8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 9, 2009

K-V Pharmaceutical Company

(Exact name of Registrant as specified in its charter)

Delaware	1-9601	43-0618919
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2503 South Hanley Road
St. Louis, MO	63144
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (314) 645-6600

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry Into a Material Definitive Agreement.

     As previously disclosed, K-V Pharmaceutical Company (the “Company”) was named as a defendant in three patent infringement cases brought by Purdue Pharma L.P., The P.F. Laboratories, Inc. and Purdue Pharmaceuticals L.P. (collectively, “Purdue”).

Litigation History

     On January 16, 2007, after the Company filed an Abbreviated New Drug Application (“KV ANDA”) with the U.S. Food and Drug Administration (“FDA”) seeking permission to market generic versions of the 10 mg, 20 mg, 40 mg and 80 mg dosage strengths of OxyContin®, a controlled-release oxycodone product marketed and sold under NDA No. 20-553 (“OxyContin”), in extended-release tablet form, Purdue filed a lawsuit in the U.S. District Court for the District of Delaware against the Company and an unrelated third party for patent infringement under the provisions of the Drug Price Competition and Patent Term Restoration Act of 1984, known as the “Hatch-Waxman Act,” with respect to three Purdue patents. In the Company’s Paragraph IV certification set forth in the KV ANDA, the Company contended that Purdue’s patents were invalid, unenforceable, or would not be infringed by the Company’s proposed generic versions of OxyContin. On February 12, 2007, Purdue filed a second patent infringement lawsuit against the Company in the same court, asserting patent infringement under the same three patents with respect to the Company’s filing of an amendment to its KV ANDA with FDA to sell a generic equivalent of Purdue’s OxyContin, 30 mg and 60 mg dosage strengths, product. On June 6, 2007, Purdue filed a third patent infringement lawsuit against the Company in the U.S. District Court for the Southern District of New York (the “NY District Court”), asserting infringement under the same three Purdue patents with respect to the Company’s filing of an amendment to its KV ANDA with FDA to sell a generic equivalent of Purdue’s OxyContin, 15 mg dosage strength, product. The two lawsuits filed in federal court in Delaware were transferred to the NY District Court for multi-district litigation purposes.

     Pursuant to the Hatch-Waxman Act, the filing of the patent infringement lawsuits against the Company by Purdue instituted an automatic stay of any FDA approval of the KV ANDA, on a dosage strength-by-dosage strength basis, until the earlier of a judgment, or 30 months from the date that Purdue received notice from the Company that the KV ANDA had been submitted to the FDA.

     In connection with the above-referenced litigation, on June 9, 2009, the Company entered into a Settlement Agreement with Purdue (the “Settlement Agreement”). In connection with the Settlement Agreement, the Company and Purdue also entered into a Patent License Agreement (the “Patent License Agreement”) and a Distribution and Supply Agreement (the “Distribution Agreement”).

Settlement Agreement

     Pursuant to the Settlement Agreement, the Company and Purdue agreed to a complete settlement of Civil Actions No. 07 Civ. 3972, 07 Civ. 3973 and 07 Civ. 4810 (SHS) in the NY District Court regarding, among other things, the validity and enforceability of United States Patents No. 5,508,042 (the “’042 Patent”), 5,226,331, 5,549,912 and 5,656,295 relating to OxyContin (collectively, the “Purdue Patents”) as well as the alleged patent infringement by the Company. The Company has also agreed to no longer dispute, among other things, the validity, enforceability or infringement of the Purdue Patents and to make, use or sell generic versions of controlled-release oxycodone product, including OxyContin, that are described in the KV ANDA (the “Company Product”) only in accordance with the Patent License Agreement.

Patent License Agreement

     Pursuant to the terms of the Patent License Agreement, dated as of June 9, 2009, Purdue granted to the Company a limited, non-exclusive, royalty-bearing, non-transferable (except as permitted by the Patent License Agreement) license of limited duration under the ‘042 Patent (the “License”) to manufacture and sell, in the United States, a certain amount of various dosage strengths of the Company

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Product under the KV ANDA. The Company will pay Purdue a royalty fee as set forth in the Patent License Agreement. The License terminates upon certain circumstances, including upon the effectiveness of the Distribution Agreement.

Distribution Agreement

     Pursuant to the Distribution Agreement, dated as of June 9, 2009, the Company has been appointed, based on certain contingencies, as an authorized, non-exclusive distributor in the United States of certain generic versions of OxyContin specified in the Distribution Agreement (the “Product”). The Company or Purdue may elect for the Distribution Agreement to become effective within a period of time specified in the Distribution Agreement, so long as the KV ANDA has not yet been approved by the FDA. The Company has agreed to take all actions reasonably necessary to obtain FDA approval of the KV ANDA as soon as reasonably practicable. Pursuant to the terms of the Distribution Agreement, Purdue will provide the Company with a specified amount of the Product to be distributed by the Company on the terms set forth in the Distribution Agreement, and the Company will pay Purdue a royalty fee and will reimburse Purdue the cost of manufacturing of the supplied Product.

     The foregoing description of the Settlement Agreement, the Patent License Agreement and the Distribution Agreement does not purport to be complete and is qualified in its entirety by reference to the Settlement Agreement, the Patent License Agreement and the Distribution Agreement, copies of which are filed as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits

     (a) Not applicable

     (b) Not applicable

     (c) Not applicable

     (d) Exhibits

     Attached as exhibits to this form are the documents listed below:

Exhibit No.	Description
10.1	Settlement Agreement, dated as of June 9, 2009, among Purdue Pharma L.P., The P.F. Laboratories, Inc., Purdue Pharmaceuticals L.P. and K-V Pharmaceutical Company.
10.2	Patent License Agreement, dated as of June 9, 2009, among Purdue Pharma L.P., The P.F. Laboratories, Inc., Purdue Pharmaceuticals L.P. and K-V Pharmaceutical Company. *
10.3	Distribution and Supply Agreement, dated as of June 9, 2009, between Purdue Pharma L.P. and K-V Pharmaceutical Company. *

* Certain confidential information contained in this exhibit has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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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 hereunto duly authorized.

K-V PHARMACEUTICAL COMPANY (Registrant)
By:	/s/ Ronald J. Kanterman
	Name:	Ronald J. Kanterman
	Title:	Vice President, Chief Financial Officer and Treasurer

Date: June 9, 2009

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Exhibit Index

Exhibit No.	Description
10.1	Settlement Agreement, dated as of June 9, 2009, among Purdue Pharma L.P., The P.F. Laboratories, Inc., Purdue Pharmaceuticals L.P. and K-V Pharmaceutical Company.
10.2	Patent License Agreement, dated as of June 9, 2009, among Purdue Pharma L.P., The P.F. Laboratories, Inc., Purdue Pharmaceuticals L.P. and K-V Pharmaceutical Company. *
10.3	Distribution and Supply Agreement, dated as of June 9, 2009, between Purdue Pharma L.P. and K-V Pharmaceutical Company. *

* Certain confidential information contained in this exhibit has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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EX-10.1

Exhibit 10.1

EXECUTION COPY

SETTLEMENT AGREEMENT

          This Settlement Agreement, dated as of June 9, 2009 (the “Effective Date”), is by and among Purdue Pharma L.P., a Delaware limited partnership (on its own behalf and as successor in interest to The Purdue Pharma Company, a Delaware general partnership), The P.F. Laboratories, Inc., a New Jersey corporation, and Purdue Pharmaceuticals L.P., a Delaware limited partnership (the foregoing are individually and collectively referred to as the “Purdue Companies”), and KV Pharmaceutical Company, a Delaware corporation (together with its Affiliates, “KV”). The Purdue Companies and KV are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

WITNESSETH:

          WHEREAS, the Purdue Companies are the owners of United States patent number 5,508,042 (the “’042 Patent”), and prior to their expiration were the owners of United States patent numbers 5,226,331 (the “’331 Patent”), 5,549,912 (the “’912 Patent”) and 5,656,295 (the “’295 Patent”), relating to and protecting controlled-release oxycodone products, including the product OxyContin^®, a controlled-release oxycodone product marketed and sold under NDA No. 20-553 (“OxyContin^®”);

          WHEREAS, the Purdue Companies and KV are involved in litigation, Civil Action No. 07 Civ. 3972, Civil Action No. 07 Civ. 3973 and Civil Action No. 07 Civ. 4810 (SHS) (collectively, the “Action”) in the United District Court for the Southern District of New York (the “District Court”) (Civil Action Nos. 07 Civ. 3972 and 07 Civ. 3973 were originally pending in the United States District Court for the District of Delaware as Civil Action No. 07-CV-0032-_ _ _ and 07-CV-0077-_ _ _, but were transferred by the Judicial Panel on Multidistrict Litigation, In re OxyContin Antitrust Litigation, Docket No. 1603, as of May 17, 2007), concerning, inter alia, the validity and enforceability of the ’042 Patent, the ’912 Patent and the ’295 Patent, as well as the infringement by KV of the ’042 Patent, resulting from KV requesting approval (the “FDA Approval”) from the United States Food and Drug Administration (the

“FDA”) of generic versions of OxyContin^® through its submission of Abbreviated New Drug Application (“ANDA”) No. 78-506 (collectively with all amendments and supplements thereto, the “KV ANDA”);

          WHEREAS, the KV ANDA contains “Paragraph IV” certifications under 21 U.S.C. §355(j)(2)(A)(vii)(IV) and 21 C.F.R. § 314.94(a)(12)(i)(A)(4) alleging that the ’042 Patent, the ’912 Patent and the ’295 Patent are invalid and unenforceable and therefore cannot be infringed by KV’s manufacture, use or sale of generic versions of controlled-release oxycodone products, including OxyContin^®, pursuant to the KV ANDA (the “KV Products”), and the Purdue Companies have disputed such contentions;

          WHEREAS, in the Action, the Purdue Companies have asserted claims against KV and KV has asserted claims and counterclaims against the Purdue Companies, including violations of federal and state antitrust and anticompetition laws, which the Parties now seek to resolve without further litigation; and

          WHEREAS, the KV ANDA has neither tentative approval nor final approval from the FDA and is currently subject to the limitations on final approval pursuant to 21 U.S.C. §355(j)(5)(B)(iii).

          NOW THEREFORE, for good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the Parties agree as follows:

          1. (a) On the Effective Date, the Purdue Companies and KV are executing and delivering to each other the following documents:

                    (i) a Patent License Agreement, in the form of Exhibit 1(a)(i) hereto (the “Patent License Agreement”);

                    (ii) a Distribution and Supply Agreement in the form of Exhibit 1(a)(ii) hereto (the “Distribution and Supply Agreement”);

                    (iii) a Risk Map License Agreement, in the form of Exhibit 1(a)(iii) hereto;

                    (iv) a Release by the Purdue Companies, in the form of Exhibit 1(a)(iv) hereto (the “Purdue Release”); and

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                    (v) a Release by KV, in the form of Exhibit 1(a)(v) hereto (the “KV Release”, and, together with the Purdue Release, the “Releases”).

               (b) On the Effective Date, the Purdue Companies and KV, through their respective attorneys of record, are executing the Consent Judgment, in the form of Exhibit 1(b) hereto (the “Consent Judgment”) and each of the Purdue Companies and KV are causing their respective attorneys of record in the Action to execute and deliver one copy of the Consent Judgment to the attorneys for the Purdue Companies and one copy of the Consent Judgment to the attorneys for KV, as applicable, to be held by each of them until submitted to the District Court in accordance with paragraph 3 of this Settlement Agreement. Unless otherwise expressly set forth herein, as used herein, the term “Settlement Agreement” shall refer to this Settlement Agreement, and such Settlement Agreement, together with each of the Exhibits attached hereto, shall be referred to as the “Settlement Documents.” The term “oxycodone” shall include oxycodone base and any of its salts and “Oxycodone API” shall mean oxycodone as an active pharmaceutical ingredient. The definitions of the terms herein apply equally to the singular and plural of the terms defined. Whenever the context may require, any pronoun will include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” will be deemed to be followed by the phrase “without limitation”. Unless the context requires otherwise, (A) any definition of or reference to any agreement, instrument or other document herein will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), and (B) the words “herein”, “hereof” and “hereunder”, and words of similar import, will be construed to refer to this Settlement Agreement in its entirety and not to any particular provision hereof. For purposes of the Settlement Documents, “Affiliate” means, as to any Party, any person, firm, trust, partnership, corporation, company or other entity or combination thereof, which directly or indirectly controls, is controlled by or is under common control with such Party, provided that for purposes of each of the Settlement Documents, The Purdue Frederick Company Inc., a New York corporation (d/b/a The Purdue Frederick Company) shall not be considered

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an “Affiliate” of any of the Purdue Companies. The terms “control” and “controlled” mean ownership of fifty percent (50%) or more, including ownership by trusts with substantially the same beneficial interests, of the voting and equity rights of such person, firm, trust, partnership, corporation, company or other entity or combination thereof or the power to direct the management of such person, firm, trust, partnership, corporation, company or other entity or combination thereof.

               (c) KV agrees that it will make, have made, use, offer to sell and sell the KV Products only in accordance with the Patent License Agreement.

               (d) KV agrees that, notwithstanding anything to the contrary set forth in any of the Settlement Documents, KV will provide the Purdue Companies with at least five (5) business days advance written notice prior to any initial launch shipment of any of the KV Products.

          2. (a) Within two business days after the Effective Date, the Parties shall comply with the requirements of Title XI, Subtitle B of the Access to Affordable Pharmaceuticals Act (The Medicare Prescription Drug Improvement and Modernization Act of 2003, Pub. L. 108-173), as the same may be amended from time to time (the “Act”), by filing all necessary copies of the Settlement Documents (the “MMA Filing”) with the Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (“DOJ”) (the FTC and the DOJ each shall be referred to as an “Agency”). The Parties will use commercially reasonable efforts to coordinate the foregoing filings and any responses thereto, to make such filings promptly and to respond promptly to any requests for additional information. Each Party will keep the other Party reasonably informed of any such communication, provided that neither Party is required to disclose to the other confidential information concerning such Party that was communicated by such Party to an Agency. Neither Party will disclose the confidential information of the other Party to an Agency without such other Party’s prior written consent (not to be unreasonably withheld, conditioned or delayed).

               (b) If, subsequent to the Effective Date, an Agency Objection (as defined below) is raised or an Agency Action (as defined below) is brought, then the Parties shall in good faith use commercially reasonable efforts to revise the Settlement Documents in a manner which “reasonably

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addresses” (as that term is defined below) such Agency Objection or Agency Action in a manner which does not materially change the economic value of the transactions contemplated by the Settlement Documents for either Party. If such commercially reasonable efforts are not successful, or if it is not possible to reasonably address such Agency Objection or Agency Action in a manner which does not materially change the economic value of the transactions contemplated by the Settlement Documents, then notwithstanding anything herein to the contrary, the Settlement Documents shall remain in full force and effect, including any revisions that the Parties shall have mutually agreed upon in writing. Notwithstanding the foregoing, if a final non-appealable judgment is entered by a court of competent jurisdiction invalidating any of the provisions of paragraphs 5(a), 5(b), 5(c) or 20 of this Settlement Agreement, the Releases or Sections 1, 2 or 3 of the Patent License Agreement or any of the provisions of Article II or Article IV of the Distribution and Supply Agreement, then the Settlement Documents shall become null and void and have no legal effect. For purposes of this paragraph 2(b), (x) the term “Agency Action” shall mean either Agency has brought a judicial or administrative proceeding against either of the Parties related to the terms of the Settlement Documents and (y) the term “Agency Objection” shall mean (i) the Director of the FTC’s Bureau of Competition or a Section Chief of the Antitrust Division of DOJ, as applicable, or a staff person acting expressly on behalf of any of those individuals, has notified either Party in writing that the staff of the Agency is recommending that the Agency institute its own judicial or administrative proceeding against either of the Parties related to the terms of the Settlement Documents, or (ii) either the Assistant Director or Deputy Assistant Director for Healthcare Services and Products Division of the FTC’s Bureau of Competition, or another staff person acting expressly on behalf of any of those individuals (each referred to herein as “Reviewing Agency Staff”), has notified either of the Parties in writing indicating that the Reviewing Agency Staff has reviewed the Settlement Documents and stating a specific objection regarding the possible competitive effects of any of the terms of the Settlement Documents. A notification from the Reviewing Agency Staff of a decision to commence an investigation regarding the Settlement Documents without stating a specific objection shall not constitute an Agency Objection. For purposes of this paragraph 2(b), the Parties shall have “reasonably addressed” any Agency

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Objection or Agency Action when (a) the FTC (including its Reviewing Agency Staff) has indicated to the Parties (in writing to either of the Parties or orally to both Parties) that such Agency Objection has been resolved or if the FTC indicates that it otherwise does not intend to expend substantial Agency resources in taking further action at such time with respect to the Settlement Documents, (b) such Agency Objection or Agency Action is withdrawn without any further challenge to the Settlement Documents, or (c) the Parties mutually agree in writing.

