to which acquiescence is made and that part which is rejected, (C) as to each part of the Indemnification Claim which is rejected, specifying whether the Receiving Party rejects its obligation to indemnify the Delivering Party in respect thereof, whether the Receiving Party accepts its indemnification obligation, but rejects the amount of the Indemnification Claim or both, and (D) setting forth in reasonable detail the nature of and the facts underlying the rejection of any part of the Indemnification Claim. (iii) Accepted Indemnification Claims. Any Indemnification Claim or portion of any Indemnification Claim which is not disputed in a Counter Notice timely delivered or which is accepted in such Counter Notice or deemed to be accepted pursuant to the immediately following sentence (each such claim, an "Accepted Claim") shall be paid in accordance with Section 8(f). 28 Failure by any Receiving Party to deliver a Counter Notice in the manner and within the period prescribed in Section 8(e)(ii) shall be deemed to be an acceptance of the validity of the Indemnification Claim or Indemnification Claims set forth in such Notice and a waiver of any right to contest the validity or amount of such Indemnification Claim. (iv) Unresolved Indemnification Claims. If the Parties are not able to resolve their differences as to the portion of any Indemnification Claim which is unresolved within forty five (45) calendar days of receipt by the Delivering Party of the Counter Notice, either Party may submit the dispute to binding arbitration in accordance with Section 10(o) of this Agreement. With respect to that portion of any such unresolved claim that is determined in a final and binding order or judgment by the arbitrator in favor of a Buyer Indemnified Party or a Seller Indemnified Party, such claim shall be deemed an Accepted Claim and paid in accordance with Section 8(f). (f) Manner of Payment. (i) Subject to Section 8(e), any indemnification obligations of Seller pursuant to Section 8(b) shall first be satisfied out of the Indemnity Escrow Account to the extent thereof and thereafter shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable Buyer Indemnified Party within 15 days after the determination thereof. (ii) Subject to Section 8(e), any indemnification obligations of Buyer pursuant to Section 8(d) shall be paid by wire transfer of immediately available funds to an account designated in writing by the applicable Seller Indemnified Party within 15 days after the determination thereof. (g) Instructions to Escrow Agent. On or after the date an Indemnification Claim by a Buyer Indemnified Party becomes an Accepted Claim in accordance with Sections 8(e)(iii) or 8(e)(iv), Buyer and Seller shall direct the Escrow Agent by issuing joint written instructions to release and deliver to such Buyer Indemnified Party cash from the Indemnity Escrow Account in satisfaction of such claim in accordance with this Agreement and the Escrow Agreement. The amount of cash released and delivered to such Buyer Indemnified Party from the Indemnity Escrow Account shall be the aggregate amount of Damages incurred by such Buyer Indemnified Party as specified in such Accepted Claim. (h) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the other Party (the "Indemnifying Party") under this Section 8, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. (ii) The Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within fifteen (15) days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Damages the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified 29 Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests or the reputation of the Indemnified Party, (E) no conflict of interest exists between the Indemnifying Party and the Indemnified Party, and (F) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. (iii) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 8(h)(ii) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably). (iv) In the event any of the conditions in Section 8(h)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), (B) the Indemnifying Party will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses), and (C) the Indemnifying Party will remain responsible for any Damages the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 8. (i) Reduction for Insurance. The amount of any payment to any Buyer Indemnified Party, Seller Indemnified Party or Indemnified Party pursuant to this Section 8 shall be reduced by the amount of any insurance proceeds actually received by or on behalf of such party in reduction of the related indemnifiable loss. A Buyer Indemnified Party, Seller Indemnified Party or Indemnified Party which subsequently receives insurance proceeds in respect of the related indemnifiable loss shall pay to Seller, Buyer or the Indemnifying Party, as applicable, an amount of such insurance proceeds actually received equal to the amount Seller, Buyer or the Indemnifying Party, as the case may be, has paid the Buyer Indemnified Party, Seller Indemnified Party or Indemnified Party, as applicable, in respect of such indemnifiable loss. (j) Exclusive Remedy. The Parties acknowledge and agree that the foregoing indemnification provisions shall be the exclusive remedy of the Seller Indemnified Parties and the Buyer Indemnified Parties with respect to the transactions contemplated by this Agreement; provided, that this Section 8(j) shall not prohibit or in any way restrict a Seller Indemnified Party's or Buyer Indemnified Party's ability to seek an injunction, specific performance, or other equitable relief, and shall not apply to fraudulent or other similar actions on the part of any Party. (k) No Consequential Damages. Seller, Buyer or any Indemnifying Party shall not be liable to any Buyer Indemnified Party, Seller Indemnified Party or Indemnified Party, respectively, for consequential, enhanced, punitive or special damages unless such damages are included in a Third Party Claim and the Indemnified Party is liable to the third party claimant for such damages. 30 9. Post-Closing Covenants. (a) General. In case at any time after the Closing any further action is reasonably necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as the other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Section 8 above). Seller acknowledges and agrees that from and after the Closing, Buyer will be entitled to possession of all documents, books, records (including Tax records), agreements, and financial data of any sort relating to the Business or the Acquired Assets, including, without limitation, all Records (other than those pertaining solely to an Excluded Asset or an Excluded Liability); provided, however, that Seller may retain (i) copies of such documents, books, records, agreements, and financial data and (ii) originals of all quality documents, including batch records. (b) Registrations; Record Keeping; NDC Numbers. (i) On the Closing Date, the Parties shall file with the FDA all documents required to transfer each NDA from Seller to Buyer substantially in the form attached hereto as Exhibit VI. Seller shall prepare and file the documents required of a former owner, and Buyer shall prepare and file the documents required of a new owner. Until the Closing Date, Seller shall be responsible for all FDA reporting requirements. Thereafter, Buyer shall be responsible for all FDA reporting requirements. (ii) Promptly following the Closing Date, Buyer shall take any and all action necessary to change the National Drug Code ("NDC") number for the Products and promptly upon receipt of such new NDC number shall notify Seller in writing and request that Seller apply, or caused to be applied, such new NDC number to the Products. (c) Litigation Support. In the event and for so long as any Party actively is contesting or defending against any Proceeding in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Business, the other Party will cooperate with the contesting or defending Party and its counsel in the contest or defense, make available its personnel, and provide such testimony and access to its books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Section 8 below). (d) Transition. For a period of one (1) year following the Closing Date, (i) Seller will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of the Business from maintaining the same business relationships with Buyer after the Closing as it maintained with Seller prior to the Closing and (ii) Seller will refer all customer inquiries relating to the Business to Buyer. (e) Use of Seller's Labeling and NDC. From and after the Closing Date, Seller shall permit Buyer to use the labeling and NDC used by Seller with respect to the Products prior to the Closing (including the use of Seller's name on such labeling) on all shipments of the Products. (f) Confidentiality. After the Closing, Seller will treat and hold as such all of the Confidential Information, refrain from using any of the Confidential Information except in connection with this Agreement, and deliver promptly to Buyer or destroy, at the request and option of Buyer, all 31 tangible embodiments (and all extracts, summaries and copies) of the Confidential Information which are in its possession or control. In the event that Seller is requested or required (by oral question or request for information or documents in any legal Proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, Seller will notify Buyer promptly of the request or requirement so that Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 9(f). If, in the absence of a protective order or the receipt of a waiver hereunder, Seller is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal, Seller may disclose the Confidential Information to the tribunal; provided, however, that Seller shall use its commercially reasonable efforts to obtain, at the reasonable request of Buyer and at Buyer's sole expense, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as Buyer shall designate. Notwithstanding anything herein to the contrary, the Parties (and each Affiliate and Person acting on behalf of any such Party) agree that each Party (and each employee, representative, and other agent of such Party) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to such Party or such Person relating to such tax treatment and tax structure, except to the extent necessary to comply with any applicable federal or state securities laws. This authorization is not intended to permit disclosure of any other information including (without limitation) (i) any portion of any materials to the extent not related to the tax treatment or tax structure of the transaction, (ii) the identities of participants or potential participants in the transaction, (iii) the existence or status of any negotiations, (iv) any pricing or financial information (except to the extent such pricing or financial information is related to the tax treatment or tax structure of the transaction), or (v) any other term or detail not relevant to the tax treatment or the tax structure of the transaction. (g) Covenant Not to Compete. From the Closing Date until the first anniversary thereof, (i) Neither Seller nor any of the Officers shall engage directly or indirectly in the distribution, promotion, marketing, use or sale of the Products, or any pharmaceutical product which is the same as or substantially similar to any of the Products or has the same indications as any of the Products (a "Competing Product") in the United States or Canada, nor market, promote, supply, distribute or manufacture any Competing Products in the United States or Canada; provided, however, that no owner of less than 5% of the outstanding stock of any publicly traded corporation shall be deemed to engage solely by reason thereof in any activity restricted by this Section 9(g)(i). (ii) Neither Seller nor any of the Officers shall disclose, assign or otherwise transfer or authorize any third party to disclose, assign or otherwise transfer to any Person, whether located within or outside of the United States and Canada, any information regarding the Products, including, without limitation, the formulation or specifications for the Products or any other know-how relating to the manufacture or use of the Products, or to the manufacture of and the formulation and specifications for the active ingredients. (iii) If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 9(g) is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. 32 (h) Employee Termination and Payment. Seller shall pay to its employees and former employees all amounts necessary to satisfy its obligations for Severance Benefits, Disposition Bonuses, and Stay Bonuses in accordance with the terms of this Agreement, the Transitional Services Agreement, the Stay Agreements, the Employment Agreements and the Escrow Agreement and shall pay all payroll taxes associated with such payments. With respect to Seller's obligations to pay Severance Benefits and the Stay Bonuses, Seller shall pay such amounts to Seller's employees and former employees as set forth on Annex G attached hereto promptly after receiving distributions from the Bonus Escrow Account to make such payments. (i) Products Liability Insurance. Within five (5) days of the Closing, Seller shall obtain a five (5) year Extended Reporting Period under the Product Liability Insurance (the "New Product Liability Insurance") pursuant to the terms and conditions set forth in Section V.1c of the Product Liability Insurance. Seller shall cause Hays Companies to be named as a "broker of record" with respect to the New Product Liability Insurance after the New Product Liability Insurance is obtained. Seller shall take any further action (including the execution and delivery of any further instruments and documents) that may be reasonably necessary for Buyer to continue to be named as an additional insured with respect to the Products Liability Insurance until Buyer has been named as an additional insured with respect to the New Product Liability Insurance. Seller shall direct copies of all future correspondence relating to the Product Liability Insurance and the New Product Liability Insurance to Buyer. (j) Additional Contracts. For a period of up to sixty (60) days following the Closing, Buyer may elect to amend Annex A attached hereto to add any Contract of Seller to Annex A without the payment of additional consideration to Seller for such Contract (an "Additional Contract") and such Contract shall become an Acquired Asset hereunder and Buyer shall assume all Liabilities arising from and after the Closing under such Additional Contract. Seller agrees and covenants that Seller will promptly, without further consideration, execute, acknowledge and deliver such further instruments of sale, grant, transfer, contribution, assignment, conveyance, assumption and delivery and such consents, assurances, powers of attorney and other instruments and take such other actions as may reasonably be necessary in order to vest in Buyer all right, title and interest in and to any Additional Contract and to otherwise further effectuate and carry out the transactions contemplated by this Agreement and any related documents, including the retention by Seller of any Liabilities arising prior to the Closing under or incurred as a result of an action taken prior to the Closing by any party to such Additional Contract. Notwithstanding the foregoing, in no event shall Seller be required to pay any amounts to any Person in connection with performing it's obligations under this Section 9(j). (k) Directors' and Officers' Insurance. Seller shall obtain, and maintain for a period of at least three (3) years, a directors' and officers' insurance policy with reputable insurers in such coverage and in such scope and amount as is reasonable and customary in Seller's industry. (l) Documentation of Expenses. Seller shall provide written documentation to Buyer within two (2) business days following the Closing setting forth the actual payments made by Seller for operating expenses of the Business from October 26, 2003, through the earlier of November 26, 2003 and the Closing. 10. Miscellaneous. (a) Press Releases and Public Announcements. Except as is consistent with the form of press release attached hereto as Exhibit VII, neither Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its 33 publicly-traded securities (in which case the disclosing Party will use its commercially reasonable efforts to advise the other Party prior to making the disclosure); provided, further, that in no event shall any such press release or public announcement disclose any of the terms or conditions of this Agreement unless, in the opinion of counsel, such disclosure is reasonably required in order to satisfy any law, regulation or any listing or trading agreement concerning its publicly-traded securities. (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they relate in any way to the subject matter hereof. (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party; provided, however, that Buyer may, without Seller's prior written approval, (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and pledge its rights hereunder to its lenders (as collateral) and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). (e) Counterparts. This Agreement may be executed in one or more counterparts (including by means of facsimile), each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (f) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) when delivered personally to the recipient, (ii) one (1) business day after being sent to the recipient by reputable overnight courier service (charges prepaid), (iii) one (1) business day after being sent to the recipient by facsimile transmission or electronic mail, or (iv) four (4) business days after being mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid, and addressed to the intended recipient as set forth below: If to Seller: Endeavor Pharmaceuticals, Inc. 127 Racine Drive, Suite 202 Wilmington, NC 28403 Attention: R. Forrest Waldon Facsimile: (910) 790-9041 Copy to (which shall not constitute notice): 34 Paul, Hastings, Janofsky & Walker LLP 55 Second Street, Twenty-Fourth Floor San Francisco, CA 94105 Attention: Thomas R. Pollock, Esq. Fax: (415) 856-7100 If to Buyer: Barr Laboratories, Inc. 400 Chestnut Ridge Road Woodcliff Lake, New Jersey 07677 Attention: General Counsel Facsimile: (888) 843-0563 Copy to (which shall not constitute notice): Kirkland & Ellis Citigroup Center 153 East 53rd Street New York, New York 10022-4611 Attention: Frederick Tanne, Esq. Facsimile: (212) 446-4900 Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York; provided, that the Delaware General Corporate Law shall govern whether Seller is in compliance with those representations and warranties relating to corporate matters. (i) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by Buyer and Seller. No waiver by any Party of any provision of this Agreement or any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be valid unless the same shall be in writing and signed by the Party making such waiver nor shall such waiver be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such default, misrepresentation, or breach of warranty or covenant except pursuant to its express terms. (j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (k) Expenses. Except as otherwise set forth herein, each of the Parties will bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the 35 transactions contemplated hereby. The Parties agree to use reasonable efforts to minimize any sales, use or other transfer taxes due in connection with the transfer of the Acquired Assets. (l) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms. Nothing in the Disclosure Schedules shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Disclosure Schedules identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself). The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. (m) Incorporation of Annexes, Exhibits and the Disclosure Schedule. The Annexes, Exhibits and the Disclosure Schedule identified in this Agreement are incorporated herein by reference and made a part hereof. (n) Specific Performance. Each Party acknowledges and agrees that the other Party would be damaged irreparably in the event any provision of this Agreement not performed in accordance with its specific terms or otherwise is breached, so that a Party shall be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in addition to any other remedy to which such Party may be entitled, at law or in equity. In particular, the Parties acknowledge that the Business is unique and recognize and affirm that in the event Seller breaches this Agreement, money damages would be inadequate and Buyer would have no adequate remedy at law, so that Buyer shall have the right, in addition to any other rights and remedies existing in its favor, to enforce its rights and the other Parties' obligations hereunder not only by action for damages but also by action for specific performance, injunctive, and/or other equitable relief. (o) Arbitration. (i) Any dispute, controversy or claim (each, a "Dispute") arising out of or relating to this Agreement or the performance, breach or termination thereof shall be submitted to binding arbitration, and any such Dispute shall be decided by one (1) arbitrator mutually agreeable to Buyer and Seller. If Buyer and Seller cannot agree on one (1) arbitrator, the Dispute shall be submitted to the American Arbitration Association ("AAA") in New York, New York, and AAA shall appoint an arbitrator to resolve the Dispute under its Commercial Arbitration Rules. The arbitrator shall set a limited time period and establish procedures designed to reduce the cost and time for discovery while allowing the Parties an opportunity, adequate in the sole judgment of the arbitrator, to discover relevant information from the opposing Party about the subject matter of the Dispute. The arbitrator shall rule upon motions to compel or limit discovery and shall have the authority to impose sanctions, including attorneys' fees and costs, to the same extent as a 36 court of competent law or equity, if the arbitrator determines that discovery was sought without substantial justification or that discovery was refused or objected to without substantial justification. The decision of the arbitrator as to the validity and amount of any claim shall be binding and conclusive upon the Parties to this Agreement. Such decision shall be written and shall be supported by written findings of fact and conclusions which shall set forth the award, judgment, decree or order awarded by the arbitrator. (ii) Judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction. Any such arbitration shall be held in New York, New York under the Commercial Arbitration Rules then in effect of AAA. The non-prevailing party to an arbitration shall pay its own costs and expenses, the fees and costs of the arbitrator, the administrative costs of the arbitration, and the expenses, including without limitation, reasonable attorneys' fees and costs, incurred by the other Party to the arbitration. * * * * * 37 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. BARR LABORATORIES, INC. By: /s/ Paul M. Bisaro -------------------------------------------- Name: Paul M. Bisaro Title: President and Chief Operating Officer ENDEAVOR PHARMACEUTICALS, INC. By: /s/ R. Forrest Waldon -------------------------------------------- Name: R. Forrest Waldon Title: President and Chief Operating Officer EX-10.1 4 y93708exv10w1.txt EXHIBIT 10.1: NON-QUALIFIED DEFERRED COMPENSATION EXHIBIT 10.1 THE CORPORATEPLAN FOR RETIREMENT(SM) EXECUTIVE PLAN BASIC PLAN DOCUMENT IMPORTANT NOTE THIS DOCUMENT HAS NOT BEEN APPROVED BY THE DEPARTMENT OF LABOR, THE INTERNAL REVENUE SERVICE OR ANY OTHER GOVERNMENTAL ENTITY. AN ADOPTING EMPLOYER MUST DETERMINE WHETHER THE PLAN IS SUBJECT TO THE FEDERAL SECURITIES LAWS AND THE SECURITIES LAWS OF THE VARIOUS STATES. AN ADOPTING EMPLOYER MAY NOT RELY ON THIS DOCUMENT TO ENSURE ANY PARTICULAR TAX CONSEQUENCES OR TO ENSURE THAT THE PLAN IS "UNFUNDED AND MAINTAINED PRIMARILY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION TO A SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES" UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT WITH RESPECT TO THE EMPLOYER'S PARTICULAR SITUATION. FIDELITY MANAGEMENT TRUST COMPANY, ITS AFFILIATES AND EMPLOYEES CANNOT PROVIDE YOU WITH LEGAL ADVICE IN CONNECTION WITH THE EXECUTION OF THIS DOCUMENT. THIS DOCUMENT SHOULD BE REVIEWED BY THE EMPLOYER'S ATTORNEY PRIOR TO EXECUTION. CORPORATEPLAN FOR EXECUTIVE BASIC PLAN DOCUMENT ARTICLE 1 ADOPTION AGREEMENT ARTICLE 2 DEFINITIONS 2.01 - Definitions ARTICLE 3 PARTICIPATION 3.01 - Date of Participation 3.02 - Resumption of Participation Following Re employment 3.03 - Cessation or Resumption of Participation Following a Change in Status ARTICLE 4 CONTRIBUTIONS 4.01 - Deferral Contributions 4.02 - Matching Contributions 4.03 - Employer Contributions 4.04 - Time of Making Contributions ARTICLE 5 PARTICIPANTS' ACCOUNTS 5.01 - Individual Accounts ARTICLE 6 INVESTMENT OF CONTRIBUTIONS 6.01 - Manner of Investment 6.02 - Investment Decisions ARTICLE 7 RIGHT TO BENEFITS 7.01 - Normal or Early Retirement 7.02 - Death 7.03 - Other Termination of Employment 7.04 - Separate Account 7.05 - Forfeitures 7.06 - Adjustment for Investment Experience 7.07 - Unforeseeable Emergency Withdrawals 7.08 - Change in Control ARTICLE 8 DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE 8.01 - Distribution of Benefits to Participants and Beneficiaries 8.02 - Determination of Method of Distribution 8.03 - Notice to Trustee 8.04 - Time of Distribution ARTICLE 9 2 AMENDMENT AND TERMINATION 9.01 - Amendment by Employer 9.02 - Retroactive Amendments 9.03 - Termination 9.04 - Distribution Upon Termination of the Plan ARTICLE 10 MISCELLANEOUS 10.01 - Communication to Participants 10.02 - Limitation of Rights 10.03 - Nonalienability of Benefits 10.04 - Facility of Payment 10.05 - Information between Employer and Trustee 10.06 - Notices 10.07 - Governing Law ARTICLE 11 PLAN ADMINISTRATION 11.01 - Powers and responsibilities of the Administrator 11.02 - Nondiscriminatory Exercise of Authority 11.03 - Claims and Review Procedures 3 PREAMBLE IT IS THE INTENTION OF THE EMPLOYER TO ESTABLISH HEREIN AN UNFUNDED PLAN MAINTAINED SOLELY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION FOR A SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES AS PROVIDED IN ERISA. ARTICLE 1. ADOPTION AGREEMENT. ARTICLE 2. DEFINITIONS. 2.01. DEFINITIONS. (a) Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context: (1) "Account" means an account established on the books of the Employer for the purpose of recording amounts credited on behalf of a Participant and any income, expenses, gains or losses included thereon. (2) "Administrator" means the Employer adopting this Plan, or other person designated by the Employer in Section 1.01(b). (3) "Adoption Agreement" means Article 1, under which the Employer establishes and adopts or amends the Plan and designates the optional provisions selected by the Employer. The provisions of the Adoption Agreement shall be an integral part of the Plan. (4) "Beneficiary" means the person or persons entitled under Section 7.02 to receive benefits under the Plan upon the death of a Participant. (5) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (6) "Compensation" means for purposes of Article 4 (Contributions) wages as defined in Section 3401(a) of the Code and all other payments of compensation to an employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the employee a written statement under Section 6041(d) and 6051(a)(3) of the Code, excluding any items elected by the Employer in Section 1.04, reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation and welfare benefits, but including amounts that are not includable in the gross income of the Participant under a salary reduction agreement by reason of the application of Sections 125, 132(f)(4), 402(e)(3), 402(h) or 403(b) of the Code. Compensation shall be determined without regard to any rules under Section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2) of the Code). Compensation shall also include amounts deferred pursuant to an election under Section 4.01. In the case of any Self-Employed Individual or an Owner-Employee, Compensation means the Self-Employed Individual's Earned Income. (7) "Earned Income" means the net earnings of a Self-Employed Individual derived from the trade or business with respect to which the Plan is established and for which the personal services of such individual are a material income-providing factor, excluding any items not included in gross income and the deductions allocated to such items, except that for taxable years beginning after December 31, 1989 net earnings shall be determined with regard to the deduction allowed under Section 164(f) of the Code, to the extent applicable to the Employer. Net earnings shall be reduced by contributions of the Employer to any qualified plan, to the extent a deduction is allowed to the Employer for such contributions under Section 404 of the Code. (8) "Employee" means any employee of the Employer, Self-Employed Individual or Owner-Employee. (9) "Employer" means the employer named in Section 1.02(a) and any Related Employers designated in Section 1.02(b). (10) "Employment Commencement Date" means the date on which the Employee first performs an Hour of Service. (11) "Entry Date" means the date(s) designated in Section 1.03(b). (12) "ERISA" means the Employee Retirement Income Security Act of 1974, as from time to time amended. (13) "Fund Share" means the share, unit, or other evidence of ownership in a Permissible Investment. (14) "Hour of Service" means, with respect to any Employee, (A) Each hour for which the Employee is directly or indirectly paid, or entitled to payment, for the performance of duties for the Employer or a Related Employer, each such hour to be credited to the Employee for the computation period in which the duties were performed; (B) Each hour for which the Employee is directly or indirectly paid, or entitled to payment, by the Employer or Related Employer (including payments made or due from a trust fund or insurer to which the Employer contributes or pays premiums) on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity, disability, layoff, jury duty, military duty, or leave of absence, each such hour to be credited to the Employee for the Eligibility Computation Period in which such period of time occurs, subject to the following rules: (i) No more than 501 Hours of Service shall be credited under this paragraph (B) on account of any single continuous period during which the Employee performs no duties; (ii) Hours of Service shall not be credited under this paragraph (B) for a payment which solely reimburses the Employee for medically-related expenses, or which is made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, unemployment compensation or disability insurance laws; and (iii) If the period during which the Employee performs no duties falls within two or more computation periods and if the payment made on account of such period is not 2 calculated on the basis of units of time, the Hours of Service credited with respect to such period shall be allocated between not more than the first two such computation periods on any reasonable basis consistently applied with respect to similarly situated Employees; and (C) Each hour not counted under paragraph (A) or (B) for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to be paid by the Employer or a Related Employer, each such hour to be credited to the Employee for the computation period to which the award or agreement pertains rather than the computation period in which the award agreement or payment is made. For purposes of determining Hours of Service, Employees of the Employer and of all Related Employers will be treated as employed by a single employer. For purposes of paragraphs (B) and (C) above, Hours of Service will be calculated in accordance with the provisions of Section 2530.200b-2(b) of the Department of Labor regulations, which are incorporated herein by reference. Solely for purposes of determining whether a break in service for participation purposes has occurred in a computation period, an individual who is absent from work for maternity or paternity reasons shall receive credit for the hours of service which would otherwise been credited to such individual but for such absence, or in any case in which such hours cannot be determined, 8 hours of service per day of such absence. For purposes of this paragraph, an absence from work for maternity reasons means an absence (1) by reason of the pregnancy of the individual, (2) by reason of a birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. The hours of service credited under this paragraph shall be credited (1) in the computation period in which the absence begins if the crediting is necessary to prevent a break in service in that period, or (2) in all other cases, in the following computation period. (15) "Normal Retirement Age" means the normal retirement age specified in Section 1.07(f) of the Adoption Agreement. (16) "Owner-Employee" means, if the Employer is a sole proprietorship, the individual who is the sole proprietor, or, if the Employer is a partnership, a partner who owns more than 10 percent of either the capital interest or the profits interest of the partnership. (17) "Participant" means any Employee who participates in the Plan in accordance with Article 3 hereof. (18) "Permissible Investment" means the investments specified by the Employer as available for investment of assets of the Trust and agreed to by the Trustee. The Permissible Investments under the Plan shall be listed in the Service Agreement. (19) "Plan" means the plan established by the Employer as set forth herein as a new plan or as an amendment to an existing plan, by executing the Adoption Agreement, together with any and all amendments hereto. (20) "Plan Year" means the 12-consecutive-month period designated by the Employer in Section 1.01(c). (21) "Related Employer" means any employer other than the Employer named in Section 1.02(a), if the Employer and such other employer are members of a controlled group of corporations (as defined in Section 414(b) of the Code) or an affiliated service group (as defined in Section 414(m)), or are trades or businesses (whether or not incorporated) which are under 3 common control (as defined in Section 414(c)), or such other employer is required to be aggregated with the Employer pursuant to regulations issued under Section 414(o). (22) "Self-Employed Individual" means an individual who has Earned Income for the taxable year from the Employer or who would have had Earned Income but for the fact that the trade or business had no net profits for the taxable year. (23) "Service Agreement" means the agreement between the Employer and Trustee regarding the arrangement between the parties for recordkeeping services with respect to the Plan. (24) "Trust" means the trust created by the Employer. (25) "Trust Agreement" means the agreement between the Employer and the Trustee, as set forth in a separate agreement, under which assets are held, administered, and managed subject to the claims of the Employer's creditors in the event of the Employer's insolvency, until paid to Plan Participants and their Beneficiaries as specified in the Plan. (26) "Trust Fund" means the property held in the Trust by the Trustee. (27) "Trustee" means the corporation or individual(s) appointed by the Employer to administer the Trust in accordance with the Trust Agreement. (28) "Years of Service for Vesting" means, with respect to any Employee, the number of whole years of his periods of service with the Employer or a Related Employer (the elapsed time method to compute vesting service), subject to any exclusions elected by the Employer in Section 1.07(c). An Employee will receive credit for the aggregate of all time period(s) commencing with the Employee's Employment Commencement Date and ending on the date a break in service begins, unless any such years are excluded by Section 1.07(c). An Employee will also receive credit for any period of severance of less than 12 consecutive months. Fractional periods of a year will be expressed in terms of days. In the case of a Participant who has 5 consecutive 1-year breaks in service, all years of service after such breaks in service will be disregarded for the purpose of vesting the Employer-derived account balance that accrued before such breaks, but both pre-break and post-break service will count for the purposes of vesting the Employer-derived account balance that accrues after such breaks. Both accounts will share in the earnings and losses of the fund. In the case of a Participant who does not have 5 consecutive 1-year breaks in service, both the pre-break and post-break service will count in vesting both the pre-break and post-break employer-derived account balance. A break in service is a period of severance of at least 12 consecutive months. Period of severance is a continuous period of time during which the Employee is not employed by the Employer. Such period begins on the date the Employee retires, quits or is discharged, or if earlier, the 12-month anniversary of the date on which the Employee was otherwise first absent from service. In the case of an individual who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first date of such absence shall not constitute a break in service. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the individual, (2) by reason of the birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. 4 If the Plan maintained by the Employer is the plan of a predecessor employer, an Employee's Years of Service for Vesting shall include years of service with such predecessor employer. In any case in which the Plan maintained by the Employer is not the plan maintained by a predecessor employer, service for such predecessor shall be treated as service for the Employer to the extent provided in Section 1.08. (b) Pronouns used in the Plan are in the masculine gender but include the feminine gender unless the context clearly indicates otherwise. ARTICLE 3. PARTICIPATION. 3.01. DATE OF PARTICIPATION. An eligible Employee (as set forth in Section 1.03(a)) who has filed an election pursuant to Section 4.01 will become a Participant in the Plan on the first Entry Date coincident with or following the date on which such election would otherwise become effective, as determined under Section 4.01. 3.02. RESUMPTION OF PARTICIPATION FOLLOWING REEMPLOYMENT. If a Participant ceases to be an Employee and thereafter returns to the employ of the Employer he will again become a Participant as of an Entry Date following the date on which he completes an Hour of Service for the Employer following his reemployment, if he is an eligible Employee as defined in Section 1.03(a), and has filed an election pursuant to Section 4.01. 3.03. CESSATION OR RESUMPTION OF PARTICIPATION FOLLOWING A CHANGE IN STATUS. If any Participant continues in the employ of the Employer or Related Employer but ceases to be an eligible Employee as defined in Section 1.03(a), the individual shall continue to be a Participant until the entire amount of his benefit is distributed; however, the individual shall not be entitled to make Deferral Contributions or receive an allocation of Matching contributions during the period that he is not an eligible Employee. Such Participant shall continue to receive credit for service completed during the period for purposes of determining his vested interest in his Accounts. In the event that the individual subsequently again becomes an eligible Employee, the individual shall resume full participation in accordance with Section 3.01. ARTICLE 4. CONTRIBUTIONS. 4.01. DEFERRAL CONTRIBUTIONS. Each Participant may elect to execute a salary reduction agreement with the Employer to reduce his Compensation by a specified percentage, not exceeding the percentage set forth in Section 1.05(a) and equal to a whole number multiple of one (1) percent, per payroll period, subject to any election regarding bonuses, as set out in Subsection 1.05(a)(2). Such agreement shall become effective on the first day of the period as set forth in the Participant's election. The election will be effective to defer Compensation relating to all services performed in a calendar year subsequent to the filing of such an election, subject to any election regarding bonuses, as set out in Subsection 1.05(a)(2). An election once made will remain in effect until a new election is made, provided, however that such an election choosing a distribution date pursuant to 1.06(b)(1)(B) will become ineffective the first day of the calendar year preceding the calendar year in which the election requires the distribution to be made. A new election will be effective as of the first day of the following calendar year and will apply only to Compensation payable with respect to services rendered after such date. Amounts credited to a Participant's account prior to the effective date of any new election will not be affected and will be paid in accordance with that prior election. The Employer shall credit an amount to the account maintained on behalf of the Participant corresponding to the amount of said reduction. Under no circumstances may a salary reduction agreement be adopted retroactively. A Participant may revoke a salary reduction agreement for a calendar year during that year, provided, however, that such revocation shall apply only to Compensation not yet earned. In that event, the Participant shall be precluded from electing to defer future Compensation hereunder during the calendar year to which the revocation applies. Notwithstanding the above, 5 (a) in the calendar year in which the Plan first becomes effective or in the year in which the Participant first becomes eligible to participate, an election to defer compensation may be made within 30 days after the Participant is first eligible or the Plan is first effective, which election shall be effective with respect to Compensation payable with respect to services rendered after the date of the election; and (b) in the event the Employer has elected to permit the deferral of bonus payments hereunder, a salary reduction agreement applicable to such bonus deferral must be made in the calendar year immediately preceding the calendar year to which the bonus relates. 4.02. MATCHING CONTRIBUTIONS. If so provided by the Employer in Section 1.05(b), the Employer shall make a "Matching Contribution" to be credited to the account maintained on behalf of each Participant who had "Deferral Contributions" pursuant to Section 4.01 made on his behalf during the year and who meets the requirement, if any, of Section 1.05(b)(3). The amount of the "Matching Contribution" shall be determined in accordance with Section 1.05(b). 