          3. On the Effective Date, counsel for the Purdue Companies and counsel for KV shall jointly inform the District Court of the execution of this Settlement Agreement. Within two (2) business days following the Effective Date, counsel for the Purdue Companies or counsel for KV will submit the fully executed Consent Judgment to the District Court for signing and entry, and will simultaneously provide the District Court with a copy of the Settlement Documents in camera and to the extent requested by the District Court, file the Settlement Documents under seal. If for any reason the District Court does not approve the Consent Judgment and enter it as an order of the District Court as submitted, the Parties agree to confer promptly in good faith and to use commercially reasonable efforts to modify the Consent Judgment or take such other action consistent with the Settlement Documents as is required to overcome the District Court’s objections or modifications, and to secure entry of the Consent Judgment as submitted or with agreed-upon modifications, failing which, notwithstanding anything herein to the contrary, (x) the Settlement Documents shall remain in full force and (y) the Parties agree to take all such actions as may be reasonably necessary to dismiss the claims of the Parties against each other in the Action without prejudice; provided, however, that neither of the Parties is under any obligation to revise the Settlement Documents in a manner which materially changes the economic value of the transactions contemplated by the Settlement Documents for such Party. The date on which the Consent Judgment is entered, following the modification of such Consent Judgment, if any, in accordance with this paragraph 3, or if the Consent Judgment is not entered, the date on which the Action is dismissed, shall be the “Consent Judgment Date.” In the event that the Settlement Documents become null and void as provided in paragraph 2 herein, neither the provisions of the Settlement Documents, nor the Settlement Documents themselves

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(except for the provisions of the Settlement Documents which remain in effect as specified in paragraph 2 hereof), may be offered into evidence, or be referred to in any testimonial or other evidence, by either Party or any of their Affiliates at any trial, action or other proceeding pertaining to the subject matter hereof, nor shall anything herein be construed as an admission or waiver as to any factual or legal matter by either Party or any of their respective Affiliates.

          4. KV acknowledges and agrees that (a) the ’042 Patent is valid, enforceable and infringed, and the ’331 Patent, the ’912 Patent and the ’295 Patent (the ’331 Patent, the ’912 Patent and the ’295 Patent being collectively referred to herein as the “Purdue Patents”) were valid and enforceable and would have been infringed during their respective terms, as to oxycodone products made, used, sold or offered for sale or imported pursuant to the KV ANDA, and (b) the ’042 Patent is valid and enforceable, and will be valid and enforceable, in any future causes of action or litigation involving KV, its successors or assigns, including any other or future causes of action or litigation respecting different or future products, and the Purdue Patents were valid and enforceable during their respective terms.

          5. (a) KV agrees that, other than in accordance with all of the terms and conditions of the Settlement Documents, KV will not, directly or indirectly, alone or in cooperation with any other person, make, have made, use, sell, ship or offer to sell, import or distribute, or authorize, permit or solicit others to make, have made, use, sell, ship or offer to sell, import or distribute, or facilitate in any manner, indemnify others regarding, or participate in the profits of others arising from, the sale of any controlled-release oxycodone product that is described in or covered by the KV ANDA or that would infringe any of the claims of the ’042 Patent; provided, however, that subject to the proviso of paragraph 5(c) and paragraph 20, the provisions of this paragraph 5(a) shall not apply following the date (the “Terminal Date”) which is the earliest to occur of (A) the expiration of the ’042 Patent, plus any period of exclusivity under the Federal Food, Drug and Cosmetic Act, 21 U.S.C. Sections 301, et seq., including any amendment thereof; and (B) the date on which, following the entry of a judgment in another case or proceeding after the Effective Date, each and every asserted claim of the ’042 Patent is either (I) unenforceable or (II) invalid; provided, however, that in the case of either clause (I) or (II) above, the

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mandate affirming the judgment in such other case or proceeding is issued by the United States Court of Appeals for the Federal Circuit following appeal of such judgment, or the time for appeal from that judgment has lapsed.

               (b) KV agrees that it will not, directly or indirectly, alone or in cooperation with any other person, make, have made, use, sell, ship, offer to sell, import or distribute, or authorize, permit or solicit others to make, have made, use, sell, ship, offer to sell, import or distribute, or facilitate in any manner, indemnify others regarding, or participate in the profits of others arising from, the sale of any controlled-release oxycodone product, including 10, 15, 20, 30, 40, 60 and 80 mg dosage strengths, (i) that is substantially as described in the KV ANDA in all foreign countries in which there is a Patent listed in Exhibit 2 hereto (the “Foreign Patents”), or (ii) in a foreign country where the making, using, selling or offering for sale, import or distribution of such product would infringe any of the claims of any of the Foreign Patents in such country; provided, however, that subject to the proviso of paragraph 5(c) and paragraph 20, the provisions of this paragraph 5(b) shall not apply on a country-by-country basis following the date which is the later of (x) (A) the expiration date of the last to expire of the Foreign Patents and (B) November 25, 2012, and (y) the date on which a court of competent jurisdiction or applicable patent office enters a final, non-appealable judgment or ruling, providing that with respect to each and every asserted claim of the Foreign Patents in suit in such country that such Foreign Patents are unenforceable or invalid.

               (c) Except as provided in paragraphs 5(a) and 5(b) of this Settlement Agreement and consistent with the proviso of this paragraph 5(c) and paragraph 20 of this Settlement Agreement, nothing set forth in the Settlement Documents shall be deemed to prevent KV from (i) making, having made, using, importing, selling or offering for sale any product which does not infringe the Purdue U.S. Patent Family (as defined in paragraph 6(a)) or Foreign Patents, or (ii) performing any act protected by 35 U.S.C. § 271(e)(1); provided, however, that nothing set forth in the Settlement Documents is intended to license or authorize KV to engage in any of the activities described above in this paragraph 5(c), or otherwise to make, have made, use, import, sell or offer for sale any product, in any case, unless

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specifically permitted and authorized by Section 1 of the Patent License Agreement, and the Purdue Companies reserve all of their rights to assert a claim of patent infringement for any of such activities and seek all remedies available to them at law or in equity with respect to such claim.

               (d) KV shall take all actions reasonably necessary to obtain FDA Approval of the KV ANDA as soon as reasonably practicable and shall use its commercially reasonable efforts in connection with such actions; provided that such obligation shall terminate upon the effectiveness of the Distribution and Supply Agreement. KV acknowledges that it is solely responsible and accepts full risk for obtaining the FDA Approval of the KV ANDA.

          6. (a) KV agrees that it will not initiate, file, participate, finance, aid, raise a defense or assist in (i) any action or proceeding that challenges the validity, patentability, priority of invention or other claim to priority, or enforceability of the ’042 Patent or any of the Purdue Patents and (ii) any reexamination, protest, observation, comment, opposition, interference or other action or proceeding in the United States Patent and Trademark Office or any federal court of the United States challenging the validity, patentability, priority of invention or other claim to priority, or enforceability of the ’042 Patent or any of the Purdue Patents, or any other patent or patent application claiming priority to application numbers U.S. 800,549 (filed November 27, 1991), U.S. 81,302 (filed June 18, 1993) or PCT/US 92/10146 (filed November 25, 1992) (any and all such ’042 Patent, Purdue Patents, other patents and patent applications are collectively referred to herein as the “Purdue U.S. Patent Family”). The provisions of this paragraph 6(a) shall not apply: (x) to the extent that KV directly or indirectly engages in conduct pursuant to the order of a court of competent jurisdiction, which conduct would otherwise be prohibited by this paragraph 6(a), provided that KV has not directly or indirectly initiated or participated in a request that such court issue such order; or (y) to the extent required by law (excluding pursuant to private contractual arrangements).

               (b) KV agrees that it will not initiate, file, finance, participate, aid, raise a defense or assist in (i) any action or proceeding that challenges the validity, patentability, priority of invention or other claim to priority, or enforceability of any of the Foreign Patents, (ii) any reexamination,

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protest, observation, comment, interference, opposition, or other action or proceeding in any foreign patent office or court challenging the validity, patentability, priority of invention or other claim to priority, or enforceability of any of the Foreign Patents, and (iii) any application seeking compulsory licensing under a claim within the Foreign Patents. The provisions of this paragraph 6(b) shall not apply on a country-by-country basis (x) following the date which is the later of: (A) the expiration date of the last to expire of the Foreign Patents and (B) November 25, 2012; (y) to the extent that KV directly or indirectly engages in conduct pursuant to the order of a court of competent jurisdiction, which conduct would otherwise be prohibited by this paragraph 6(b), provided that KV has not directly or indirectly initiated or participated in a request that such court issue such order; and (z) to the extent required by law (excluding pursuant to private contractual arrangements).

               (c) KV will not take any action or waive any right, including (i) the right to assert a conflict of interest or (ii) rights under a confidentiality agreement or order, which would have the effect of permitting any of its attorneys of record in the Action to take any action on behalf of a third party which, if taken by KV, would be prohibited by paragraphs 6(a) or 6(b) of this Settlement Agreement. The provisions of the immediately preceding sentence shall not apply (x) to the extent that KV directly or indirectly engages in conduct pursuant to the order of a court of competent jurisdiction, which conduct would otherwise be prohibited by this paragraph 6(c), provided that KV has not directly or indirectly initiated or participated in a request that such court issue such order; or (y) to the extent required by law (excluding pursuant to private contractual arrangements). KV will not provide to any third party any confidential information or attorney work product relating to the Action or the KV ANDA, except as required by statute, ordinance, regulation, court order or compulsory legal process, provided that KV will request confidential treatment with respect to any confidential information or attorney work product disclosed pursuant hereto.

          7. The Purdue Companies represent and warrant as of the Effective Date that (a) each of them has all necessary partnership or corporate, as applicable, power and authority to execute and deliver the Settlement Documents and to perform its obligations thereunder, (b) the execution, delivery and

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performance of the Settlement Documents have been duly and validly authorized by each of them and they are delivering to KV an incumbency certificate simultaneously with the execution of this Settlement Agreement attesting to the incumbency of each of the officers executing this Settlement Agreement and the other Settlement Documents on behalf of the Purdue Companies, (c) there is no other agreement, whether written or oral, among the Parties hereto with respect to the subject matter of the Settlement Documents other than as set forth herein and therein, and (d) the Purdue Companies or their Affiliates collectively own all right, title and interest in and to each and every patent and/or patent application within the Purdue U.S. Patent Family and have not granted or otherwise transferred to any third party any right to enforce any patent or patent application included in the Purdue U.S. Patent Family, or any right to practice any patent or patent application included in the Purdue U.S. Patent Family that would conflict with this Settlement Agreement. Upon execution and delivery of the Settlement Documents by each of the Purdue Companies, the Settlement Documents shall constitute the legal, valid and binding agreement of each of them, enforceable against each of them in accordance with their respective terms and conditions, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors’ rights generally and other general equitable principles which may limit the right to obtain certain remedies.

          8. KV represents and warrants as of the Effective Date that (a) KV has all necessary corporate, limited liability company or partnership, as applicable, power and authority to execute and deliver the Settlement Documents and to perform KV’s obligations thereunder, (b) the execution, delivery and performance of the Settlement Documents have been duly and validly authorized by KV and KV is delivering to the Purdue Companies an incumbency certificate simultaneously with the execution of this Settlement Agreement attesting to the incumbency of each of the officers executing this Settlement Agreement and the other Settlement Documents on behalf of KV, (c) there is no other agreement, whether written or oral, among the Parties hereto with respect to the subject matter of the Settlement Documents other than as set forth herein and therein, (d) KV owns all right, title and interest in and to the KV ANDA, no other person or entity has any rights under the KV ANDA, and KV has not otherwise transferred or

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assigned any of its rights under the KV ANDA, (e) KV has not transferred or assigned any of its rights or claims with respect to the Action, (f) KV does not have any other pending ANDA relating to controlled-release oxycodone products and has no current plans to file any other ANDA relating to any such product, (g) KV is not subject to or aware of an order of a court of competent jurisdiction of the type referred to in paragraph 6(a)(x), paragraph 6(b)(y) or paragraph 6(c)(x) hereof, (h) KV is not a party to or bound by a contractual arrangement of the type referred to in paragraph 6(a)(y), paragraph 6(b)(z) or paragraph 6(c)(y) hereof, (i) the only dosage strengths for which KV has requested FDA Approval under the KV ANDA are 10, 15, 20, 30, 40, 60 and 80 mg., (j) no Affiliate of KV has offered to sell, sold, marketed, shipped, distributed or imported any KV Products, (k) KV has not appointed any third party to make, have made, use, offer to sell, sell, ship, distribute or import the KV Products and (l) KV has not offered to sell, sold, marketed, shipped, distributed or imported the KV Products to third parties for resale by such third parties for and on behalf of KV. Upon execution and delivery of the Settlement Documents by KV, the Settlement Documents shall constitute the legal, valid and binding agreements of KV, enforceable against it in accordance with their respective terms and conditions, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors’ rights generally and other general equitable principles which may limit the right to obtain certain remedies. KV shall be liable for (i) any breach of the provisions of the Settlement Documents by any of its Affiliates and (ii) any failure by KV to cause its Affiliates to comply with the Settlement Documents.

          9. Except as (a) required by statute, ordinance or regulation, (b) required pursuant to compulsory legal process, (c) necessary for the exercise of the rights granted to the Parties under the Settlement Documents, (d) expressly permitted under this paragraph 9, (e) set forth in the press releases attached hereto as Exhibit 9(e) to be issued by the respective Parties at 7:00 AM EDT on the day following the Effective Date, or as otherwise agreed to by the Parties, or (f) set forth in the Current Report on Form 8-K attached hereto as Exhibit 9(f), none of the Purdue Companies, KV, or any of their respective Affiliates will publicly announce or otherwise disclose to any third party any of the terms of the Settlement Documents, without the prior written approval of the other Party. Except as set forth

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above in paragraphs 9(e) and (f), the Parties will only release public announcements of the execution of the Settlement Documents in forms to be mutually agreed to by the Parties, provided if a Party is disclosing information relating to the Settlement Documents because it is required to do so to comply with statutory, regulatory or legal process requirements, including its reporting requirements under the Securities Exchange Act of 1934, as amended, or any national securities exchange on which it is listed, which may include the aggregate financial effects of the different options under the Settlement Documents on KV’s financial condition, but shall not include specific timing, pricing or units, such Party intending to make such disclosure shall give the other Party at least two (2) business days prior notice in writing of the text of the intended disclosure, unless such statutory, regulatory or legal process requirements would require earlier disclosure, in which event, the notice shall be provided as early as practicable. A disclosing Party agrees to request confidential treatment with respect to the terms of the Settlement Documents and to use commercially reasonable efforts to have redacted such provisions of the Settlement Documents as the Parties may agree from any copies filed pursuant to such statutory, regulatory or legal process requirements. If either Party determines that it will be required to file the Settlement Documents as provided above, promptly after the giving of notice by such Party as contemplated above, the Parties will use commercially reasonable efforts to agree on those provisions of the Settlement Documents that the Parties will seek to have redacted as provided above. Notwithstanding anything to the contrary above, (i) the Purdue Companies may disclose the terms of the Settlement Documents to (x) present, former or future co-promoters of controlled-release oxycodone products who have a legitimate business reason to know such terms, subject to all such co-promoters keeping the terms of the Settlement Documents confidential, and (y) third parties in connection with patent litigation involving the Purdue U.S. Patent Family or the Foreign Patents or in connection with settlement discussions and agreements with alleged infringers of the Purdue U.S. Patent Family or the Foreign Patents, subject to all such third parties keeping the terms of the Settlement Documents confidential, and (ii) each Party may disclose the terms of the Settlement Documents to its respective Affiliates, insurers,

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lenders, attorneys and accountants, subject to such Affiliates, insurers, lenders, attorneys and accountants being bound by confidentiality obligations.

          10. This Settlement Agreement, including the obligations of the Parties under the Consent Judgment and the other Exhibits hereto, is binding upon and shall inure to the benefit of each Party hereto, and each of its successors and permitted assigns. KV may not assign, transfer, license or otherwise convey in any other form (by way of merger, acquisition, statute, operation of law or otherwise), in whole or in part, any of its rights or obligations under this Settlement Agreement or the KV ANDA (an “Assignment”) without the prior written consent of the Purdue Companies, which consent may be withheld in the sole discretion of the Purdue Companies; provided, however, that no such Assignment shall in any manner limit or impair the obligations of KV hereunder; and provided further, however, that any party that acquires this Settlement Agreement or the KV ANDA as a result of such Assignment will thereby become subject to the terms and conditions of this Settlement Agreement. If notwithstanding the above, there is a Change of Control of KV, this Settlement Agreement shall be deemed to be assigned and each person or entity directly or indirectly controlling KV and each Affiliate of such person or entity shall become subject to the terms and conditions of this Settlement Agreement and shall agree in writing to be bound hereby and KV shall remain primarily liable for the performance of all its obligations under this Settlement Agreement and for causing its assignees to act in a manner consistent herewith. For purposes of this paragraph 10, “Change of Control” shall mean the transfer or disposition (including by way of merger, acquisition, consolidation, sale of stock, sale of assets, operation of law or otherwise), directly or indirectly, of more than 50% of the total assets, equity interests, or voting power of KV. Any Assignment, attempted Assignment or assignment of the rights hereunder by KV in contravention of the provisions of this paragraph 10 shall be void and shall have no force or effect. In the event that the Purdue Companies (or any of their respective successors and assigns) sell or assign (other than in connection with the grant of a security interest), the ’042 Patent to any other person or entity, such person or entity shall agree to assume the obligations of the Purdue Companies under the Settlement Documents in writing as a condition to such acquisition.

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          11. The Settlement Documents set forth the entire agreement and understanding among the Parties hereto as to the subject matter hereof and supersede all other documents, oral consents or understandings, if any, made between the Purdue Companies and KV (excluding any agreements or stipulations endorsed by court order) before the Effective Date with respect to the subject matter hereof. None of the terms of the Settlement Documents shall be amended or modified except in a writing signed by each of the Parties hereto. The Parties acknowledge that there have been a number of drafts of the Settlement Documents exchanged between them prior to the Parties’ agreement on the final version of the Settlement Documents which have been executed by them. The Parties expressly agree that these drafts have been superseded by the executed Settlement Documents and shall not be used in any dispute between the Parties as evidence with respect to interpreting the meaning of any provision of this Settlement Agreement.

          12. Any term or provision of the Settlement Documents which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be deemed reformed to the extent required to make such term or provision valid or enforceable in the manner most closely reflecting the Parties’ intentions as reflected in the Settlement Documents (provided that any such reformation can be achieved without material change to the economic value of the transactions contemplated by the Settlement Documents), and shall not render invalid or unenforceable the remaining terms and provisions of the Settlement Documents in such jurisdiction or in any other jurisdiction, except as expressly provided in paragraphs 2 or 3 of this Settlement Agreement.

          13. This Settlement Agreement, and the rights and obligations created hereunder, shall be governed by and interpreted according to the substantive laws of the State of New York without regard to its choice of law or conflicts of law principles.

          14. Any notice required under this Settlement Agreement shall be in writing and shall be given (and shall be deemed to be duly given upon receipt) by delivery in person, by facsimile or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

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If to any of the Purdue Companies:

Purdue Pharma L.P.
One Stamford Forum
201 Tresser Boulevard
Stamford, CT 06901-3431
Attention: General Counsel
Fax No.: (203) 588-6204

with a copy to:

Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: Stuart D. Baker
Fax No.: (212) 489-7130

If to KV:

KV Pharmaceutical Company
2503 South Hanley Road
St. Louis, Missouri 63144
Attention: Paul Brady
Fax No.: (314) 644-2419

with a copy to:

Locke Lord Bissell & Liddell
3 World Financial Center
New York, New York 10281-2101
Attention: John F. Sweeney
Fax No.: (212) 303-2754

Each of the Purdue Companies hereby agrees that Purdue Pharma L.P. (or any other Purdue Company authorized by the Purdue Companies pursuant to the next sentence to provide consents on their behalf under this Settlement Agreement) shall be authorized to provide (and to determine whether or not to provide) any and all consents on behalf of each of them under this Settlement Agreement and shall not take any action inconsistent with such authorization. The Purdue Companies may, at any time upon written notice to KV as provided above, replace Purdue Pharma L.P. (or any replacement thereof) with any other Purdue Company who they agree shall be authorized to provide consents on behalf of each of the Purdue Companies under this Settlement Agreement.

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          15. A waiver by any Party of any term or condition of this Settlement Agreement in any one instance shall not be deemed or construed to be a waiver of such term or condition for any other instance in the future (whether similar or dissimilar) or of any subsequent breach of this Settlement Agreement. All rights, remedies, undertakings, obligations and agreements contained in this Settlement Agreement shall be cumulative and none of them shall be a limitation of any other remedy, right, undertaking, obligation or agreement of any of the Parties.

          16. Each of the Parties agrees that in executing the Settlement Documents and in accepting the consideration provided for herein, each of the Parties does so with full knowledge of any and all rights that each of the Parties may have with respect to the controversies herein compromised. Each of the Parties affirms that it is not relying and has not relied upon any representation or statement made by any of the other Parties with respect to the facts involved in said controversies or with regard to each of the Parties’ legal rights or asserted legal rights, except as set forth in paragraphs 7 and 8 hereof, and except as set forth in any representation or warranty in the Patent License Agreement or the Distribution and Supply Agreement, as the case may be. Each of the Parties hereby assumes the risk of any mistake of fact or legal right with regard to said controversies or with regard to any of the facts or legal rights that are now unknown to such Party, except with respect to any breach of paragraphs 7 and 8 hereof, and except as set forth in any representation or warranty in the Patent License Agreement or the Distribution and Supply Agreement, as the case may be.

          17. Each of the Parties agrees that it has received independent legal advice from its attorneys with respect to the rights and asserted rights arising out of the controversies between the Parties relating to the Purdue U.S. Patent Family, the Foreign Patents and the Action. Each of the Parties further agrees that it and its counsel have had adequate opportunity to make whatever investigation or inquiry they may have deemed necessary or desirable in connection with the subject matter of this Settlement Agreement, prior to the execution hereof.

          18. If KV breaches, in any material respect, any provision of paragraphs 1(c), 1(d), 4, 5(a), 5(b) or 6 of this Settlement Agreement, or Sections 1 or 2(a) of the Patent License Agreement, in

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addition to any other remedy the Purdue Companies may have at law or in equity, the Purdue Companies, upon a showing of such breach, shall be entitled to a preliminary injunction to prevent the continuance of such breach, without the requirement of the posting of a bond.

          19. This Settlement Agreement may be executed in counterparts (including by facsimile or other electronic transmission), and each fully executed counterpart shall be deemed an original of this Settlement Agreement.

          20. Except for the rights, agreements and covenants specifically granted pursuant to this Settlement Agreement, no other right, written or oral license, covenant not to sue, waiver or release of future infringement or other written or oral authorization is or has been granted or implied by this Settlement Agreement. Furthermore, and for the avoidance of doubt, no activity by KV with respect to the making, having made, using, offering to sell, selling, shipping, distributing or importing of any (a) KV Product and (b) any other pharmaceutical product or ingredient, shall constitute an authorized sale under this Settlement Agreement unless, in the case of (a) above, it is expressly permitted and authorized under Section 1 of the Patent License Agreement or Section 2.1 of the Distribution and Supply Agreement, as applicable; and no determination that any patent rights of the Purdue Companies in the ‘042 Patent or any other intellectual property have been terminated or exhausted may be based on any activity by KV whatsoever unless and solely to the extent that such activity relates to a sale of KV Products expressly permitted and authorized under Section 1 of the Patent License Agreement or Section 2.1 of the Distribution and Supply Agreement, as applicable.

[Remainder of this page intentionally left blank]

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Settlement Agreement Signature Page

          IN WITNESS WHEREOF, each of the Parties has caused this Settlement Agreement to be executed as of the date first written above by its duly authorized officer or agent.

PURDUE PHARMA L.P. (on its own behalf and as successor in interest to The Purdue Pharma Company)
By:	Purdue Pharma Inc., its general partner
By:	/s/ Edward B. Mahony
	Name:	Edward B. Mahony
	Title:	EVP, CFO & Treasurer
THE P.F. LABORATORIES, INC.
By:	/s/ Edward B. Mahony
	Name:	Edward B. Mahony
	Title:	EVP, CFO & Treasurer
PURDUE PHARMACEUTICALS L.P.
By:	Purdue Pharma Inc., its general partner
By:	/s/ Edward B. Mahony
	Name:	Edward B. Mahony
	Title:	EVP, CFO & Treasurer
KV PHARMACEUTICAL COMPANY
By:	/s/ Paul T. Brady
	Name:	Paul T. Brady
	Title:	Corporate Vice President, B.D.

EX-10.2

Exhibit 10.2

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY A TRIPLE ASTERISK (***). THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXECUTION COPY

PATENT LICENSE AGREEMENT

          This Patent License Agreement (the “Patent License Agreement”), dated as of June 9, 2009 (the “Effective Date”), is by and among Purdue Pharma L.P., a Delaware limited partnership, The P.F. Laboratories, Inc., a New Jersey corporation, and Purdue Pharmaceuticals L.P., a Delaware limited partnership (the foregoing are individually and collectively referred to for purposes of this Patent License Agreement as the “Purdue Companies”), and KV Pharmaceutical Company, a Delaware corporation (“KV”, and together with its Affiliates referred to for purposes of this Patent License Agreement as “KVCO”). The Purdue Companies, on the one hand, and KV, on the other hand, are sometimes referred to herein individually as a “Party” and collectively as the “Parties”. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Settlement Agreement entered into by the Parties on the date hereof (the “Settlement Agreement”).

WITNESSETH:

          WHEREAS, the Purdue Companies are the owners of United States patent number 5,508,042 (the “’042 Patent”), relating to and protecting controlled-release oxycodone products, including the product OxyContin^®, a controlled-release oxycodone product marketed and sold under NDA No. 20-553 (“OxyContin^®”); and

          WHEREAS, the Purdue Companies and KV are involved in litigation, Civil Action No. 07 Civ. 3972, Civil Action No. 07 Civ. 3973 and Civil Action No. 07 Civ. 4810 (SHS) (collectively, the “Action”) in the United Stated District Court for the Southern District of New York (the “District Court”) (Civil Action Nos. 07 Cir. 3972 and 07 Cir. 3973 were originally pending in the United States District Court for the District of Delaware as Civil Action Nos. 07-CV-0032-_ _ _ and 07-CV-0077-_ _ _, but were transferred by the Judicial Panel on Multidistrict Litigation, In re OxyContin Antitrust Litigation, Docket

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

No. 1603, as of May 17, 2007), concerning, inter alia, the validity and enforceability of the ’042 Patent, as well as the infringement by KV of the ’042 Patent resulting from KV requesting approval (“FDA Approval”) from the United States Food and Drug Administration (the “FDA”) of certain generic versions of controlled-release oxycodone products through its submission of Abbreviated New Drug Application No. 78-506 (collectively with all amendments and supplements thereto, the “KV ANDA”); and

          WHEREAS, in the Action, certain of the Purdue Companies have asserted claims against KV and KV has asserted claims and counterclaims against the Purdue Companies and certain of their Affiliates, including violations of federal and state antitrust and anticompetition laws, which the Parties now seek to resolve without further litigation; and

          WHEREAS, the Purdue Companies and KV have entered into the Settlement Agreement, to resolve the Action and as a result of and pursuant to the Settlement Agreement, the Purdue Companies desire to grant to KV certain limited license rights under the ’042 Patent to manufacture, use, offer to sell and sell generic versions of certain dosage strengths of controlled-release oxycodone products that are specifically described in the KV ANDA in the United States (collectively, the “KV Products”).

          NOW THEREFORE, the Parties agree as follows:

          1. License Grant; Royalty.

(a) Subject to the terms and conditions of this Patent License Agreement, the Purdue Companies hereby grant to KVCO a limited, non-exclusive, royalty-bearing, non-transferable (except in conjunction with an assignment of this Patent License Agreement in accordance with Section 11 of this Patent License Agreement) license (the “License”) of limited duration under the ’042 Patent to make, have made, use, offer to Sell (as defined below) and Sell, in the United States, up to an aggregate of *** bottles, subject to the reductions set forth below (the “Maximum Number of Bottles”), of the generic versions of 10 mg, 15 mg, 20 mg, 30 mg, 40 mg, 60 mg and 80 mg dosage strengths of the KV Products, allocated among the dosage strengths in the manner set forth in Schedule 1 hereto under “Maximum Total Number of Bottles During

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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License Term.” Each bottle (a “Bottle”) shall contain 100 tablets. In no event will KVCO be permitted to sell, in the aggregate, tablets containing more than *** kilograms of Oxycodone API, subject to the reductions set forth below, pursuant to the License (the “Maximum Kilos”). The term of the License (the “License Term”) shall commence on the Effective Date (the “License Commencement Date”) and, unless the License is terminated earlier pursuant to Section 10 hereof, shall terminate upon the earliest to occur of: (i) the date on which KVCO has Sold *** Bottles, (ii) the date on which KVCO has Sold, in the aggregate, tablets containing *** kilograms of Oxycodone API and (iii) ***; provided, however, that (A) if as of ***, KVCO has Sold fewer than *** Bottles and, in the aggregate, tablets containing less than *** kilograms of Oxycodone API, the License Term shall be extended to the earliest to occur of (1) the date on which KVCO has Sold *** Bottles, (2) the date on which KVCO has Sold, in the aggregate, tablets containing *** kilograms of Oxycodone API and (3) ***; (B) if as of ***, KVCO has Sold fewer than *** Bottles and, in the aggregate, tablets containing less than *** kilograms of Oxycodone API, the License Term shall be extended to the earliest to occur of (1) the date on which KVCO has Sold *** Bottles, (2) the date on which KVCO has Sold, in the aggregate, tablets containing *** kilograms of Oxycodone API and (3) and ***; (C) if as of ***, KVCO has Sold fewer than *** Bottles and, in the aggregate, tablets containing less than *** kilograms of Oxycodone API, the License Term shall be extended to the earliest to occur of (1) the date on which KVCO has Sold *** Bottles, (2) the date on which KVCO has Sold, in the aggregate, tablets containing *** kilograms of Oxycodone API and (3) and ***; and (D) if as of ***, KVCO has Sold fewer than *** Bottles and, in the aggregate, tablets containing less than *** kilograms of Oxycodone API, the License Term shall be extended to the earliest to occur of (1) the date on which KVCO has Sold *** Bottles (2) the date on which KVCO has Sold, in the aggregate, tablets containing *** kilograms of Oxycodone API and (3) and ***. If the License Term is extended pursuant to any one or more of clauses (A) through (D) above, in no event shall KVCO Sell more Bottles or a greater amount of Oxycodone API than the amount specified in the last applicable clause. The date on which this License terminates is referred to herein as the

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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“License Termination Date.” For purposes of determining the total number of Bottles Sold or kilograms of Oxycodone API utilized for any purpose hereunder (including for the purpose of determining the Maximum Number of Bottles or the Maximum Kilos), the number of Bottles shall include any Bottles Sold or otherwise disposed of to customers by KVCO, but shall not include any Bottles that are returned, recalled or otherwise rejected before the License Termination Date. For the purpose of clarity, KV’s right to replace returned, recalled or otherwise rejected KV Products shall not exceed the Maximum Number of Bottles or the Maximum Kilos. For purposes hereof, the terms “Sale,” “Sell,” “Selling” or “Sold” mean selling by KVCO to a third party bona fide purchaser for commercial sale. Notwithstanding anything to the contrary contained herein, this Patent License Agreement shall automatically terminate prior to the License Commencement Date upon the Effective Date of the Distribution and Supply Agreement being entered into by the Parties simultaneously herewith (such date referred to herein as the “PLA Termination Date”), and in no event shall both this Patent License Agreement and the Distribution and Supply Agreement be effective at the same time.

               For the avoidance of doubt, KVCO shall have no right to grant sublicenses under the License granted to it under this Section 1(a) or any other provision of this Patent License Agreement. Except with respect to the Sale of KV Products specifically permitted by this Patent License Agreement, nothing in this Section 1(a) or in any provision of this Patent License Agreement or any of the Settlement Documents shall be construed to be a grant of any rights, licenses or covenants, whether express, implied or otherwise, by any or all of the Purdue Companies or their Affiliates to KV, KVCO or any of their Affiliates with respect to the manufacture, use, offer for sale, sale, import or supply of pharmaceutical products, or any components, portions, ingredients or excipients relating thereto, on behalf of or to third parties.