4.03. EMPLOYER CONTRIBUTIONS. If so provided by the Employer in Section 1.05(c)(1), the Employer shall make an "Employer Contribution" to be credited to the account maintained on behalf of each Participant who meets the requirement, if any, of Section 1.05(c)(3) in the amount required by Section 1.05(c)(1). If so provided by the Employer in Section 1.05(c)(2), the Employer may make an "Employer Contribution" to be credited to the account maintained on behalf of any Participant in such an amount as the Employer, in its sole discretion, shall determine. In making "Employer Contributions" pursuant to Section 1.05(c)(2), the Employer shall not be required to treat all Participants in the same manner in determining such contributions and may determine the "Employer Contribution" of any Participant to be zero. 4.04. TIME OF MAKING CONTRIBUTIONS. The Employer shall remit contributions deemed made hereunder to the Trust as soon as practicable after such contributions are deemed made under the terms of the Plan. ARTICLE 5. PARTICIPANTS' ACCOUNTS. 5.01. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an Account for each Participant, which will reflect Matching and Deferral Contributions credited to the Account on behalf of the Participant and earnings, expenses, gains and losses credited thereto, and deemed investments made with amounts in the Participant's Account. The Administrator will establish and maintain such other accounts and records as it decides in its discretion to be reasonably required or appropriate in order to discharge its duties under the Plan. Participants will be furnished statements of their Account values at least once each Plan Year. The Administrator shall provide the Trustee with information on the amount credited to the separate account of each Participant maintained by the Administrator in its records. ARTICLE 6. INVESTMENT OF CONTRIBUTIONS. 6.01. MANNER OF INVESTMENT. All amounts credited to the Accounts of Participants shall be treated as though invested and reinvested only in eligible investments selected by the Employer in the Service Agreement. 6.02. INVESTMENT DECISIONS. Investments in which the Accounts of Participants shall be treated as invested and reinvested shall be directed by the Employer or by each Participant, or both, in accordance with the Employer's election in Section 1.11(a). (a) All dividends, interest, gains and distributions of any nature that would be earned in respect of Fund Shares in which the Account is treated as investing shall be credited to the Account as though reinvested in additional shares of that Permissible Investment. 6 (b) Expenses that would be attributable to the acquisition of investments shall be charged to the Account of the Participant for which such investment is treated as having been made. ARTICLE 7. RIGHT TO BENEFITS. 7.01. NORMAL OR EARLY RETIREMENT. If provided by the Employer in Section 1.07(e), each Participant who attains his Normal Retirement Age or Early Retirement Age will have a nonforfeitable interest in his Account in accordance with the vesting schedule(s) elected in Section 1.07. If a Participant retires on or after attainment of Normal or Early Retirement Age, such retirement is referred to as a normal retirement. On or after his normal retirement, the balance of the Participant's Account, plus any amounts thereafter credited to his Account, subject to the provisions of Section 7.06, will be distributed to him in accordance with Article 8. If provided by the Employer in Section 1.07, a Participant who separates from service before satisfying the age requirements for early retirement, but has satisfied the service requirement will be entitled to the distribution of his Account, subject to the provisions of Section 7.06, in accordance with Article 8, upon satisfaction of such age requirement. 7.02. DEATH. If a Participant dies before the distribution of his Account has commenced, or before such distribution has been completed, his Account shall become vested in accordance with the vesting schedule(s) elected in Section 1.07 and his designated Beneficiary or Beneficiaries will be entitled to receive the balance or remaining balance of his Account, plus any amounts thereafter credited to his Account, subject to the provisions of Section 7.06. Distribution to the Beneficiary or Beneficiaries will be made in accordance with Article 8. A Participant may designate a Beneficiary or Beneficiaries, or change any prior designation of Beneficiary or Beneficiaries, by giving notice to the Administrator on a form designated by the Administrator. If more than one person is designated as the Beneficiary, their respective interests shall be as indicated on the designation form. A copy of the death certificate or other sufficient documentation must be filed with and approved by the Administrator. If upon the death of the Participant there is, in the opinion of the Administrator, no designated Beneficiary for part or all of the Participant's Account, such amount will be paid to his surviving spouse or, if none, to his estate (such spouse or estate shall be deemed to be the Beneficiary for purposes of the Plan). If a Beneficiary dies after benefits to such Beneficiary have commenced, but before they have been completed, and, in the opinion of the Administrator, no person has been designated to receive such remaining benefits, then such benefits shall be paid to the deceased Beneficiary's estate. 7.03. OTHER TERMINATION OF EMPLOYMENT. If provided by the Employer in Section 1.07, if a Participant terminates his employment for any reason other than death or normal retirement, he will be entitled to a termination benefit equal to (i) the vested percentage(s) of the value of the Matching Contributions to his Account, as adjusted for income, expense, gain, or loss, such percentage(s) determined in accordance with the vesting schedule(s) selected by the Employer in Section 1.07, and (ii) the value of the Deferral Contributions to his Account as adjusted for income, expense, gain or loss. The amount payable under this Section 7.03 will be subject to the provisions of Section 7.06 and will be distributed in accordance with Article 8. 7.04. SEPARATE ACCOUNT. If a distribution from a Participant's Account has been made to him at a time when he has a nonforfeitable right to less than 100 percent of his Account, the vesting schedule in Section 1.07 will thereafter apply only to amounts in his Account attributable to Matching Contributions allocated after such distribution. The balance of his Account immediately after such distribution will be transferred to a separate account that will be maintained for the purpose of determining his interest therein according to the following provisions. 7 At any relevant time prior to a forfeiture of any portion thereof under Section 7.05, a Participant's nonforfeitable interest in his Account held in a separate account described in the preceding paragraph will be equal to P(AB + (RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time determined under Section 7.05; AB is the account balance of the separate account at the relevant time; D is the amount of the distribution; and R is the ratio of the account balance at the relevant time to the account balance after distribution. Following a forfeiture of any portion of such separate account under Section 7.05 below, any balance in the Participant's separate account will remain fully vested and nonforfeitable. 7.05. FORFEITURES. If a Participant terminates his employment, any portion of his Account (including any amounts credited after his termination of employment) not payable to him under Section 7.03 will be forfeited by him. 7.06. ADJUSTMENT FOR INVESTMENT EXPERIENCE. If any distribution under this Article 7 is not made in a single payment, the amount remaining in the Account after the distribution will be subject to adjustment until distributed to reflect the income and gain or loss on the investments in which such amount is treated as invested and any expenses properly charged under the Plan to such amounts. 7.07. UNFORESEEABLE EMERGENCY WITHDRAWALS. Subject to the provisions of Article 8, a Participant shall not be permitted to withdraw his Account (and earnings thereon) prior to retirement or termination of employment, except that, to the extent permitted under Section 1.09, a Participant may apply to the Administrator to withdraw some or all of his Account if such withdrawal is made on account of a unforeseeable emergency as determined by the Administrator. 7.08. CHANGE IN CONTROL. If the Employer has elected to apply Section 1.06(c), then, upon a Change in Control, as defined in Section 1.12, notwithstanding any other provision of the Plan to the contrary, all Participants shall have a nonforfeitable right to receive the entire amount of their account balances under the Plan and all such amounts shall be paid out to Participants as soon as administratively practicable. ARTICLE 8. DISTRIBUTION OF BENEFITS. 8.01. FORM OF DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES. The Plan provides for distribution as a lump sum to be paid in cash on the date specified by the Employer in Section 1.06 pursuant to the method provided in Section 8.02. If elected by the Employer in Section 1.10 and specified in the Participant's deferral election, the distribution will be paid through a systematic withdrawal plan (installments) for a time period not exceeding 10 years beginning on the date specified by the Employer in Section 1.06. 8.02. EVENTS REQUIRING DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES. (a) If elected by the Employer in Section 1.06(a), the Participant will receive a distribution upon the earliest of the events specified by the Employer in Section 1.06(a), subject to the provisions of Section 7.08, and at the time indicated in Section 1.06(a)(2). If the Participant dies before any event in Section 1.06(a) occurs, the Participant shall be considered to have terminated employment and the Participant's benefit will be paid to the Participant's Beneficiary in the same form and at the same time as it would have been paid to the Participant pursuant to this Article 8. (b) If elected by the Employer in Section 1.06(b), the Participant will receive a distribution of all amounts not deferred pursuant to Section 1.06(b)(1)(B) (and earnings attributable to those amounts) upon termination of employment. If elected by the Employer in Section 1.06(b)(1)(B), the Participant shall have the election to receive distributions of amounts deferred pursuant to Section 4.01 (and earnings attributable to those amounts) after a date specified by the Participant in his deferral election which is at least 12 months after the first day of the calendar year in which such amounts would be earned. Amounts distributed to the Participant pursuant to Section 1.06(b) shall be distributed at the time indicated in Section 1.06(b)(2). Subject to the provisions of Section 7.08, the Participant shall receive a distribution in the form provided in Section 8.01. If the Participant 8 dies before any event in Section 1.06(a) occurs, the Participant shall be considered to have terminated employment and the Participant's benefit will be paid to the Participant's Beneficiary in the same form and at the same time as it would have been paid to the Participant pursuant to this Article 8. However, if the Participant dies before the date specified by the Participant in an election pursuant to Section 1.06(b)(1)(B), then the Participant's benefit shall be paid to the Participant's Beneficiary in the form provided in Section 8.01 as if the Participant had elected to be paid at termination of employment. 8.03. DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will determine the method of distribution of benefits to himself and his Beneficiary, subject to the provisions of Section 8.02. Such determination will be made at the time the Participant makes a deferral election. Unless the Employer has elected Section 1.06(b) to control distributions, the period certain specified in a Participant's first deferral election specifying distribution under a systematic withdrawal plan shall apply to all subsequent elections of distributions under a systematic withdrawal plan made by the Participant. Once a Participant has made an election for the method of distribution, that election shall be effective for all contributions made on behalf of the Participant attributable to any Plan Year after that election was made and before the Plan Year in which that election was altered in the manner prescribed by the Administrator. If the Participant does not designate in the manner prescribed by the Administrator the method of distribution to him and his Beneficiary, the method of distribution shall be a lump sum at termination of employment. 8.04. NOTICE TO TRUSTEE. The Administrator will notify the Trustee, pursuant to the method stated in the Trust Agreement for providing direction, whenever any Participant or Beneficiary is entitled to receive benefits under the Plan. The Administrator's notice shall indicate the form, amount and frequency of benefits that such Participant or Beneficiary shall receive. 8.05. TIME OF DISTRIBUTION. In no event will distribution to a Participant be made later than the date specified by the Participant in his salary reduction agreement. All distributions will be made as soon as administratively feasible following the distribution date specified in Section 1.06 or Section 7.08, if applicable. ARTICLE 9. AMENDMENT AND TERMINATION. 9.01 AMENDMENT BY EMPLOYER. The Employer reserves the authority to amend the Plan by filing with the Trustee an amended Adoption Agreement, executed by the Employer only, on which said Employer has indicated a change or changes in provisions previously elected by it. Such changes are to be effective on the effective date of such amended Adoption Agreement. Any such change notwithstanding, no Participant's Account shall be reduced by such change below the amount to which the Participant would have been entitled if he had voluntarily left the employ of the Employer immediately prior to the date of the change. The Employer may from time to time make any amendment to the Plan that may be necessary to satisfy the Code or ERISA. The Employer's board of directors or other individual specified in the resolution adopting this Plan shall act on behalf of the Employer for purposes of this Section 9.01. 9.02 RETROACTIVE AMENDMENTS. An amendment made by the Employer in accordance with Section 9.01 may be made effective on a date prior to the first day of the Plan Year in which it is adopted if such amendment is necessary or appropriate to enable the Plan and Trust to satisfy the applicable requirements of the Code or ERISA or to conform the Plan to any change in federal law or to any regulations or ruling thereunder. Any retroactive amendment by the Employer shall be subject to the provisions of Section 9.01. 9.03. TERMINATION. The Employer has adopted the Plan with the intention and expectation that contributions will be continued indefinitely. However, said Employer has no obligation or liability whatsoever to maintain the Plan for any length of time and may discontinue contributions under the Plan or terminate the Plan at any time by written notice delivered to the Trustee without any liability hereunder for any such discontinuance or termination. 9 9.04. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination of the Plan, no further Deferral Contributions or Matching Contributions shall be made under the Plan, but Accounts of Participants maintained under the Plan at the time of termination shall continue to be governed by the terms of the Plan until paid out in accordance with the terms of the Plan. ARTICLE 10. MISCELLANEOUS. 10.01. COMMUNICATION TO PARTICIPANTS. The Plan will be communicated to all Participants by the Employer promptly after the Plan is adopted. 10 02. LIMITATION OF RIGHTS. Neither the establishment of the Plan and the Trust, nor any amendment thereof, nor the creation of any fund or account, nor the payment of any benefits, will be construed as giving to any Participant or other person any legal or equitable right against the Employer, Administrator or Trustee, except as provided herein; and in no event will the terms of employment or service of any Participant be modified or in any way affected hereby. 10.03. NONALIENABILITY OF BENEFITS. The benefits provided hereunder will not be subject to alienation, assignment, garnishment, attachment, execution or levy of any kind, either voluntarily or involuntarily, and any attempt to cause such benefits to be so subjected will not be recognized, except to such extent as may be required by law. 10 04. FACILITY OF PAYMENT. In the event the Administrator determines, on the basis of medical reports or other evidence satisfactory to the Administrator, that the recipient of any benefit payments under the Plan is incapable of handling his affairs by reason of minority, illness, infirmity or other incapacity, the Administrator may disburse such payments, or direct the Trustee to disburse such payments, as applicable, to a person or institution designated by a court which has jurisdiction over such recipient or a person or institution otherwise having the legal authority under State law for the care and control of such recipient. The receipt by such person or institution of any such payments shall be complete acquittance therefore, and any such payment to the extent thereof, shall discharge the liability of the Trust for the payment of benefits hereunder to such recipient. 10.05. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to furnish the Trustee, and the Trustee agrees to furnish the Employer with such information relating to the Plan and Trust as may be required by the other in order to carry out their respective duties hereunder, including without limitation information required under the Code or ERISA and any regulations issued or forms adopted thereunder. 10.06. NOTICES. Any notice or other communication in connection with this Plan shall be deemed delivered in writing if addressed as provided below and if either actually delivered at said address or, in the case of a letter, three business days shall have elapsed after the same shall have been deposited in the United States mails, first-class postage prepaid and registered or certified: (a) If to the Employer or Administrator, to it at the address set forth in the Adoption Agreement, to the attention of the person specified to receive notice in the Adoption Agreement; (b) If to the Trustee, to it at the address set forth in the Trust Agreement; or, in each case at such other address as the addressee shall have specified by written notice delivered in accordance with the foregoing to the addressor's then effective notice address. 10.07. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will be construed, administered and enforced according to ERISA, and to the extent not preempted thereby, the laws of the Commonwealth of Massachusetts, without regard to its conflicts of law principles. 10 ARTICLE 11. PLAN ADMINISTRATION. 11.01. POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The Administrator has the full power and the full responsibility to administer the Plan in all of its details, subject, however, to the applicable requirements of ERISA. The Administrator's powers and responsibilities include, but are not limited to, the following: (a) To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan; (b) To interpret the Plan, its interpretation thereof in good faith to be final and conclusive on all persons claiming benefits under the Plan; (c) To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan; (d) To administer the claims and review procedures specified in Section 11.03; (e) To compute the amount of benefits which will be payable to any Participant, former Participant or Beneficiary in accordance with the provisions of the Plan; (f) To determine the person or persons to whom such benefits will be paid; (g) To authorize the payment of benefits; (h) To comply with any applicable reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA; (i) To appoint such agents, counsel, accountants, and consultants as may be required to assist in administering the Plan; (j) By written instrument, to allocate and delegate its responsibilities, including the formation of an Administrative Committee to administer the Plan; 11.02. NONDISCRIMINATORY EXERCISE OF AUTHORITY. Whenever, in the administration of the Plan, any discretionary action by the Administrator is required, the Administrator shall exercise its authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment. 11.03. CLAIMS AND REVIEW PROCEDURES. (a) Claims Procedure. If any person believes he is being denied any rights or benefits under the Plan, such person may file a claim in writing with the Administrator. If any such claim is wholly or partially denied, the Administrator will notify such person of its decision in writing. Such notification will contain (i) specific reasons for the denial, (ii) specific reference to pertinent Plan provisions, (iii) a description of any additional material or information necessary for such person to perfect such claim and an explanation of why such material or information is necessary, and (iv) information as to the steps to be taken if the person wishes to submit a request for review, including a statement of the such person's right to bring a civil action under Section 502(a) of ERISA following as adverse determination upon review. Such notification will be given within 90 days after the claim is received by the Administrator (or within 180 days, if special circumstances require an extension of time for processing the claim, and if written notice of such extension and circumstances is given to such person within the initial 90-day period). If the claim concerns disability benefits under the Plan, the Plan Administrator must notify the claimant in writing within 45 days after the claim has been filed in order to deny it. If special circumstances require an extension of time to process the claim, the Plan Administrator must notify 11 the claimant before the end of the 45-day period that the claim may take up to 30 days longer to process. If special circumstances still prevent the resolution of the claim, the Plan Administrator may then only take up to another 30 days after giving the claimant notice before the end of the original 30-day extension. If the Plan Administrator gives the claimant notice that the claimant needs to provide additional information regarding the claim, the claimant must do so within 45 days of that notice. (b) Review Procedure. Within 60 days after the date on which a person receives a written notice of a denied claim (or, if applicable, within 60 days after the date on which such denial is considered to have occurred), such person (or his duly authorized representative) may (i) file a written request with the Administrator for a review of his denied claim and of pertinent documents and (ii) submit written issues and comments to the Administrator. This written request may include comments, documents, records, and other information relating to the claim for benefits. The claimant shall be provided, upon the claimant's request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim for benefits. The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The Administrator will notify such person of its decision in writing. Such notification will be written in a manner calculated to be understood by such person and will contain specific reasons for the decision as well as specific references to pertinent Plan provisions. The decision on review will be made within 60 days after the request for review is received by the Administrator (or within 120 days, if special circumstances require an extension of time for processing the request, such as an election by the Administrator to hold a hearing, and if written notice of such extension and circumstances is given to such person within the initial 60-day period). The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the determination on review. If the initial claim was for disability benefits under the Plan and has been denied by the Plan Administrator, the claimant will have 180 days from the date the claimant received notice of the claim's denial in which to appeal that decision. The review will be handled completely independently of the findings and decision made regarding the initial claim and will be processed by an individual who is not a subordinate of the individual who denied the initial claim. If the claim requires medical judgment, the individual handling the appeal will consult with a medical professional whom was not consulted regarding the initial claim and who is not a subordinate of anyone consulted regarding the initial claim and identify that medical professional to the claimant. The Plan Administrator shall provide the claimant with written notification of a plan's benefit determination on review. In the case of an adverse benefit determination, the notification shall set forth, in a manner calculated to be understood by the claimant - the specific reason or reasons for the adverse determinations, reference to the specific plan provisions on which the benefit determination is based, a statement that the claimant is entitled to receive, upon the claimant's request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim for benefits. 12 ADDENDUM TO THE FIDELITY CORPORATEPLAN FOR RETIREMENT EXECUTIVE PLAN ADOPTION AGREEMENT AND BASIC PLAN DOCUMENT This Addendum is being executed contemporaneously with, and shall be considered part of, the Barr Laboratories, Inc. Non-Qualified Deferred Compensation Plan (the "Plan"), which includes but is not limited to the Adoption Agreement constituting Article 1 of the Plan (the "Adoption Agreement"). The provisions of the Plan as revised in this Addendum are intended to and shall supersede those provisions as they appear in the Plan. This Addendum shall hereby be deemed to be incorporated by reference in the Plan. In the event of any conflict between the terms of this Addendum and the Plan, the terms of this Addendum shall control. 1. Subsection (a) of Section 1.05 of the Adoption Agreement is revised to read as follows: "(a) Employee contributions (Complete all that apply) "(1) [X] The Employer shall make a Deferral Contribution in accordance with, and subject to, Section 4.01 on behalf of each Participant who has an executed salary reduction agreement in effect with the Employer for the calendar year (or portion of the calendar year) in question, not to exceed 100% of salary for that calendar year (or portion of the calendar year) less any Deferral Contributions actually made by or on behalf of such Participant from the Participant's salary for that calendar year (or portion of the calendar year) under the Barr Laboratories, Inc. Savings and Retirement Plan (the "Qualified 401(k) Plan") or the Excess 401(k) Plan, subject, however, to any election regarding bonuses, as set out in Subsection 1.05(a)(2). "(2) [X] Bonus Contributions. The Employer may allow a Participant upon proper notice and approval to enter into a special salary reduction agreement to make Deferral Contributions in an amount up to 100% of any cash bonus that is awarded to such Participant for his or her services in a fiscal year of the Employer less any Deferral Contributions actually made by or on behalf of such Participant from such cash bonus under the Excess 401(k) Plan and the Qualified 401(k) Plan and less the amount of any Employer Contribution credited to the Participant in lieu of all or a portion of such cash bonus. "(3) Any provision of Subsection 1.05(a)(1) or 1.05(a)(2) to the contrary notwithstanding, the making of a Deferral Contribution on behalf of a Participant pursuant to either Subsection 1.05(a)(1) or 1.05(a)(2) in any calendar year shall be contingent on the Page 1 of 8 Participant's having a salary reduction agreement in effect under the Qualified 401(k) Plan that will result in tax deferred employee contributions under the Qualified 401(k) Plan in that calendar year at least equal to the dollar limitation on elective deferrals imposed under Section 402(g) of the Internal Revenue Code or, if less, any limitation on tax-deferred contributions pursuant to the terms of the Qualified 401(k) Plan." 2. Part (2) of Subsection 1.05(b) of the Adoption Agreement is revised to read as follows: "(2) [X] Matching Contribution Offset. For each Participant who has made deferrals to the Qualified 401(k) Plan of at least the maximum amount allowed pursuant to Section 402(g) of the Code or the maximum allowed under the Qualified 401(k) Plan, the Employer shall credit a Matching Contribution in an amount equal to (A) minus (B) below: "(A) The Matching Employer Contributions, as defined in the Qualified 401(k) Plan, that would have been credited to the Participant under the Qualified 401(k) Plan if (i) the Participant's Deferral Contributions actually made under the Excess 401(k) Plan and this Plan (including any Employer Contribution deemed to be a Deferral Contribution pursuant to Section 1.05(c)(2) below) which, when added to the Participant's Deferral Contributions (other than unmatched catch-up contributions) and after-tax contributions (if any) actually made to the Qualified 401(k) Plan, do not exceed 10% of the Participant's Compensation as adjusted in accordance with clause (iii) of this subparagraph (A), were deemed to have been made to the Qualified 401(k) Plan, and (ii) no limits imposed by the Code, or regulations issued thereunder, applied to such Matching Employer Contributions, and (iii) all of the aforementioned actual or deemed Deferral Contributions (if any) that are not included in the Participant's "Compensation" for purposes of determining the Matching Employer Contributions that are credited to the Participant under the Qualified 401(k) Plan for the Plan Year of the determination of the Matching Contribution in question were included in the Participant's "Compensation" for those purposes; "(B) The Matching Employer Contributions actually credited to such Participant under the Qualified 401(k) Plan and Excess 401(k) Plan for the Plan Year of the determination of the Matching Contribution hereunder." Page 2 of 8 3. Part (3) of Subsection 1.05(b) of the Adoption Agreement is revised to read as follows: "(3) [X] Matching Contribution Limits (check the appropriate box(es)): "(A) [X] Deferral Contributions (including any Employer Contribution deemed to be a Deferral Contribution pursuant to Section 1.05(c)(2) below) which, when added to the Participant's Deferral Contributions under the Qualified 401(k) Plan and Excess 401(k) Plan for the period in question, are in excess of 10% of the Participant's Compensation for the period in question adjusted as provided in Section 1.05(b)(2)(A)(3), shall not be considered for Matching Contributions. "Note: If the Employer elects a percentage limit in (A) above and requests the Trustee to account separately for matched and unmatched Deferral Contributions, the Matching Contributions allocated to each Participant must be computed, and the percentage limit applied, based upon each period." 4. Part (2) of Subsection 1.05(c) of the Adoption Agreement is revised to read as follows: "(2) [X] Discretionary Employer Contributions. The Employer may credit Employer Contributions to the accounts of Participants in any amount, as determined by the Employer in its sole discretion from time to time, which amount shall be zero unless the Employer provides otherwise. An Employer Contribution that is credited to the account of a Participant in lieu of all or a portion of a bonus for his or her services in a fiscal year of the Employer shall be deemed to be a Deferral Contribution for the period in which it is credited for purposes of determining the Matching Contribution which the Employer is to credit to such Participant pursuant to Section 1.05(b)(2) above for that period. For purposes of this Plan, an Employer Contribution that is credited to the account of a Participant shall be deemed to be in lieu of all or a portion of a bonus for his or her services in a fiscal year of the Employer unless the Employer provides otherwise when such Employer Contribution is credited." 5. Part (1) of Subsection 1.06(a) of the Adoption Agreement is revised to read as follows: "(1) [X] Termination of employment with the Employer or, if sooner, the date on which the Participant has received (or has been entitled to receive) long term disability benefits for 12 (twelve) months under the Employer's long term disability insurance program (the "LTD Anniversary Date"). In the event of a distribution on the LTD Anniversary Date, the amount to be Page 3 of 8 distributed shall be determined in accordance with section 7.02 of the Plan. Notwithstanding the foregoing, unless the Committee directs otherwise at the time an Employer Contribution is credited to the account of a Participant, an Employer Contribution (as adjusted for income, expenses, gains and losses) shall be distributed on the earliest date on which the payment can be made without loss of the Employer's tax deduction for such payment under Section 162(m) of the Internal Revenue Code (as determined by the Employer). All distributions pursuant to this Section 1.06(a)(1) shall be made at the time provided in Section 1.06(a)(2)." 6. Subsection (c) of Section 1.07 of the Adoption Agreement, and Part (1) of that Subsection, are revised to read as follows: "(c) [X] YEARS OF SERVICE FOR VESTING SHALL EXCLUDE (check one): "(1) [X] service prior to July 1, 1999 (the effective date of the Excess 401(k) Plan), and service prior to the date on which the Participant first becomes eligible to participate in the Excess 401(k) Plan." 7. Parts (3) and (4) of Subsection 1.07(e) of the Adoption Agreement are revised to read as follows: "(3) [X] Death. "(4) [X] The date, if any, on which the Participant has received (or has been entitled to receive) long term disability benefits for 12 (twelve) months under the Employer's long term disability insurance program." 8. Section 1.10 of the Adoption Agreement is revised to read as follows: "1.10 DISTRIBUTIONS "SUBJECT TO ARTICLES 7 AND 8, DISTRIBUTIONS UNDER THE PLAN MAY BE MADE IN THE FORM OF A LUMP SUM. CHECK BELOW TO ALLOW DISTRIBUTIONS IN INSTALLMENT PAYMENTS: "[X] under a systematic withdrawal plan (installments) not to exceed 15 years." Page 4 of 8 9. The definition of "Compensation" in Section 2.01(a)(6) of the Plan is revised by changing the third sentence thereof to read as follows: "Compensation for purposes of Article 4 shall also include amounts deferred pursuant to an election under Section 4.01 or under the Excess 401(k) Plan." 10. Section 3.01 of the Plan is revised by adding the following sentence to the end thereof: "An eligible Employee on whose behalf an Employer Contribution is made pursuant to Section 1.05(c)(2) and who is not otherwise a Participant shall become a Participant in the Plan on the date as of which such Employer Contribution is credited to him, whether or not such Employee has filed an election pursuant to Section 4.01." 11. Clause (b) of Section 4.01 of the Plan is revised to read as follows: "(b) in the event the Employer has elected to permit the deferral of bonus payments hereunder, a salary reduction agreement applicable to such bonus deferral must be made not later than in the calendar year immediately preceding the calendar year in which the bonus would be paid but for the election to defer." 12. Section 4.02 of the Plan is revised to read as follows: "4.02. MATCHING CONTRIBUTIONS. If so provided by the Employer in Section 1.05(b), the Employer shall make a "Matching Contribution" to be credited to the account maintained on behalf of each Participant who had "Deferral Contributions" pursuant to Section 4.01 made (or deemed made pursuant to Section 1.05(c)(2)) on his behalf during the year subject to the limitations of Section 1.05(b)(3). The amount of the "Matching Contribution" shall be determined in accordance with Section 1.05(b)." 13. Section 7.02 of the Plan is revised by changing the first paragraph thereof to read as follows: "7.02. DEATH OR DISABILITY. If a Participant dies or an LTD Anniversary Date (as defined in Section 1.06(a)(1)) occurs before the distribution of his Account has commenced, or before such distribution has been completed, his Account shall become vested in accordance with the vesting schedule(s) elected in Section 1.07 and he, or in the event of his death, his designated Beneficiary or Beneficiaries will be entitled to receive the remaining balance of his Account, plus any amounts thereafter credited to his Account, subject to the provisions of Section 7.06. Distribution to him or, in the event of his death, the Beneficiary or Beneficiaries will be made in accordance with Article 8." Page 5 of 8 14. Section 7.03 of the Plan is revised to read as follows: "7.03. OTHER TERMINATION OF EMPLOYMENT. If provided by the Employer in Section 1.07, if a Participant's employment terminates for any reason than death and an LTD Anniversary Date (as defined in Section 1.06(a)(1)) has not occurred before such termination of employment, he will be entitled to a termination benefit equal to (i) the vested percentage(s) of the value of the Matching Contributions to his Account, as adjusted for income, expense, gain, or loss, such percentage(s) determined in accordance with the vesting schedule(s) selected by the Employer in Section 1.07, and (ii) the value of the Deferral Contributions and Employer Contributions to his Account as adjusted for income, expense, gain or loss. The amount payable under this Section 7.03 will be subject to the provisions of Section 7.06 and will be distributed in accordance with Article 8." 15. Section 7.04 of the Plan is revised by changing "Section 1.07" in the first sentence thereof to "Section 1.07(a)". 16. Section 7.05 of the Plan is revised to read as follows: "7.05. FORFEITURES. If a Participant's employment terminates, any portion of his Account (including any amounts credited after his employment terminates) not payable to him under Section 7.03 will be forfeited by him." 17. Section 8.01 of the Plan is revised by changing "10 years" in the second sentence thereof to "15 years". 18. Paragraph (b) of Section 8.02 of the Plan is revised by changing the first sentence thereof to read as follows: "(b) If elected by the Employer in Section 1.06(b), the Participant will receive a distribution of all amounts not deferred pursuant to Section 1.06(b)(1)(B) (and income, expense, gain or losses attributable to those amounts) upon termination of employment except if and to the extent that Section 1.06(b) provides for distribution to be made on a different date." 19. Paragraph (b) of Section 8.02 of the Plan is further revised by changing the penultimate sentence thereof to read as follows: "If the Participant dies before any event elected by the Employer in Section 1.06(a) occurs, the Participant shall be considered to have terminated employment and the Participant's benefit will be paid to the Participant's Beneficiary in the same form and at the same time as it would have been paid to the Participant pursuant to this Article 8." Page 6 of 8 20. Section 8.03 of the Plan is revised by changing the last two sentences thereof to read as follows: "Once a Participant has made an election for the method of distribution, that election shall be effective for all contributions made on behalf of the Participant attributable to any Plan Year after that election was made and, in the case of an election made within a 30 day period described in Section 4.01(a), attributable to the Plan Year in which the election was made, and before the effective date of a new election the Participant makes in the manner and on the terms and conditions prescribed by the Administrator. If the Participant does not designate in the manner prescribed by the Administrator the method of distribution to him and his Beneficiary, the method of distribution shall be a lump sum." 21. Section 8.05 of the Plan is revised to read as follows: "8.05. TIME OF DISTRIBUTION. In no event will distribution to a Participant be made later than the date specified by the Participant in his salary reduction agreement in accordance with the Plan. All distributions will be made as soon as administratively feasible following the distribution date specified in Section 1.06 or Section 7.08, if applicable." 22. Section 9.01 of the Plan is revised by changing the third sentence thereof to read as follows: "Any such change notwithstanding, no Participant's Account shall be reduced by such change." 23. Section 9.04 of the Plan is revised to read as follows: "9.04. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination of the Plan, no further Deferral Contributions or Matching Contributions or Employer Contributions shall be made under the Plan, but Accounts of Participants maintained under the Plan at the time of termination shall continue to be governed by the terms of the Plan until paid out in accordance with the terms of the Plan." 24. Section 10.07 of the Plan is revised to read as follows: "10.07. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will be construed, administered and enforced according to ERISA, and to the extent not preempted thereby, the laws of the State of New York, without regard to its conflicts of law principles." 25. Section 11.02 of the Plan is revised to read as follows: "11.02. EXERCISE OF AUTHORITY. Whenever, in the administration of the Plan, any discretionary action by the Administrator is required or permitted, the Page 7 of 8 Administrator need not exercise its authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment, unless the exercise of its authority in such a nondiscriminatory manner is required by law." IN WITNESS WHEREOF, the Employer has caused this Addendum to be executed as of the 24th day of October, 2003. BARR LABORATORIES, INC. By: /s/ Catherine F. Higgins ------------------------ Name: Catherine F. Higgins ---------------------- Title: Senior Vice President, Human Resources -------------------------------------- Page 8 of 8 EX-31.1 5 y93708exv31w1.txt EXHIBIT 31.1: CERTIFICATION Exhibit 31.1 CERTIFICATION OF BRUCE L. DOWNEY PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Bruce L. Downey, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Barr Pharmaceuticals, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2004 /s/ Bruce L. Downey --------------------------- Bruce L. Downey Chief Executive Officer EX-31.2 6 y93708exv31w2.txt EXHIBIT 31.2: CERTIFICATION Exhibit 31.2 CERTIFICATION OF WILLIAM T. MCKEE PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, William T. McKee, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Barr Pharmaceuticals, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2004 /s/ William T. McKee ----------------------- William T. McKee Chief Financial Officer EX-32.0 7 y93708exv32w0.txt EXHIBIT 32.0: CERTIFICATION Exhibit 32.0 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Each of the undersigned hereby certifies, in his capacity as an officer of Barr Pharmaceuticals, Inc. (the "Company"), for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge: (1) The Quarterly Report of the Company on Form 10-Q for the period ended December 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 11, 2004 /s/ Bruce L. Downey - ----------------------- Bruce L. Downey Chief Executive Officer /s/ William T. McKee - ----------------------- William T. McKee Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to Barr Pharmaceuticals, Inc. and will be retained by Barr Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----

EX-2.2

                                                                  EXECUTION COPY

                                                                     EXHIBIT 2.2

                            ASSET PURCHASE AGREEMENT

                                     BETWEEN

                             BARR LABORATORIES, INC.

                                       AND

                         ENDEAVOR PHARMACEUTICALS, INC.

                                NOVEMBER 20, 2003



                                TABLE OF CONTENTS

                                                                                                     
1.   Definitions................................................................................         1

2.   Basic Transaction..........................................................................         9
         (a)   Purchase and Sale of Assets......................................................         9
         (b)   Assumption of Liabilities........................................................         9
         (c)   Purchase Price...................................................................         9
         (d)   Closing..........................................................................         9
         (e)   Deliveries at Closing............................................................        10
         (f)   Allocation.......................................................................        10
         (g)   Product Liability Insurance......................................................        10

3.   Seller's Representations and Warranties....................................................        10
         (a)   Organization of Seller...........................................................        10
         (b)   Authorization of Transaction.....................................................        11
         (c)   No Conflicts; No Bankruptcy......................................................        11
         (d)   Brokers' Fees....................................................................        12
         (e)   Title to Assets; Sufficiency of Assets...........................................        12
         (f)   Financial Statements.............................................................        12
         (g)   Events Subsequent to Most Recent Fiscal Month End................................        12
         (h)   Undisclosed Liabilities..........................................................        14
         (i)   Legal Compliance.................................................................        14
         (j)   Tax Matters......................................................................        15
         (k)   Intellectual Property............................................................        15
         (l)   Contracts........................................................................        18
         (m)   Powers of Attorney...............................................................        19
         (n)   Insurance........................................................................        19
         (o)   Product Liability................................................................        19
         (p)   Real Property Used in the Business...............................................        19
         (q)   Suppliers........................................................................        19
         (r)   Regulatory Matters...............................................................        19
         (s)   Affiliate Transactions...........................................................        20
         (t)   Product Safety...................................................................        20
         (u)   Disclosure.......................................................................        20

4.   Buyer's Representations and Warranties.....................................................        20
         (a)   Organization of Buyer............................................................        20
         (b)   Authorization of Transaction.....................................................        21
         (c)   No Conflict......................................................................        21
         (d)   Brokers' Fees....................................................................        21

5.   Pre-Closing Covenants......................................................................        21
         (a)   General..........................................................................        21
         (b)   Notices and Consents.............................................................        21
         (c)   Operation of Business............................................................        21
         (d)   Preservation of Business.........................................................        22
         (e)   Full Access......................................................................        22
         (f)   Notice of Developments...........................................................        22
         (g)   Exclusivity......................................................................        22
         (h)   Confidentiality..................................................................        22



                                       ii



                                                                                                     
         (i)   Product Liability Insurance......................................................        23

6.   Conditions to Obligation to Close..........................................................        23
         (a)   Conditions to Buyer's Obligation.................................................        23
         (b)   Conditions to Seller's Obligation................................................        24

7.   Termination................................................................................        25
         (a)   Termination of Agreement.........................................................        25
         (b)   Effect of Termination............................................................        26

8.   Remedies for Breaches of This Agreement....................................................        26
         (a)   Survival of Representations and Warranties.......................................        26
         (b)   Indemnification Provisions for Buyer's Benefit...................................        26
         (c)   Limitations to Indemnification Obligation........................................        27
         (d)   Indemnification Provisions for Seller's Benefit..................................        27
         (e)   Procedures.......................................................................        28
         (f)   Manner of Payment................................................................        29
         (g)   Instructions to Escrow Agent.....................................................        29
         (h)   Matters Involving Third Parties..................................................        29
         (i)   Reduction for Insurance..........................................................        30
         (j)   Exclusive Remedy.................................................................        30
         (k)   No Consequential Damages.........................................................        30

9.   Post-Closing Covenants.....................................................................        31
         (a)   General..........................................................................        31
         (b)   Registrations; Record Keeping; NDC Numbers.......................................        31
         (c)   Litigation Support...............................................................        31
         (d)   Transition.......................................................................        31
         (e)   Use of Seller's Labeling and NDC.................................................        31
         (f)   Confidentiality..................................................................        31
         (g)   Covenant Not to Compete..........................................................        32
         (h)   Employee Termination and Payment.................................................        33
         (i)   Products Liability Insurance.....................................................        33
         (j)   Additional Contracts.............................................................        33
         (k)   Directors' and Officers' Insurance...............................................        33
         (l)   Documentation of Expenses........................................................        33

10.  Miscellaneous..............................................................................        33
         (a)   Press Releases and Public Announcements..........................................        33
         (b)   No Third-Party Beneficiaries.....................................................        34
         (c)   Entire Agreement.................................................................        34
         (d)   Succession and Assignment........................................................        34
         (e)   Counterparts.....................................................................        34
         (f)   Headings.........................................................................        34
         (g)   Notices..........................................................................        34
         (h)   Governing Law....................................................................        35
         (i)   Amendments and Waivers...........................................................        35
         (j)   Severability.....................................................................        35
         (k)   Expenses.........................................................................        35
         (l)   Construction.....................................................................        36
         (m)   Incorporation of Annexes, Exhibits and the Disclosure Schedule...................        36



                                      iii



                                                                                                     
         (n)   Specific Performance.............................................................        36
         (o)   Arbitration......................................................................        36



Exhibit I - Escrow Agreement
Exhibit II - Assignment and Assumption Agreement
Exhibit III - Bill of Sale
Exhibit IV - Financial Statements
Exhibit V - Legal Opinion
Exhibit VI - NDA Transfer Letter
Exhibit VII - Press Release
Exhibit VIII - Transitional Services Agreement

Annex A - Assumed Contracts
Annex B - Claims
Annex C - Contracts
Annex D - Certain Activities and Events
Annex E - NDAs and INDs
Annex F - Stay Agreements
Annex G - Severance and Stay Bonus Payments
Annex H - Tangible Personal Property
Annex I - Business Intellectual Property
Annex J - Product Liability Insurance

          The Exhibits and Annexes listed above
          are omitted from this filing with the
          Commission. The registrant agrees to
          furnish supplementally to the
          Commission a copy of any omitted
          Exhibit or Annex upon the Commission's
          request.

                                       iv



                            ASSET PURCHASE AGREEMENT

         This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
November 20, 2003, by and between Barr Laboratories, Inc., a New York
corporation ("Buyer") and Endeavor Pharmaceuticals, Inc., a Delaware corporation
("Seller"). Each of Buyer and Seller are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."

         WHEREAS, Seller is engaged in the business of research and development
of pharmaceutical Products (as defined below) based on proprietary combinations
of hormones, alone or in combination with other compounds, for application in
health care (the "Business"); and

         WHEREAS, Seller desires to sell the Business and substantially all of
its assets, including the Products, and Buyer desires to purchase the Business
and substantially all of the assets of Seller, including, without limitation,
the Products, in return for cash and the assumption of certain liabilities by
Buyer relating to such Products and other assets from and after the Closing Date
upon the terms and subject to the conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties
hereto, intending to be legally bound, agree as follows.

         1.       Definitions. As used in this Agreement, including the
Exhibits, Annexes and the Disclosure Schedule, the following capitalized terms
shall have the respective meanings ascribed to them below:

         "AAA" has the meaning set forth in Section 10(o)(i) below.

         "AAI" means, collectively, aaiPharma, Inc., AAI International Inc. and
their respective Affiliates.

         "Acquired Assets" means all of Seller's right, title, and interest in
and to all of the assets owned by Seller or used by Seller in the Business,
including, without limitation, all of Seller's right, title and interest in and
to (a) the Products, (b) each NDA and IND relating to the Products (including
all rights of reference to support such NDA), (c) the Marketing Materials, (d)
the Business Intellectual Property, (e) the Contracts set forth on Annex A, as
amended from time to time pursuant to the terms of this Agreement, (f) the
Claims of Seller, (g) the Permits, (h) the Inventory and (i) the Records;
provided, that notwithstanding the above, the Acquired Assets shall not include
the Excluded Assets.

         "Acquisition Proposal" has the meaning set forth in Section 5(g) below.

         "Additional Contracts" has the meaning set forth in Section 9(j) below.

         "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.

         "Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision of
state, local, or foreign law.

         "Agreement" has the meaning set forth in the preface above.



         "Assumed Liabilities" means all Liabilities of Seller from and after
the Closing relating solely to the Acquired Assets, other than the Contracts,
and the following Liabilities of Seller related to the Business: (a) all
Liabilities of Seller arising from and after the Closing relating to the
Business under the Contracts set forth on Annex A attached hereto, as amended
from time to time pursuant to the terms of this Agreement; (b) any product
liability arising from and after the Closing with respect to the Products; (c)
all obligations from and after the Closing with respect to regulatory matters
regarding the Business, (d) all Liabilities from and after the Closing arising
in connection with any Intellectual Property infringement claim with respect to
the Products or Business Intellectual Property and (e) all Liabilities arising
in connection with the sale, marketing, distribution, promotion and advertising
of any Products following the Closing; provided, that notwithstanding the above,
the Assumed Liabilities shall not include the Excluded Liabilities.

         "Bankruptcy and Equity Exception" has the meaning set forth in Section
3(b) below.

         "Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that reasonably forms or reasonably could
form the basis for any specified consequence.

         "Basket" has the meaning set forth in Section 8(c)(i) below.

         "Bonus Escrow Account" has the meaning set forth in Section 2(c)(iii)
below.

         "Business" has the meaning set forth in the preface above.

         "Business Intellectual Property" has the meaning set forth in Section
3(k)(i) below.

         "Buyer" has the meaning set forth in the preface above.

         "Buyer Indemnified Party" and "Buyer Indemnified Parties" have the
meanings set forth in Section 8(b) below.

         "Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.

         "Claims" means the claims, deposits, prepayments, refunds, causes of
action, choices in action, rights of recovery, rights of set off, and rights of
recoupment (including any such item relating to the payment of Taxes) relating
to the Business and the Acquired Assets (excluding those pertaining solely to
the Excluded Assets and those arising under this Agreement or any other
agreement or arrangement contemplated herein), including, without limitation,
those set forth on Annex B attached hereto.

         "Closing" has the meaning set forth in Section 2(d) below.

         "Closing Date" has the meaning set forth in Section 2(d) below.

         "COBRA" means Part 6 of Subtitle B of Title I of ERISA, Code Section
4980B, and any similar state law.

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

         "Company Group" has the meaning set forth in Section 5(g) below.

                                       2


         "Competing Product" has the meaning set forth in Section 9(g)(i) below.

         "Confidential Information" means any information concerning the
Business or the Acquired Assets that is not already generally available to the
public.

         "Contracts" means the agreements, contracts, instruments, Liens,
purchase orders, licenses, sublicenses, supply agreements, development
agreements, insurance agreements and other arrangements and commitments, to
which Seller is a party or by which it is bound or to which any of its assets is
subject (including any rights thereunder and amendments thereto through the date
hereof), but excluding (a) those pertaining solely to the Excluded Assets and
the Excluded Liabilities, the Leases, the Employment Agreements and the Stay
Agreements and (b) this Agreement and any other agreement or arrangement
contemplated herein. A list of the material Contracts is set forth on Annex C
attached hereto.

         "Counter Notice" has the meaning set forth in Section 8(e)(ii) below.

         "Damages" has the meaning set forth in Section 8(b) below.

         "Delivering Party" has the meaning set forth in Section 8(e)(i) below.

         "Deposit Amount" means the earnest money deposits of (a) $250,000 paid
by Buyer to Seller on October 6, 2003 and (b) $500,000 paid by Buyer to Seller
on October 24, 2003.

         "Disclosure Schedule" means the disclosure schedule accompanying this
Agreement and delivered by Seller to Buyer on the date hereof. The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in Section 3.

         "Disposition Bonus" has the meaning given to such term in the Stay
Agreements.

         "Dispute" has the meaning set forth in Section 10(o)(i) below.

         "Employee Benefit Plan" means any "employee benefit plan" (as such term
is defined in ERISA Section 3(3)) and any other employee benefit plan, program
or arrangement of any kind, at any time maintained, sponsored or contributed to
by Seller or any ERISA Affiliate or with respect to which Seller or any ERISA
Affiliate has any Liability.

         "Employment Agreements" means the Employment Agreements between Seller
and each of the Officers dated as of May 3, 2002, as amended.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

         "ERISA Affiliate" means any entity that, with Seller, is considered a
single employer under Code Section 414.

         "Escrow Agent" has the meaning set forth in Section 2(c)(ii) below.

         "Escrow Agreement" has the meaning set forth in Section 2(c)(ii) below.

         "Excluded Assets" means (a) Seller's corporate charter, qualifications
to conduct business as a foreign corporation, arrangements with registered
agents relating to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, stock transfer books, blank stock certificates,
and other documents relating to the organization, maintenance, and existence of
Seller as a corporation, (b) any assets, contracts or records related to or
maintained in connection with any Employee Benefit Plan,

                                       3


(c) Seller's Cash (including the $1,000,000 held by Seller in a separate account
pursuant to Section 9.8 of the OLG Agreement), (d) the Real Property, (e) the
Tangible Personal Property and (f) any of the rights of Seller under this
Agreement and any other agreement or arrangement contemplated herein.

         "Excluded Liabilities" means any and all Liabilities relating to or
arising out of the conduct of the Business prior to the Closing, and any other
Liabilities of Seller or any of its Affiliates, whether or not related to the
Business, that are not Assumed Liabilities, including, without limitation, (a)
any Liability arising out of or relating to, directly or indirectly, clinical
trials conducted by Seller prior to the Closing and any infringement,
misappropriation or violation by Seller of the Intellectual Property right of
any other Person prior to the Closing, (b) any Liability (i) arising prior to
the Closing under, or incurred as a result of an action taken prior to the
Closing by any party to, any of the Contracts set forth on Annex A attached
hereto, as amended from time to time pursuant to the terms of this Agreement or
(ii) arising under, or incurred prior to or following the Closing as a result of
any action taken by any party to, any Contract (other than the Contracts set
forth on Annex A attached hereto, as amended from time to time pursuant to the
terms of this Agreement), including, without limitation, Liabilities under the
Securities Payment Agreement with AAI, (c) any Liability related to the
Inventory arising prior to the Closing, (d) any Liability of Seller for Taxes
(with respect to the Acquired Assets or otherwise), including, without
limitation, any Liability of Seller for the unpaid Taxes of any Person under
Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract or otherwise, but excluding any
Taxes that are Assumed Liabilities, (e) any Liability of Seller under any bulk
transfer law of any jurisdiction, under any common law doctrine of de facto
merger or successor liability, or otherwise by operation of law, (f) any
obligation of Seller to indemnify any Person by reason of the fact that such
Person was a director, officer, employee, or agent of Seller and was serving at
the request of Seller as a partner, trustee, director, officer, employee, or
agent of another entity (whether such indemnification is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such indemnification is pursuant to any statute, charter
document, bylaw, agreement, or otherwise), (g) any Liability of Seller for costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby, (h) any Liability of Seller or any ERISA Affiliate arising
under or in connection with or related to any Employee Benefit Plan, including,
without limitation, any Liability arising under COBRA or Title IV of ERISA, (i)
any Liability of Seller to employees or former employees of Seller, including,
without limitation, the obligations to pay the Disposition Bonuses, Stay Bonuses
and Severance Benefits under the Stay Agreements and the Employment Agreements,
(j) any Liability of Seller to any stockholder or holder of any rights or
options to subscribe for or to purchase any shares of the Seller's capital stock
pursuant to any shareholder agreement, stock option plan or warrant agreement;
(k) any Liability of Seller arising under the Leases, and (l) any Liability or
obligation of Seller under this Agreement or any other agreement or arrangement
contemplated herein.

         "FDA" means the United States Food and Drug Administration, and any
successor agency or entity thereto that may be established hereafter.

         "Financial Statements" has the meaning set forth in Section 3(f) below.

         "Foreign Authorities" has the meaning set forth in Section 3(r)(i)
below.

         "GAAP" means United States generally accepted accounting principles as
in effect from time to time, consistently applied.

         "Governmental Entity" means any federal, state, local or foreign
governmental or regulatory authority, agency, commission, body or other
governmental entity.

         "IND" means an investigational new drug application.

                                       4


         "Indemnification Claim Amount" has the meaning set forth in Section
8(e)(i) below.

         "Indemnification Claim" has the meaning set forth in Section 8(e)(i)
below.

         "Indemnification Notice" has the meaning set forth in Section 8(e)(i)
below.

         "Indemnified Party" has the meaning set forth in Section 8(h)(i) below.

         "Indemnifying Party" has the meaning set forth in Section 8(h)(i)
below.

         "Indemnity Escrow Account" has the meaning set forth in Section
2(c)(ii) below.

         "Indemnity Escrow Amount" has the meaning set forth in Section 2(c)(ii)
below.

         "In-Licensed Intellectual Property" has the meaning set forth in
Section 3(k)(v) below.

         "Intellectual Property" means all of the following in any jurisdiction
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes, standard operating
procedures and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (e) all computer software (including, without
limitation, source and object code and all documentation), data and databases,
other than commercially available off-the-shelf software purchased or licensed,
(f) all advertising and promotional materials, (g) all other proprietary and
industrial rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).

         "Inventory" means all raw materials and supplies owned by Seller.

         "Knowledge" or "aware" means, when used in reference to any Party to
this Agreement, the actual knowledge of the directors, officers and key
employees of such Party.

         "Leases" means leases and all other arrangements pursuant to which
Seller has rights to the Leased Real Property.

         "Leased Real Property" means all leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures, improvements,
fixtures or other interest in real property held by Seller.

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

         "Lien" means any mortgage, pledge, lien, encumbrance, charge, or other
security interest other than (a) liens for Taxes not yet due and payable, (b)
purchase money liens and liens securing rental

                                       5


payments under capital lease arrangements, and (c) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.

         "Marketing Materials" means all rights of Seller in and to the
promotional materials in physical form and camera-ready artwork used or held for
use in the Business.

         "Material Adverse Effect" or "Material Adverse Change" means any
change, development or effect that has been or would reasonably be expected to
be materially adverse to the Business or the Acquired Assets as owned or
operated by Seller during the four (4) month period immediately preceding
January 1, 2003, taken as a whole, or on the ability of Seller to consummate
timely the transactions contemplated hereby; provided, however, that activities
and events set forth on Annex D shall not, individually or in the aggregate,
constitute a Material Adverse Effect or Material Adverse Change.