               (b) Immediately upon the occurrence of the License Termination Date, all solicitations for Sale, offers to Sell, Sales and shipments of KV Products into interstate commerce for commercial sale in the United States by or on behalf of KVCO under the License shall cease as set forth in

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Section 2 hereof. Notwithstanding anything to the contrary set forth in this Patent License Agreement, KV shall not, and shall not permit any Affiliate or other third party to, replace any returned, recalled or otherwise rejected KV Products after the License Termination Date, regardless of whether any such return, recall or other rejection occurred prior to, on or after the License Termination Date. Nothing herein will prohibit KV from making, having made, using, Selling, or offering for Sale, any KV Products, after the Terminal Date and subject to the provisions of the Settlement Documents.

               (c) Except as expressly granted herein, no other right, written or oral license or sublicense, covenant not to sue, waiver or release of future infringement or other written or oral authorization is granted or implied by this Patent License Agreement. For the avoidance of doubt, the Purdue Companies reserve all rights not expressly granted herein, including the right to sue for patent infringement for sales that are not permitted pursuant to the License. In addition, KV acknowledges and agrees that nothing herein shall preclude the Purdue Companies, for themselves or through an Affiliate or a third party acting on their behalf, from soliciting offers for sale, offering for sale, selling, shipping or causing to be shipped any controlled-release oxycodone product, including oxycodone products marketed and sold under NDA No. 20-553.

               (d) No activity by KVCO with respect to the making, having made, using, offering to sell, selling, shipping, distributing or importing of any (a) KV Product and (b) any other pharmaceutical product or ingredient, shall be authorized under this Section 1, and no determination that any patent rights of the Purdue Companies in the ’042 Patent or any other intellectual property have been terminated or exhausted may be based on any activity by KVCO whatsoever unless and solely to the extent that such activity relates to an authorized sale of a KV Product expressly permitted and authorized under this Section 1.

               (e) In consideration of the License granted herein, KV agrees to pay to the Purdue Companies a royalty (the “Royalty”) equal to *** percent (***%) of KVCO’s Net Sales (as defined herein) from the

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Sale of KV Products by KVCO or any party acting on KV’s behalf, determined in accordance with United States generally accepted accounting principles consistently applied (and derived from KV’s audited financial statements to the extent possible). KV shall pay such Royalty to the Purdue Companies in United States dollars in cash, or by wire transfer to an account designated in writing by the Purdue Companies (x) within forty-five (45) days following the end of each period of each calendar quarter during the License Term (each, a “License Quarter”) with respect to Net Sales under the License derived during the immediately preceding License Quarter, and (y) in any event within thirty (30) days following the License Termination Date with respect to any Net Sales under the License for which payment has not yet been made. For clarity, License Quarters shall mean the three (3) month periods ending on each March 31, June 30, September 30 and December 31 during the License Term and the first License Quarter during the License Term shall consist of the period from the License Commencement Date to the first to occur of March 31, June 30, September 30 or December 31 of such year. KV shall pay interest on any and all amounts not paid when due under this Patent License Agreement (including any amount owing pursuant to any other provision set forth in this Patent License Agreement) at a rate equal to the lesser of (i) *** percent (***%) above the prime rate reported in The Wall Street Journal (Eastern Edition) on the date such Royalty was due, but not less than *** percent (***%), and (ii) the maximum permissible rate under the law. Such interest shall accrue from the date such payment was originally due. Each Royalty payment by KV hereunder shall be accompanied by a certificate (a “Royalty Certificate”) from the Chief Executive Officer or Chief Financial Officer of KV certifying as to (i) the number of Bottles of KV Products in each dosage strength Sold by KVCO during the License Quarter for which the Royalty is being paid, (ii) the amount of kilograms of Oxycodone API included in the KV Products Sold by KVCO during the License Quarter for which the Royalty is being paid, (iii) the Net Sales derived from the Sale of such Bottles and (iv) the amount of the Royalty payable with respect to such Net Sales. If the Purdue Companies dispute the Net Sales and/or Royalty amounts set forth in the Royalty Certificate, such dispute shall be resolved in accordance with Section 1(f). In addition, KV

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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shall deliver a report to the Purdue Companies for each calendar month during the License Term that summarizes the following: (i) the total number of Bottles shipped, on a dosage strength by dosage strength basis, for such month; (ii) the number of returns, on a dosage strength by dosage strength basis, during such month; (iii) the differences between the number of Bottles shipped and returns for each month, on a dosage strength by dosage strength basis; (iv) the total number of Bottles shipped, on a dosage by dosage strength basis, since the License Commencement Date; (v) the number of returns, on a dosage by dosage strength basis since the License Commencement Date; and (vi) the difference between (iv) and (v), on a dosage strength by dosage strength basis (each a “Monthly Report”). KV shall deliver each Monthly Report to the Purdue Companies no later than ten (10) days after the end of the month that such Monthly Report covers to the attention of: Executive Vice President, CFO of Purdue Pharma L.P., One Stamford Forum, 201 Tresser Boulevard, Stamford, CT 06901-3431. For purposes of this Patent License Agreement, “Net Sales” shall mean the gross amount invoiced for the sale or other disposition of the KV Products less the following amounts: (a) sales and excise taxes, value added taxes, and duties which fall due as a direct consequence of such sales and any other governmental charges imposed upon the importation, use or sale, but only to the extent that such taxes and duties are (i) actually included and itemized in the gross amounts invoiced to and specifically paid by the purchaser over and above the usual selling price, (ii) not recovered or recoverable, and (iii) not income taxes or franchise taxes or taxes in lieu thereof; (b) trade, sales, trade show, quantity and cash discounts and stocking allowances, except to the extent such discounts are greater than they otherwise would be for similar products sold in similar competitive markets in order to gain, maintain or otherwise facilitate sales of any of KV’s or its Affiliates’ other products; (c) credits to customers for purchaser returns, returned goods allowances, billing and shipping errors, recalls, rejected goods and damaged goods; (d) price adjustments, including those on customer inventories following price changes; (e) allowances or credits to customers on account of withdrawal, recall or return; and (f) rebates, PBM administrative fees and

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

7

wholesaler chargebacks or similar credits or payments granted to customers pursuant to contract or otherwise, including those granted to government agencies.

               (f) (i) The Purdue Companies shall have the right to engage Deloitte & Touche Financial Advisory Services LLP, or another independent certified public accounting firm chosen by the Purdue Companies and reasonably acceptable to KV (a “CPA Firm”), to conduct an audit of KVCO for the purposes of confirming compliance with this Patent License Agreement including the Net Sales and Royalty for the period for which the Royalty is being paid.

                    (ii) The CPA Firm shall be given access to and shall be permitted to examine and copy such books and records of KVCO as it shall request upon five (5) business days’ notice having been given by the Purdue Companies, during regular business hours, for the purpose of determining compliance with this Patent License Agreement including the Net Sales and Royalty amounts. Prior to any such examination taking place, the CPA Firm shall enter into a confidentiality agreement reasonably acceptable to KV with respect to the information to which they are given access.

                    (iii) If the CPA Firm determines that the Net Sales or Royalty amounts set forth in the Royalty Certificate are incorrect, then the Purdue Companies and KV shall be entitled to receive a full written report of the CPA Firm with respect to its findings. Absent manifest error by the CPA firm, the determination by the CPA Firm following such audit shall be final and binding on the Parties.

                    (iv) Upon completion of the CPA Firm’s audit, KV shall pay to the Purdue Companies the Royalty amount determined by the CPA Firm. If the report of the CPA Firm shows that the Royalty to which the Purdue Companies is entitled differs from the Royalty amount reflected by KV in the Royalty Certificate by *** percent (***%) or more, then in addition to the payment of the Royalty amount and late payment interest in accordance with Section 1(e), KV shall be responsible for the fees and expenses of the CPA Firm in performing such audit. If the CPA Firm confirms that the Royalty amount reflected by KV

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

8

in the Royalty Certificate is correct, the Purdue Companies shall be responsible for the fees and expenses of the CPA Firm in performing such audit.

          2. Commencement Date and Termination Date. (a) The provisions of this Patent License Agreement shall become effective on the License Commencement Date. This Patent License Agreement and all rights granted to KV under the License will terminate on the License Termination Date. From and after the License Termination Date until the Terminal Date, KV shall prohibit any third party, for or on its behalf, from soliciting offers for, offering to Sell, Selling, shipping, or causing to be shipped or distributed, or indemnifying others regarding or participating in the profits of others arising from the Sale of, any KV Products into interstate commerce for commercial sale in the United States. Promptly after the License Termination Date, KV and its Affiliates shall destroy any inventories of the KV Products remaining on the License Termination Date. Promptly following the License Termination Date, KV shall deliver to the Purdue Companies a certificate from the Chief Executive Officer or Chief Financial Officer of KV certifying (i) that KV ceased directly or indirectly soliciting offers for, offering to Sell, Selling, shipping or causing to be shipped, or facilitating in any manner, or indemnifying others regarding or participating in the profits of others arising from the Sale of, any controlled-release oxycodone product described in or covered by the KV ANDA or that otherwise infringes any of the claims of the ’042 Patent, into interstate commerce for commercial sale in the United States on or before the License Termination Date, (ii) that no Sales above the Maximum Number of Bottles or Maximum Kilos were made by KV prior to the License Termination Date, and (iii) that all inventories of KV Products in KV’s possession or control and remaining on the License Termination Date have been destroyed. The certifications of KV referred to above shall be delivered two (2) business days following the License Termination Date.

               (b) KV acknowledges and agrees that KV’s violation or breach of Section 1(a) or 1(b) of this Patent License Agreement or its material breach of any other provision of this Patent License Agreement would cause the Purdue Companies to suffer substantial damages and irreparable harm that

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

9

could not adequately be remedied by an action at law. Accordingly, KV agrees that the Purdue Companies will be entitled to specific performance or preliminary or permanent injunctive relief without the requirement of posting a bond in any action, hearing, litigation or suit for violation or breach of this Patent License Agreement, such rights and remedies being in addition to all other rights and remedies available to the Purdue Companies at law, in equity or otherwise, and KV will not assert in opposition to the Purdue Companies’ request for any equitable relief that the Purdue Companies have an adequate remedy at law. KV hereby waives and agrees, on behalf of itself and its Affiliates, not to raise or assert as a defense or counterclaim in any action brought by the Purdue Companies to enforce KV’s obligations hereunder, any contention of non-infringement, invalidity or unenforceability of the 5,508,042 Patent, or that the 5,226,331 Patent, the 5,549,912 Patent or the 5,656,295 Patent were invalid or unenforceable and could not have been infringed during their respective terms, or any contention under Federal or state antitrust or unfair competition laws. In addition to the foregoing rights and reservations, and in addition to any other rights the Purdue Companies may have, should KVCO (or any other party acting on its behalf) ship any KV Products into interstate commerce for commercial sale in the United States in excess of the Maximum Number of Bottles or Maximum Kilos before the License Commencement Date or after the License Termination Date but prior to the Terminal Date (in either case, “Excess Sales”), the Purdue Companies shall have the right to receive, and KV agrees promptly to pay the Purdue Companies (without any waiver or offset by the Purdue Companies of any right to further damages), an amount equal to $*** for each kilogram (or pro rata amount for any portion thereof) of Oxycodone API of Excess Sales sold; provided, however, that the rate per kilogram payable by KV shall be increased by a percentage equal to the amount of any Purdue Company-announced percentage increase, subsequent to the date hereof, in the price of the wholesale acquisition cost of OxyContin^®.

               (c) (i) In addition to the audit rights set forth in Section 1(f), the Purdue Companies shall have the right to engage the CPA Firm to conduct an audit of KVCO at any time after the License Termination Date for the purposes of confirming that no Sales of KV Products resulted in Excess

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

10

Sales. Subject to entering into a confidentiality agreement reasonably acceptable to KV, the CPA Firm shall be given access to and shall be permitted to examine and copy such books and records of KVCO as it shall request, including DEA 222 forms, upon five (5) business days’ notice having been given by the Purdue Companies, during regular business hours, for the purpose of reporting to the Parties that no Sales of KV Products resulted in Excess Sales.

                    (ii) Whether or not the CPA Firm determines that Sales of KV Products resulted in Excess Sales, KV and the Purdue Companies shall be entitled to receive a full written report of the CPA Firm with respect to its findings. The determination by the CPA Firm following such audit shall be final and binding on the Parties unless KV or the Purdue Companies challenges the findings of the CPA firm. In the event KV or the Purdue Companies challenges the findings of the CPA Firm, the Parties shall submit such findings to a binding arbitrator mutually acceptable to both Parties and the findings of such arbitrator shall be binding upon the Parties.

                    (iii) If the report of the CPA Firm shows that Sales of KV Products resulted in Excess Sales, KV shall pay to the Purdue Companies (A) the amount specified in Section 2(b) for such Excess Sales and (B) the fees and expenses of the CPA Firm. If the CPA Firm reports that no such Sales resulted in Excess Sales, the Purdue Companies shall pay the fees and expenses of the CPA Firm. KV shall cooperate with the CPA Firm in conducting such audit, including by providing books and records, including DEA 222 forms, relating to its Sale and manufacture of KV Products.

          3. Food and Drug Administration. (a) Within ten (10) days after the Effective Date, KV shall submit to the FDA, with a copy to the Purdue Companies, pursuant to 21 C.F.R. § 314.94(a)(12)(v), a statement that KV has been granted a license pursuant to the terms of this Patent License Agreement.

               (b) Within ten (10) days after the Consent Judgment Date, KV shall submit to the FDA, with a copy to the Purdue Companies, pursuant to 21 C.F.R. § 314.107(e), a copy of the Consent

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

11

Judgment or, if the Consent Judgment is not entered, such other document as is executed by the District Court dismissing the Action. Pursuant to 21 C.F.R. § 314.94(a)(12)(viii)(A), within five (5) days after the License Termination Date or two (2) days after KV receives the Initial Supply Amount or Equivalent Supply Amount pursuant to the Distribution and Supply Agreement. KV shall submit to the FDA, with a copy to the Purdue Companies, an amendment to KV’s certifications in the KV ANDA with respect to the ’042 Patent, changing those certifications to certifications under 21 C.F.R. § 314.94(a)(12)(i)(A)(3) and unconditionally requesting that the FDA promptly change the requested approval of the KV ANDA to a tentative approval and, if the KV ANDA has received effective approval, such approval be rescinded, and instead a tentative approval granted. Within five (5) days of receipt, KV shall provide copies to the Purdue Companies of any response by the FDA to said request. From and after the date on which, following the entry of a district court judgment in another case or proceeding after the Effective Date, each and every asserted claim of the ’042 Patent is either (I) unenforceable or (II) invalid, nothing herein will prohibit KV from filing or maintaining with respect to the KV Products a certification, including a certification based on invalidity or unenforceability, pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(IV) and 21 C.F.R. § 314.94 (a)(12)(i)(A)(4); provided, however, that if there is a vacatur or reversal of the district court judgment referred to above, then within ten (10) days after such vacatur or reversal, KV shall submit to the FDA, with a copy to the Purdue Companies, an amendment to KV’s certifications and requests to the FDA specified in the second sentence of this Section 3(b).

               (c) KV acknowledges and agrees that (i) it assumes all risks that it will not be able to Sell the Maximum Number of Bottles or the Maximum Kilos during the License Term for any reason; and (ii) if any Governmental Entity (as described below) takes action (a “Governmental Action”) to prevent or restrict the manufacture, marketing, sale, distribution or substitution of KV Products or otherwise inhibits or interferes with KV’s ability, in connection with this Patent License Agreement or in any other respect, to Sell the KV Products, such inability may not form the basis for any claim for legal or

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

12

equitable relief by KV against any of the Purdue Companies or any of their Affiliates or any third party acting on their behalf (including a claim under this Patent License Agreement or any of the Settlement Documents) or a basis for amendment of this Patent License Agreement, and this Section 3(c) shall be effective notwithstanding any allegation or evidence that the Governmental Action was caused, directly or indirectly, by any action by or on behalf of any of the Purdue Companies or their Affiliates. For purposes of this Patent License Agreement, “Governmental Entity” shall be defined as any federal, state, county, local, municipal or other entity, department, commission, bureau, agency, political subdivision, instrumentality, branch, department, authority, board, court, arbitral or other tribunal, official or officer, exercising executive, judicial, legislative, police, regulatory, administrative or taxing authority or functions of any nature pertaining to government, including the Drug Enforcement Administration (“DEA”) or the FDA.

          4. Registration. KV will be responsible for, and will bear all costs involved in respect of, the registration of the KV Products with any Governmental Entity.