         "Most Recent Balance Sheet" has the meaning set forth in Section 3(f)
below.

         "Most Recent Fiscal Month End" has the meaning set forth in Section
3(f) below.

         "NDA" means each of Seller's new drug applications for Enjuvia tablets
(in 0.3, 0.45, 0.625 and 1.25 mg dosage strengths) in draft or on file with the
FDA and described on Annex E attached hereto, including reference to the drug
master files, and any and all amendments and supplements thereto.

         "NDC" has the meaning set forth in Section 9(b)(ii) below.

         "New Product Liability Insurance" has the meaning set forth in Section
9(i).

         "Officers" mean the following officers of Seller: R. Forrest Waldon,
Esq., Chairman, Chief Executive Officer and President; Thomas W. Leonard, Vice
President and Chief Scientific Officer; Stephen F. Rizzo, Vice President and
Chief Financial Officer; Christopher Smith, Vice President of Regulatory Affairs
and Quality Assurance; Richard F. Moldin, Vice President of Manufacturing and
Business Development; Parris J. Sanz, Esq., Vice President, General Counsel and
Secretary; and Kathleen M. Milligan, Vice President, Marketing and Sales.

         "OLG Agreement" means the Supply Agreement, dated November 1, 2000,
between Seller and Organics/LaGrange, Inc., an Illinois corporation, as amended.

         "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).

         "Owned Real Property" means land, together with all buildings,
structures, improvements or fixtures located thereon, and all easements and
other rights and interests appurtenant thereto, owned by Seller and used or
intended to be used in, or otherwise related to, the Business.

         "Party" has the meaning set forth in the preface above.

         "Permits" means the franchises, approvals, permits, licenses, orders,
registrations, certificates, variances, and similar rights obtained from
Governmental Entities relating to the Acquired Assets and all applications
therefor currently pending.

         "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity, or a
Governmental Entity.

                                       6


         "Proceeding" has the meaning set forth in Section 3(i)(i) below.

         "Product Liability Insurance" has the meaning set forth in Section 5(i)
below.

         "Products" means all pharmaceutical product candidates at any stage of
research or development based on combinations of hormones, alone or in
combination with other compounds, including without limitation, Enjuvia(TM),
Projuvia(TM) and Juviand(TM).

         "Purchase Price" has the meaning set forth in Section 2(c) below.

         "Real Property" has the meaning set forth in Section 3(p) below.

         "Receiving Party" has the meaning set forth in Section 8(e)(ii) below.

         "Records" means the files (including all electronic data files),
documents, correspondence, lists, drawings and specifications, creative
materials, marketing plans, studies, reports, and other printed or written
materials of the Business (in whatever form or medium), including, without
limitation, (i) all clinical or pre-clinical scientific studies and data
relating to the Products, (ii) all files and data packages that are part of each
IND and NDA and all correspondence with any Governmental Entity related to each
IND and NDA (including information on clinical and pre-clinical studies and
adverse event reports), (iii) all correspondence with any Governmental Entity
related to the use of the Products (including any information on clinical and
pre-clinical studies, adverse events, written contact regulatory reports and
formal minutes with any Governmental Entity to the extent Seller normally
retains such records and minutes in the ordinary course of its regulatory
activities), (iv) any and all rights of reference to any files (including any
drug master files) cited in each IND and NDA, (v) all other documents relating
to each IND and NDA or to the subject matter of each IND and NDA and (vi) all
financial books, records, statements or reports of Seller to the extent such
items relate to the Acquired Assets.

         "Registered Business Intellectual Property" has the meaning set forth
in Section 3(k)(iv) below.

         "Securities Act" means the Securities Act of 1933, as amended.

         "Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         "Securities Payment Agreement" means the Securities Payment Agreement
between Seller and AAI dated March 25, 2003.

         "Seller" has the meaning set forth in the preface above.

         "Seller Indemnified Party" and "Seller Indemnified Parties" have the
meanings set forth in Section 8(d) below.

         "Severance Benefits" means the applicable severance benefits payable
(i) to R. Forrest Waldon pursuant to Section 7 of his Employment Agreement and
(ii) to the other Officers pursuant to Section 6(b) of their respective
Employment Agreements.

         "Solvent" means, with respect to any Person on a particular date, that
on such date (a) the fair market value of the assets of such Person is greater
than the total amount of Liabilities (including contingent Liabilities) of such
Person, (b) the present realizable value of the assets of such Person is greater
than the amount that will be required to pay the probable Liabilities of such
Person on its debts as

                                       7


they become absolute and matured, and (c) such Person is able to realize upon
its assets and pay its debts and other Liabilities, including contingent
obligations, as they mature.

         "Stay Agreements" means (a) the Stay Agreements between Seller and each
of the individuals listed on Annex F attached hereto, (b) the amendments to the
Employment Agreements dated as of (i) September 19, 2003 and October 27, 2003,
for each of R. Forrest Waldon, Thomas W. Leonard and Stephen F. Rizzo, (ii)
September 19, 2003 and November 12, 2003, for Kathleen Milligan, and (iii)
September 19, 2003 for each other Officer.

         "Stay Bonus" has the meaning given to such term in the Stay Agreements.

         "Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association, or other business entity of
which (a) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (b) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), a majority of partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons owns a majority ownership interest in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity's gains or losses or shall
be or control any managing director or general partner of such business entity
(other than a corporation). The term "Subsidiary" shall include all Subsidiaries
of such Subsidiary.

         "Tangible Personal Property" means all tangible personal property used
in or held for use in the Business listed on Annex H (such as rights of Seller
in and to its furniture, fixtures and equipment), other than the Inventory and
the Marketing Materials.

         "Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, whether computed on a
separate or consolidated, unitary or combined basis or in any other manner,
including any interest, penalty, or addition thereto, whether disputed or not
and including any obligation to indemnify or otherwise assume or succeed to the
Tax Liability of any other Person.

         "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

         "Third Party Acquisition" has the meaning set forth in Section 5(g)
below.

         "Third Party Claim" has the meaning set forth in Section 8(h)(i) below.

         "Transitional Services Agreement" means the Transitional Services
Agreement dated as of the Closing Date, made by and between Buyer and Seller,
substantially in the form attached hereto as Exhibit VIII.

                                       8


         2.       Basic Transaction.

         (a)      Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Buyer shall purchase from Seller, and Seller shall
sell, transfer, assign, convey, and deliver to Buyer, all of Seller's rights,
title and interests in and to the Acquired Assets at the Closing free and clear
of all Liens, other than the Liens set forth in Section 3(e) of the Disclosure
Schedule, for the consideration specified below in this Section 2.

         (b)      Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Buyer shall assume and become responsible for all
of the Assumed Liabilities at the Closing. Buyer will not assume or have any
responsibility, however, with respect to any Excluded Liabilities.

         (c)      Purchase Price. On and subject to the terms and conditions of
this Agreement, in consideration for the Acquired Assets and the Business, Buyer
has paid to Seller the Deposit Amount and, at the Closing, Buyer shall pay to
Seller or to Melon Bank (or such other Person mutually selected by the Parties)
as escrow agent (the "Escrow Agent"), as set forth below, in cash or other
immediately available funds, the following amounts (such Deposit Amount,
together with the following amounts, collectively, the "Purchase Price"):

                  (i)      to Seller, the sum of $30,250,000;

                  (ii)     to the Escrow Agent for deposit in an account (the
         "Indemnity Escrow Account") established by the Escrow Agent pursuant to
         the Escrow Agreement substantially in the form attached hereto as
         Exhibit I (the "Escrow Agreement"), the sum of $2,000,000 (the
         "Indemnity Escrow Amount") which shall be available to satisfy any
         amount owed by Seller pursuant to Section 8 below and which shall be
         paid in accordance with the terms of this Agreement and the Escrow
         Agreement;

                  (iii)    to the Escrow Agent for deposit in an account (the
         "Bonus Escrow Account"), the sum of $1,533,195, which amount shall be
         paid to Seller in accordance with the terms of this Agreement, the
         Transitional Services Agreement and the Escrow Agreement, to satisfy
         Seller's obligation to pay Severance Benefits and Stay Bonuses to the
         individuals and in the amounts set forth on Annex G; provided, that to
         the extent that Seller's obligation to pay such Severance Benefits and
         Stay Bonuses is ultimately determined to be less than $1,533,195
         pursuant to the terms of the Stay Agreements and Employment Agreements,
         the difference between such actual amount and $1,533,195 shall be
         distributed to Buyer in accordance with the Escrow Agreement;

                  (iv)     to Seller, $350,000 for actual payments made by
         Seller for operating expenses of the Business from October 26, 2003,
         through the earlier of November 26, 2003 and the Closing (as evidenced
         by written documentation to be provided by Seller to Buyer after the
         Closing); provided, that if such actual payments are less than
         $350,000, the remainder of such $350,000 amount shall be retained by
         Seller as part of its retainer pursuant to Section 2.3 of the
         Transitional Services Agreement; provided further, that such remainder,
         if any, shall be treated by the Parties as a reduction to the Purchase
         Price; and

                  (v)      to Seller, the sum of $130,000, to pay Seller's
         extended reporting period on its directors' and officers' insurance
         policy for a period of at least three (3) years.

         (d)      Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis
LLP, in New York, New York commencing at 10:00 a.m. local time on the first
business day following the satisfaction or waiver (by the Party required or

                                       9


entitled to waive) of all conditions to the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine (the "Closing Date").

         (e)      Deliveries at Closing. At the Closing, (i) Seller will deliver
to Buyer the various certificates, instruments, and documents referred to in
Section 6(a) below; (ii) Buyer will deliver to Seller the various certificates,
instruments, and documents referred to in Section 6(b) below; (iii) Seller will
execute, acknowledge (if appropriate), and deliver to Buyer (A) an Assignment
and Assumption Agreement in the form attached hereto as Exhibit II, (B) a Bill
of Sale in the form attached hereto as Exhibit III, and (C) such other
instruments of sale, transfer, conveyance, and assignment as Buyer and its
counsel reasonably may request; (iv) Buyer will execute, acknowledge (if
appropriate), and deliver to Seller (A) an Assignment and Assumption Agreement
in the form attached hereto as Exhibit II and (B) such other instruments of
assumption as Seller and its counsel reasonably may request and (v) Buyer will
make the payments required by Section 2(c).

         (f)      Allocation. Buyer shall prepare an allocation of the Purchase
Price (and all other capitalized costs) among the Acquired Assets in accordance
with Code Section 1060 and the Treasury regulations thereunder (and any similar
provision of state, local or foreign law, as appropriate), which allocation
shall be binding upon Seller. Buyer shall deliver such allocation to Seller
within ninety (90) days after the Closing Date. Buyer and Seller and their
Affiliates shall report, act and file all Tax Returns (including, but not
limited to, Internal Revenue Service Form 8594) in all respects and for all
purposes consistent with such allocation prepared by Buyer. Seller shall timely
and properly prepare, execute, file and deliver all such documents, forms and
other information as Buyer may reasonably request to allow the Parties to
prepare such allocation. Neither Buyer nor Seller shall take any position
(whether in audits, Tax Returns or otherwise) that is inconsistent with such
allocation unless required to do so by applicable law.

         (g)      Product Liability Insurance. In addition to the payments set
forth in Section 2(c), on and subject to the terms and conditions of this
Agreement, Buyer shall pay to Seller at the Closing $70,000 in cash or other
immediately available funds to be used by Seller to obtain the five (5) year
Extended Reporting Period Endorsement pursuant to the terms and conditions set
forth in Section V.1c of the Products Liability Insurance.

         3.       Seller's Representations and Warranties. Seller represents and
warrants to Buyer that the statements contained in this Section 3 are true,
correct and complete as of the date hereof and will be correct and complete as
of the Closing Date (as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout Section 3 other than with
respect to representations and warranties that speak of a specific date),
except, with respect to any representation or warranty, as otherwise set forth
in the particular section of the Disclosure Schedule that corresponds to such
representation or warranty; it being understood that the disclosure in any such
section of the Disclosure Schedule shall qualify other representations and
warranties contained in this Section 3 only to the extent that it is apparent
from a reading of such disclosure that it also qualifies such other sections.

         (a)      Organization of Seller.

                  (i)      Seller is a corporation duly organized, validly
         existing, and in good standing under the laws of the jurisdiction of
         its incorporation with full corporate power and authority to own or
         lease its properties and to conduct its business in the manner and in
         the places where such properties are owned or leased or such business
         is conducted by it. The copies of the charter documents of Seller, as
         amended to date, and the bylaws of Seller, as amended to date, and
         heretofore delivered to Buyer's counsel, are complete and correct
         copies of the same, and no

                                       10


         amendments thereto are pending. Seller is qualified to do business as a
         foreign corporation in each jurisdiction in which such qualification is
         necessary to the operation of the Business as currently conducted by
         Seller, except where the failure to be so qualified would not,
         individually or in the aggregate, have a Material Adverse Effect.

                  (ii)     Except as set forth in Section 3(a)(ii) of the
         Disclosure Schedule, none of the Business is conducted and none of the
         Acquired Assets are owned or held by, any Affiliates of Seller; it
         being understood that the Business is conducted by officers and
         directors of Seller.

                  (iii)    Seller does not have any Subsidiaries.

         (b)      Authorization of Transaction. Seller has full power and
authority to execute and deliver this Agreement and each agreement, document and
instrument to be executed and delivered by it pursuant to or contemplated by
this Agreement and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and each such other
agreement, document and instrument by Seller has been duly authorized by all
necessary corporate action of Seller, including, without limitation, by the
affirmative vote of holders of at least 66-2/3% of the outstanding shares of
Preferred Stock of Seller, and no other action on the part of Seller is required
to authorize the same. This Agreement and each agreement, document and
instrument to be executed and delivered by Seller pursuant to or as contemplated
by this Agreement constitute, or when executed and delivered by Seller will
constitute, (assuming, in each case, the execution and delivery of such
agreement, document or instrument by Buyer, if applicable) the valid and legally
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms and conditions, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
rights of creditors generally and subject to the rules of law and public policy
governing (and all limitations on) specific performance, injunctive relief,
indemnification and other equitable remedies (the "Bankruptcy and Equity
Exception").

         (c)      No Conflicts; No Bankruptcy. Except as set forth in Section
3(c) of the Disclosure Schedule, neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate in any material respect, any statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
Governmental Entity to which Seller is, or its assets or properties are,
subject, (ii) contravene, conflict with or result in a material breach or
violation of any provision of the charter or bylaws of Seller, each as amended
to date, (iii) materially conflict with, result in a material breach of,
constitute a material default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any material Contract set forth on Annex C, other than such notices
and/or consents as are required to assign the Acquired Assets to Buyer as set
forth in Section 3(c) of the Disclosure Schedule or (iv) result in the
imposition of any Lien upon any of the Acquired Assets. Except as set forth in
Section 3(c) of the Disclosure Schedule, Seller does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any Governmental Entity or any other Person in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above) other than with
respect to those that have been obtained or will be obtained prior to Closing.
For the avoidance of doubt, for the purposes of the representations and
warranties in this Section 3(c), the Acquired Assets shall not include the
Additional Contracts, if any. There is no proceeding pending or, to the
Knowledge of Seller, threatened against Seller that challenges, or may have the
effect of preventing, delaying, making illegal or otherwise interfering with the
transactions contemplated by this Agreement. Seller was Solvent before, and will
be Solvent after, the consummation of the transactions contemplated hereby. No
order has been entered or petition presented by Seller for the winding up,
insolvency, liquidation, or bankruptcy of Seller.

                                       11


         (d)      Brokers' Fees. Other than the fees and expenses of Bear,
Stearns & Co. as set forth in the Disclosure Schedule, which Seller shall pay at
Closing, the fees and expenses of Seller's attorneys and accountants, and the
Stay Bonuses and the Disposition Bonuses, which Seller will pay in accordance
with the terms of this Agreement, the Escrow Agreement, the Stay Agreements and
Employment Agreements, Seller has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Buyer could become liable or obligated.

         (e)      Title to Assets; Sufficiency of Assets.

                  (i)      Seller has good and marketable title to the Acquired
         Assets, including an enforceable right, with the ability to freely use
         and transfer, to the intangible portion of the Acquired Assets,
         including those listed on Annex I, free and clear of all Liens or
         restrictions on transfer, except as set forth in Section 3(e)(i) of the
         Disclosure Schedule, and Seller has and will convey at the Closing good
         and marketable title to all of its personal property, tangible and
         intangible, included in the Acquired Assets, free and clear of all
         Liens.

                  (ii)     The Acquired Assets and the Excluded Assets are all
         of the assets used or held for use in the Business as currently
         operated by Seller or owned or possessed by Seller and the Acquired
         Assets constitute all of the assets, goodwill, properties and rights of
         every nature, kind and description, whether tangible or intangible,
         real or personal, necessary for or material to the operation of the
         Business as it was conducted during the four (4) month period
         immediately preceding January 1, 2003 and as of the date of the Most
         Recent Balance Sheet, except as provided on Annex D attached hereto.

         (f)      Financial Statements. Attached hereto as Exhibit IV (unless
otherwise specified below) are the following financial statements (collectively
the "Financial Statements"): (i) the audited balance sheets of Seller as of
December 31, 2001 and December 31, 2002, and the related statements of
operations, stockholders deficit and cash flows for the fiscal years ended
December 31, 2000, December 31, 2001 and December 31, 2002; and (ii) the
unaudited balance sheet of Seller (the "Most Recent Balance Sheet") as of
October 31, 2003 (the "Most Recent Fiscal Month End") and the related statements
of operations and cash flows of Seller for the ten (10) months ended October 31,
2003. The Financial Statements (including the notes thereto) have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, are correct and complete, are consistent with the books and
records of Seller (which books and records are correct and complete), and
present fairly the financial condition of Seller as of such dates and the
results of operations of Seller for such periods in all material respects,
subject, in the case of any unaudited Financial Statements, to year-end audit
adjustments, absence of footnotes and other presentation items.

         (g)      Events Subsequent to Most Recent Fiscal Month End. Except as
set forth on Annex D attached hereto, since January 1, 2003, there has not been
any Material Adverse Change and Seller has conducted its business only in the
Ordinary Course of Business. Without limiting the generality of the foregoing,
except as set forth in the appropriate subsection of Section 3(g) of the
Disclosure Schedule, since the Most Recent Fiscal Month End:

                  (i)      Seller has not sold, leased, transferred, or assigned
         any of its assets, tangible or intangible, other than in the Ordinary
         Course of Business for fair consideration;

                  (ii)     Seller has not entered into any Contract (or series
         of related Contracts) either involving more than $25,000 or outside the
         Ordinary Course of Business;

                                       12


                  (iii)    no Person (including Seller) has accelerated,
         terminated, modified, or canceled any material Contract (or series of
         related Contracts);

                  (iv)     Seller has not made or committed to make any capital
         expenditures (or series thereof) involving more than $25,000;

                  (v)      Seller has not made any capital investment in, any
         loan to, or any acquisition of the securities or assets of, any other
         Person (or series of related capital investments, loans and
         acquisitions) involving more than $25,000;

                  (vi)     Seller has not issued any note, bond or other debt
         security, or created, incurred, assumed, or guaranteed any indebtedness
         for borrowed money or capitalized lease obligation either involving
         more than $10,000 singly or $50,000 in the aggregate;

                  (vii)    Seller has not made any loan to, or entered into any
         other transaction with, any of its directors, officers and employees
         outside of the Ordinary Course of Business, other than the Stay
         Agreements;

                  (viii)   Seller has not entered into any employment contract
         or collective bargaining agreement, written or oral, or modified the
         terms of any existing such contract or agreement other than the Stay
         Agreements;

                  (ix)     Seller has not granted any increase in the base
         compensation of any of its directors, officers and employees outside of
         the Ordinary Course of Business;

                  (x)      Seller has not adopted, amended, modified, or
         terminated any Employee Benefit Plan;

                  (xi)     Seller has not made any other change in employment
         terms for any of its directors, officers and employees outside of the
         Ordinary Course of Business other than the Stay Agreements;

                  (xii)    Seller has not made any loans or advances of money;

                  (xiii)   Seller has not imposed or permitted to exist any Lien
         upon any of the Acquired Assets;

                  (xiv)    Seller has not delayed or postponed the payment of
         accounts payable or other Liabilities outside the Ordinary Course of
         Business;

                  (xv)     Seller has not canceled, compromised, waived, or
         released any right or claim (or series of related rights and claims)
         involving more than $25,000;

                  (xvi)    Seller has not transferred, assigned, or granted any
         license or sublicense of any rights under or with respect to any
         Intellectual Property relating to the Business or the Acquired Assets;

                  (xvii)   Seller has not licensed any Intellectual Property
         relating to the Business or the Acquired Assets from any third party;

                                       13


                  (xviii)  Seller has not failed to take any commercially
         reasonable action to maintain, renew, or protect the Business
         Intellectual Property at the federal level in the United States of
         America;

                  (xix)    Seller has not experienced any material damage,
         destruction, or loss (whether or not covered by insurance) affecting
         any of the Acquired Assets or the Business;

                  (xx)     there has not been any other material occurrence,
         event, incident, action, failure to act, or transaction outside the
         Ordinary Course of Business involving Seller, other than the
         negotiations with Buyer with respect to the transactions contemplated
         hereunder;

                  (xxi)    there has not been any material change in the kind
         and amount of insurance maintained by Seller;

                  (xxii)   to Seller's Knowledge, there has not been any
         material increase or notice thereof in the cost of raw materials used
         by Seller;

                  (xxiii)  Seller has not discharged a material Liability or
         Lien;

                  (xxiv)   there has not been any material change in the manner
         of keeping books, accounts, records, accounting methods or practices
         used by Seller;

                  (xxv)    Seller has not disclosed any Confidential Information
         of Seller to any Person that is not an officer, director or employee of
         Seller, except in the Ordinary Course of Business and pursuant to
         written agreements obligating the recipient to maintain the
         confidentiality thereof; and

                  (xxvi)   Seller has not committed to do any of the foregoing.

         (h)      Undisclosed Liabilities. Seller does not have any Liability
(and there is no Basis for any present or, to the Knowledge of Seller, future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Seller giving rise to any Liability), except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (ii) Liabilities which have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law on the
part of Seller).

         (i)      Legal Compliance.

                  (i)      Each of Seller and, to Seller's Knowledge, its
         predecessors and Affiliates, has complied with all applicable laws
         (including rules, regulations, codes, plans, injunctions, judgments,
         orders, decrees, rulings, and charges thereunder and including, without
         limitation, the Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1 et seq.
         and all such laws relating to the import, export, storage, handling
         treatment and/or disposal of or otherwise relating to animals and
         biologic materials (including transgenic animals and materials)) of all
         Governmental Entities, except where the failure to comply would not
         have a Material Adverse Effect, and, to Seller's Knowledge, no action,
         suit, proceeding, hearing, investigation, charge, complaint, claim,
         demand, or notice (a "Proceeding") has been filed or commenced against
         any of them alleging any failure to so comply.

                  (ii)     Seller holds the Permits and the Permits are all
         material permits, licenses, certificates, accreditations and other
         authorizations of all Governmental Entities required for the

                                       14


         conduct of the Business and the ownership of the Acquired Assets as
         currently conducted and owned by Seller, and Section 3(i)(ii) of the
         Disclosure Schedule sets forth a list of the Permits. No notices have
         been received by Seller alleging the failure to hold any permit,
         license, certificate, accreditation or other authorization of any
         Governmental Entity. Seller is in material compliance with all terms
         and conditions of all Permits.

         (j)      Tax Matters.

                  (i)      Seller has timely filed all Tax Returns that it was
         required to file. All such Tax Returns were correct and complete in all
         material respects. All Taxes owed by Seller (whether or not shown or
         required to be shown on any Tax Return) have been paid. Seller is not
         currently the beneficiary of any extension of time within which to file
         any Tax Return. No claim has ever been made by an authority in a
         jurisdiction where Seller does not file Tax Returns that it is or may
         be subject to taxation by that jurisdiction. There are no Liens on any
         of the Acquired Assets that arose in connection with any failure (or
         alleged failure) to pay any Tax.

                  (ii)     Seller has withheld and paid all Taxes required to
         have been withheld and paid in connection with any amounts paid or
         owing to any employee, independent contractor, creditor, stockholder,
         or other third party, and all Forms W-2 and 1099 required with respect
         thereto have been properly completed and timely filed.

                  (iii)    Seller does not expect any Governmental Entity to
         assess any additional Taxes for any period for which Tax Returns have
         been filed. There is no dispute or claim concerning any Tax Liability
         of Seller either (A) claimed or raised by any Governmental Entity in
         writing or (B) as to which Seller and the directors and officers (and
         employees responsible for Tax matters) of Seller has any Knowledge
         based upon personal contact with any agent of such Governmental Entity.

                  (iv)     Seller has not waived any statute of limitations in
         respect of Taxes or agreed to any extension of time with respect to a
         Tax assessment or deficiency.

                  (v)      Seller is not a party to any Tax allocation or
         sharing agreement that could result in any Liability to Buyer. Seller
         (A) has not been a member of an Affiliated Group filing a consolidated
         federal income Tax Return (other than a group the common parent of
         which was Seller) and (B) has no Liability for the Taxes of any Person
         under Reg. Section 1.1502-6 (or any similar provision of state, local,
         or foreign law), as a transferee or successor, by contract, or
         otherwise that could result in any Liability to Buyer.

                  (vi)     Seller has provided to Buyer the tax basis of each
         Acquired Asset and the dollar amount of all Assumed Liabilities.

         (k)      Intellectual Property.

                  (i)      Except as set forth in Section 3(k)(i) of the
         Disclosure Schedule, Seller owns all right, title and interest in and
         to all Intellectual Property listed on Annex I attached hereto (the
         "Business Intellectual Property"). The Business Intellectual Property
         and In-Licensed Intellectual Property constitute all Intellectual
         Property necessary for or material to the operation of the Business in
         the manner conducted by Seller during the four (4) month period
         immediately preceding January 1, 2003, except as set forth in Section
         3(k)(i) of the Disclosure Schedule. Each item of Business Intellectual
         Property and In-Licensed Intellectual Property owned or used by Seller
         immediately prior to the Closing will be owned or available for use by
         Buyer on identical

                                       15


         terms and conditions immediately subsequent to the Closing, assuming,
         in each case, the execution and delivery by each Party and other Person
         identified in Section 3(c) of the Disclosure Schedule, as necessary, of
         each agreement, document or instrument required by any Governmental
         Entity or other Persons identified in Section 3(c) of the Disclosure
         Schedule to effect the transfer of such Business Intellectual Property
         or In-Licensed Intellectual Property from Seller to Buyer. Except as
         set forth in Section 3(k)(i) of the Disclosure Schedule, Seller has
         taken commercially reasonable actions to maintain and protect all
         current federal registrations or applications pertaining to any of the
         Business Intellectual Property necessary for the operation of the
         Business in the manner conducted by Seller during the four (4) month
         period immediately preceding January 1, 2003 and has filed the foreign
         registrations or applications pertaining to the Business Intellectual
         Property listed on Annex I.

                  (ii)     Seller follows reasonable commercial practices to
         protect its proprietary and Confidential Information, including
         requiring its employees, consultants and agents (in accordance with
         reasonable commercial practice) to be bound in writing by obligations
         of confidentiality and non-disclosure, and requiring its employees,
         consultants and agents (in accordance with reasonable commercial
         practice) to assign to it any and all inventions and discoveries and
         other Intellectual Property conceived, reduced to practice, developed
         or discovered by such employees, consultants and/or agents made within
         the scope of, and during their employment (to the extent permitted by
         law) pursuant to written agreements executed by each such employee,
         consultant or agent, and only disclosing proprietary and confidential
         information to third parties pursuant to written confidentiality and
         non-disclosure agreements, except where the failure to protect Seller's
         proprietary or Confidential Information would not have or be reasonably
         expected to have a Material Adverse Effect.

                  (iii)    To Seller's Knowledge, after reasonable
         investigation, the conduct of the Business by Seller has not and as of
         the Closing Date, will not interfere with, infringe upon,
         misappropriate, or otherwise come into conflict with any Intellectual
         Property rights of any third parties, and Seller, except as set forth
         in Section 3(k)(iii) of the Disclosure Schedule, has never received any
         charge, complaint, claim, demand, or notice alleging any such
         interference, infringement, misappropriation, or other conflict
         (including any claim or written notice that Seller must license or
         refrain from using any Intellectual Property rights of any Person) and
         Seller is not aware of any Basis for the same. Except as set forth in
         Section 3(k)(iii) of the Disclosure Schedule, to the Knowledge of
         Seller, no third party has interfered with, infringed upon,
         misappropriated, or otherwise come into conflict with any Business
         Intellectual Property, and no licensee or sublicensee of Seller has
         provided Seller with any information of any of the foregoing by such
         licensee or sublicensee in connection with such licensee's or
         sublicensee's practice of any Business Intellectual Property licensed
         or sublicensed to it by Seller

                  (iv)     Annex I attached hereto identifies each patent,
         trademark or copyright registration that has been issued to Seller with
         respect to any of the Business Intellectual Property and each pending
         patent, trademark or copyright application or registration that Seller
         has made with respect to any of the Business Intellectual Property
         (collectively, the "Registered Business Intellectual Property").
         Section 3(k)(iv) of the Disclosure Schedule identifies each license,
         sublicense and agreement that Seller has granted to any third party
         with respect to any of the Business Intellectual Property. Seller has
         made available to Buyer correct and complete copies of all such
         patents, registrations, patent, trademark and copyright applications,
         licenses, sublicenses and agreements (as amended to date) and has made
         available to Buyer correct and complete copies of all other material
         written documentation evidencing ownership and prosecution (if
         applicable) of each such item. Annex I attached hereto also identifies
         each material unregistered trademark, material unregistered service
         mark, trade name, corporate name or Internet domain

                                       16


         name, computer software item (other than commercially available
         off-the-shelf software purchased or licensed) and each material
         unregistered copyright used by Seller in connection with the Business.
         Except as otherwise set forth in Section 3(k)(iv) of the Disclosure
         Schedule, with respect to each item of the Business Intellectual
         Property, including the Registered Business Intellectual Property,
         identified on Annex I:

                           (A)      Seller owns and possesses all right, title,
                  and interest in and to the item, free and clear of any Lien,
                  license, or, to Seller's Knowledge, other restriction or
                  limitation regarding use or disclosure, except as provided in
                  the terms of the applicable application, registration,
                  license, sublicense or agreement;

                           (B)      the item is not subject to any outstanding
                  injunction, judgment, order, decree, ruling, or charge;

                           (C)      Seller has paid the registration,
                  maintenance and renewal fees (if applicable) related to the
                  Business Intellectual Property and the Registered Business
                  Intellectual Property as indicated on Annex I attached hereto;

                           (D)      to Seller's Knowledge, no action, suit,
                  proceeding, hearing, investigation, charge, complaint, claim,
                  or demand is pending or is threatened which challenges the
                  legality, validity, enforceability, use, or ownership of the
                  item, other than Proceedings by the United States Patent and
                  Trademark Office (and corresponding foreign bodies) with
                  respect to the prosecution of the patent and trademark
                  applications;

                           (E)      Seller has never agreed to indemnify any
                  Person for or against any interference, infringement,
                  misappropriation, or other conflict with respect to the item;
                  and

                           (F)      to Seller's Knowledge, after reasonable
                  investigation, no loss or expiration of the item is
                  threatened, pending, or reasonably foreseeable, except for
                  patents expiring at the end of their statutory terms (and not
                  as a result of any act or omission by Seller, including
                  without limitation, a failure by Seller to pay any required
                  maintenance fees).

                  (v)      Section 3(k)(v) of the Disclosure Schedule identifies
         each item of Intellectual Property that any third party owns and that
         Seller uses or holds for use in the Business as currently conducted and
         pursuant to license, sublicense, agreement, or permission (the
         "In-Licensed Intellectual Property"). Seller has delivered to Buyer
         correct and complete copies of all such licenses, sublicenses,
         agreements, and permissions (as amended to date) and represents that,
         to Seller's Knowledge, there are no blocking patent rights or similar
         intellectual property rights owned or controlled by any Affiliate of
         the Seller, affecting the manufacture, distribution, marketing or sale
         of the Products or that has a Material Adverse Effect on the Business.
         With respect to each item of In-Licensed Intellectual Property, Seller
         has not granted any sublicense or similar right with respect to the
         license, sublicense, agreement, or permission. With respect to each
         item of In-Licensed Intellectual Property:

                           (A)      to Seller's Knowledge, after reasonable
                  investigation, the license, sublicense, agreement, or
                  permission covering the item is valid, binding, enforceable,
                  and in full force and effect;

                                       17


                           (B)      to Seller's Knowledge, after reasonable
                  investigation, the license, sublicense, agreement, or
                  permission will continue to be valid, binding, enforceable,
                  and in full force and effect on identical terms following
                  consummation of the transactions contemplated hereby,
                  assuming, in each case, the execution and delivery by each
                  Party and other Person identified in Section 3(c) of the
                  Disclosure Schedule, as necessary, of each agreement, document
                  or instrument required by any Governmental Entity or other
                  Persons identified in Section 3(c) of the Disclosure Schedule
                  to effect the transfer of such In-Licensed Intellectual
                  Property from Seller to Buyer;

                           (C)      to Seller's Knowledge, after reasonable
                  investigation, no party to the license, sublicense, agreement,
                  or permission is in breach or default, and no event has
                  occurred which with notice or lapse of time would constitute a
                  breach or default or permit termination, modification, or
                  acceleration thereunder;

                           (D)      Seller has not repudiated any provision of
                  any license, sublicense, agreement, or permission and, to
                  Seller's Knowledge, after reasonable investigation, no other
                  party to such license, sublicense, agreement, or permission
                  has repudiated any provision thereof;

                           (E)      to Seller's Knowledge, after reasonable
                  investigation, the underlying item of Intellectual Property is
                  not subject to any outstanding attachment, injunction,
                  judgment, order, decree, ruling, or charge; and

                  (vi)     Seller has complied in all material respects with and
         is presently in compliance in all material respects with all foreign,
         federal, state, local, governmental (including, but not limited to, the
         FDA, the Federal Trade Commission and State Attorneys General),
         administrative or regulatory laws, regulations, guidelines and rules
         applicable to any Business Intellectual Property and the conduct of the
         Business and Seller shall take all steps reasonably necessary to ensure
         such compliance until the Closing.

         (l)      Contracts. Seller has delivered or made available to Buyer a
correct and complete copy of each Contract (as amended to date) set forth on
Annex C attached hereto. Except as set forth in Section 3(l) of the Disclosure
Schedule, the Contracts set forth on Annex C attached hereto constitute all of
the contracts and agreements (other than the Leases, the Employment Agreements,
the Stay Agreements and the agreements pertaining solely to the Excluded Assets
or the Excluded Liabilities) necessary for or material to the operation of the
Business in substantially the same manner as operated by Seller during the four
(4) month period immediately preceding January 1, 2003. Except as set forth in
Section 3(l) of the Disclosure Schedule, with respect to each Contract set forth
on Annex C attached hereto: (i) such Contract is valid, binding upon and
enforceable against Seller and, to Seller's Knowledge, the other parties
thereto and in full force and effect; (ii) such Contract (but only to the extent
it is also listed on Annex A attached as of the date hereof and is not an
Additional Contract) will continue, to Seller's Knowledge, to be valid, binding
upon and enforceable against the parties thereto (other than Seller) and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 2 above) to the same extent as immediately prior to the
Closing, assuming in each case, the execution and delivery of each consent
required pursuant to Section 3(c), as set forth in Section 3(c) of the
Disclosure Schedule; (iii) neither Seller nor, to Seller's Knowledge, after
reasonable investigation, any other party is in breach or default, and no event
has occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under such
Contract; and (iv) neither Seller nor, to Seller's Knowledge, any other party
has repudiated any provision of any Contract or provided the other party with
any default notice.

                                       18


         (m)      Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of Seller, other than to outside patent counsel and
their foreign agents listed in Section 3(m) of the Disclosure Schedule.

         (n)      Insurance. The Acquired Assets are insured to the extent
described in the insurance policies disclosed in Section 3(n) of the Disclosure
Schedule. Said insurance policies and arrangements are in full force and effect,
all premiums currently due with respect thereto have been paid, and Seller is in
compliance in all material respects with the terms of such policies. There is no
claim by Seller pending under any such policies as to which coverage has been
questioned, denied or disputed by the insurer. Each such insurance policy shall
continue to be in full force and effect through the date of the Closing. To the
Knowledge of Seller, such policies of insurance are of the type and in amounts
customarily carried by Persons conducting business similar to that of the
Business.

         (o)      Product Liability. Seller does not have any Liability (and
there is no Basis for any present or, to the Knowledge of Seller, future
Proceeding against Seller giving rise to any Liability) arising out of any
personal injury and/or death or damage to property relating to or arising in
connection with the Products. The Product Liability Insurance has covered all
clinical and pharmacokinetic trials with respect to the Products.

         (p)      Real Property Used in the Business. The Leased Real Property
identified in Section 3(p) of the Disclosure Schedule (the "Real Property")
comprises all of the real property used or intended to be used in, or otherwise
related to, the Business. Seller does not have any Owned Real Property.

         (q)      Suppliers. No material supplier of the Business has indicated
that it shall stop, or materially decrease the rate of, supplying materials,
products or services to the Business.

         (r)      Regulatory Matters.

                  (i)      Seller is in material compliance with all applicable
         laws, rules and regulations of the United States or any applicable
         foreign jurisdiction, including of the FDA or similar foreign
         governmental authority ("Foreign Authorities") with respect to the
         manufacture, sale, labeling, storing, testing, distribution, promotion
         and marketing of the Products. Seller has all requisite permits,
         approvals, registrations, licenses or the like from the FDA or Foreign
         Authorities to conduct the Business as currently operated by Seller.
         Seller has previously delivered or made available to Buyer an index of
         all applications, approvals, registrations, licenses or the like
         obtained by Seller from the FDA and Foreign Authorities or required
         from Seller in connection with the conduct of the Business in
         substantially the same manner as currently conducted by Seller.

                  (ii)     Seller has made available to Buyer all written
         communications and oral communications to the extent reduced to written
         or other tangible form between Seller and the FDA or Foreign
         Authorities from the date each NDA was initially filed through the date
         hereof. Seller shall promptly deliver or make available to Buyer copies
         of all written communications and information (and records regarding
         all oral communications reduced to written form), between Seller and
         the FDA or Foreign Authorities from the date hereof through and after
         the Closing Date. Seller is not in receipt of notice of, and, to its
         Knowledge, after reasonable investigation, is not subject to, any
         adverse inspection, finding of deficiency, finding of non-compliance,
         compelled or voluntary recall, investigation, penalty for corrective or
         remedial action or other compliance or enforcement action, in each case
         relating to the Products or to the facilities in which the Products are
         manufactured, collected or handled, by the FDA or Foreign Authorities.
         There are no pending or, to the Knowledge of Seller, threatened,
         Proceedings or complaints by

                                       19


         the FDA or Foreign Authorities which would prohibit or impede the
         conduct of the Business in substantially the same manner as currently
         conducted by Seller.

                  (iii)    Seller has not made any material false statements on,
         or material omissions from, the applications, approvals, reports and
         other submissions to the FDA or Foreign Authorities prepared or
         maintained to comply with the requirements of the FDA or Foreign
         Authorities.

                  (iv)     Seller has not received any notification, written or
         oral, that remains unresolved, from Foreign Authorities, the FDA or
         other Governmental Entities indicating that any Products are misbranded
         or adulterated as defined in the U.S. Food, Drug & Cosmetic Act, 21
         U.S.C. 321, et seq., as amended, and the rules and regulations
         promulgated thereunder or any similar law, rule or regulation, whether
         under the jurisdiction of the FDA or any similar Foreign Authority
         applicable to Seller.

                  (v)      Seller has not committed any act, made any statement
         or failed to make any statement that would breach the FDA's policy with
         respect to "Fraud, Untrue Statements of Material Facts, Bribery, and
         Illegal Gratuities" set forth in 56 Fed. Reg. 46191 (September 10,
         1991) or any similar laws, rules or regulations, whether under the
         jurisdiction of the FDA or any Foreign Authority, and any amendments or
         other modifications thereto. Neither Seller nor, to the Knowledge of
         Seller, any Officer, key employee or agent of Seller has been convicted
         of any crime or engaged in any conduct that would reasonably be
         expected to result in (i) debarment under 21 U.S.C. Section 335a or any
         similar state or foreign law or regulation or (ii) exclusion under 42
         U.S.C. Section 1320a-7 or any similar state or foreign law or
         regulation, and neither Seller nor any such Person has been so debarred
         or excluded.

         (s)      Affiliate Transactions. Except as set forth in Section 3(s) of
the Disclosure Schedule, no officer, director or employee of Seller, or, to
Seller's Knowledge after reasonable investigation, shareholder or Affiliate of
Seller or any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is, or has been in the past twelve (12) months, a party to
any agreement, contract, arrangement, commitment or transaction with respect to
the Acquired Assets or the Business or has any material interest in any Acquired
Asset or the Business.

         (t)      Product Safety. Seller has made available to Buyer all
material information in Seller's possession regarding the safety, efficacy and
toxicity of the Products.

         (u)      Disclosure. The representations and warranties contained in
this Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading. Except for the
representations and warranties contained in this Agreement or any certificate or
instrument delivered pursuant to this Agreement, Seller makes no other
representation or warranty as to any fact or matter, and no Party shall be
entitled to rely upon any such other representation or warranty.

         4.       Buyer's Representations and Warranties. Buyer represents and
warrants to Seller that the statements contained in this Section 4 are correct
and complete as of the date hereof and will be correct and complete as of the
Closing Date (as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout Section 4).

         (a)      Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation with full power and authority to own

                                       20


or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is conducted
by it.

         (b)      Authorization of Transaction. Buyer has full power and
authority to execute and deliver this Agreement and each agreement, document and
instrument to be executed and delivered by it pursuant to or contemplated by
this Agreement and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and each such other
agreement, document and instrument by Buyer has been duly authorized by all
necessary corporate action of Buyer, and no other action on the part of Buyer is
required to authorize the same. This Agreement and each agreement, document and
instrument to be executed and delivered by Buyer pursuant to or as contemplated
by this Agreement constitute, or when executed and delivered by Buyer will
constitute, the valid and legally binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms and conditions, except
as the same may be limited by the Bankruptcy and Equity Exception.

         (c)      No Conflict. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate in any material respect, any statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
Governmental Entity to which Buyer is, or its assets or properties are, subject,
(ii) contravene, conflict with or result in a material breach or violation of
any provision of the charter or bylaws of Buyer, each as amended to date, (iii)
conflict with, result in a material breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any material
agreement, contract, lease, license, instrument, or other arrangement to which
Buyer is a party or by which it is bound or to which any of its assets is
subject or (iv) result in the imposition of any Lien upon any of its assets.
Buyer does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Entity or any other
Person in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in Section
2 above). There is no Proceeding pending, or to the Knowledge of Buyer,
threatened against Buyer that challenges, or may have the effect of presenting,
delaying, making illegal or otherwise interfering with the transactions
contemplated by this Agreement.

         (d)      Brokers' Fees. Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Seller could become liable
or obligated.

         5.       Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.

         (a)      General. Each of the Parties will use its commercially
reasonable efforts to take all actions and to do all things reasonably
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the Closing conditions set forth in Section 6 below, which such Party
is required to satisfy hereby).

         (b)      Notices and Consents. Seller will give any notices to third
parties, and Seller will use its commercially reasonable efforts to obtain any
third party consents, set forth in Section 3(c) of the Disclosure Schedule. Each
of the Parties will give any notices to, make any filings with, and use its
commercially reasonable efforts to obtain any authorizations, consents, and
approvals of Governmental Entities in connection with the matters referred to in
Section 3(c) and Section 4(c) above.

         (c)      Operation of Business. Except as contemplated by this
Agreement, Seller will not engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of

                                       21


Business. Without limiting the generality of the foregoing, Seller will not
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 3(g) above without Buyer's written consent.

         (d)      Preservation of Business. Seller will use its commercially
reasonable efforts to keep the Business substantially intact, including its
present operations, physical facilities, working conditions, insurance policies,
and relationships with lessors, licensors, suppliers and customers.

         (e)      Full Access. Seller will (and will cause its officers,
directors, employees, attorneys, accountants, advisors and other agents to and
will use commercially reasonable efforts to cause its Affiliates to) permit
representatives of Buyer to have full and complete access, during normal
business hours and with reasonable notice to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents
related to the Business; provided, however, that prior to Closing, Buyer shall
not be provided with (i) copies of Seller's formulation data for Enjuvia (which
have been provided to Buyer's intellectual property counsel pursuant to the
terms of a confidentiality and non-disclosure agreement), or (ii) samples of
Enjuvia or analytical methods.

         (f)      Notice of Developments. Each Party will give prompt written
notice to the other Party of any material adverse development causing an
inaccuracy in or breach of any of its own representations and warranties in
Section 3 and Section 4 above. Seller shall have the continuing obligation to
supplement promptly and amend the Disclosure Schedule as necessary or
appropriate with respect to any matter arising or discovered after the date of
this Agreement, which, if existing and known on the date of this Agreement,
would have been required to be set forth or described in the Disclosure
Schedule. Notwithstanding the foregoing, if Buyer elects to proceed with the
Closing, Buyer shall be deemed to have waived the right thereafter to assert any
claim hereunder with respect to any matter specifically and accurately disclosed
by Seller in such supplemental or amended disclosure.

         (g)      Exclusivity. Seller agrees that it and its representatives,
officers, directors, agents, stockholders or Affiliates (all such persons and
entities, the "Company Group") shall not, directly or indirectly, initiate,
solicit, entertain, negotiate, accept or discuss any proposal or offer (an
"Acquisition Proposal") to provide financing to Seller or to acquire all or any
significant part of Seller, whether by merger, purchase of stock, purchase of
assets, tender offer or otherwise (a "Third Party Acquisition"), or provide any
nonpublic information to any third party in connection with an Acquisition
Proposal or a Third Party Acquisition, or enter into any agreement, arrangement
or understanding requiring Seller to abandon, terminate or fail to consummate
the transactions contemplated under this Agreement. Seller shall (i) immediately
notify Buyer if any member of the Company Group receives any indication of
interest, request for information or offer in respect of an Acquisition
Proposal, (ii) communicate to Buyer in reasonable detail the terms of any such
indication, request or proposal, and (iii) provide Buyer with copies of all
written communications relating to any such indication, request or proposal.
Seller represents that no member of the Company Group is party to or bound by
any agreement with respect to an Acquisition Proposal or a Third Party
Acquisition other than under this Agreement and the members of the Company Group
have terminated all discussions with third parties (other than Buyer) regarding
Acquisition Proposals or Third Party Acquisitions. Seller shall use its
commercially reasonable efforts to cause each other member of the Company Group
to comply with the provisions of this Section 5(g). In the event that Seller
breaches the provisions of this Section 5(g) and the transactions contemplated
hereby are not consummated for any reason (other than as a direct result of a
breach of this Agreement by Buyer in the absence of any breach of this Agreement
by Seller), Seller shall promptly return $500,000 of the Deposit Amount to
Buyer.

         (h)      Confidentiality. The provisions of the Confidential Disclosure
Agreement entered into between Barr Laboratories, Inc. and Seller on June 6,
2003, shall continue in full force and effect in

                                       22


accordance with its terms until the Closing, and shall terminate and be of no
further force and effect upon the consummation of the transactions contemplated
hereby.

         (i)      Product Liability Insurance. On or prior to the Closing Date,
Seller shall cause the Product Liability policy described on Annex J attached
hereto (the "Product Liability Insurance") to name Buyer as an additional
insured with respect thereto, effective as of the Closing, at Buyer's sole cost
and expense.

         6.       Conditions to Obligation to Close.

         (a)      Conditions to Buyer's Obligation. Buyer's obligation to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:

                  (i)      the representations and warranties set forth in
         Section 3 above shall be true and correct at and as of the date hereof
         and true and correct in all material respects at and as of the Closing
         Date, except to the extent that such representations and warranties (x)
         speak as of an earlier date or (y) are qualified by terms such as
         "material", "Material Adverse Change" and "Material Adverse Effect", in
         which case such representations and warranties shall, disregarding all
         qualifications and exceptions contained therein as to the
         "materiality", "Material Adverse Change" and "Material Adverse Effect",
         be true and correct in all respects at and as of the Closing Date,
         except for any inaccuracies which, individually or in the aggregate,
         are not material or have not had, or would not be reasonably likely to
         have, a Material Adverse Effect;

                  (ii)     Seller shall have performed and complied with all of
         its covenants hereunder that are required to be performed or complied
         with prior to the Closing Date in all material respects, except to the
         extent that such covenants are qualified by terms such as "material"
         and "Material Adverse Effect", in which case Seller shall have
         performed and complied with all of such covenants in all respects;

                  (iii)    Seller shall have procured all of the third party
         consents specified in Section 3(c) above;

                  (iv)     no Proceeding shall be pending or threatened before
         any court or Governmental Entity or before any arbitrator involving
         Seller wherein an unfavorable injunction, judgment, order, decree,
         ruling, or charge would (A) prevent consummation of any of the
         transactions contemplated by this Agreement, (B) cause any of the
         transactions contemplated by this Agreement to be rescinded following
         consummation, or (C) affect adversely and materially the right of Buyer
         to own the Acquired Assets and to operate the Business (and no such
         injunction, judgment, order, decree, ruling, or charge shall be in
         effect);

                  (v)      Seller shall have delivered to Buyer a certificate to
         the effect that each of the conditions specified above in Section
         6(a)(i) through (iv) is satisfied in all respects;

                  (vi)     Seller shall have delivered to Buyer all
         authorizations, consents, and approvals of Governmental Entities
         referred to in Section 3(c) above;

                  (vii)    Seller shall have delivered to Buyer forms of
         assignment of all patents, trademarks, service marks and copyrights and
         applications for any of the foregoing included in the Registered
         Business Intellectual Property suitable for recordation in the relevant
         U.S. or foreign government offices, and shall have taken all actions
         reasonably necessary to transfer to Buyer any domain name registrations
         included in the Business Intellectual Property;

                                       23


                  (viii)   Buyer shall have received from Paul, Hastings,
         Janofsky & Walker LLP, counsel to Seller, an opinion with respect to
         the matters set forth in Exhibit V attached hereto, which shall be
         addressed to Buyer, and dated as of the Closing Date.

                  (ix)     Each of Seller and the Escrow Agent shall have
         executed and delivered the Escrow Agreement.

                  (x)      There shall not have occurred since the date hereof
         any event, circumstance or change that has had or would reasonably be
         expected to have a Material Adverse Effect other than any such event,
         circumstance or change that was disclosed to Buyer in writing by Seller
         on the date hereof.

                  (xi)     All actions to be taken by Seller in connection with
         consummation of the transactions contemplated hereby and all
         certificates, instruments, and other documents required to effect the
         transactions contemplated hereby shall be reasonably satisfactory in
         form and substance to Buyer;

                  (xii)    Seller shall have delivered to Buyer copies of the
         Certificate of Incorporation of Seller certified on or within seven (7)
         days before the Closing Date by the Secretary of State of Delaware;

                  (xiii)   Buyer shall have been named as an additional insured
         with respect to the Product Liability Insurance and Seller shall have
         delivered documentation to that effect in form and substance
         satisfactory to Buyer;

                  (xiv)    Seller shall have delivered to Buyer copies of the
         certificate of good standing of Seller issued on or within seven (7)
         days before the Closing Date by the Secretary of State of Delaware;

                  (xv)     Seller shall have executed and delivered the
         Transitional Services Agreement substantially in the form attached
         hereto as Exhibit VIII;

                  (xvi)    Seller shall have delivered to Buyer the audited
         financial statements of Seller for the year ended December 31, 2002 and
         unaudited financial statements of Seller for the ten months ended
         October 31, 2003; and

                  (xvii)   Seller shall have delivered to Buyer a certificate of
         the secretary or an assistant secretary of Seller, dated the Closing
         Date, in form and substance reasonably satisfactory to Buyer, as to (i)
         no amendments to the Certificate of Incorporation of Seller since the
         date of certification contemplated in clause (xiv) above; (ii) the
         bylaws (or other organizational documents) of Seller; (iii) the
         resolutions of the board of directors of Seller authorizing the
         execution, delivery, and performance of this Agreement and the
         transactions contemplated hereby; and (iv) incumbency and signatures of
         the officers of Seller executing this Agreement or any other agreement
         contemplated by this Agreement.

Buyer may waive any condition specified in this Section 6(a) if it executes a
writing so stating at or prior to the Closing.

         (b)      Conditions to Seller's Obligation. Seller's obligation to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:

                                       24


                  (i)      the representations and warranties set forth in
         Section 4 above shall be true and correct at and as of the date hereof
         and true and correct in all material respects at and as of the Closing
         Date, except to the extent that such representations and warranties (x)
         speak as of an earlier date or (y) are qualified by terms such as
         "material", "Material Adverse Change" and "Material Adverse Effect", in
         which case such representations and warranties shall, disregarding all
         qualifications and exceptions contained therein as to the
         "materiality", "Material Adverse Change" and "Material Adverse Effect",
         be true and correct in all respects at and as of the Closing Date,
         except for any inaccuracies which, individually or in the aggregate,
         are not material or have not had, or would not be reasonably likely to
         have, a Material Adverse Effect;

                  (ii)     Buyer shall have performed and complied with all of
         its covenants hereunder that are required to be performed and complied
         with prior to the Closing Date in all material respects, except to the
         extent that such covenants are qualified by terms such as "material"
         and "Material Adverse Effect", in which case Buyer shall have performed
         and complied with all of such covenants in all respects;

                  (iii)    no Proceeding shall be pending or threatened before
         any court or Governmental Entity or before any arbitrator involving
         Buyer wherein an unfavorable injunction, judgment, order, decree,
         ruling, or charge would (A) prevent consummation of any of the
         transactions contemplated by this Agreement or (B) cause any of the
         transactions contemplated by this Agreement to be rescinded following
         consummation (and no such injunction, judgment, order, decree, ruling,
         or charge shall be in effect);

                  (iv)     Buyer shall have delivered to Seller a certificate to
         the effect that each of the conditions specified above in Section
         6(b)(i) through (iii) is satisfied in all respects;

                  (v)      Buyer and the Escrow Agent shall have executed and
         delivered the Escrow Agreement;

                  (vi)     Buyer shall have executed and delivered the
         Transitional Services Agreement substantially in the form attached
         hereto as Exhibit VIII; and

                  (vii)    all actions to be taken by Buyer in connection with
         consummation of the transactions contemplated hereby and all
         certificates, instruments, and other documents required to effect the
         transactions contemplated hereby will be reasonably satisfactory in
         form and substance to Seller.

Seller may waive any condition specified in this Section 6(b) if it executes a
writing so stating at or prior to the Closing.

         7.       Termination.

         (a)      Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:

                  (i)      Buyer and Seller may terminate this Agreement by
         mutual written consent at any time prior to the Closing;

                  (ii)     Buyer may terminate this Agreement by giving written
         notice to Seller at any time prior to the Closing (A) in the event
         Seller has breached any representation, warranty or covenant contained
         in this Agreement in any material respect, Buyer has notified Seller of
         the

                                       25


         breach, and the breach has continued without cure for a period of
         thirty (30) days after the notice of breach or (B) if the Closing shall
         not have occurred on or before December 12, 2003 by reason of the
         failure of any condition precedent under Section 6(a) hereof (unless
         the failure results primarily from Buyer itself breaching any
         representation, warranty, or covenant contained in this Agreement); and

                  (iii)    Seller may terminate this Agreement by giving written
         notice to Buyer at any time prior to the Closing (A) in the event Buyer
         has breached any representation, warranty or covenant contained in this
         Agreement in any material respect, Seller has notified Buyer of the
         breach, and the breach has continued without cure for a period of
         thirty (30) days after the notice of breach or (B) if the Closing shall
         not have occurred on or before December 12, 2003 by reason of the
         failure of any condition precedent under Section 6(b) hereof (unless
         the failure results primarily from Seller itself breaching any
         representation, warranty, or covenant contained in this Agreement).

         (b)      Effect of Termination. In the event of the termination of this
Agreement as provided above, this Agreement shall forthwith become void and of
no further force and effect, except that the covenants and agreements set forth
in the last sentence of Section 5(g) and in Sections 1, 7(b), 10(b), 10(c),
10(e), 10(f), 10(g), 10(h), 10(i), 10(j), 10(k), 10(l), 10(m), 10(n) and 10(o)
shall survive such termination indefinitely, and except that nothing in this
Section 7(b) shall be deemed to release any Party from any Liability for any
breach by such Party of the terms and provisions of this Agreement or to impair
the right of any Party to compel specific performance by another Party of its
obligations under this Agreement.

         8.       Remedies for Breaches of This Agreement.

         (a)      Survival of Representations and Warranties.

         All of the representations and warranties of Seller contained in
Section 3 of this Agreement or in any certificate or instrument delivered to
Buyer pursuant to this Agreement shall survive the Closing and continue in full
force and effect until the twelve (12) month anniversary of the Closing Date.
All of the representations and warranties of Buyer contained in Section 4 of
this Agreement or in any certificate or instrument delivered pursuant to this
Agreement shall survive the Closing and continue in full force and effect until
the twelve (12) month anniversary of the Closing Date.