          5. WARRANTY DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS PATENT LICENSE AGREEMENT OR IN THE SETTLEMENT AGREEMENT, NEITHER PARTY NOR THEIR AFFILIATES MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT, INCLUDING (1) FOR THE PURDUE COMPANIES, WITH RESPECT TO THE PURDUE PATENTS OR ANY LICENSE GRANTED BY ANY OF THE PURDUE COMPANIES HEREUNDER, OR (2) ANY MATERIALS OR INFORMATION PROVIDED BY SUCH PARTY OR ANY OF ITS AFFILIATES UNDER THIS PATENT LICENSE AGREEMENT OR THE SETTLEMENT AGREEMENT, OR (3) WITH RESPECT TO ANY PRODUCTS OR SERVICES OF EITHER PARTY HERETO OR THEIR AFFILIATES. FURTHERMORE, UNLESS EXPRESSLY STATED IN THIS PATENT LICENSE AGREEMENT OR IN THE SETTLEMENT AGREEMENT, NOTHING IN THIS

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

13

PATENT LICENSE AGREEMENT OR THE SETTLEMENT AGREEMENT SHALL BE CONSTRUED AS A WARRANTY THAT ANY PATENT, THE PRACTICE OF ANY INVENTION CLAIMED IN ANY PATENT OR OTHER PROPRIETARY RIGHTS INCLUDED IN THE ’042 PATENT OR ANY LICENSE GRANTED BY ANY OF THE PURDUE COMPANIES DO NOT, OR THE MAKING, HAVING MADE, USING, SELLING, OFFERING FOR SALE OR IMPORTING OF KV PRODUCTS BY ANY PERSON DOES NOT, INFRINGE ANY PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. IT IS HEREBY AGREED AND ACKNOWLEDGED BY KV THAT THE PURDUE COMPANIES ARE GIVING NO GUARANTEE OR WARRANTY, EXPRESS OR IMPLIED, TO KV IN RELATION TO THE SAFETY OR THERAPEUTIC EFFECTIVENESS OF THE KV PRODUCTS OR THE VALIDITY OR ENFORCEABILITY OF ANY INTELLECTUAL PROPERTY RIGHTS. FURTHER, KV WILL NOT GIVE ANY SUCH GUARANTEE OR WARRANTY TO ANY THIRD PARTIES ON BEHALF OF THE PURDUE COMPANIES.

          6. Bankruptcy. The License is, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title XI of the United States Code (the “Bankruptcy Code”), a license of rights to “intellectual property,” as defined in Section 101(56) of the Bankruptcy Code.

          7. Indemnification. (a) KV shall defend, indemnify and hold harmless the Purdue Companies, their Affiliates and their respective owners, directors, officers, agents and employees of each of them (collectively, the “Purdue Parties”), from and against any and all expenses (including reasonable attorneys’ fees), demands, liabilities, damages or money judgments (“Losses”) incurred by or rendered against the Purdue Parties resulting from (i) any claim, action or proceeding by any third party arising out of the making, use, offer for sale, sale, marketing, shipping or distribution of the KV Products or any products previously made, used, offered for sale or sold, marketed, shipped or distributed under the KV ANDA, (ii) any claim, action or proceeding by any third party arising out of any material breach by KV of any of its

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

14

representations, warranties, covenants or agreements made under this Patent License Agreement and (iii) any action against any of the Purdue Parties based upon the dissemination of information concerning any product which contains oxycodone.

               (b) The Purdue Companies shall defend, indemnify and hold harmless KV, its Affiliates, and the respective directors, officers, agents and employees of each of them (collectively, the “KV Parties”), from and against any and all Losses incurred by or rendered against the KV Parties resulting from (i) any claim, action or proceeding by any third party arising out of the sale by the Purdue Companies of their controlled-release oxycodone products, and (ii) any claim, action or proceeding by any third party arising out of any material breach by the Purdue Companies of any of their representations, warranties, covenants or agreements made under this Patent License Agreement.

               (c) The provisions of this Section 7 shall not apply to any claims made by either Party or by third parties under Federal or state antitrust or unfair competition laws.

          8. Purdue Companies’ Representations and Warranties. The Purdue Companies hereby represent and warrant as of the Effective Date that: (i) each of them has all necessary partnership or corporate, as applicable, power and authority to execute and deliver this Patent License Agreement and to perform its obligations hereunder, and that the execution, delivery and performance of this Patent License Agreement have been duly and validly authorized by each of them; (ii) upon execution and delivery of this Patent License Agreement by each of the Purdue Companies, this Patent License Agreement shall constitute the legal, valid and binding agreement of each of them, enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors’ rights generally and other general equitable principles which may limit the right to obtain certain remedies; and (iii) the Purdue Companies or their Affiliates collectively own all right, title and interest in and to each and every patent and/or patent application within the Purdue U.S. Patent Family, and have not granted or otherwise transferred to any third party any right to enforce any

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

15

patent or patent applications included in the Purdue U.S. Patent Family, or any right to practice any patent or patent applications included in the Purdue U.S. Patent Family that would conflict with the License granted to KV hereunder.

          9. KV’s Representations and Warranties. KV hereby represents and warrants as of the Effective Date that: (i) it has all necessary corporate power and authority to execute and deliver this Patent License Agreement and to perform its obligations hereunder, and that the execution, delivery and performance of this Patent License Agreement have been duly and validly authorized by it; (ii) upon execution and delivery of this Patent License Agreement by KV, this Patent License Agreement shall constitute the legal, valid and binding agreement of KV and its Affiliates, enforceable against them in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforceability of creditors’ rights generally and other general equitable principles which may limit the right to obtain certain remedies; (iii) the only dosage strengths for which KV has requested approval from the FDA with respect to controlled-release oxycodone products are 10mg, 15mg, 20mg, 30mg, 40mg, 60mg and 80mg; (iv) no Affiliate of KV has offered to Sell, Sold, marketed, shipped, distributed or imported the KV Products; and (v) KV has not appointed any third party to make, have made, use, offer to Sell, Sell, market, ship, distribute or import the KV Products.

          10. Termination. In the event of a material breach by KV of this Patent License Agreement or the Settlement Agreement, the Purdue Companies will have the right to terminate this Patent License Agreement upon written notice to KV, such termination to take effect immediately upon the delivery of such notice to KV. With respect to all other terminations of this Patent License Agreement, except for material breach as provided for in the immediately preceding sentence, this Patent License Agreement shall automatically terminate and be of no further force or effect in the event that (i) the Settlement Agreement is no longer in full force or effect or (ii) KV or any party acting on its behalf or

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

16

succeeding to its rights attempts to reject, avoid or disavow the Settlement Agreement or any of the other Settlement Documents.

          11. No Assignment. This Patent License Agreement is binding upon and shall inure to the benefit of each Party hereto and each of its successors and permitted assigns. KV may not assign (by way of merger, acquisition, statute, operation of law or otherwise), in whole or in part, any of its rights or obligations under this Patent License Agreement (an “Assignment”) without the prior written consent of the Purdue Companies, which consent may be withheld in the Purdue Companies’ sole discretion; provided, however, that, in the event such consent is granted, no such Assignment shall in any manner limit or impair the obligations of KV hereunder; and provided further, however, that any party that acquires this Patent License Agreement as a result of such Assignment and any Affiliate of such party will thereby become subject to the terms and conditions of this Patent License Agreement. If notwithstanding the above, there is a Change of Control of KV, this Patent License Agreement shall be deemed to be assigned and each person or entity directly or indirectly controlling KV and each Affiliate of such person or entity shall become subject to the terms and conditions of this Patent License Agreement and shall agree in writing to be bound hereby and KV shall remain primarily liable for the performance of all its obligations under this Patent License Agreement and for causing its assignees to act in a manner consistent herewith. For purposes of this Section 11, “Change of Control” shall mean the transfer or disposition (including by way of merger, acquisition, consolidation, sale of stock, sale of assets, operation of law or otherwise), directly or indirectly, of more than 50% of the total assets, equity interests, or voting power of KV. Any Assignment, attempted Assignment or assignment of the rights granted hereunder, by KV, in contravention of the provisions of this Section 11 shall be void and shall have no force or effect. In the event that the Purdue Companies (or any of their respective successors and assigns) sells or assigns (other than in connection with the grant of a security interest) the ’042 Patent to any other person or entity, such person or entity shall agree to assume the

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

17

obligations of the Purdue Companies under this Patent License Agreement in writing as a condition to such acquisition.

          12. Entire Agreement. This Patent License Agreement, along with the Settlement Agreement and the documents referred to herein and therein, set forth the entire agreement and understanding among the Parties hereto as to the subject matter hereof and supersede all other documents, oral consents or understandings, if any, made between the Purdue Companies and KV (excluding any agreements or stipulations endorsed by court order) before the date hereof with respect to the subject matter hereof. None of the terms of this Patent License Agreement shall be amended or modified except in a writing signed by each of the Parties hereto. To the extent there is an inconsistency between any provisions of this Patent License Agreement and the Settlement Agreement, the provisions of the Settlement Agreement shall govern. The Parties acknowledge that there have been a number of drafts of this Patent License Agreement exchanged between them prior to the Parties’ agreement on the final version of this Patent License Agreement which has been executed by them. The Parties expressly agree that all such prior drafts have been superseded by this executed Patent License Agreement and shall not be used in any dispute between the Parties as evidence with respect to interpreting the meaning of any provision of this Patent License Agreement.

          13. Enforceability. Any term or provision of this Patent License Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability, without rendering invalid or unenforceable the remaining terms and provisions of this Patent License Agreement in such jurisdiction or in any other jurisdiction.

          14. Governing Law. This Patent License Agreement, and the rights and obligations created hereunder, shall be governed by and interpreted according to the substantive laws of the State of New York without regard to its choice of law or conflicts of law principles.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

18

          15. Notices. Any notice required under this Patent License Agreement shall be in writing and shall be given (and shall be deemed to be duly given upon receipt) by delivery in person, by facsimile or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

If to any of the Purdue Companies:

Purdue Pharma L.P.
One Stamford Forum
201 Tresser Boulevard
Stamford, CT 06901-3431
Attention: General Counsel
Fax No.: (203) 588-6204

with a copy to:

Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: Stuart D. Baker
Fax No.: (212) 489-7130

If to KV:

KV Pharmaceutical Company
2503 South Hanley Road
St. Louis, Missouri 63144
Attention: Paul Brady
Fax No.: (314) 644-2419

with a copy to:

Locke Lord Bissell & Liddell
3 World Financial Center
New York, New York 10281-2101
Attention: John F. Sweeney
Fax No.: (212) 303-2754

          16. Effect of Waiver. A waiver by any Party of any term or condition of this Patent License Agreement in any one instance shall not be deemed or construed to be a waiver of such term or condition for any other instance in the future (whether similar or dissimilar) or of any subsequent breach hereof. All rights, remedies, undertakings, obligations and agreements contained in this Patent License

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

19

Agreement shall be cumulative and none of them shall be a limitation of any other remedy, right, undertaking, obligation or agreement of any of the Parties.

          17. Legal Advice; Investigation. Each of the Parties agrees that it has received independent legal advice from its attorneys with respect to the rights and asserted rights arising out of this Patent License Agreement and the Settlement Agreement. Each of the Parties further agrees that it and its counsel have had adequate opportunity to make whatever investigation or inquiry they may deem necessary or desirable in connection with the subject matter of this Patent License Agreement, prior to the execution hereof.

          18. Counterparts. This Patent License Agreement may be executed in counterparts (including by facsimile or other electronic transmission), and each fully executed counterpart shall be deemed an original of this Patent License Agreement.

          19. Enforcement of Patents. Purdue shall have the sole right, but no obligation to enforce any of the patent and/or patent applications within the Purdue U.S. Patent Family and to retain any recoveries in such actions. KV shall not have any right to participate in any such actions.

          20. Definitions. The definitions of the terms herein apply equally to the singular and plural of the terms defined. Whenever the context may require, any pronoun will include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” will be deemed to be followed by the phrase “without limitation”. Unless the context requires otherwise, (A) any definition of or reference to any agreement, instrument or other document herein will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein) and (B) the words “herein”, “hereof” and “hereunder”, and words of similar import, will be construed to refer to this Patent License Agreement in its entirety and not to any particular provision hereof.

[remainder of this page intentionally left blank]

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Patent License Agreement Signature Page

          IN WITNESS WHEREOF, each of the Parties has caused this Patent License Agreement to be executed as of the date first written above by its duly authorized officer or agent.

PURDUE PHARMA L.P.
By:	Purdue Pharma Inc., its general partner
By:	/s/ Edward B. Mahony
	Name:	Edward B. Mahony
	Title:	EVP, CFO & Treasurer
THE P.F. LABORATORIES, INC.
By:	/s/ Edward B. Mahony
	Name:	Edward B. Mahony
	Title:	EVP, CFO & Treasurer
PURDUE PHARMACEUTICALS L.P.
By:	Purdue Pharma Inc., its general partner
By:	/s/ Edward B. Mahony
	Name:	Edward B. Mahony
	Title:	EVP, CFO & Treasurer
KV PHARMACEUTICAL COMPANY
By:	/s/ Paul T. Brady
	Name:	Paul T. Brady
	Title:	Corporate Vice President, B.D.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Schedule 1
to Patent License Agreement

	Maximum Total
	Number of Bottles
Dosage Strength	During License Term*
10 mg		***
15 mg		***
20 mg		***
30 mg		***
40 mg		***
60 mg		***
80 mg		***

* If KV is unable to sell any Bottles of a dosage strength shown in the chart above, the Maximum Number of Bottles of the remaining dosage strengths will be adjusted proportionately; provided that the total kilograms of Oxycodone API included in the tablets contained in such Bottles may not exceed ***. In lieu of the foregoing, KV at its option may reallocate Bottles among the dosage strengths set forth in the chart by up to ***% of the Total Number of Bottles set forth for each dosage strength; provided that the total number of Bottles shall not exceed *** Bottles and provided further that the total kilograms of Oxycodone API included in the tablets contained in such Bottles may not exceed ***.

If the numbers of Bottles for which the License is granted are reduced in accordance with the provisions of Section 1(a), the allocation of Bottles set forth on Schedule 1 and the limitation on the total kilograms of Oxycodone API included in the tablets contained in such Bottles shall be reduced as set forth in Section 1(a).

Notwithstanding the foregoing, in no event may the total kilograms of Oxycodone API contained in the total number of Bottles exceed the amounts specified in Section 1(a).

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-10.3

Exhibit 10.3

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY A TRIPLE ASTERISK (***). THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXECUTION COPY

DISTRIBUTION AND SUPPLY AGREEMENT

BETWEEN

PURDUE PHARMA L.P.

AND

KV PHARMACEUTICAL COMPANY

DATED AS OF

JUNE 9, 2009

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS; INTERPRETATIONS				1
	1.1	Definitions		1
	1.2	Interpretations		7
ARTICLE II DISTRIBUTORSHIP/APPOINTMENT				8
	2.1	Appointment/Authorization		8
	2.2	Limitation on Rights		10
	2.3	Distributor Obligations		11
	2.4	Meetings		11
ARTICLE III GENERAL TERMS OF SUPPLY				11
	3.1	Sales and Supply of Product		11
	3.2	Shipment		12
	3.3	Storage and Shipments		13
	3.4	Product Rejection		13
	3.5	Quality Control; Change in Specifications		14
ARTICLE IV PAYMENTS AND REPORTS				14
	4.1	Payment to Purdue		14
	4.2	Reporting Obligations and Audit Rights		15
	4.3	Mode of Payment		16
	4.4	Records Retention		16
	4.5	Certificates; Audit		17
	4.6	Taxes		17
	4.7	Late Payments		17
	4.8	Notice of Destruction of Records		18
ARTICLE V COVENANTS				18
	5.1	Mutual Covenants		18
	5.2	Purdue Covenants		18
	5.3	Distributor Covenants		19
ARTICLE VI REPRESENTATIONS AND WARRANTIES				21
	6.1	Representations and Warranties of Both Parties		21
	6.2	Additional Purdue Representations and Warranties		22
	6.3	Additional Distributor Representations and Warranties		23
	6.4	No Reliance by Third Parties		23
	6.5	Disclaimer of Warranties		23
ARTICLE VII INTELLECTUAL PROPERTY				24
	7.1	Limited Intellectual Property Rights		24

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

i

			Page
	7.2	No Improvements		24
	7.3	Improvements		24
ARTICLE VIII INDEMNIFICATION; LIMITATIONS ON LIABILITY				24
	8.1	Purdue Indemnity		25
	8.2	Distributor Indemnity		25
	8.3	Procedure for Indemnification		25
	8.4	Limitations on Liability		27
ARTICLE IX COMPLIANCE WITH GOVERNMENTAL AUTHORITY REGULATIONS				27
	9.1	Governmental Authority Communications		27
	9.2	Governmental and Regulatory Inspections		28
	9.3	Quality Agreement		29
ARTICLE X CONFIDENTIALITY				29
	10.1	Confidentiality		29
	10.2	Authorized Disclosure		29
	10.3	Remedies		30
	10.4	Return of Confidential Information		30
	10.5	Unauthorized Use		30
	10.6	Exclusive Property		30
ARTICLE XI TERM; TERMINATION				31
	11.1	Term		31
	11.2	Termination		31
	11.3	Effect of Termination		32
	11.4	Accrued Rights; Surviving Obligations		32
ARTICLE XII MISCELLANEOUS PROVISIONS				34
	12.1	Force Majeure		34
	12.2	Notice		34
	12.3	Assignment		35
	12.4	No Waiver		35
	12.5	Injunction		36
	12.6	Governing Law		36
	12.7	Entirety of Agreement		36
	12.8	Public Announcements		36
	12.9	Relationship of the Parties		37
	12.10	Non-Solicitation of Employees		37
	12.11	Severability		37
	12.12	Books and Records		37
	12.13	Expenses		37
	12.14	No Third Party Beneficiary		38

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

ii

		Page
12.15	Further Actions		38
12.16	Counterparts; Facsimile Signatures		38
12.17	Headings		38

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

iii

SCHEDULES

Schedule 1.1A	Branded Products
Schedule 1.1B	Cost of Goods Sold
Schedule 1.1C	Products
Schedule 1.1D	Risk Management Program
Schedule 3.1.1	Supply Amount
Schedule 3.1.4	Initial Label; Indicia
Schedule 3.3.3	Shipping Location
Schedule 3.3.5A	Form of Certificate of Analysis
Schedule 3.3.5B	Form of Certificate of Compliance

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

iv

DISTRIBUTION AND SUPPLY AGREEMENT

     THIS DISTRIBUTION AND SUPPLY AGREEMENT is entered into as of June 9, 2009 between Purdue Pharma L.P., a Delaware limited partnership (“Purdue”), and KV Pharmaceutical Company, a Delaware corporation (“Distributor”).