         (b)      Indemnification Provisions for Buyer's Benefit. Subject to the
terms and conditions of this Section 8(b), Seller shall indemnify Buyer and each
of its officers, directors, agents, and each Person, if any, who controls Buyer
within the meaning of the Securities Act (each a "Buyer Indemnified Party" and
collectively, the "Buyer Indemnified Parties") in respect of, and hold them
harmless against, any and all debts, obligations and other Liabilities, monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation reasonable amounts paid to enforce the
provisions of this Section 8 and amounts paid in settlement, interest, court
costs, costs of investigators, reasonable fees and out-of-pocket expenses of
attorneys, accountants, financial advisors and other experts, and other
reasonable expenses of litigation) (collectively, "Damages") incurred or
suffered by any of the foregoing parties resulting from, relating to or
constituting:

                  (i)      any fraud, misrepresentation or breach of warranty of
         Seller contained in this Agreement (including any fraud,
         misrepresentation or breach of warranty deemed to have been made by the
         delivery of any certificate or instrument delivered pursuant to this
         Agreement), or any Proceeding asserted or instituted arising out of any
         matter constituting fraud or a breach of such representations or
         warranties (including any fraud or breach of any representations or

                                       26


         warranties deemed to have been made by the delivery of any certificate
         or instrument delivered pursuant to this Agreement);

                  (ii)     any breach by Seller of any of its covenants under
         this Agreement;

                  (iii)    any Proceeding asserted or instituted against Buyer,
         or any of its properties or assets, by any third party for damages
         suffered by such third party by reason of or resulting from (A) any
         Excluded Liability, (B) the ownership or operation of the Business
         prior to the Closing or the Excluded Assets, or (C) any actions taken
         or omitted to be taken by Seller prior to the Closing (other than
         Assumed Liabilities);

                  (iv)     any Excluded Liability or Excluded Asset.

         (c)      Limitations to Indemnification Obligation. Notwithstanding
         anything to the contrary contained in Section 8(b), Seller shall not
         have any obligation to indemnify any Buyer Indemnified Party:

                  (i)      until the Buyer Indemnified Parties have suffered
         Damages for which Seller would otherwise have (but for the provisions
         of this Section 8(c)) an indemnification obligation in excess of
         $348,650 (the "Basket"), in which case, Seller shall only be liable for
         all such Damages in excess of the Basket;

                  (ii)     for any Damages for which Seller would otherwise have
         an indemnification obligation, to the extent that Seller has previously
         indemnified Buyer Indemnified Parties for Damages in the aggregate
         amount equal to the Indemnity Escrow Amount;

                  (iii)    for any Damages incurred as a result of, or arising
         out of, an inaccurate representation or breach of warranty, or breach
         or nonperformance of any covenant made by Seller in this Agreement
         (including any inaccurate representation or breach of any warranty
         deemed to have been made by delivery of any certificate or instrument
         pursuant to this Agreement) to the extent that Buyer had Knowledge of
         the same prior to the Closing Date through the delivery by Seller of
         the Disclosure Schedule or a supplemental or amended disclosure
         pursuant to Section 5(f) hereof; or

                  (iv)     for any indemnification obligation for which Buyer
         fails to notify Seller pursuant to Section 8(e) on or prior to the
         twelve (12) month anniversary of the Closing;

         provided, however, that the limitations contained in clauses (i) and
(ii) above shall not apply to indemnification claims (x) involving fraud,
intentional misrepresentation or deliberate or willful material breach and (y)
pursuant to Sections 8(b)(iii) and 8(b)(iv) above.

         (d)      Indemnification Provisions for Seller's Benefit. Buyer shall
indemnify Seller and each of its officers, directors, agents, and each Person,
if any, who controls Seller within the meaning of the Securities Act (each a
"Seller Indemnified Party" and collectively, the "Seller Indemnified Parties")
in respect of, and hold them harmless against, any and all Damages incurred or
suffered by any of the foregoing parties resulting from, relating to or
constituting:

                  (i)      any fraud, misrepresentation or breach of warranty of
         Buyer contained in this Agreement (including any fraud,
         misrepresentation or breach of warranty deemed to have been made by the
         delivery of any certificate or instrument delivered pursuant to this
         Agreement), or any Proceeding asserted or instituted arising out of any
         matter constituting fraud or a breach of

                                       27


         such representations or warranties (including any fraud or breach of
         any representations or warranties deemed to have been made by the
         delivery of any certificate or instrument delivered pursuant to this
         Agreement);

                  (ii)     any breach by Buyer of any of its covenants under
         this Agreement;

                  (iii)    any Proceeding asserted or instituted against Seller,
         or any of Seller's properties or assets, by any third party for damages
         suffered by such third party by reason of or resulting from (A) any
         Assumed Liability or (B) the ownership or operation of the Acquired
         Assets or the Business after the Closing including, without limitation,
         the sale, labeling, storing, testing, distribution, promotion and
         marketing of any Products after the Closing;

                  (iv)     any Assumed Liability; or

                  (v)      any Liability of Seller for any Tax that arises due
         to the nature of the transaction contemplated hereby being structured
         as an asset sale rather than a stock sale, including, but not limited
         to, all federal, state and local income taxes, all transfer,
         documentary, sales, use, stamp, registration and other such taxes, all
         conveyance fees, recording charges and other fees and charges
         (including any penalties and interest) incurred in connection with the
         transfer of the Acquired Assets and the Business and any Liability
         arising out of or related to Buyer's allocation of the Purchase Price
         pursuant to Section 2(f).

         (e)      Procedures.

                  (i)      Notice. Any Party seeking indemnification under this
         Agreement (the "Delivering Party") shall deliver notice (each, an
         "Indemnification Notice") thereof to the other Party with a copy to the
         Escrow Agent. Such notice shall (A) be signed by an officer of the
         Delivering Party, (B) shall identify the particular section of this
         Agreement containing the inaccurate representation, or the warranty or
         covenant that has been breached or not performed, which gives rise to
         such indemnification obligation, and (C) specify, in reasonable detail,
         the nature, underlying facts, and, to the extent determinable at the
         time of such Indemnification Notice, the dollar amount or a good faith
         approximation thereof (an "Indemnification Claim Amount") of any claim
         for indemnification (an "Indemnification Claim") it may have. Each
         Party may make more than one Indemnification Claim with respect to any
         underlying state of facts.

                  (ii)     Counter Notice. Within thirty (30) calendar days of
         receipt of an Indemnification Notice, the Party receiving such Notice
         (the "Receiving Party") shall deliver to the Delivering Party a notice
         (a "Counter Notice") with a copy to the Escrow Agent, signed by an
         officer of the Receiving Party, setting forth (A) the Receiving Party's
         acquiescence to, or rejection of, the Indemnification Claim in its
         totality, or of its partial acceptance of the Indemnification Claim,
         (B) specifying that part of the Indemnification Claim to which
         acquiescence is made and that part which is rejected, (C) as to each
         part of the Indemnification Claim which is rejected, specifying whether
         the Receiving Party rejects its obligation to indemnify the Delivering
         Party in respect thereof, whether the Receiving Party accepts its
         indemnification obligation, but rejects the amount of the
         Indemnification Claim or both, and (D) setting forth in reasonable
         detail the nature of and the facts underlying the rejection of any part
         of the Indemnification Claim.

                  (iii)    Accepted Indemnification Claims. Any Indemnification
         Claim or portion of any Indemnification Claim which is not disputed in
         a Counter Notice timely delivered or which is accepted in such Counter
         Notice or deemed to be accepted pursuant to the immediately following
         sentence (each such claim, an "Accepted Claim") shall be paid in
         accordance with Section 8(f).

                                       28


         Failure by any Receiving Party to deliver a Counter Notice in the
         manner and within the period prescribed in Section 8(e)(ii) shall be
         deemed to be an acceptance of the validity of the Indemnification Claim
         or Indemnification Claims set forth in such Notice and a waiver of any
         right to contest the validity or amount of such Indemnification Claim.

                  (iv)     Unresolved Indemnification Claims. If the Parties are
         not able to resolve their differences as to the portion of any
         Indemnification Claim which is unresolved within forty five (45)
         calendar days of receipt by the Delivering Party of the Counter Notice,
         either Party may submit the dispute to binding arbitration in
         accordance with Section 10(o) of this Agreement. With respect to that
         portion of any such unresolved claim that is determined in a final and
         binding order or judgment by the arbitrator in favor of a Buyer
         Indemnified Party or a Seller Indemnified Party, such claim shall be
         deemed an Accepted Claim and paid in accordance with Section 8(f).

         (f)      Manner of Payment.

                  (i)      Subject to Section 8(e), any indemnification
         obligations of Seller pursuant to Section 8(b) shall first be satisfied
         out of the Indemnity Escrow Account to the extent thereof and
         thereafter shall be paid by wire transfer of immediately available
         funds to an account designated in writing by the applicable Buyer
         Indemnified Party within 15 days after the determination thereof.

                  (ii)     Subject to Section 8(e), any indemnification
         obligations of Buyer pursuant to Section 8(d) shall be paid by wire
         transfer of immediately available funds to an account designated in
         writing by the applicable Seller Indemnified Party within 15 days after
         the determination thereof.

         (g)      Instructions to Escrow Agent. On or after the date an
Indemnification Claim by a Buyer Indemnified Party becomes an Accepted Claim in
accordance with Sections 8(e)(iii) or 8(e)(iv), Buyer and Seller shall direct
the Escrow Agent by issuing joint written instructions to release and deliver to
such Buyer Indemnified Party cash from the Indemnity Escrow Account in
satisfaction of such claim in accordance with this Agreement and the Escrow
Agreement. The amount of cash released and delivered to such Buyer Indemnified
Party from the Indemnity Escrow Account shall be the aggregate amount of Damages
incurred by such Buyer Indemnified Party as specified in such Accepted Claim.

         (h)      Matters Involving Third Parties.

                  (i)      If any third party shall notify any Party (the
         "Indemnified Party") with respect to any matter (a "Third Party Claim")
         which may give rise to a claim for indemnification against the other
         Party (the "Indemnifying Party") under this Section 8, then the
         Indemnified Party shall promptly notify the Indemnifying Party thereof
         in writing; provided, however, that no delay on the part of the
         Indemnified Party in notifying the Indemnifying Party shall relieve the
         Indemnifying Party from any obligation hereunder unless (and then
         solely to the extent) the Indemnifying Party thereby is prejudiced.

                  (ii)     The Indemnifying Party will have the right to defend
         the Indemnified Party against the Third Party Claim with counsel of its
         choice reasonably satisfactory to the Indemnified Party so long as (A)
         the Indemnifying Party notifies the Indemnified Party in writing within
         fifteen (15) days after the Indemnified Party has given notice of the
         Third Party Claim that the Indemnifying Party will indemnify the
         Indemnified Party from and against the entirety of any Damages the
         Indemnified Party may suffer resulting from, arising out of, relating
         to, in the nature of, or caused by the Third Party Claim, (B) the
         Indemnifying Party provides the Indemnified

                                       29


         Party with evidence reasonably acceptable to the Indemnified Party that
         the Indemnifying Party will have the financial resources to defend
         against the Third Party Claim and fulfill its indemnification
         obligations hereunder, (C) the Third Party Claim involves only money
         damages and does not seek an injunction or other equitable relief, (D)
         settlement of, or an adverse judgment with respect to, the Third Party
         Claim is not, in the good faith judgment of the Indemnified Party,
         likely to establish a precedential custom or practice materially
         adverse to the continuing business interests or the reputation of the
         Indemnified Party, (E) no conflict of interest exists between the
         Indemnifying Party and the Indemnified Party, and (F) the Indemnifying
         Party conducts the defense of the Third Party Claim actively and
         diligently.

                  (iii)    So long as the Indemnifying Party is conducting the
         defense of the Third Party Claim in accordance with Section 8(h)(ii)
         above, (A) the Indemnified Party may retain separate co-counsel at its
         sole cost and expense and participate in the defense of the Third Party
         Claim, (B) the Indemnified Party will not consent to the entry of any
         judgment or enter into any settlement with respect to the Third Party
         Claim without the prior written consent of the Indemnifying Party (not
         to be withheld unreasonably), and (C) the Indemnifying Party will not
         consent to the entry of any judgment or enter into any settlement with
         respect to the Third Party Claim without the prior written consent of
         the Indemnified Party (not to be withheld unreasonably).

                  (iv)     In the event any of the conditions in Section
         8(h)(ii) above is or becomes unsatisfied, however, (A) the Indemnified
         Party may defend against, and consent to the entry of any judgment or
         enter into any settlement with respect to, the Third Party Claim in any
         manner it reasonably may deem appropriate (and the Indemnified Party
         need not consult with, or obtain any consent from, the Indemnifying
         Party in connection therewith), (B) the Indemnifying Party will
         reimburse the Indemnified Party promptly and periodically for the costs
         of defending against the Third Party Claim (including reasonable
         attorneys' fees and expenses), and (C) the Indemnifying Party will
         remain responsible for any Damages the Indemnified Party may suffer
         resulting from, arising out of, relating to, in the nature of, or
         caused by the Third Party Claim to the fullest extent provided in this
         Section 8.

         (i)      Reduction for Insurance. The amount of any payment to any
Buyer Indemnified Party, Seller Indemnified Party or Indemnified Party pursuant
to this Section 8 shall be reduced by the amount of any insurance proceeds
actually received by or on behalf of such party in reduction of the related
indemnifiable loss. A Buyer Indemnified Party, Seller Indemnified Party or
Indemnified Party which subsequently receives insurance proceeds in respect of
the related indemnifiable loss shall pay to Seller, Buyer or the Indemnifying
Party, as applicable, an amount of such insurance proceeds actually received
equal to the amount Seller, Buyer or the Indemnifying Party, as the case may be,
has paid the Buyer Indemnified Party, Seller Indemnified Party or Indemnified
Party, as applicable, in respect of such indemnifiable loss.

         (j)      Exclusive Remedy. The Parties acknowledge and agree that the
foregoing indemnification provisions shall be the exclusive remedy of the Seller
Indemnified Parties and the Buyer Indemnified Parties with respect to the
transactions contemplated by this Agreement; provided, that this Section 8(j)
shall not prohibit or in any way restrict a Seller Indemnified Party's or Buyer
Indemnified Party's ability to seek an injunction, specific performance, or
other equitable relief, and shall not apply to fraudulent or other similar
actions on the part of any Party.

         (k)      No Consequential Damages. Seller, Buyer or any Indemnifying
Party shall not be liable to any Buyer Indemnified Party, Seller Indemnified
Party or Indemnified Party, respectively, for consequential, enhanced, punitive
or special damages unless such damages are included in a Third Party Claim and
the Indemnified Party is liable to the third party claimant for such damages.

                                       30


         9.       Post-Closing Covenants.

         (a)      General. In case at any time after the Closing any further
action is reasonably necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Section 8 above). Seller acknowledges and agrees that from and after the
Closing, Buyer will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort relating to
the Business or the Acquired Assets, including, without limitation, all Records
(other than those pertaining solely to an Excluded Asset or an Excluded
Liability); provided, however, that Seller may retain (i) copies of such
documents, books, records, agreements, and financial data and (ii) originals of
all quality documents, including batch records.

         (b)      Registrations; Record Keeping; NDC Numbers.

                  (i)      On the Closing Date, the Parties shall file with the
         FDA all documents required to transfer each NDA from Seller to Buyer
         substantially in the form attached hereto as Exhibit VI. Seller shall
         prepare and file the documents required of a former owner, and Buyer
         shall prepare and file the documents required of a new owner. Until the
         Closing Date, Seller shall be responsible for all FDA reporting
         requirements. Thereafter, Buyer shall be responsible for all FDA
         reporting requirements.

                  (ii)     Promptly following the Closing Date, Buyer shall take
         any and all action necessary to change the National Drug Code ("NDC")
         number for the Products and promptly upon receipt of such new NDC
         number shall notify Seller in writing and request that Seller apply, or
         caused to be applied, such new NDC number to the Products.

         (c)      Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any Proceeding in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Business, the other Party will cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available its personnel, and provide such testimony and access to its books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 8 below).

         (d)      Transition. For a period of one (1) year following the Closing
Date, (i) Seller will not take any action that is designed or intended to have
the effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of the Business from maintaining the same business
relationships with Buyer after the Closing as it maintained with Seller prior to
the Closing and (ii) Seller will refer all customer inquiries relating to the
Business to Buyer.

         (e)      Use of Seller's Labeling and NDC. From and after the Closing
Date, Seller shall permit Buyer to use the labeling and NDC used by Seller with
respect to the Products prior to the Closing (including the use of Seller's name
on such labeling) on all shipments of the Products.

         (f)      Confidentiality. After the Closing, Seller will treat and hold
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to Buyer or destroy, at the request and option of Buyer, all

                                       31


tangible embodiments (and all extracts, summaries and copies) of the
Confidential Information which are in its possession or control. In the event
that Seller is requested or required (by oral question or request for
information or documents in any legal Proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Seller will notify Buyer promptly of the request or requirement so
that Buyer may seek an appropriate protective order or waive compliance with the
provisions of this Section 9(f). If, in the absence of a protective order or the
receipt of a waiver hereunder, Seller is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal, Seller may disclose the
Confidential Information to the tribunal; provided, however, that Seller shall
use its commercially reasonable efforts to obtain, at the reasonable request of
Buyer and at Buyer's sole expense, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as Buyer shall designate. Notwithstanding anything
herein to the contrary, the Parties (and each Affiliate and Person acting on
behalf of any such Party) agree that each Party (and each employee,
representative, and other agent of such Party) may disclose to any and all
Persons, without limitation of any kind, the tax treatment and tax structure of
the transaction and all materials of any kind (including opinions or other tax
analyses) that are provided to such Party or such Person relating to such tax
treatment and tax structure, except to the extent necessary to comply with any
applicable federal or state securities laws. This authorization is not intended
to permit disclosure of any other information including (without limitation) (i)
any portion of any materials to the extent not related to the tax treatment or
tax structure of the transaction, (ii) the identities of participants or
potential participants in the transaction, (iii) the existence or status of any
negotiations, (iv) any pricing or financial information (except to the extent
such pricing or financial information is related to the tax treatment or tax
structure of the transaction), or (v) any other term or detail not relevant to
the tax treatment or the tax structure of the transaction.

         (g)      Covenant Not to Compete. From the Closing Date until the first
anniversary thereof,

                  (i)      Neither Seller nor any of the Officers shall engage
         directly or indirectly in the distribution, promotion, marketing, use
         or sale of the Products, or any pharmaceutical product which is the
         same as or substantially similar to any of the Products or has the same
         indications as any of the Products (a "Competing Product") in the
         United States or Canada, nor market, promote, supply, distribute or
         manufacture any Competing Products in the United States or Canada;
         provided, however, that no owner of less than 5% of the outstanding
         stock of any publicly traded corporation shall be deemed to engage
         solely by reason thereof in any activity restricted by this Section
         9(g)(i).

                  (ii)     Neither Seller nor any of the Officers shall
         disclose, assign or otherwise transfer or authorize any third party to
         disclose, assign or otherwise transfer to any Person, whether located
         within or outside of the United States and Canada, any information
         regarding the Products, including, without limitation, the formulation
         or specifications for the Products or any other know-how relating to
         the manufacture or use of the Products, or to the manufacture of and
         the formulation and specifications for the active ingredients.

                  (iii)    If the final judgment of a court of competent
         jurisdiction declares that any term or provision of this Section 9(g)
         is invalid or unenforceable, the Parties agree that the court making
         the determination of invalidity or unenforceability shall have the
         power to reduce the scope, duration, or area of the term or provision,
         to delete specific words or phrases, or to replace any invalid or
         unenforceable term or provision with a term or provision that is valid
         and enforceable and that comes closest to expressing the intention of
         the invalid or unenforceable term or provision, and this Agreement
         shall be enforceable as so modified after the expiration of the time
         within which the judgment may be appealed.

                                       32


         (h)      Employee Termination and Payment. Seller shall pay to its
employees and former employees all amounts necessary to satisfy its obligations
for Severance Benefits, Disposition Bonuses, and Stay Bonuses in accordance with
the terms of this Agreement, the Transitional Services Agreement, the Stay
Agreements, the Employment Agreements and the Escrow Agreement and shall pay all
payroll taxes associated with such payments. With respect to Seller's
obligations to pay Severance Benefits and the Stay Bonuses, Seller shall pay
such amounts to Seller's employees and former employees as set forth on Annex G
attached hereto promptly after receiving distributions from the Bonus Escrow
Account to make such payments.

         (i)      Products Liability Insurance. Within five (5) days of the
Closing, Seller shall obtain a five (5) year Extended Reporting Period under the
Product Liability Insurance (the "New Product Liability Insurance") pursuant to
the terms and conditions set forth in Section V.1c of the Product Liability
Insurance. Seller shall cause Hays Companies to be named as a "broker of record"
with respect to the New Product Liability Insurance after the New Product
Liability Insurance is obtained. Seller shall take any further action (including
the execution and delivery of any further instruments and documents) that may be
reasonably necessary for Buyer to continue to be named as an additional insured
with respect to the Products Liability Insurance until Buyer has been named as
an additional insured with respect to the New Product Liability Insurance.
Seller shall direct copies of all future correspondence relating to the Product
Liability Insurance and the New Product Liability Insurance to Buyer.

         (j)      Additional Contracts. For a period of up to sixty (60) days
following the Closing, Buyer may elect to amend Annex A attached hereto to add
any Contract of Seller to Annex A without the payment of additional
consideration to Seller for such Contract (an "Additional Contract") and such
Contract shall become an Acquired Asset hereunder and Buyer shall assume all
Liabilities arising from and after the Closing under such Additional Contract.
Seller agrees and covenants that Seller will promptly, without further
consideration, execute, acknowledge and deliver such further instruments of
sale, grant, transfer, contribution, assignment, conveyance, assumption and
delivery and such consents, assurances, powers of attorney and other instruments
and take such other actions as may reasonably be necessary in order to vest in
Buyer all right, title and interest in and to any Additional Contract and to
otherwise further effectuate and carry out the transactions contemplated by this
Agreement and any related documents, including the retention by Seller of any
Liabilities arising prior to the Closing under or incurred as a result of an
action taken prior to the Closing by any party to such Additional Contract.
Notwithstanding the foregoing, in no event shall Seller be required to pay any
amounts to any Person in connection with performing it's obligations under this
Section 9(j).

         (k)      Directors' and Officers' Insurance. Seller shall obtain, and
maintain for a period of at least three (3) years, a directors' and officers'
insurance policy with reputable insurers in such coverage and in such scope and
amount as is reasonable and customary in Seller's industry.

         (l)      Documentation of Expenses. Seller shall provide written
documentation to Buyer within two (2) business days following the Closing
setting forth the actual payments made by Seller for operating expenses of the
Business from October 26, 2003, through the earlier of November 26, 2003 and the
Closing.

         10.      Miscellaneous.

         (a)      Press Releases and Public Announcements. Except as is
consistent with the form of press release attached hereto as Exhibit VII,
neither Party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement prior to the Closing without
the prior written approval of the other Party; provided, however, that any Party
may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its

                                       33


publicly-traded securities (in which case the disclosing Party will use its
commercially reasonable efforts to advise the other Party prior to making the
disclosure); provided, further, that in no event shall any such press release or
public announcement disclose any of the terms or conditions of this Agreement
unless, in the opinion of counsel, such disclosure is reasonably required in
order to satisfy any law, regulation or any listing or trading agreement
concerning its publicly-traded securities.

         (b)      No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.

         (c)      Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties with
respect to the subject matter hereof and supersedes any prior understandings,
agreements, or representations by or between the Parties, written or oral, to
the extent they relate in any way to the subject matter hereof.

         (d)      Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that Buyer may, without Seller's
prior written approval, (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and pledge its rights hereunder to
its lenders (as collateral) and (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).

         (e)      Counterparts. This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.

         (f)      Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

         (g)      Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered personally to the recipient, (ii) one (1) business day after being
sent to the recipient by reputable overnight courier service (charges prepaid),
(iii) one (1) business day after being sent to the recipient by facsimile
transmission or electronic mail, or (iv) four (4) business days after being
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid, and addressed to the intended recipient as set
forth below:

         If to Seller:

         Endeavor Pharmaceuticals, Inc.
         127 Racine Drive, Suite 202
         Wilmington, NC 28403
         Attention: R. Forrest Waldon
         Facsimile: (910) 790-9041

         Copy to (which shall not constitute notice):

                                       34


         Paul, Hastings, Janofsky & Walker LLP
         55 Second Street, Twenty-Fourth Floor
         San Francisco, CA 94105
         Attention: Thomas R. Pollock, Esq.
         Fax: (415) 856-7100

         If to Buyer:

         Barr Laboratories, Inc.
         400 Chestnut Ridge Road
         Woodcliff Lake, New Jersey 07677
         Attention: General Counsel
         Facsimile: (888) 843-0563

         Copy to (which shall not constitute notice):

         Kirkland & Ellis
         Citigroup Center
         153 East 53rd Street
         New York, New York 10022-4611
         Attention: Frederick Tanne, Esq.
         Facsimile: (212) 446-4900

Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.

         (h)      Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York; provided, that
the Delaware General Corporate Law shall govern whether Seller is in compliance
with those representations and warranties relating to corporate matters.

         (i)      Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. No waiver by any Party of any provision of this Agreement or any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such default, misrepresentation, or breach of warranty or
covenant except pursuant to its express terms.

         (j)      Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

         (k)      Expenses. Except as otherwise set forth herein, each of the
Parties will bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the

                                       35


transactions contemplated hereby. The Parties agree to use reasonable efforts to
minimize any sales, use or other transfer taxes due in connection with the
transfer of the Acquired Assets.

         (l)      Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms. Nothing in the Disclosure Schedules shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Disclosure Schedules identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
The Parties intend that each representation, warranty, and covenant contained
herein shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty, or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.

         (m)      Incorporation of Annexes, Exhibits and the Disclosure
Schedule. The Annexes, Exhibits and the Disclosure Schedule identified in this
Agreement are incorporated herein by reference and made a part hereof.

         (n)      Specific Performance. Each Party acknowledges and agrees that
the other Party would be damaged irreparably in the event any provision of this
Agreement not performed in accordance with its specific terms or otherwise is
breached, so that a Party shall be entitled to injunctive relief to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in addition to any other remedy to
which such Party may be entitled, at law or in equity. In particular, the
Parties acknowledge that the Business is unique and recognize and affirm that in
the event Seller breaches this Agreement, money damages would be inadequate and
Buyer would have no adequate remedy at law, so that Buyer shall have the right,
in addition to any other rights and remedies existing in its favor, to enforce
its rights and the other Parties' obligations hereunder not only by action for
damages but also by action for specific performance, injunctive, and/or other
equitable relief.

         (o)      Arbitration.

                  (i)      Any dispute, controversy or claim (each, a "Dispute")
         arising out of or relating to this Agreement or the performance, breach
         or termination thereof shall be submitted to binding arbitration, and
         any such Dispute shall be decided by one (1) arbitrator mutually
         agreeable to Buyer and Seller. If Buyer and Seller cannot agree on one
         (1) arbitrator, the Dispute shall be submitted to the American
         Arbitration Association ("AAA") in New York, New York, and AAA shall
         appoint an arbitrator to resolve the Dispute under its Commercial
         Arbitration Rules. The arbitrator shall set a limited time period and
         establish procedures designed to reduce the cost and time for discovery
         while allowing the Parties an opportunity, adequate in the sole
         judgment of the arbitrator, to discover relevant information from the
         opposing Party about the subject matter of the Dispute. The arbitrator
         shall rule upon motions to compel or limit discovery and shall have the
         authority to impose sanctions, including attorneys' fees and costs, to
         the same extent as a

                                       36


         court of competent law or equity, if the arbitrator determines that
         discovery was sought without substantial justification or that
         discovery was refused or objected to without substantial justification.
         The decision of the arbitrator as to the validity and amount of any
         claim shall be binding and conclusive upon the Parties to this
         Agreement. Such decision shall be written and shall be supported by
         written findings of fact and conclusions which shall set forth the
         award, judgment, decree or order awarded by the arbitrator.

                  (ii)     Judgment upon any award rendered by the arbitrator
         may be entered in any court having jurisdiction. Any such arbitration
         shall be held in New York, New York under the Commercial Arbitration
         Rules then in effect of AAA. The non-prevailing party to an arbitration
         shall pay its own costs and expenses, the fees and costs of the
         arbitrator, the administrative costs of the arbitration, and the
         expenses, including without limitation, reasonable attorneys' fees and
         costs, incurred by the other Party to the arbitration.