PRELIMINARY STATEMENTS

     A. Purdue, directly or indirectly through its Affiliates, manufactures, distributes, markets and sells the Branded Products in the Territory.

     B. Subject to the terms and conditions of this Agreement, Purdue desires to engage Distributor as an authorized, non-exclusive distributor to distribute, market and sell the Products in the Territory.

     C. Subject to the terms and conditions of this Agreement, Distributor desires to obtain from Purdue the right to distribute, market and sell the Products in the Territory.

     NOW, THEREFORE, in consideration of the foregoing and of the terms, conditions, agreements and covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS; INTERPRETATIONS

     1.1 Definitions. For purposes of this Agreement:

     “’042 Patent” means United States Patent 5,508,042.

     “Affiliate” means, as to any Party, any person, firm, trust, partnership, corporation, company or other entity or combination thereof, which directly or indirectly (i) controls a Party, (ii) is controlled by a Party or (iii) is under common control with a Party. The terms “control” and “controlled” mean (x) ownership of 50% or more, including ownership by trusts with substantially the same beneficial interests, of the voting and equity rights of such person, firm, trust, partnership, corporation, company or other entity or combination thereof or (y) the power to direct the management of such person, firm, trust, partnership, corporation, company or other entity or combination thereof. Notwithstanding the above, for purposes of this Agreement, The Purdue Frederick Company Inc., a New York corporation (d/b/a The Purdue Frederick Company) shall not be considered an Affiliate of Purdue.

     “Agreement” means this Distribution and Supply Agreement, together with all appendices, exhibits and schedules attached hereto, as the same may be amended or supplemented from time to time, by written agreement of the Parties.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

     “ANDA” means an abbreviated new drug application seeking approval for a drug under Section 505(j) of the Federal Food, Drug and Cosmetic Act, and the rules, regulations and guidelines promulgated thereunder, and FDA’s implementing regulations, including all amendments and supplements, filed pursuant to the requirements of the FDA, including all documents, data and other information concerning such drug submitted as part of the application or in amendments or supplements thereto that are necessary for FDA approval to market the drug in the Territory.

     “API” means active pharmaceutical ingredient.

     “Bankruptcy Code” has the meaning set forth in Section 11.2.2.

     “Bottle” means a bottle of Product containing 100 tablets.

     “Branded Product” means any of Purdue’s branded products listed on Schedule 1.1A.

     “Bundled Product” means a Product offered or sold in combination with one or more of Distributor’s other products.

     “Business Day” means any day other than a Saturday, Sunday or other day on which banks in the City of New York are authorized or required by Law to close.

     “Certificate of Analysis” means the certificate of analysis for each Product in the form attached hereto as Schedule 3.3.5A.

     “Certificate of Compliance” means the certificate of compliance for each Product in the form attached hereto as Schedule 3.3.5B.

     “Change of Control” has the meaning set forth in Section 12.3.

     “Commercially Reasonable Efforts” means, with respect to a given goal, the efforts, consistent with the practice of comparable pharmaceutical companies with respect to a pharmaceutical product owned by it or to which it has rights of comparable market potential at a similar stage in its product life (taking into account the competitiveness of the marketplace, the proprietary position of the applicable active ingredient, the regulatory structure involved, and the profitability of the product), that a reasonable Person in the position of the obligor would use so as to achieve that goal as expeditiously as possible.

     “Confidential Information” means all secret, confidential or proprietary information or data, whether provided in written, oral, graphic, video, computer or other form, provided by one Party or its Affiliates or representatives (the “Disclosing Party”) to the other Party or its Affiliates or representatives (the “Receiving Party”) pursuant to this Agreement or generated pursuant to this Agreement, including any information or reports the Receiving Party may generate, the terms of this Agreement and any other materials that have not been made available by the Disclosing Party

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

2

to the general public. Notwithstanding the foregoing sentence, Confidential Information will not include any specific portion of any information or materials that:

          (a) were already known to the Receiving Party (other than under an obligation of confidentiality) at the time of disclosure by the Disclosing Party to the extent such Receiving Party has documentary evidence to that effect;

          (b) were generally available to the public at the time of their disclosure to the Receiving Party;

          (c) became generally available to the public after their disclosure or development, as the case may be, other than through any act or omission of a Party in breach of such Party’s confidentiality obligations under this Agreement;

          (d) were disclosed to a Receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the Disclosing Party not to disclose such information to others; or

          (e) are independently developed by employees, authorized agents or independent contractors of the Receiving Party without use of, reference to or reliance upon the information furnished by the Disclosing Party, as evidenced by documentary evidence to that effect or other competent proof.

The above exceptions will not apply to (i) any individual parts of the Confidential Information merely because such parts are included in more general information, or (ii) any specific combination of the items found in the Confidential Information merely because such combination can be pieced together from multiple sources, none of which shows the whole combination.

     “Convicted” means (i) when a judgment or conviction has been entered by a federal or state court in the Territory, regardless of whether there is an appeal pending; (ii) when a plea of guilty or nolo contendere has been accepted by a federal or state court in the Territory; or (iii) when a party has entered into participation in a first offender, deferred adjudication or other similar arrangement or program where a judgment of conviction in a federal or state court in the Territory has been withheld.

     “CPA Firm” has the meaning set forth in Section 4.2.1.

     “DEA” means the United States Drug Enforcement Administration, or any successor agency with responsibilities comparable to those of the United States Drug Enforcement Administration.

     “Disclosing Party” has the meaning set forth in the definition of Confidential Information.

     “Distributor” has the meaning set forth in the first paragraph of this Agreement.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

3

     “Distributor’s ANDA” means ANDA No. 78-506, along with all amendments and supplements thereto.

     “Distributor Election” has the meaning set forth in the definition of Effective Date.

     “Distributor Indemnitees” has the meaning set forth in Section 8.1.

     “Effective Date” means the first to occur of (a) Purdue’s election to commence this Agreement (the “Purdue Election”); and (b) Distributor’s election to commence this Agreement (the “Distributor Election”), in either case, as of the date of such election at any time after ***; provided, however, that neither Party may make such election if (x) FDA Approval has been granted on the same day or prior to either Party’s making such election or (y) neither Party has made such election prior to ***.

     “Equivalent Supply Amount” has the meaning set forth in Section 2.1.7.

     “FDA” means the United States Food and Drug Administration, or any successor agency with responsibilities comparable to those of the United States Food and Drug Administration.

     “FDA Approval” means the final approval by the FDA of Distributor’s ANDA to market certain generic versions of controlled-release oxycodone products as described therein in the Territory.

     “Final Cost of Goods Sold Payment” means payment of Purdue’s cost of goods sold for the Remainder Supply Amount as set forth on Schedule 1.1B.

     “Final Net Sales Payment” means ***% of aggregate Net Sales with respect to the Remainder Supply Amount; provided, however, that to the extent any portion of the Remainder Supply Amount has not been sold as of the date such payment is due, the Final Net Sales Payment will be based on a good faith estimate of the Net Sales for such unsold portion.

     “Force Majeure Event” has the meaning set forth in Section 12.1.

     “GAAP” means United States generally accepted accounting principles, consistently applied.

     “Good Manufacturing Practices” means current good manufacturing practices (i) requirements of the FDA and other appropriate agencies, as set forth in 21 C.F.R. Parts 210 and 211, as amended from time to time, and (ii) set forth in all other Laws applicable to the manufacture of the Products that are in effect at the time and place of manufacture of the Products.

     “Governmental Authority” means within the Territory any (i) federal, state or local government; (ii) court, arbitral or other tribunal or governmental or quasi governmental authority of any nature (including any governmental agency, political subdivision, instrumentality, branch, department, official, or entity); or (iii) body exercising, or entitled to exercise, any administrative,

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

4

executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature pertaining to government.

     “Indemnifying Party” has the meaning set forth in Section 8.3.1.

     “Indemnitee” has the meaning set forth in Section 8.3.1.

     “Indemnitee Settlement” has the meaning set forth in Section 8.3.3.

     “Initial Cost of Goods Sold Payment” means payment of Purdue’s cost of goods sold for the Initial Supply Amount as set forth on Schedule 1.1B.

     “Initial Net Sales Payment” means ***% of aggregate Net Sales with respect to the Initial Supply Amount; provided, however, to the extent any portion of the Initial Supply Amount has not been sold as of the date such payment is due, the Initial Net Sales Payment will be based on a good faith estimate of the Net Sales for such unsold portion.

     “Initial Supply Amount” means *** Bottles in the Product mix set forth on Schedule 3.1.1.

     “Inventoried Remaining Product” has the meaning set forth in Section 4.5.1.

     “Involuntary Recall” has the meaning set forth in Section 9.2.2.

     “Label” means any label, labeling, package inserts and packaging designed for use with a Product.

     “Laws” means all applicable laws, rules, regulations, judgments, orders, subpoenas, decrees, statutes, ordinances and other requirements of any Governmental Authority or instrumentality within the Territory.

     “Losses” has the meaning set forth in Section 8.1.

     “Monthly Report” has the meaning set forth in Section 4.2.1.

     “NDA” means Purdue’s FDA New Drug Application number 20-553 (including all amendments and supplements to the application).

     “NDC” means National Drug Code number.

     “Net Sales” means the gross amount invoiced for sale or other disposition of the Products by Distributor and its Affiliates to Third Parties, less the following amounts directly attributable to the Products: (a) sales and excise taxes, value added taxes, and duties which fall due as a direct consequence of such sales and any other governmental charges imposed upon the importation, use or sale, but only to the extent that such taxes and duties are (i) actually included and itemized in the gross amounts invoiced to and specifically paid by the purchaser over and above the usual selling price, (ii) not recovered or recoverable, and (iii) not income or franchise taxes or taxes in lieu

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

5

thereof; (b) trade, sales, trade show, quantity and early payment discounts and stocking allowances, except to the extent such discounts are greater than they otherwise would be for similar products sold in similar competitive markets in order to gain, maintain or otherwise facilitate sales of any of Distributor’s or its Affiliates’ other products; (c) credits to customers for purchaser returns, returned goods allowances, billing and shipping errors, recalls, rejected goods and damaged goods; (d) price adjustments, including those on customer inventories following price changes; (e) allowances or credits to customers on account of rejection, withdrawal, recall, or return; and (f) rebates, PBM administrative fees and wholesaler chargebacks or similar credits or payments granted to customers pursuant to contract or otherwise, including those granted to government agencies.

     “Net Sales Payment Certificate” has the meaning set forth in Section 4.2.1.

     “Party” means Purdue or Distributor and, when used in the plural, means Purdue and Distributor.

     “Person” means any individual, group, corporation, partnership, joint venture, limited liability company, trust, business association, organization, Governmental Authority, a division or operating group of any of the foregoing or other entity or organization, including any successors or assigns (by merger or otherwise) of any such entity.

     “Product” means, except when used in “Branded Products”, any of the authorized generic versions of the Branded Products listed on Schedule 1.1C. Each NDC (dosage strength) listed on Schedule 1.1C will constitute a separate Product. If the Purdue Election is made and the Third Party Agreement is entered into, “Product” shall mean an AB rated generic version of the Branded Product authorized for distribution and sale pursuant to the Third Party’s ANDA as set forth in Section 2.1.7.

     “Purdue” has the meaning set forth in the first paragraph of this Agreement.

     “Purdue Election” has the meaning set forth in the definition of Effective Date.

     “Purdue Indemnitees” has the meaning set forth in Section 8.2.

     “Quality Agreement” means the Quality Agreement to be mutually agreed between the Parties within 90 days after the date hereof.

     “Receiving Party” has the meaning set forth in the definition of Confidential Information.

     “Remainder Supply Amount” means *** Bottles in the Product mix set forth on Schedule 3.1.1.

     “Risk Management Program” means the activities and security controls that Purdue will require Distributor to follow as set forth on Schedule 1.1D, as may be amended by Purdue from time to time, in its sole discretion.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

6

     “Selling Period” means the period beginning at 12:01 a.m., New York City time, on the Effective Date and ending on the Selling Termination Date.

     “Selling Termination Date” means the earlier of (a) the date on which Distributor has sold the entire Supply Amount and (b) ***.

     “Settlement Agreement” means the Settlement Agreement, dated as of the date hereof, by and among Purdue (on its own behalf and as successor in interest to The Purdue Pharma Company, a Delaware general partnership), The P.F. Laboratories, Inc., a New Jersey corporation and Purdue Pharmaceuticals L.P., a Delaware limited partnership, and Distributor and its Affiliates.

     “Specifications” means, for a Product, such specifications (other than indicia and name) for such Product as set forth in the NDA, as the same may be amended from time to time after the date of this Agreement.

     “Supply Amount” means *** Bottles in the Product mix set forth on Schedule 3.1.1. For the avoidance of doubt, the Supply Amount means the maximum number of Bottles in the Product mix set forth on Schedule 3.1.1 permitted to be sold hereunder and all sales and the arrangement of sales of the Product must immediately cease no later than the Selling Termination Date regardless of whether the amount of Bottles actually sold during the Selling Period is less than the Supply Amount.

     “Term” has the meaning set forth in Section 11.1.

     “Territory” means the United States of America, its territories and possessions.

     “Third Party” means any Person who or which is neither a Party nor an Affiliate of a Party.

     “Third Party Agreement” has the meaning set forth in Section 2.1.7.

     “Third Party Claim” has the meaning set forth in Section 8.1.

     “Trade” means wholesalers, chains, distributors, retailers, pharmacies, mail order pharmacies or any other classes of trade that participate in the distribution or sale of pharmaceutical products.

     “Voluntary Recall” has the meaning set forth in Section 9.2.1.

     1.2 Interpretations.

          1.2.1 In the event an ambiguity or a question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

7

          1.2.2 The definitions of the terms herein apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun will include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” will be deemed to be followed by the phrase “without limitation.” Unless the context requires otherwise, (A) any definition of or reference to any agreement, instrument or other document herein will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), (B) any reference to any Laws herein will be construed as referring to such Laws as from time to time enacted, repealed or amended, (C) any reference herein to any Person will be construed to include the Person’s successors and assigns, (D) the words “herein”, “hereof” and “hereunder”, and words of similar import, will be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (E) any reference herein to the words “mutually agree” or “mutual written agreement” will not impose any obligation on either Party to agree to any terms relating thereto or to engage in discussions relating to such terms except as such Party may determine in such Party’s sole discretion, and (F) all references herein without a reference to any other agreement to Articles, Sections, Exhibits or Schedules will be construed to refer to Articles, Sections, Exhibits and Schedules of this Agreement.

ARTICLE II

DISTRIBUTORSHIP/APPOINTMENT

     2.1 Appointment/Authorization.

          2.1.1 At any time after ***, but prior to ***, either Purdue or Distributor may cause this Agreement to commence as of the Effective Date by making the Purdue Election or the Distributor Election. The Effective Date of this Agreement shall only occur as a result of either the Purdue Election or the Distributor Election. This Agreement shall automatically terminate and shall be of no further force and effect if (a) FDA Approval is granted before either Party has made an election to commence this Agreement or (b) neither Party has made such election prior to ***. If FDA Approval were to be granted on the same day as either Party attempted to make an election, such FDA Approval shall be deemed to have occurred prior to such attempted election and such attempted election shall be null and void. Subject to the terms and conditions set forth in this Agreement including those set forth in Section 2.1.7 below, upon and as of the Effective Date, Purdue appoints Distributor as an authorized non-exclusive distributor of the Products not to exceed the Supply Amount in the Territory during the Selling Period, and in connection with such appointment, grants to Distributor the right to market, distribute and sell the Products in amounts not to exceed the Supply Amount in the Territory during the Selling Period.

          2.1.2 Subject to the terms and conditions set forth in this Agreement including those set forth in Section 2.1.7 below, Distributor accepts the appointment as an authorized distributor of Products in the Territory from and after the Effective Date as provided in Section 2.1.1.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

8

          2.1.3 Pursuant to 21 C.F.R. §314.94(a)(12)(viii)(A), within *** days after receipt of the Initial Supply Amount or the Equivalent Supply Amount if Purdue has made the election for Distributor to enter into a distribution and supply agreement with a Third Party as set forth in Section 2.1.7, Distributor shall submit to the FDA with a copy to Purdue, an amendment to the patent certifications in Distributor’s ANDA with respect to the ’042 Patent, changing those certifications to certifications under 21 C.F.R. §314.94(a)(12)(i)(A)(3) and unconditionally requesting that the FDA promptly change the requested approval of the ANDA to a tentative approval and, if Distributor’s ANDA has received effective approval, such approval be rescinded and instead a tentative approval granted.

          2.1.4 [Intentionally left blank].

          2.1.5 Purdue specifically reserves the right, at its sole discretion, either directly or through its Affiliates or Third Parties, to: (i) manufacture, distribute and sell the Products to Distributor pursuant to this Agreement; and (ii) develop, manufacture, market, distribute and sell any products (including the Products and the Branded Products) anywhere in the world, including in the Territory.

          2.1.6 No rights, titles, interests, licenses, waivers, releases, authorizations or covenants (either express or implied) other than those expressly granted in this Section 2.1 have been or are granted (or should be construed to be granted) by or under this Agreement to Distributor in respect of the NDA or any other intellectual property or drug applications owned or controlled by Purdue or any of its Affiliates or with respect to the Products or the Branded Products.

          2.1.7 In lieu of and in full satisfaction of its obligations under this Agreement to supply the Supply Amount of Product to Distributor upon the making by Purdue of the Purdue Election or by the Distributor of the Distributor Election, Purdue may elect for Distributor to enter into a distribution and supply agreement with a Third Party (a “Third Party Agreement”), whereby Distributor would be supplied by such Third Party with an amount of an AB rated generic version of the Branded Product authorized for distribution and sale pursuant to the Third Party’s ANDA equal to the Supply Amount of the Product (the “Equivalent Supply Amount”) at Purdue’s direction and at the same cost that Purdue would sell Product to Distributor. If Purdue elects to have a Third Party supply the Equivalent Supply Amount, (i) the provisions of this Agreement (including the obligation of Distributor to withdraw its request for FDA Approval pursuant to Section 2.1.3), to the extent applicable, shall remain in full force and effect, (ii) Distributor will use its Commercially Reasonable Efforts to negotiate a Third Party Agreement with the Third Party in form and substance similar to this Agreement and (iii) Purdue and Distributor will amend this Agreement only to such extent as is necessary to reflect that such Third Party is supplying the Equivalent Supply Amount instead of Purdue. Purdue shall provide Distributor with written notice of its election under this Section 2.1.7 no later than three (3) Business Days after the making of the Purdue Election or the Distributor Election, as the case may be. Failure of Purdue to provide such written notice in a timely manner shall be deemed a waiver by it of its right to require Distributor to enter into the Third Party Agreement. If, despite the use of its Commercially

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

9

Reasonable Efforts, Distributor is unsuccessful in negotiating and entering into a Third Party Agreement within thirty (30) days of the commencement of such negotiations with the Third Party following a Purdue Election, Distributor shall not be required to enter into a Third Party Agreement and the provisions of this Agreement shall remain in full force and effect. For clarity and notwithstanding anything in this Agreement to the contrary, (i) Purdue shall remain fully liable to Distributor for such Third Party’s performance of Purdue’s obligations to Distributor under this Agreement and (ii) Purdue’s indemnification obligations under Section 8.1 shall include any Third Party claims arising from or in connection with such Third Party’s gross negligence or willful misconduct or breach of any of Purdue’s representations, warranties, covenants or agreements under this Agreement.

          2.1.8 Purdue hereby covenants that neither it, nor any of its Affiliates, will sue, assert any claim or counterclaim against or otherwise participate in any action or proceeding in the United States against Distributor, its Affiliates or purchasers of Product claiming that the sale or offer for sale of Product pursuant to this Agreement infringes any patents owned, licensed or controlled by the Purdue Companies or their Affiliates now or in the future. This covenant not to sue shall be non-transferable (except as provided in Section 12.3 of this Agreement). Nothing in this Section 2.1.8 shall be interpreted to prohibit Purdue or its Affiliates from suing, asserting any claim or counterclaim against or otherwise participating in any action or proceeding against Distributor or its Affiliates not specifically precluded by this Section 2.1.8, including in order to enforce this Agreement, the Settlement Agreement or the Consent Judgment (as such term is defined in the Settlement Agreement).

     2.2 Limitation on Rights.

          2.2.1 Distributor is, and will remain subject at all times prior to, during and following the Term, to the terms and conditions of the Settlement Agreement.

          2.2.2 Distributor hereby acknowledges Purdue’s ownership of the NDA. Pursuant to the Settlement Agreement and the terms of this Agreement, Distributor will not (i) directly or indirectly contest the validity of the NDA or the right and title of Purdue therein and thereto, or (ii) claim or represent that under this Agreement Distributor has acquired any title in, ownership of, or right of reference to, the NDA or any other Purdue intellectual property or new drug application.

          2.2.3 Distributor will not use the NDA in any way other than in accordance with this Agreement.

          2.2.4 Except pursuant to the terms of the Settlement Agreement and this Agreement, Distributor will not, directly or indirectly through its Affiliates or Third Parties solicit offers for sale, offer to sell, sell, ship, or cause to be shipped into interstate commerce for commercial sale in the Territory, or make, have made, import, develop, acquire, license, distribute, promote or market in the Territory, any AB rated generic version of any Branded Product. During the Term, in no event will Distributor submit an ANDA to the FDA or any other Governmental

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Authority for any AB rated generic version of any Branded Product, except that Distributor may maintain on file, as provided for in the Settlement Agreement, Distributor’s ANDA.

          2.2.5 Without the prior written consent of Purdue, which may be withheld in Purdue’s sole discretion, Distributor will not grant sub-Distributorships or otherwise assign or grant an interest in any of its rights or obligations under this Agreement, in whole or in part, to its Affiliates or to Third Parties.

     2.3 Distributor Obligations.

          2.3.1 Commencing on the Effective Date, Distributor will use Commercially Reasonable Efforts to market, sell and distribute and will be responsible for marketing, sales and distribution of, the Products to the Trade throughout the Territory, including all operations relating to any of the foregoing (including pricing, invoicing, collections, customer returns, contracting, and rebates, including Medicaid rebates), and Distributor will comply with all Laws relating to all of the foregoing.

          2.3.2 In order to ensure proper allocation of Net Sales to Purdue, unless otherwise permitted in writing by Purdue in advance, Distributor shall not sell Products as part of (i) a Bundled Product or (ii) in any discounting program in which Distributor’s terms and conditions for sale are not applied to the Products in the same way that they are applied to the majority of Distributor’s other products. If no written permission is given by Purdue in advance and a Product is part of such a Bundled Product or such a discounting program, then the Product sale will be treated for purposes of this Agreement as if it were made at Distributor’s then prevailing list price for such Product.

          2.3.3 Distributor will market, sell and distribute all Products with the approved Label pursuant to Section 3.1.4.

     2.4 Meetings. The Parties will meet as needed, at such times and locations as are mutually acceptable to the Parties, to discuss each Party’s obligations under this Agreement and any disputes relating to the performance by each Party of its obligations hereunder. In connection with the foregoing, each Party will be responsible for all travel and related costs and expenses for its attendees at all such meetings in accordance with this Section 2.4.

ARTICLE III

GENERAL TERMS OF SUPPLY

     3.1 Sales and Supply of Product.

          3.1.1 Subject to the provisions of Section 2.1.7, if the Effective Date occurs, subject to Distributor’s compliance with Section 3.1.4 with respect to the selection of the indicia and Label, Purdue will use its best efforts to complete shipping to Distributor, no later than *** days after the Effective Date (but in no event later than *** days after the Effective Date), the

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Initial Supply Amount in the Product mix set forth on Schedule 3.1.1 subject to receiving from Distributor all documentation required by this Agreement or any Laws, including DEA Form 222. If Distributor makes the payments with respect to the Initial Supply Amount required by Section 4.1 within the time period set forth therein, Purdue will complete shipping to Distributor, no later than *** days after the date it receives the payments described above, the Remainder Supply Amount in the Product mix set forth on Schedule 3.1.1, subject to receiving from Distributor all documentation required by this Agreement or any Laws, including DEA Form 222. If Distributor does not make the payments required by Section 4.1 within the time period set forth therein, Purdue may elect, at its sole discretion, to terminate Distributor’s right to receive the Remainder Supply Amount. If Purdue elects to so terminate Distributor’s right, it shall send Distributor notice of such election. Purdue’s exercise of such election shall have no effect on any other rights or obligations of the Parties hereunder, including Distributor’s obligation to make the Initial Cost of Goods Sold Payment and the Initial Net Sales Payment.

          3.1.2 Distributor will sell the Products in accordance with the terms of this Agreement and immediately cease selling, marketing, and distributing the Products at the conclusion of the Selling Period.

          3.1.3 All Products supplied hereunder will be in finished dosage form, filled, packaged and Labeled for commercial sale in accordance with the terms and conditions of this Agreement, the Quality Agreement, the Specifications and applicable Laws. Purdue will be responsible for the purchase of all materials that are included in finished Products. If due to limitations on Purdue’s receiving a sufficient DEA quota of oxycodone or other materials, Purdue does not have sufficient manufacturing capacity to fulfill Distributor’s scheduled requirements for the Product in accordance with Section 3.1.1, Purdue may elect to extend the Selling Termination Date for up to *** months to enable it to supply such Product.

          3.1.4 Distributor will use the indicia selected by Purdue and will agree with Purdue within 30 days of the date hereof on a Label. Nothing contained herein will prevent Purdue from modifying the indicia or Labeling, so long as such changes conform to FDA requirements and the NDA relating to the Products. Purdue will be responsible for all indicia and Label modification costs if Purdue initiates any modification or change in the indicia or Label, or if the FDA requires the indicia or Label to be modified or changed. Purdue will notify Distributor promptly following a final decision to make changes to the indicia or Label or, if FDA approval is required, to seek approval for such changes, but in no event will Distributor be given less than 30 calendar days’ advance written notice of such modification, unless a shorter time is required to comply with FDA requirements. If Purdue elects to have a Third Party supply the Supply Amount, Distributor, Purdue and the Third Party will agree on the Label within 30 days after Purdue gives Distributor notice of such election under Section 2.1.7.

     3.2 Shipment.

          3.2.1 With KV’s consent, which will not be unreasonably withheld, conditioned or delayed, the Supply Amount may be adjusted among dosage strengths, without altering the total

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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API contained in the Supply Amount, to be in quantities consistent with Purdue’s then current minimum validated batch sizes for such Product, or multiples thereof.

          3.2.2 No terms and conditions contained in any preprinted form issued by either Party will be effective to the extent they are inconsistent with or modify the terms and conditions contained herein or in either the Quality Agreement or the Settlement Agreement.

     3.3 Storage and Shipments.

          3.3.1 Purdue will store and transport Products, and other Product materials and API according to the Specifications for the Products and applicable Good Manufacturing Practices.

          3.3.2 Purdue will notify Distributor when the scheduled delivery amounts become available for shipment. Within twenty-four (24) hours after receiving such notice, Distributor will provide to Purdue a DEA Form 222 and mutually agree with Purdue on a shipment date for the scheduled delivery amounts.

          3.3.3 Within two Business Days after the mutually agreed upon shipment date pursuant to Section 3.3.2, and Purdue’s receipt of all required documentation, including DEA Form 222, Purdue will ship Product to Distributor’s designated distribution facility listed on Schedule 3.3.3 (which may be amended by written agreement of the Parties from time to time) on Purdue’s customary carrier, C.I.P. (Incoterms 2000) customer destination, except that no shipments will be made on Friday, Saturday, Sunday, a legal holiday, or the day before a legal holiday in any week, and shipments due for those days will commence on the following Business Day.

          3.3.4 Each Party will be responsible for its own DEA reporting, where applicable. Purdue will obtain and pay for freight insurance, custom clearance (if necessary), and any duties or taxes in connection with the shipment of any Product to Distributor’s designated distribution facility. Only following approval and release from Purdue’s quality assurance group will Product be shipped to Distributor.

          3.3.5 Purdue will package the Product for shipment in accordance with its customary practices. Purdue will include the following with its shipment of the scheduled delivery amounts: (a) the Purdue lot and batch numbers for the Products constituting such scheduled delivery amounts, (b) the quantity of the Products included, (c) the Certificate of Analysis and (d) the Certificate of Compliance.

     3.4 Product Rejection.

          3.4.1 Distributor will give written notice to Purdue of any claim that any Product does not conform with the requirements set forth in the Quality Agreement promptly upon Distributor becoming aware of such non-compliance, but in no event later than seven calendar days after receipt of such Product by Distributor. In the event that Distributor fails to notify

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Purdue of any such claim within the applicable notice period specified in the preceding sentence, such Product will be deemed accepted by Distributor. Any such notice by Distributor pursuant to this Section 3.4.1 that any Product does not conform with the requirements set forth in the Quality Agreement must be accompanied by a reasonably detailed statement of Distributor’s findings of non-conformance. Such non-compliance is limited to physical inspection of the finished goods, as the Parties do not intend any method transfer protocol to be set forth herein. The Parties will cooperate in good faith to resolve any dispute arising under this Section 3.4.1. Distributor will not dispose of any Product claimed by it not to conform with the terms and conditions hereof until resolution of any dispute with respect thereto is finalized by the Parties. Such resolution may include a mutually agreed upon method to replace or re-label the non-conforming materials.

          3.4.2 If Purdue acknowledges an alleged nonconformity in writing, Purdue will promptly (and in any case within 10 Business Days thereafter) make arrangements for the return or disposal, at Purdue’s option, of the non-conforming Product, if in fact, the non-conforming Product cannot be reworked. Non-conformance relating to physical labeling or packaging will be addressed first by reworking the Product into acceptable physical labeling and/or packaging. If Purdue instructs Distributor to dispose of such non-conforming Product, Purdue will give Distributor written instructions as to the process by which Distributor or its agent must dispose of such non-conforming Product, and Distributor will provide Purdue with written certification of such destruction. Purdue will have the right to witness such destruction. Purdue will be under no obligation to accept a return of Product except as provided in this Section 3.4.2.

          3.4.3 If Product was in fact non-conforming (whether pursuant to Section 3.4.1 or if Purdue so acknowledges in writing), then, Purdue will use Commercially Reasonable Efforts to provide replacement Products for such non-conforming Product if Distributor returns such Product to Purdue or destroys such Product as instructed by Purdue. Replacement shipments will also be subject to the Product rejection procedures contained in this Section 3.4. The Selling Period will be extended for a period equal to the time elapsed between the original scheduled delivery date of Product and the receipt of replacement Product.

     3.5 Quality Control; Change in Specifications.

          3.5.1 The quality control obligations with respect to the manufacture, handling, storage and shipment of the Products are set forth in the Quality Agreement.

          3.5.2 All changes to Specifications must be in accordance with Purdue’s change control procedure set forth in the Quality Agreement.