                                    * * * * *

                                       37


         IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.

                                BARR LABORATORIES, INC.

                                By: /s/ Paul M. Bisaro
                                    --------------------------------------------
                                    Name:  Paul M. Bisaro
                                    Title: President and Chief Operating Officer

                                ENDEAVOR PHARMACEUTICALS, INC.

                                By: /s/ R. Forrest Waldon
                                    --------------------------------------------
                                    Name:  R. Forrest Waldon
                                    Title: President and Chief Operating Officer

EX-10.1

                                                                    EXHIBIT 10.1

                       THE CORPORATEPLAN FOR RETIREMENT(SM)
                                 EXECUTIVE PLAN

                              BASIC PLAN DOCUMENT

                                 IMPORTANT NOTE

THIS DOCUMENT HAS NOT BEEN APPROVED BY THE DEPARTMENT OF LABOR, THE INTERNAL
REVENUE SERVICE OR ANY OTHER GOVERNMENTAL ENTITY. AN ADOPTING EMPLOYER MUST
DETERMINE WHETHER THE PLAN IS SUBJECT TO THE FEDERAL SECURITIES LAWS AND THE
SECURITIES LAWS OF THE VARIOUS STATES. AN ADOPTING EMPLOYER MAY NOT RELY ON THIS
DOCUMENT TO ENSURE ANY PARTICULAR TAX CONSEQUENCES OR TO ENSURE THAT THE PLAN IS
"UNFUNDED AND MAINTAINED PRIMARILY FOR THE PURPOSE OF PROVIDING DEFERRED
COMPENSATION TO A SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES"
UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT WITH RESPECT TO THE EMPLOYER'S
PARTICULAR SITUATION. FIDELITY MANAGEMENT TRUST COMPANY, ITS AFFILIATES AND
EMPLOYEES CANNOT PROVIDE YOU WITH LEGAL ADVICE IN CONNECTION WITH THE EXECUTION
OF THIS DOCUMENT. THIS DOCUMENT SHOULD BE REVIEWED BY THE EMPLOYER'S ATTORNEY
PRIOR TO EXECUTION.



                           CORPORATEPLAN FOR EXECUTIVE
                               BASIC PLAN DOCUMENT

ARTICLE 1
     ADOPTION AGREEMENT

ARTICLE 2
     DEFINITIONS

     2.01 - Definitions

ARTICLE 3
     PARTICIPATION

     3.01 - Date of Participation
     3.02 - Resumption of Participation Following Re employment
     3.03 - Cessation or Resumption of Participation Following a Change in
            Status

ARTICLE 4
     CONTRIBUTIONS

     4.01 - Deferral Contributions
     4.02 - Matching Contributions
     4.03 - Employer Contributions
     4.04 - Time of Making Contributions

ARTICLE 5
     PARTICIPANTS' ACCOUNTS

     5.01 - Individual Accounts

ARTICLE 6
     INVESTMENT OF CONTRIBUTIONS

     6.01 - Manner of Investment
     6.02 - Investment Decisions

ARTICLE 7
     RIGHT TO BENEFITS

     7.01 - Normal or Early Retirement
     7.02 - Death
     7.03 - Other Termination of Employment
     7.04 - Separate Account
     7.05 - Forfeitures
     7.06 - Adjustment for Investment Experience
     7.07 - Unforeseeable Emergency Withdrawals
     7.08 - Change in Control

ARTICLE 8
     DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE

     8.01 - Distribution of Benefits to Participants and Beneficiaries
     8.02 - Determination of Method of Distribution
     8.03 - Notice to Trustee
     8.04 - Time of Distribution

ARTICLE 9

                                       2


     AMENDMENT AND TERMINATION

     9.01 - Amendment by Employer
     9.02 - Retroactive Amendments
     9.03 - Termination
     9.04 - Distribution Upon Termination of the Plan

ARTICLE 10
     MISCELLANEOUS

     10.01 - Communication to Participants
     10.02 - Limitation of Rights
     10.03 - Nonalienability of Benefits
     10.04 - Facility of Payment
     10.05 - Information between Employer and Trustee
     10.06 - Notices
     10.07 - Governing Law

ARTICLE 11
     PLAN ADMINISTRATION

     11.01 - Powers and responsibilities of the Administrator
     11.02 - Nondiscriminatory Exercise of Authority
     11.03 - Claims and Review Procedures

                                       3


                                    PREAMBLE

IT IS THE INTENTION OF THE EMPLOYER TO ESTABLISH HEREIN AN UNFUNDED PLAN
MAINTAINED SOLELY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION FOR A
SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES AS PROVIDED IN ERISA.

ARTICLE 1. ADOPTION AGREEMENT.

ARTICLE 2. DEFINITIONS.

2.01. DEFINITIONS.

     (a) Wherever used herein, the following terms have the meanings set forth
     below, unless a different meaning is clearly required by the context:

          (1) "Account" means an account established on the books of the
          Employer for the purpose of recording amounts credited on behalf of a
          Participant and any income, expenses, gains or losses included
          thereon.

          (2) "Administrator" means the Employer adopting this Plan, or other
          person designated by the Employer in Section 1.01(b).

          (3) "Adoption Agreement" means Article 1, under which the Employer
          establishes and adopts or amends the Plan and designates the optional
          provisions selected by the Employer. The provisions of the Adoption
          Agreement shall be an integral part of the Plan.

          (4) "Beneficiary" means the person or persons entitled under Section
          7.02 to receive benefits under the Plan upon the death of a
          Participant.

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

          (6) "Compensation" means for purposes of Article 4 (Contributions)
          wages as defined in Section 3401(a) of the Code and all other payments
          of compensation to an employee by the Employer (in the course of the
          Employer's trade or business) for which the Employer is required to
          furnish the employee a written statement under Section 6041(d) and
          6051(a)(3) of the Code, excluding any items elected by the Employer in
          Section 1.04, reimbursements or other expense allowances, fringe
          benefits (cash and non-cash), moving expenses, deferred compensation
          and welfare benefits, but including amounts that are not includable in
          the gross income of the Participant under a salary reduction agreement
          by reason of the application of Sections 125, 132(f)(4), 402(e)(3),
          402(h) or 403(b) of the Code. Compensation shall be determined without
          regard to any rules under Section 3401(a) of the Code that limit the
          remuneration included in wages based on the nature or location of the
          employment or the services performed (such as the exception for
          agricultural labor in Section 3401(a)(2) of the Code).

             Compensation shall also include amounts deferred pursuant to an
          election under Section 4.01.

             In the case of any Self-Employed Individual or an Owner-Employee,
          Compensation means the Self-Employed Individual's Earned Income.



          (7) "Earned Income" means the net earnings of a Self-Employed
          Individual derived from the trade or business with respect to which
          the Plan is established and for which the personal services of such
          individual are a material income-providing factor, excluding any items
          not included in gross income and the deductions allocated to such
          items, except that for taxable years beginning after December 31, 1989
          net earnings shall be determined with regard to the deduction allowed
          under Section 164(f) of the Code, to the extent applicable to the
          Employer. Net earnings shall be reduced by contributions of the
          Employer to any qualified plan, to the extent a deduction is allowed
          to the Employer for such contributions under Section 404 of the Code.

          (8) "Employee" means any employee of the Employer, Self-Employed
          Individual or Owner-Employee.

          (9) "Employer" means the employer named in Section 1.02(a) and any
          Related Employers designated in Section 1.02(b).

          (10) "Employment Commencement Date" means the date on which the
          Employee first performs an Hour of Service.

          (11) "Entry Date" means the date(s) designated in Section 1.03(b).

          (12) "ERISA" means the Employee Retirement Income Security Act of
          1974, as from time to time amended.

          (13) "Fund Share" means the share, unit, or other evidence of
          ownership in a Permissible Investment.

          (14) "Hour of Service" means, with respect to any Employee,

               (A) Each hour for which the Employee is directly or indirectly
               paid, or entitled to payment, for the performance of duties for
               the Employer or a Related Employer, each such hour to be credited
               to the Employee for the computation period in which the duties
               were performed;

               (B) Each hour for which the Employee is directly or indirectly
               paid, or entitled to payment, by the Employer or Related Employer
               (including payments made or due from a trust fund or insurer to
               which the Employer contributes or pays premiums) on account of a
               period of time during which no duties are performed (irrespective
               of whether the employment relationship has terminated) due to
               vacation, holiday, illness, incapacity, disability, layoff, jury
               duty, military duty, or leave of absence, each such hour to be
               credited to the Employee for the Eligibility Computation Period
               in which such period of time occurs, subject to the following
               rules:

                    (i) No more than 501 Hours of Service shall be credited
                    under this paragraph (B) on account of any single continuous
                    period during which the Employee performs no duties;

                    (ii) Hours of Service shall not be credited under this
                    paragraph (B) for a payment which solely reimburses the
                    Employee for medically-related expenses, or which is made or
                    due under a plan maintained solely for the purpose of
                    complying with applicable workmen's compensation,
                    unemployment compensation or disability insurance laws; and

                    (iii) If the period during which the Employee performs no
                    duties falls within two or more computation periods and if
                    the payment made on account of such period is not

                                       2



                    calculated on the basis of units of time, the Hours of
                    Service credited with respect to such period shall be
                    allocated between not more than the first two such
                    computation periods on any reasonable basis consistently
                    applied with respect to similarly situated Employees; and

               (C) Each hour not counted under paragraph (A) or (B) for which
               back pay, irrespective of mitigation of damages, has been either
               awarded or agreed to be paid by the Employer or a Related
               Employer, each such hour to be credited to the Employee for the
               computation period to which the award or agreement pertains
               rather than the computation period in which the award agreement
               or payment is made.

                    For purposes of determining Hours of Service, Employees of
               the Employer and of all Related Employers will be treated as
               employed by a single employer. For purposes of paragraphs (B) and
               (C) above, Hours of Service will be calculated in accordance with
               the provisions of Section 2530.200b-2(b) of the Department of
               Labor regulations, which are incorporated herein by reference.

                    Solely for purposes of determining whether a break in
               service for participation purposes has occurred in a computation
               period, an individual who is absent from work for maternity or
               paternity reasons shall receive credit for the hours of service
               which would otherwise been credited to such individual but for
               such absence, or in any case in which such hours cannot be
               determined, 8 hours of service per day of such absence. For
               purposes of this paragraph, an absence from work for maternity
               reasons means an absence (1) by reason of the pregnancy of the
               individual, (2) by reason of a birth of a child of the
               individual, (3) by reason of the placement of a child with the
               individual in connection with the adoption of such child by such
               individual, or (4) for purposes of caring for such child for a
               period beginning immediately following such birth or placement.
               The hours of service credited under this paragraph shall be
               credited (1) in the computation period in which the absence
               begins if the crediting is necessary to prevent a break in
               service in that period, or (2) in all other cases, in the
               following computation period.

          (15) "Normal Retirement Age" means the normal retirement age specified
          in Section 1.07(f) of the Adoption Agreement.

          (16) "Owner-Employee" means, if the Employer is a sole proprietorship,
          the individual who is the sole proprietor, or, if the Employer is a
          partnership, a partner who owns more than 10 percent of either the
          capital interest or the profits interest of the partnership.

          (17) "Participant" means any Employee who participates in the Plan in
          accordance with Article 3 hereof.

          (18) "Permissible Investment" means the investments specified by the
          Employer as available for investment of assets of the Trust and agreed
          to by the Trustee. The Permissible Investments under the Plan shall be
          listed in the Service Agreement.

          (19) "Plan" means the plan established by the Employer as set forth
          herein as a new plan or as an amendment to an existing plan, by
          executing the Adoption Agreement, together with any and all amendments
          hereto.

          (20) "Plan Year" means the 12-consecutive-month period designated by
          the Employer in Section 1.01(c).

          (21) "Related Employer" means any employer other than the Employer
          named in Section 1.02(a), if the Employer and such other employer are
          members of a controlled group of corporations (as defined in Section
          414(b) of the Code) or an affiliated service group (as defined in
          Section 414(m)), or are trades or businesses (whether or not
          incorporated) which are under

                                       3


          common control (as defined in Section 414(c)), or such other employer
          is required to be aggregated with the Employer pursuant to regulations
          issued under Section 414(o).

          (22) "Self-Employed Individual" means an individual who has Earned
          Income for the taxable year from the Employer or who would have had
          Earned Income but for the fact that the trade or business had no net
          profits for the taxable year.

          (23) "Service Agreement" means the agreement between the Employer and
          Trustee regarding the arrangement between the parties for
          recordkeeping services with respect to the Plan.

          (24) "Trust" means the trust created by the Employer.

          (25) "Trust Agreement" means the agreement between the Employer and
          the Trustee, as set forth in a separate agreement, under which assets
          are held, administered, and managed subject to the claims of the
          Employer's creditors in the event of the Employer's insolvency, until
          paid to Plan Participants and their Beneficiaries as specified in the
          Plan.

          (26) "Trust Fund" means the property held in the Trust by the Trustee.

          (27) "Trustee" means the corporation or individual(s) appointed by the
          Employer to administer the Trust in accordance with the Trust
          Agreement.

          (28) "Years of Service for Vesting" means, with respect to any
          Employee, the number of whole years of his periods of service with the
          Employer or a Related Employer (the elapsed time method to compute
          vesting service), subject to any exclusions elected by the Employer in
          Section 1.07(c). An Employee will receive credit for the aggregate of
          all time period(s) commencing with the Employee's Employment
          Commencement Date and ending on the date a break in service begins,
          unless any such years are excluded by Section 1.07(c). An Employee
          will also receive credit for any period of severance of less than 12
          consecutive months. Fractional periods of a year will be expressed in
          terms of days.

               In the case of a Participant who has 5 consecutive 1-year breaks
          in service, all years of service after such breaks in service will be
          disregarded for the purpose of vesting the Employer-derived account
          balance that accrued before such breaks, but both pre-break and
          post-break service will count for the purposes of vesting the
          Employer-derived account balance that accrues after such breaks. Both
          accounts will share in the earnings and losses of the fund.

               In the case of a Participant who does not have 5 consecutive
          1-year breaks in service, both the pre-break and post-break service
          will count in vesting both the pre-break and post-break
          employer-derived account balance.

               A break in service is a period of severance of at least 12
          consecutive months. Period of severance is a continuous period of time
          during which the Employee is not employed by the Employer. Such period
          begins on the date the Employee retires, quits or is discharged, or if
          earlier, the 12-month anniversary of the date on which the Employee
          was otherwise first absent from service.

               In the case of an individual who is absent from work for
          maternity or paternity reasons, the 12-consecutive month period
          beginning on the first anniversary of the first date of such absence
          shall not constitute a break in service. For purposes of this
          paragraph, an absence from work for maternity or paternity reasons
          means an absence (1) by reason of the pregnancy of the individual, (2)
          by reason of the birth of a child of the individual, (3) by reason of
          the placement of a child with the individual in connection with the
          adoption of such child by such individual, or (4) for purposes of
          caring for such child for a period beginning immediately following
          such birth or placement.

                                       4


               If the Plan maintained by the Employer is the plan of a
          predecessor employer, an Employee's Years of Service for Vesting shall
          include years of service with such predecessor employer. In any case
          in which the Plan maintained by the Employer is not the plan
          maintained by a predecessor employer, service for such predecessor
          shall be treated as service for the Employer to the extent provided in
          Section 1.08.

     (b) Pronouns used in the Plan are in the masculine gender but include the
     feminine gender unless the context clearly indicates otherwise.

ARTICLE 3. PARTICIPATION.

3.01. DATE OF PARTICIPATION. An eligible Employee (as set forth in Section
1.03(a)) who has filed an election pursuant to Section 4.01 will become a
Participant in the Plan on the first Entry Date coincident with or following the
date on which such election would otherwise become effective, as determined
under Section 4.01.

3.02. RESUMPTION OF PARTICIPATION FOLLOWING REEMPLOYMENT. If a Participant
ceases to be an Employee and thereafter returns to the employ of the Employer he
will again become a Participant as of an Entry Date following the date on which
he completes an Hour of Service for the Employer following his reemployment, if
he is an eligible Employee as defined in Section 1.03(a), and has filed an
election pursuant to Section 4.01.

3.03. CESSATION OR RESUMPTION OF PARTICIPATION FOLLOWING A CHANGE IN STATUS. If
any Participant continues in the employ of the Employer or Related Employer but
ceases to be an eligible Employee as defined in Section 1.03(a), the individual
shall continue to be a Participant until the entire amount of his benefit is
distributed; however, the individual shall not be entitled to make Deferral
Contributions or receive an allocation of Matching contributions during the
period that he is not an eligible Employee. Such Participant shall continue to
receive credit for service completed during the period for purposes of
determining his vested interest in his Accounts. In the event that the
individual subsequently again becomes an eligible Employee, the individual shall
resume full participation in accordance with Section 3.01.

ARTICLE 4. CONTRIBUTIONS.

4.01. DEFERRAL CONTRIBUTIONS. Each Participant may elect to execute a salary
reduction agreement with the Employer to reduce his Compensation by a specified
percentage, not exceeding the percentage set forth in Section 1.05(a) and equal
to a whole number multiple of one (1) percent, per payroll period, subject to
any election regarding bonuses, as set out in Subsection 1.05(a)(2). Such
agreement shall become effective on the first day of the period as set forth in
the Participant's election. The election will be effective to defer Compensation
relating to all services performed in a calendar year subsequent to the filing
of such an election, subject to any election regarding bonuses, as set out in
Subsection 1.05(a)(2). An election once made will remain in effect until a new
election is made, provided, however that such an election choosing a
distribution date pursuant to 1.06(b)(1)(B) will become ineffective the first
day of the calendar year preceding the calendar year in which the election
requires the distribution to be made. A new election will be effective as of the
first day of the following calendar year and will apply only to Compensation
payable with respect to services rendered after such date. Amounts credited to a
Participant's account prior to the effective date of any new election will not
be affected and will be paid in accordance with that prior election. The
Employer shall credit an amount to the account maintained on behalf of the
Participant corresponding to the amount of said reduction. Under no
circumstances may a salary reduction agreement be adopted retroactively. A
Participant may revoke a salary reduction agreement for a calendar year during
that year, provided, however, that such revocation shall apply only to
Compensation not yet earned. In that event, the Participant shall be precluded
from electing to defer future Compensation hereunder during the calendar year to
which the revocation applies. Notwithstanding the above,

                                       5


     (a) in the calendar year in which the Plan first becomes effective or in
     the year in which the Participant first becomes eligible to participate, an
     election to defer compensation may be made within 30 days after the
     Participant is first eligible or the Plan is first effective, which
     election shall be effective with respect to Compensation payable with
     respect to services rendered after the date of the election; and

     (b) in the event the Employer has elected to permit the deferral of bonus
     payments hereunder, a salary reduction agreement applicable to such bonus
     deferral must be made in the calendar year immediately preceding the
     calendar year to which the bonus relates.

4.02. MATCHING CONTRIBUTIONS. If so provided by the Employer in Section 1.05(b),
the Employer shall make a "Matching Contribution" to be credited to the account
maintained on behalf of each Participant who had "Deferral Contributions"
pursuant to Section 4.01 made on his behalf during the year and who meets the
requirement, if any, of Section 1.05(b)(3). The amount of the "Matching
Contribution" shall be determined in accordance with Section 1.05(b).

4.03. EMPLOYER CONTRIBUTIONS. If so provided by the Employer in Section
1.05(c)(1), the Employer shall make an "Employer Contribution" to be credited to
the account maintained on behalf of each Participant who meets the requirement,
if any, of Section 1.05(c)(3) in the amount required by Section 1.05(c)(1). If
so provided by the Employer in Section 1.05(c)(2), the Employer may make an
"Employer Contribution" to be credited to the account maintained on behalf of
any Participant in such an amount as the Employer, in its sole discretion, shall
determine. In making "Employer Contributions" pursuant to Section 1.05(c)(2),
the Employer shall not be required to treat all Participants in the same manner
in determining such contributions and may determine the "Employer Contribution"
of any Participant to be zero.

4.04. TIME OF MAKING CONTRIBUTIONS. The Employer shall remit contributions
deemed made hereunder to the Trust as soon as practicable after such
contributions are deemed made under the terms of the Plan.

ARTICLE 5. PARTICIPANTS' ACCOUNTS.

5.01. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an
Account for each Participant, which will reflect Matching and Deferral
Contributions credited to the Account on behalf of the Participant and earnings,
expenses, gains and losses credited thereto, and deemed investments made with
amounts in the Participant's Account. The Administrator will establish and
maintain such other accounts and records as it decides in its discretion to be
reasonably required or appropriate in order to discharge its duties under the
Plan. Participants will be furnished statements of their Account values at least
once each Plan Year. The Administrator shall provide the Trustee with
information on the amount credited to the separate account of each Participant
maintained by the Administrator in its records.

ARTICLE 6. INVESTMENT OF CONTRIBUTIONS.

6.01. MANNER OF INVESTMENT. All amounts credited to the Accounts of Participants
shall be treated as though invested and reinvested only in eligible investments
selected by the Employer in the Service Agreement.

6.02. INVESTMENT DECISIONS. Investments in which the Accounts of Participants
shall be treated as invested and reinvested shall be directed by the Employer or
by each Participant, or both, in accordance with the Employer's election in
Section 1.11(a).

     (a) All dividends, interest, gains and distributions of any nature that
     would be earned in respect of Fund Shares in which the Account is treated
     as investing shall be credited to the Account as though reinvested in
     additional shares of that Permissible Investment.

                                       6


     (b) Expenses that would be attributable to the acquisition of investments
     shall be charged to the Account of the Participant for which such
     investment is treated as having been made.

ARTICLE 7. RIGHT TO BENEFITS.

7.01. NORMAL OR EARLY RETIREMENT. If provided by the Employer in Section
1.07(e), each Participant who attains his Normal Retirement Age or Early
Retirement Age will have a nonforfeitable interest in his Account in accordance
with the vesting schedule(s) elected in Section 1.07. If a Participant retires
on or after attainment of Normal or Early Retirement Age, such retirement is
referred to as a normal retirement. On or after his normal retirement, the
balance of the Participant's Account, plus any amounts thereafter credited to
his Account, subject to the provisions of Section 7.06, will be distributed to
him in accordance with Article 8.

     If provided by the Employer in Section 1.07, a Participant who separates
from service before satisfying the age requirements for early retirement, but
has satisfied the service requirement will be entitled to the distribution of
his Account, subject to the provisions of Section 7.06, in accordance with
Article 8, upon satisfaction of such age requirement.

7.02. DEATH. If a Participant dies before the distribution of his Account has
commenced, or before such distribution has been completed, his Account shall
become vested in accordance with the vesting schedule(s) elected in Section 1.07
and his designated Beneficiary or Beneficiaries will be entitled to receive the
balance or remaining balance of his Account, plus any amounts thereafter
credited to his Account, subject to the provisions of Section 7.06. Distribution
to the Beneficiary or Beneficiaries will be made in accordance with Article 8.

     A Participant may designate a Beneficiary or Beneficiaries, or change any
prior designation of Beneficiary or Beneficiaries, by giving notice to the
Administrator on a form designated by the Administrator. If more than one person
is designated as the Beneficiary, their respective interests shall be as
indicated on the designation form.

     A copy of the death certificate or other sufficient documentation must be
filed with and approved by the Administrator. If upon the death of the
Participant there is, in the opinion of the Administrator, no designated
Beneficiary for part or all of the Participant's Account, such amount will be
paid to his surviving spouse or, if none, to his estate (such spouse or estate
shall be deemed to be the Beneficiary for purposes of the Plan). If a
Beneficiary dies after benefits to such Beneficiary have commenced, but before
they have been completed, and, in the opinion of the Administrator, no person
has been designated to receive such remaining benefits, then such benefits shall
be paid to the deceased Beneficiary's estate.

7.03. OTHER TERMINATION OF EMPLOYMENT. If provided by the Employer in Section
1.07, if a Participant terminates his employment for any reason other than death
or normal retirement, he will be entitled to a termination benefit equal to (i)
the vested percentage(s) of the value of the Matching Contributions to his
Account, as adjusted for income, expense, gain, or loss, such percentage(s)
determined in accordance with the vesting schedule(s) selected by the Employer
in Section 1.07, and (ii) the value of the Deferral Contributions to his Account
as adjusted for income, expense, gain or loss. The amount payable under this
Section 7.03 will be subject to the provisions of Section 7.06 and will be
distributed in accordance with Article 8.

7.04. SEPARATE ACCOUNT. If a distribution from a Participant's Account has been
made to him at a time when he has a nonforfeitable right to less than 100
percent of his Account, the vesting schedule in Section 1.07 will thereafter
apply only to amounts in his Account attributable to Matching Contributions
allocated after such distribution. The balance of his Account immediately after
such distribution will be transferred to a separate account that will be
maintained for the purpose of determining his interest therein according to the
following provisions.

                                       7


     At any relevant time prior to a forfeiture of any portion thereof under
Section 7.05, a Participant's nonforfeitable interest in his Account held in a
separate account described in the preceding paragraph will be equal to P(AB +
(RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time
determined under Section 7.05; AB is the account balance of the separate account
at the relevant time; D is the amount of the distribution; and R is the ratio of
the account balance at the relevant time to the account balance after
distribution. Following a forfeiture of any portion of such separate account
under Section 7.05 below, any balance in the Participant's separate account will
remain fully vested and nonforfeitable.

7.05. FORFEITURES. If a Participant terminates his employment, any portion of
his Account (including any amounts credited after his termination of employment)
not payable to him under Section 7.03 will be forfeited by him.

7.06. ADJUSTMENT FOR INVESTMENT EXPERIENCE. If any distribution under this
Article 7 is not made in a single payment, the amount remaining in the Account
after the distribution will be subject to adjustment until distributed to
reflect the income and gain or loss on the investments in which such amount is
treated as invested and any expenses properly charged under the Plan to such
amounts.

7.07. UNFORESEEABLE EMERGENCY WITHDRAWALS. Subject to the provisions of Article
8, a Participant shall not be permitted to withdraw his Account (and earnings
thereon) prior to retirement or termination of employment, except that, to the
extent permitted under Section 1.09, a Participant may apply to the
Administrator to withdraw some or all of his Account if such withdrawal is made
on account of a unforeseeable emergency as determined by the Administrator.

7.08. CHANGE IN CONTROL. If the Employer has elected to apply Section 1.06(c),
then, upon a Change in Control, as defined in Section 1.12, notwithstanding any
other provision of the Plan to the contrary, all Participants shall have a
nonforfeitable right to receive the entire amount of their account balances
under the Plan and all such amounts shall be paid out to Participants as soon as
administratively practicable.

ARTICLE 8. DISTRIBUTION OF BENEFITS.

8.01. FORM OF DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES. The
Plan provides for distribution as a lump sum to be paid in cash on the date
specified by the Employer in Section 1.06 pursuant to the method provided in
Section 8.02. If elected by the Employer in Section 1.10 and specified in the
Participant's deferral election, the distribution will be paid through a
systematic withdrawal plan (installments) for a time period not exceeding 10
years beginning on the date specified by the Employer in Section 1.06.

8.02. EVENTS REQUIRING DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND
BENEFICIARIES.

     (a) If elected by the Employer in Section 1.06(a), the Participant will
     receive a distribution upon the earliest of the events specified by the
     Employer in Section 1.06(a), subject to the provisions of Section 7.08, and
     at the time indicated in Section 1.06(a)(2). If the Participant dies before
     any event in Section 1.06(a) occurs, the Participant shall be considered to
     have terminated employment and the Participant's benefit will be paid to
     the Participant's Beneficiary in the same form and at the same time as it
     would have been paid to the Participant pursuant to this Article 8.

     (b) If elected by the Employer in Section 1.06(b), the Participant will
     receive a distribution of all amounts not deferred pursuant to Section
     1.06(b)(1)(B) (and earnings attributable to those amounts) upon termination
     of employment. If elected by the Employer in Section 1.06(b)(1)(B), the
     Participant shall have the election to receive distributions of amounts
     deferred pursuant to Section 4.01 (and earnings attributable to those
     amounts) after a date specified by the Participant in his deferral election
     which is at least 12 months after the first day of the calendar year in
     which such amounts would be earned. Amounts distributed to the Participant
     pursuant to Section 1.06(b) shall be distributed at the time indicated in
     Section 1.06(b)(2). Subject to the provisions of Section 7.08, the
     Participant shall receive a distribution in the form provided in Section
     8.01. If the Participant

                                       8


     dies before any event in Section 1.06(a) occurs, the Participant shall be
     considered to have terminated employment and the Participant's benefit will
     be paid to the Participant's Beneficiary in the same form and at the same
     time as it would have been paid to the Participant pursuant to this Article
     8. However, if the Participant dies before the date specified by the
     Participant in an election pursuant to Section 1.06(b)(1)(B), then the
     Participant's benefit shall be paid to the Participant's Beneficiary in the
     form provided in Section 8.01 as if the Participant had elected to be paid
     at termination of employment.

8.03. DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will determine
the method of distribution of benefits to himself and his Beneficiary, subject
to the provisions of Section 8.02. Such determination will be made at the time
the Participant makes a deferral election. Unless the Employer has elected
Section 1.06(b) to control distributions, the period certain specified in a
Participant's first deferral election specifying distribution under a systematic
withdrawal plan shall apply to all subsequent elections of distributions under a
systematic withdrawal plan made by the Participant. Once a Participant has made
an election for the method of distribution, that election shall be effective for
all contributions made on behalf of the Participant attributable to any Plan
Year after that election was made and before the Plan Year in which that
election was altered in the manner prescribed by the Administrator. If the
Participant does not designate in the manner prescribed by the Administrator the
method of distribution to him and his Beneficiary, the method of distribution
shall be a lump sum at termination of employment.

8.04. NOTICE TO TRUSTEE. The Administrator will notify the Trustee, pursuant to
the method stated in the Trust Agreement for providing direction, whenever any
Participant or Beneficiary is entitled to receive benefits under the Plan. The
Administrator's notice shall indicate the form, amount and frequency of benefits
that such Participant or Beneficiary shall receive.

8.05. TIME OF DISTRIBUTION. In no event will distribution to a Participant be
made later than the date specified by the Participant in his salary reduction
agreement. All distributions will be made as soon as administratively feasible
following the distribution date specified in Section 1.06 or Section 7.08, if
applicable.

ARTICLE 9. AMENDMENT AND TERMINATION.

9.01 AMENDMENT BY EMPLOYER. The Employer reserves the authority to amend the
Plan by filing with the Trustee an amended Adoption Agreement, executed by the
Employer only, on which said Employer has indicated a change or changes in
provisions previously elected by it. Such changes are to be effective on the
effective date of such amended Adoption Agreement. Any such change
notwithstanding, no Participant's Account shall be reduced by such change below
the amount to which the Participant would have been entitled if he had
voluntarily left the employ of the Employer immediately prior to the date of the
change. The Employer may from time to time make any amendment to the Plan that
may be necessary to satisfy the Code or ERISA. The Employer's board of directors
or other individual specified in the resolution adopting this Plan shall act on
behalf of the Employer for purposes of this Section 9.01.

9.02 RETROACTIVE AMENDMENTS. An amendment made by the Employer in accordance
with Section 9.01 may be made effective on a date prior to the first day of the
Plan Year in which it is adopted if such amendment is necessary or appropriate
to enable the Plan and Trust to satisfy the applicable requirements of the Code
or ERISA or to conform the Plan to any change in federal law or to any
regulations or ruling thereunder. Any retroactive amendment by the Employer
shall be subject to the provisions of Section 9.01.

9.03. TERMINATION. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for any
length of time and may discontinue contributions under the Plan or terminate the
Plan at any time by written notice delivered to the Trustee without any
liability hereunder for any such discontinuance or termination.

                                       9


9.04. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination of the Plan,
no further Deferral Contributions or Matching Contributions shall be made under
the Plan, but Accounts of Participants maintained under the Plan at the time of
termination shall continue to be governed by the terms of the Plan until paid
out in accordance with the terms of the Plan.

ARTICLE 10. MISCELLANEOUS.

10.01. COMMUNICATION TO PARTICIPANTS. The Plan will be communicated to all
Participants by the Employer promptly after the Plan is adopted.

10 02. LIMITATION OF RIGHTS. Neither the establishment of the Plan and the
Trust, nor any amendment thereof, nor the creation of any fund or account, nor
the payment of any benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the Employer, Administrator or
Trustee, except as provided herein; and in no event will the terms of employment
or service of any Participant be modified or in any way affected hereby.

10.03. NONALIENABILITY OF BENEFITS. The benefits provided hereunder will not be
subject to alienation, assignment, garnishment, attachment, execution or levy of
any kind, either voluntarily or involuntarily, and any attempt to cause such
benefits to be so subjected will not be recognized, except to such extent as may
be required by law.

10 04. FACILITY OF PAYMENT. In the event the Administrator determines, on the
basis of medical reports or other evidence satisfactory to the Administrator,
that the recipient of any benefit payments under the Plan is incapable of
handling his affairs by reason of minority, illness, infirmity or other
incapacity, the Administrator may disburse such payments, or direct the Trustee
to disburse such payments, as applicable, to a person or institution designated
by a court which has jurisdiction over such recipient or a person or institution
otherwise having the legal authority under State law for the care and control of
such recipient. The receipt by such person or institution of any such payments
shall be complete acquittance therefore, and any such payment to the extent
thereof, shall discharge the liability of the Trust for the payment of benefits
hereunder to such recipient.

10.05. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to furnish
the Trustee, and the Trustee agrees to furnish the Employer with such
information relating to the Plan and Trust as may be required by the other in
order to carry out their respective duties hereunder, including without
limitation information required under the Code or ERISA and any regulations
issued or forms adopted thereunder.

10.06. NOTICES. Any notice or other communication in connection with this Plan
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mails, first-class postage prepaid and registered or certified:

     (a) If to the Employer or Administrator, to it at the address set forth in
     the Adoption Agreement, to the attention of the person specified to receive
     notice in the Adoption Agreement;

     (b) If to the Trustee, to it at the address set forth in the Trust
     Agreement;

or, in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor's
then effective notice address.

10.07. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will be
construed, administered and enforced according to ERISA, and to the extent not
preempted thereby, the laws of the Commonwealth of Massachusetts, without regard
to its conflicts of law principles.

                                       10


ARTICLE 11. PLAN ADMINISTRATION.

11.01. POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The Administrator has
the full power and the full responsibility to administer the Plan in all of its
details, subject, however, to the applicable requirements of ERISA. The
Administrator's powers and responsibilities include, but are not limited to, the
following:

     (a) To make and enforce such rules and regulations as it deems necessary or
     proper for the efficient administration of the Plan;

     (b) To interpret the Plan, its interpretation thereof in good faith to be
     final and conclusive on all persons claiming benefits under the Plan;

     (c) To decide all questions concerning the Plan and the eligibility of any
     person to participate in the Plan;

     (d) To administer the claims and review procedures specified in Section
     11.03;

     (e) To compute the amount of benefits which will be payable to any
     Participant, former Participant or Beneficiary in accordance with the
     provisions of the Plan;

     (f) To determine the person or persons to whom such benefits will be paid;

     (g) To authorize the payment of benefits;

     (h) To comply with any applicable reporting and disclosure requirements of
     Part 1 of Subtitle B of Title I of ERISA;

     (i) To appoint such agents, counsel, accountants, and consultants as may be
     required to assist in administering the Plan;

     (j) By written instrument, to allocate and delegate its responsibilities,
     including the formation of an Administrative Committee to administer the
     Plan;

11.02. NONDISCRIMINATORY EXERCISE OF AUTHORITY. Whenever, in the administration
of the Plan, any discretionary action by the Administrator is required, the
Administrator shall exercise its authority in a nondiscriminatory manner so that
all persons similarly situated will receive substantially the same treatment.

11.03. CLAIMS AND REVIEW PROCEDURES.

     (a) Claims Procedure. If any person believes he is being denied any rights
     or benefits under the Plan, such person may file a claim in writing with
     the Administrator. If any such claim is wholly or partially denied, the
     Administrator will notify such person of its decision in writing. Such
     notification will contain (i) specific reasons for the denial, (ii)
     specific reference to pertinent Plan provisions, (iii) a description of any
     additional material or information necessary for such person to perfect
     such claim and an explanation of why such material or information is
     necessary, and (iv) information as to the steps to be taken if the person
     wishes to submit a request for review, including a statement of the such
     person's right to bring a civil action under Section 502(a) of ERISA
     following as adverse determination upon review. Such notification will be
     given within 90 days after the claim is received by the Administrator (or
     within 180 days, if special circumstances require an extension of time for
     processing the claim, and if written notice of such extension and
     circumstances is given to such person within the initial 90-day period).

          If the claim concerns disability benefits under the Plan, the Plan
     Administrator must notify the claimant in writing within 45 days after the
     claim has been filed in order to deny it. If special circumstances require
     an extension of time to process the claim, the Plan Administrator must
     notify

                                       11


     the claimant before the end of the 45-day period that the claim may take up
     to 30 days longer to process. If special circumstances still prevent the
     resolution of the claim, the Plan Administrator may then only take up to
     another 30 days after giving the claimant notice before the end of the
     original 30-day extension. If the Plan Administrator gives the claimant
     notice that the claimant needs to provide additional information regarding
     the claim, the claimant must do so within 45 days of that notice.

     (b) Review Procedure. Within 60 days after the date on which a person
     receives a written notice of a denied claim (or, if applicable, within 60
     days after the date on which such denial is considered to have occurred),
     such person (or his duly authorized representative) may (i) file a written
     request with the Administrator for a review of his denied claim and of
     pertinent documents and (ii) submit written issues and comments to the
     Administrator. This written request may include comments, documents,
     records, and other information relating to the claim for benefits. The
     claimant shall be provided, upon the claimant's request and free of charge,
     reasonable access to, and copies of, all documents, records, and other
     information relevant to the claim for benefits. The review will take into
     account all comments, documents, records, and other information submitted
     by the claimant relating to the claim, without regard to whether such
     information was submitted or considered in the initial benefit
     determination. The Administrator will notify such person of its decision in
     writing. Such notification will be written in a manner calculated to be
     understood by such person and will contain specific reasons for the
     decision as well as specific references to pertinent Plan provisions. The
     decision on review will be made within 60 days after the request for review
     is received by the Administrator (or within 120 days, if special
     circumstances require an extension of time for processing the request, such
     as an election by the Administrator to hold a hearing, and if written
     notice of such extension and circumstances is given to such person within
     the initial 60-day period). The extension notice shall indicate the special
     circumstances requiring an extension of time and the date by which the Plan
     expects to render the determination on review.

     If the initial claim was for disability benefits under the Plan and has
     been denied by the Plan Administrator, the claimant will have 180 days from
     the date the claimant received notice of the claim's denial in which to
     appeal that decision. The review will be handled completely independently
     of the findings and decision made regarding the initial claim and will be
     processed by an individual who is not a subordinate of the individual who
     denied the initial claim. If the claim requires medical judgment, the
     individual handling the appeal will consult with a medical professional
     whom was not consulted regarding the initial claim and who is not a
     subordinate of anyone consulted regarding the initial claim and identify
     that medical professional to the claimant.

     The Plan Administrator shall provide the claimant with written notification
     of a plan's benefit determination on review. In the case of an adverse
     benefit determination, the notification shall set forth, in a manner
     calculated to be understood by the claimant - the specific reason or
     reasons for the adverse determinations, reference to the specific plan
     provisions on which the benefit determination is based, a statement that
     the claimant is entitled to receive, upon the claimant's request and free
     of charge, reasonable access to, and copies of, all documents, records, and
     other information relevant to the claim for benefits.

                                       12



                            ADDENDUM TO THE FIDELITY
                   CORPORATEPLAN FOR RETIREMENT EXECUTIVE PLAN
                   ADOPTION AGREEMENT AND BASIC PLAN DOCUMENT

         This Addendum is being executed contemporaneously with, and shall be
considered part of, the Barr Laboratories, Inc. Non-Qualified Deferred
Compensation Plan (the "Plan"), which includes but is not limited to the
Adoption Agreement constituting Article 1 of the Plan (the "Adoption
Agreement"). The provisions of the Plan as revised in this Addendum are intended
to and shall supersede those provisions as they appear in the Plan. This
Addendum shall hereby be deemed to be incorporated by reference in the Plan. In
the event of any conflict between the terms of this Addendum and the Plan, the
terms of this Addendum shall control.

         1.       Subsection (a) of Section 1.05 of the Adoption Agreement is
revised to read as follows:

         "(a)     Employee contributions (Complete all that apply)

                  "(1)     [X] The Employer shall make a Deferral Contribution
                           in accordance with, and subject to, Section 4.01 on
                           behalf of each Participant who has an executed salary
                           reduction agreement in effect with the Employer for
                           the calendar year (or portion of the calendar year)
                           in question, not to exceed 100% of salary for that
                           calendar year (or portion of the calendar year) less
                           any Deferral Contributions actually made by or on
                           behalf of such Participant from the Participant's
                           salary for that calendar year (or portion of the
                           calendar year) under the Barr Laboratories, Inc.
                           Savings and Retirement Plan (the "Qualified 401(k)
                           Plan") or the Excess 401(k) Plan, subject, however,
                           to any election regarding bonuses, as set out in
                           Subsection 1.05(a)(2).

                  "(2)     [X] Bonus Contributions. The Employer may allow a
                           Participant upon proper notice and approval to enter
                           into a special salary reduction agreement to make
                           Deferral Contributions in an amount up to 100% of any
                           cash bonus that is awarded to such Participant for
                           his or her services in a fiscal year of the Employer
                           less any Deferral Contributions actually made by or
                           on behalf of such Participant from such cash bonus
                           under the Excess 401(k) Plan and the Qualified 401(k)
                           Plan and less the amount of any Employer Contribution
                           credited to the Participant in lieu of all or a
                           portion of such cash bonus.

                  "(3)     Any provision of Subsection 1.05(a)(1) or 1.05(a)(2)
                           to the contrary notwithstanding, the making of a
                           Deferral Contribution on behalf of a Participant
                           pursuant to either Subsection 1.05(a)(1) or
                           1.05(a)(2) in any calendar year shall be contingent
                           on the

                                  Page 1 of 8



                           Participant's having a salary reduction agreement in
                           effect under the Qualified 401(k) Plan that will
                           result in tax deferred employee contributions under
                           the Qualified 401(k) Plan in that calendar year at
                           least equal to the dollar limitation on elective
                           deferrals imposed under Section 402(g) of the
                           Internal Revenue Code or, if less, any limitation on
                           tax-deferred contributions pursuant to the terms of
                           the Qualified 401(k) Plan."

         2.       Part (2) of Subsection 1.05(b) of the Adoption Agreement is
revised to read as follows:

         "(2)     [X] Matching Contribution Offset. For each Participant who has
                  made deferrals to the Qualified 401(k) Plan of at least the
                  maximum amount allowed pursuant to Section 402(g) of the Code
                  or the maximum allowed under the Qualified 401(k) Plan, the
                  Employer shall credit a Matching Contribution in an amount
                  equal to (A) minus (B) below:

                  "(A)     The Matching Employer Contributions, as defined in
                           the Qualified 401(k) Plan, that would have been
                           credited to the Participant under the Qualified
                           401(k) Plan if (i) the Participant's Deferral
                           Contributions actually made under the Excess 401(k)
                           Plan and this Plan (including any Employer
                           Contribution deemed to be a Deferral Contribution
                           pursuant to Section 1.05(c)(2) below) which, when
                           added to the Participant's Deferral Contributions
                           (other than unmatched catch-up contributions) and
                           after-tax contributions (if any) actually made to the
                           Qualified 401(k) Plan, do not exceed 10% of the
                           Participant's Compensation as adjusted in accordance
                           with clause (iii) of this subparagraph (A), were
                           deemed to have been made to the Qualified 401(k)
                           Plan, and (ii) no limits imposed by the Code, or
                           regulations issued thereunder, applied to such
                           Matching Employer Contributions, and (iii) all of the
                           aforementioned actual or deemed Deferral
                           Contributions (if any) that are not included in the
                           Participant's "Compensation" for purposes of
                           determining the Matching Employer Contributions that
                           are credited to the Participant under the Qualified
                           401(k) Plan for the Plan Year of the determination of
                           the Matching Contribution in question were included
                           in the Participant's "Compensation" for those
                           purposes;

                  "(B)     The Matching Employer Contributions actually credited
                           to such Participant under the Qualified 401(k) Plan
                           and Excess 401(k) Plan for the Plan Year of the
                           determination of the Matching Contribution
                           hereunder."

                                  Page 2 of 8



         3.       Part (3) of Subsection 1.05(b) of the Adoption Agreement is
revised to read as follows:

         "(3)     [X] Matching Contribution Limits (check the appropriate
                  box(es)):

                  "(A)     [X] Deferral Contributions (including any Employer
                           Contribution deemed to be a Deferral Contribution
                           pursuant to Section 1.05(c)(2) below) which, when
                           added to the Participant's Deferral Contributions
                           under the Qualified 401(k) Plan and Excess 401(k)
                           Plan for the period in question, are in excess of 10%
                           of the Participant's Compensation for the period in
                           question adjusted as provided in Section
                           1.05(b)(2)(A)(3), shall not be considered for
                           Matching Contributions.

                  "Note:   If the Employer elects a percentage limit in (A)
                           above and requests the Trustee to account separately
                           for matched and unmatched Deferral Contributions, the
                           Matching Contributions allocated to each Participant
                           must be computed, and the percentage limit applied,
                           based upon each period."

         4.       Part (2) of Subsection 1.05(c) of the Adoption Agreement is
revised to read as follows:

         "(2)     [X] Discretionary Employer Contributions. The Employer may
                  credit Employer Contributions to the accounts of Participants
                  in any amount, as determined by the Employer in its sole
                  discretion from time to time, which amount shall be zero
                  unless the Employer provides otherwise. An Employer
                  Contribution that is credited to the account of a Participant
                  in lieu of all or a portion of a bonus for his or her services
                  in a fiscal year of the Employer shall be deemed to be a
                  Deferral Contribution for the period in which it is credited
                  for purposes of determining the Matching Contribution which
                  the Employer is to credit to such Participant pursuant to
                  Section 1.05(b)(2) above for that period. For purposes of this
                  Plan, an Employer Contribution that is credited to the account
                  of a Participant shall be deemed to be in lieu of all or a
                  portion of a bonus for his or her services in a fiscal year of
                  the Employer unless the Employer provides otherwise when such
                  Employer Contribution is credited."

         5.       Part (1) of Subsection 1.06(a) of the Adoption Agreement is
revised to read as follows:

         "(1)     [X] Termination of employment with the Employer or, if sooner,
                  the date on which the Participant has received (or has been
                  entitled to receive) long term disability benefits for 12
                  (twelve) months under the Employer's long term disability
                  insurance program (the "LTD Anniversary Date"). In the event
                  of a distribution on the LTD Anniversary Date, the amount to
                  be

                                  Page 3 of 8



                  distributed shall be determined in accordance with section
                  7.02 of the Plan. Notwithstanding the foregoing, unless the
                  Committee directs otherwise at the time an Employer
                  Contribution is credited to the account of a Participant, an
                  Employer Contribution (as adjusted for income, expenses, gains
                  and losses) shall be distributed on the earliest date on which
                  the payment can be made without loss of the Employer's tax
                  deduction for such payment under Section 162(m) of the
                  Internal Revenue Code (as determined by the Employer). All
                  distributions pursuant to this Section 1.06(a)(1) shall be
                  made at the time provided in Section 1.06(a)(2)."

         6.       Subsection (c) of Section 1.07 of the Adoption Agreement, and
Part (1) of that Subsection, are revised to read as follows:

         "(c)     [X] YEARS OF SERVICE FOR VESTING SHALL EXCLUDE (check one):

                  "(1)     [X] service prior to July 1, 1999 (the effective date
                           of the Excess 401(k) Plan), and service prior to the
                           date on which the Participant first becomes eligible
                           to participate in the Excess 401(k) Plan."

         7.       Parts (3) and (4) of Subsection 1.07(e) of the Adoption
Agreement are revised to read as follows:

                  "(3)     [X] Death.

                  "(4)     [X] The date, if any, on which the Participant has
                           received (or has been entitled to receive) long term
                           disability benefits for 12 (twelve) months under the
                           Employer's long term disability insurance program."

         8.       Section 1.10 of the Adoption Agreement is revised to read as
follows:

         "1.10    DISTRIBUTIONS

         "SUBJECT TO ARTICLES 7 AND 8, DISTRIBUTIONS UNDER THE PLAN MAY BE MADE
         IN THE FORM OF A LUMP SUM. CHECK BELOW TO ALLOW DISTRIBUTIONS IN
         INSTALLMENT PAYMENTS:

         "[X] under a systematic withdrawal plan (installments) not to exceed 15
         years."

                                  Page 4 of 8


         9.       The definition of "Compensation" in Section 2.01(a)(6) of the
Plan is revised by changing the third sentence thereof to read as follows:

                  "Compensation for purposes of Article 4 shall also include
         amounts deferred pursuant to an election under Section 4.01 or under
         the Excess 401(k) Plan."

         10.      Section 3.01 of the Plan is revised by adding the following
sentence to the end thereof:

         "An eligible Employee on whose behalf an Employer Contribution is made
         pursuant to Section 1.05(c)(2) and who is not otherwise a Participant
         shall become a Participant in the Plan on the date as of which such
         Employer Contribution is credited to him, whether or not such Employee
         has filed an election pursuant to Section 4.01."

         11.      Clause (b) of Section 4.01 of the Plan is revised to read as
follows:

         "(b) in the event the Employer has elected to permit the deferral of
         bonus payments hereunder, a salary reduction agreement applicable to
         such bonus deferral must be made not later than in the calendar year
         immediately preceding the calendar year in which the bonus would be
         paid but for the election to defer."

         12.      Section 4.02 of the Plan is revised to read as follows:

         "4.02. MATCHING CONTRIBUTIONS. If so provided by the Employer in
         Section 1.05(b), the Employer shall make a "Matching Contribution" to
         be credited to the account maintained on behalf of each Participant who
         had "Deferral Contributions" pursuant to Section 4.01 made (or deemed
         made pursuant to Section 1.05(c)(2)) on his behalf during the year
         subject to the limitations of Section 1.05(b)(3). The amount of the
         "Matching Contribution" shall be determined in accordance with Section
         1.05(b)."

         13.      Section 7.02 of the Plan is revised by changing the first
paragraph thereof to read as follows:

         "7.02. DEATH OR DISABILITY. If a Participant dies or an LTD Anniversary
         Date (as defined in Section 1.06(a)(1)) occurs before the distribution
         of his Account has commenced, or before such distribution has been
         completed, his Account shall become vested in accordance with the
         vesting schedule(s) elected in Section 1.07 and he, or in the event of
         his death, his designated Beneficiary or Beneficiaries will be entitled
         to receive the remaining balance of his Account, plus any amounts
         thereafter credited to his Account, subject to the provisions of
         Section 7.06. Distribution to him or, in the event of his death, the
         Beneficiary or Beneficiaries will be made in accordance with Article
         8."

                                  Page 5 of 8


         14. Section 7.03 of the Plan is revised to read as follows:

         "7.03. OTHER TERMINATION OF EMPLOYMENT. If provided by the Employer in
         Section 1.07, if a Participant's employment terminates for any reason
         than death and an LTD Anniversary Date (as defined in Section
         1.06(a)(1)) has not occurred before such termination of employment, he
         will be entitled to a termination benefit equal to (i) the vested
         percentage(s) of the value of the Matching Contributions to his
         Account, as adjusted for income, expense, gain, or loss, such
         percentage(s) determined in accordance with the vesting schedule(s)
         selected by the Employer in Section 1.07, and (ii) the value of the
         Deferral Contributions and Employer Contributions to his Account as
         adjusted for income, expense, gain or loss. The amount payable under
         this Section 7.03 will be subject to the provisions of Section 7.06 and
         will be distributed in accordance with Article 8."

         15.      Section 7.04 of the Plan is revised by changing "Section 1.07"
in the first sentence thereof to "Section 1.07(a)".

         16.      Section 7.05 of the Plan is revised to read as follows:

         "7.05. FORFEITURES. If a Participant's employment terminates, any
         portion of his Account (including any amounts credited after his
         employment terminates) not payable to him under Section 7.03 will be
         forfeited by him."

         17.      Section 8.01 of the Plan is revised by changing "10 years" in
the second sentence thereof to "15 years".

         18.      Paragraph (b) of Section 8.02 of the Plan is revised by
changing the first sentence thereof to read as follows:

         "(b) If elected by the Employer in Section 1.06(b), the Participant
         will receive a distribution of all amounts not deferred pursuant to
         Section 1.06(b)(1)(B) (and income, expense, gain or losses attributable
         to those amounts) upon termination of employment except if and to the
         extent that Section 1.06(b) provides for distribution to be made on a
         different date."

         19.      Paragraph (b) of Section 8.02 of the Plan is further revised
by changing the penultimate sentence thereof to read as follows:

         "If the Participant dies before any event elected by the Employer in
         Section 1.06(a) occurs, the Participant shall be considered to have
         terminated employment and the Participant's benefit will be paid to the
         Participant's Beneficiary in the same form and at the same time as it
         would have been paid to the Participant pursuant to this Article 8."

                                  Page 6 of 8


         20.      Section 8.03 of the Plan is revised by changing the last two
sentences thereof to read as follows:

         "Once a Participant has made an election for the method of
         distribution, that election shall be effective for all contributions
         made on behalf of the Participant attributable to any Plan Year after
         that election was made and, in the case of an election made within a 30
         day period described in Section 4.01(a), attributable to the Plan Year
         in which the election was made, and before the effective date of a new
         election the Participant makes in the manner and on the terms and
         conditions prescribed by the Administrator. If the Participant does not
         designate in the manner prescribed by the Administrator the method of
         distribution to him and his Beneficiary, the method of distribution
         shall be a lump sum."

         21.      Section 8.05 of the Plan is revised to read as follows:

         "8.05. TIME OF DISTRIBUTION. In no event will distribution to a
         Participant be made later than the date specified by the Participant in
         his salary reduction agreement in accordance with the Plan. All
         distributions will be made as soon as administratively feasible
         following the distribution date specified in Section 1.06 or Section
         7.08, if applicable."

         22.      Section 9.01 of the Plan is revised by changing the third
sentence thereof to read as follows:

         "Any such change notwithstanding, no Participant's Account shall be
         reduced by such change."

         23.      Section 9.04 of the Plan is revised to read as follows:

         "9.04. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination of
         the Plan, no further Deferral Contributions or Matching Contributions
         or Employer Contributions shall be made under the Plan, but Accounts of
         Participants maintained under the Plan at the time of termination shall
         continue to be governed by the terms of the Plan until paid out in
         accordance with the terms of the Plan."

         24.      Section 10.07 of the Plan is revised to read as follows:

         "10.07. GOVERNING LAW. The Plan and the accompanying Adoption Agreement
         will be construed, administered and enforced according to ERISA, and to
         the extent not preempted thereby, the laws of the State of New York,
         without regard to its conflicts of law principles."

         25.      Section 11.02 of the Plan is revised to read as follows:

         "11.02. EXERCISE OF AUTHORITY. Whenever, in the administration of the
         Plan, any discretionary action by the Administrator is required or
         permitted, the

                                  Page 7 of 8


         Administrator need not exercise its authority in a nondiscriminatory
         manner so that all persons similarly situated will receive
         substantially the same treatment, unless the exercise of its authority
         in such a nondiscriminatory manner is required by law."

         IN WITNESS WHEREOF, the Employer has caused this Addendum to be
executed as of the 24th day of October, 2003.

                                  BARR LABORATORIES, INC.

                                  By: /s/ Catherine F. Higgins
                                      ------------------------

                                  Name: Catherine F. Higgins
                                        ----------------------

                                  Title: Senior Vice President, Human Resources
                                         --------------------------------------

                                  Page 8 of 8

EX-31.1

                                                                    Exhibit 31.1

                  CERTIFICATION OF BRUCE L. DOWNEY PURSUANT TO
             EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce L. Downey, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Barr Pharmaceuticals,
     Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this quarterly
     report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):



     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date: February 11, 2004

                                                     /s/ Bruce L. Downey
                                                     ---------------------------
                                                     Bruce L. Downey
                                                     Chief Executive Officer

EX-31.2

                                                                    Exhibit 31.2

                  CERTIFICATION OF WILLIAM T. MCKEE PURSUANT TO
             EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William T. McKee, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Barr Pharmaceuticals,
     Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this quarterly
     report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):



     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date: February 11, 2004

                                                         /s/ William T. McKee
                                                         -----------------------
                                                         William T. McKee
                                                         Chief Financial Officer

EX-32.0

                                                                    Exhibit 32.0

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of Barr
Pharmaceuticals, Inc. (the "Company"), for the purposes of 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to the best of his knowledge:

(1) The Quarterly Report of the Company on Form 10-Q for the period ended
December 31, 2003 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

Dated:  February 11, 2004

/s/ Bruce L. Downey
- -----------------------
Bruce L. Downey
Chief Executive Officer

/s/ William T. McKee
- -----------------------
William T. McKee
Chief Financial Officer

A signed original of this written statement required by Section 906 has been
provided to Barr Pharmaceuticals, Inc. and will be retained by Barr
Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.