ARTICLE IV

PAYMENTS AND REPORTS

     4.1 Payment to Purdue. As consideration to Purdue for the rights granted to Distributor under this Agreement, Distributor will, in accordance with the terms of this Article IV, pay to Purdue (i) the Initial Cost of Goods Sold Payment and the Initial Net Sales Payment within 45

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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calendar days of the delivery of the Initial Supply Amount pursuant to Section 3.1 of this Agreement and (ii) the Final Cost of Goods Sold Payment and the Final Net Sales Payment within 30 calendar days after the last sale of Products made under this Agreement. The calculation of Net Sales shall be made in accordance with the definition thereof and in accordance with GAAP. Simultaneously with the delivery of the Initial Supply Amount and the Remainder Supply Amount, Purdue shall deliver to Distributor a certificate from the Executive Vice President, Chief Financial Officer of Purdue certifying the amount of the Initial Cost of Goods Sold Payment for the Initial Supply Amount or the Final Cost of Goods Sold Payment for the Remainder Supply Amount, as the case may be, calculated in accordance with Schedule 1.1B.

     4.2 Reporting Obligations and Audit Rights.

          4.2.1 Each of the Initial Net Sales Payment and the Final Net Sales Payment by Distributor hereunder shall be accompanied by a certificate (the “Net Sales Payment Certificate”) from the Chief Financial Officer of Distributor or other executive officer of Distributor certifying as to (i) the number of Bottles of Products in each dosage strength sold by Distributor, (ii) the Net Sales derived from the sale of such Bottles, and (iii) the amount of the Net Sales payments payable with respect to such Net Sales. The Net Sales Payment Certificate will specify the extent to which the applicable Net Sales payment is based upon a good faith estimate of the Net Sales for any unsold portion of the Initial Supply Amount or Remainder Supply Amount, as the case may be. If Purdue disputes either of the Net Sales Payment amounts set forth in the Net Sales Payment Certificate, such dispute shall be resolved in accordance with this Section 4.2.1. In addition, Distributor shall deliver a report to Purdue for each calendar month during the Term that summarizes the following: (i) the total number of Bottles shipped, on a dosage strength by dosage strength basis, for such month; (ii) the number of returns, on a dosage strength by dosage strength basis, during such month; (iii) the differences between the number of Bottles shipped and returns for each month, on a dosage strength by dosage strength basis; (iv) the total number of Bottles shipped, on a dosage strength by dosage strength basis, since the Effective Date; (v) the number of returns, on a dosage strength by dosage strength basis since the Effective Date; and (vi) the difference between (iv) and (v), on a dosage strength by dosage strength basis (each a “Monthly Report”). Distributor shall deliver each Monthly Report to Purdue no later than five (5) calendar days after the end of the month that such Monthly Report covers to the attention of: Executive Vice President, Chief Financial Officer of Purdue, One Stamford Forum, 201 Tresser Boulevard, Stamford, CT 06901-3431.

                    (a) Purdue shall have the right to engage Deloitte & Touche Financial Advisory Services LLP, or another independent certified public accounting firm chosen by Purdue and reasonably acceptable to Distributor (a “CPA Firm”), to conduct an audit of Distributor for the purposes of confirming compliance with this Agreement, including the amount of Net Sales and the Initial Net Sales Payment and the Final Net Sales Payment. Such right shall exist during the Term and for a period of two (2) years after the Term and shall be limited to conducting such an audit no more than once per calendar year.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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                    (b) The CPA Firm shall be given access to and shall be permitted to examine and copy such books and records of Distributor as it shall request upon ten (10) Business Days’ notice having been given by Purdue, during regular business hours, for the purpose of determining compliance with this Agreement, including the amount of Net Sales and the Initial Net Sales Payment and the Final Net Sales Payment. Prior to any such examination taking place, the CPA Firm shall enter into a confidentiality agreement reasonably acceptable to Distributor with respect to the information to which it is given access.

                    (c) If the CPA Firm determines non-compliance with this Agreement, including that the amount of Net Sales or the Initial Net Sales Payment or the Final Net Sales Payment is incorrect, then Purdue and Distributor shall be entitled to receive a full written report of the CPA Firm with respect to its findings. The determination by the CPA Firm following such audit shall be final and binding on the Parties, unless Distributor or Purdue challenges the findings of the CPA Firm. In the event Distributor or Purdue challenges the findings of the CPA Firm, the Parties shall submit such findings to a binding arbitrator, mutually acceptable to both Parties, and the findings of such arbitrator shall be binding upon the Parties.

                    (d) Upon completion of the CPA Firm’s audit, Distributor shall pay to Purdue the Initial Net Sales Payment amount or the Final Net Sales Payment amount that remains unpaid as determined by the CPA Firm. If the report of the CPA Firm shows that the Initial Net Sales Payment or the Final Net Sales Payment to which Purdue is entitled differs from the Net Sales amount reflected by Distributor in the Net Sales Payment Certificate, then in addition to the payment of the Initial Net Sales Payment or the Final Net Sales Payment amount that remains unpaid, Distributor shall be responsible for late payment interest from the date that the payment would have been due to Purdue and, if such difference is greater than ***%, for the fees and expenses of the CPA Firm in performing such audit. If the report of the CPA Firm shows a difference of less than ***%, each Party shall pay one-half of the fees and expenses of the CPA Firm in performing such audit. If the CPA Firm confirms that the Initial Net Sales Payment or the Final Net Sales Payment, as the case may be, reflected by Distributor in the Net Sales Payment Certificate is correct, Purdue shall be responsible for the fees and expenses of the CPA Firm in performing such audit. Distributor shall cooperate with the CPA Firm in conducting such audit, including by providing sales records relating to Distributor’s sale of Products.

     4.3 Mode of Payment. Distributor will make all payments required under this Agreement by electronic funds wire transfer in United States dollars to a bank account designated by Purdue from time to time. Distributor will give Purdue one Business Day’s written notice prior to making any such wire transfers.

     4.4 Records Retention. Distributor will keep complete, true and accurate records pertaining to its activities under this Agreement, including records pertaining to the sales of Products in the Territory and covering all transactions from which Net Sales are derived, in accordance with and for the time period required by Law, but in no event for a period of less than ten calendar years after the year in which such sales occurred (as currently required by Law), and in sufficient detail to permit Purdue to confirm the accuracy of Net Sales, the Initial Net Sales

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Payment and the Final Net Sales Payment due under this Agreement, the applicable “average manufacturer price” and/or the applicable “best price”.

     4.5 Certificates; Audit.

          4.5.1 Immediately upon the conclusion of the Selling Period, Distributor will give Purdue access to Distributor’s facilities, or such other places that Product is stored, upon reasonable notice in advance, in order to inventory the remaining Product (the “Inventoried Remaining Product”). Following the conclusion of the Selling Period, Distributor will also deliver to Purdue certificates from the Chief Executive Officer or the Chief Financial Officer of Distributor certifying (i) that Distributor ceased shipping the Product into interstate commerce for commercial sale in the Territory on the Selling Termination Date, (ii) the number of Bottles, allocated by dosage strength, sold by Distributor during the Selling Period, (iii) that all Inventoried Remaining Product has been or will be destroyed or returned to Purdue at Distributor’s sole cost and expense within five Business Days following the Selling Termination Date and (iv) that no sales resulting in sales above the Supply Amount were made by Distributor prior to the Selling Termination Date. The certifications referred to in clause (i) above will be delivered within two (2) Business Days following the Selling Termination Date and the certifications referred to in clauses (ii)-(iv) above will be delivered within ten (10) calendar days following the Selling Termination Date.

          4.5.2 Purdue will have the right to engage the CPA Firm to conduct an audit of Distributor for the purpose of confirming that no sales of any AB rated generic version of the Branded Product or Product by Distributor occurred other than during the Selling Period. Subject to its entering into a confidentiality agreement reasonably acceptable to Distributor, the CPA Firm will be given access to and will be permitted to examine and copy such books and records of Distributor as it will reasonably request upon five Business Days’ prior written notice having been given by Purdue for the purpose of reporting to the Parties that no sales of any AB rated generic version of the Branded Product or Product by Distributor occurred other than during the Selling Period. The determination by the CPA Firm following such audit will be final and binding on the Parties. Distributor will cooperate with and will cause its Affiliates to cooperate with all reasonable requests of the CPA Firm in conducting such audit, including by providing sales records relating to its sale of any Product.

     4.6 Taxes. Any and all transfer, sales, use, registration and other taxes imposed upon or with respect to or measured by the shipment by Purdue to Distributor of any Product under this Agreement will be the responsibility of and for the account of Distributor. Notwithstanding the previous sentence, Distributor will have no obligation to pay any income tax imposed on Purdue or any of its Affiliates which may arise from the transactions contemplated by this Agreement.

     4.7 Late Payments. In the event that any payment due by Distributor under this Agreement is not made when due, the payment will accrue interest from the date due at a rate equal to the lesser of (a) *** percent (*** %) above the prime rate reported in The Wall Street Journal (Eastern Edition) on the date such payment was due but not less than *** percent (*** %) and (b) the maximum permissible rate

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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under Law, with such interest to compound monthly. The payment of such interest will not limit Purdue from exercising any other rights it may have as a consequence of the lateness of any payment.

     4.8 Notice of Destruction of Records. Notwithstanding any other provision of this Agreement to the contrary, neither Party will destroy any records created under this Agreement without first giving the other Party advance written notice so that such Party may request additional retention of such records for good cause.

ARTICLE V

COVENANTS

     5.1 Mutual Covenants.

          5.1.1 Compliance with Laws. Each Party will maintain in full force and effect all necessary licenses, permits and other authorizations required by Law to carry out its duties and obligations under this Agreement. Each Party will comply in all material respects with all Laws applicable to its activities under this Agreement and the Quality Agreement. Distributor and Purdue will handle and store the Products in compliance in all material respects with all applicable Laws. Each Party will keep all records and reports required to be kept by applicable Laws. The Parties will reasonably cooperate with one another with the goal of ensuring full compliance in all material respects with applicable Laws. Each Party will cooperate with the other to provide such letters, documentation and other information on a timely basis as the other Party may reasonably require to fulfill its reporting and other obligations under applicable Laws to applicable Governmental Authorities.

          5.1.2 Reasonable Cooperation. Purdue and Distributor will each use Commercially Reasonable Efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary or proper to make effective the transactions contemplated by this Agreement, including such actions as may be reasonably necessary to obtain any approvals and consents of Governmental Authorities and other Persons; provided that no Party will be required to assume any other material obligation not otherwise required to be assumed by this Agreement or the Quality Agreement.

     5.2 Purdue Covenants.

                    (a) Purdue will comply in all material respects with all applicable Laws (including DEA and FDA regulations) relating to the manufacturing, packaging, Labeling, handling, storage and shipment of the Products, including filing with the FDA required notices, supplemental applications and annual or other reports, including adverse event reports, with respect to the NDA, except to the extent such non-compliance would not have a material adverse effect on the NDA, Branded Products or Products.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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                    (b) Purdue will perform all stability and other testing sufficient to maintain the Product in conformity with the NDA.

                    (c) The Products manufactured by Purdue and supplied to Distributor under this Agreement:

                    (i) will not be adulterated under applicable Laws at the time they are tendered to Purdue’s customary carrier for shipment to Distributor;

                    (ii) will meet the Specifications therefor at the time they are tendered to Purdue’s customary carrier for shipment to Distributor;

                    (iii) will be manufactured, packaged and Labeled in accordance with Good Manufacturing Practices; and

                    (iv) will have a shelf life of not less than twenty (20) months at the time the Products are tendered to Purdue’s customary carrier for shipment to Distributor.

                    (d) Labels of Products will not be misbranded under applicable Laws, will meet the Specifications, and will be Labeled in accordance with Good Manufacturing Practices at the time the Products are tendered to Purdue’s customary carrier for shipment to Distributor.

                    (e) Purdue will review all marketing and sales materials within 30 Business Days after receipt from Distributor.

                    (f) Purdue will immediately inform Distributor if Purdue or any of its Affiliates providing services to Distributor in connection with this Agreement are debarred, under Section 306(a) or 306(b) of the Generic Drug Enforcement Act of 1992 or under 42 U.S.C. Section 1320-7, or are sanctioned by, suspended, excluded or otherwise ineligible to participate in any federal health care program, including Medicare and Medicaid or in Federal procurement or non-procurement programs.

     5.3 Distributor Covenants.

                    (a) Distributor will only sell and distribute the Product in the Territory, or make or solicit offers to sell the Product in the Territory during the Selling Period and in no event will such sales of the Product exceed the Supply Amount.

                    (b) Distributor will comply in all material respects with all applicable Laws (including DEA and FDA regulations) relating to the handling, storage and disposal of the Products.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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                    (c) Distributor will comply with all applicable Laws related to the marketing, distribution and sale of the Products.

                    (d) Prior to Distributor using any marketing and sales materials pursuant to this Agreement, Distributor will submit to Purdue for Purdue’s written approval all such marketing and sales materials.

                    (e) Distributor will be responsible for all pricing decisions with respect to the Products.

                    (f) In accordance with applicable Law, Distributor will register and sell the Products using only NDC numbers that reflect Distributor as the distributor of the Products.

                    (g) Distributor will be responsible for all price reporting under Distributor’s own NDC for the Products to any and all Governmental Authorities, as well as to any Third Party pricing publications.

                    (h) Distributor will cause its employees responsible for the supply, distribution, sale or marketing of the Products in the Territory to act in accordance with the highest standards of the industry and in a professional, ethical and lawful manner, consistent with the same diligence used with regard to other products marketed by Distributor.

                    (i) Distributor acknowledges that nothing in this Agreement will grant to Distributor any rights, titles, interests, licenses, waivers, releases, authorizations or covenants to, or interest in, either express or implied, any intellectual property improvements, new formulations, indications, dosages, forms of administration, dosage strengths, or other presentations or uses of Product at any time, whether past, present or future, derived or developed by or on behalf of Purdue or its Affiliates, or any other product, compound or molecule owned or controlled, in whole or in part, by Purdue or its Affiliates.

                    (j) Distributor will not market, distribute or sell the Product to any Third Party in the Territory for resale outside of the Territory.

                    (k) Distributor will process and be responsible for all rebates, price protection claims and payments to Medicaid, Medicare, PBMs (pharmacy benefit managers) and other payors under Distributor’s NDC number, whether required by contract or Law, for the Products. Furthermore, for all rebates due under or calculated under 42 U.S.C. 1396r-8, Distributor acknowledges that it will treat the Products as innovator multiple source drugs, as defined in 42 U.S.C. 1396r-8(k)(7)(A)(ii), and that Distributor will carry over the base average manufacturer price for the Products in accordance with HCFA Labeler Release No. 26.

                    (l) Distributor will timely provide Purdue with Medicare “best price” and “average manufacturers price” data on a 9 and 11 digit NDC basis for each of the Products.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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                    (m) Distributor will take all reasonable actions to ensure that all discounts and price reductions offered to its customers and included in the definition of Net Sales fall within the discount safe-harbor to the federal anti-kickback statute, as described in 42 U.S.C. 1320a-7b(b)(3)(A) and 42 C.F.R. 1001.952(h).

                    (n) Distributor will process all customer returns of Product.

                    (o) Distributor will credit customers for the customers’ Product returns in accordance with Distributor’s general returns policy that applies to all of Distributor’s products, including the Products.

                    (p) Distributor will immediately inform Purdue if Distributor or any of its Affiliates providing services to Purdue in connection with this Agreement are debarred, under Section 306(a) or 306(b) of the Generic Drug Enforcement Act of 1992 or under 42 U.S.C. Section 1320-7, or are sanctioned by, suspended, excluded or otherwise ineligible to participate in any federal health care program, including Medicare and Medicaid or in Federal procurement or non-procurement programs.

                    (q) Distributor will comply with the Risk Management Program. Upon Purdue amending the Risk Management Program, Distributor will implement any additional risk management activities under such amended Risk Management Program as soon as possible.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

     6.1 Representations and Warranties of Both Parties. Each of Purdue and Distributor represents and warrants to the other Party that:

          6.1.1 Organization. Each Party is duly organized and validly existing under the laws of its state of formation.

          6.1.2 Authority. Each Party has all the requisite power and authority to execute and deliver this Agreement and the Quality Agreement and to perform all of its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Quality Agreement and the performance by the Parties of their respective obligations hereunder and thereunder have been authorized by all requisite limited partnership or corporate action, as applicable, on their respective parts. This Agreement has been validly authorized, executed and delivered by each Party and constitutes a valid and binding obligation of each Party, enforceable against each Party in accordance with its terms.

          6.1.3 Consents and Approvals; No Violations.

                    (a) Except as otherwise set forth in this Agreement or the Settlement Agreement, no material filing with, and no material permit, authorization, consent or approval of

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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any Governmental Authority is necessary for the consummation by each Party of the transactions contemplated by this Agreement and the Quality Agreement, except for those filings, permits, authorizations, consents or approvals, the failure of which to be made or obtained would not materially impair such Party’s ability to consummate the transactions contemplated hereby, or materially delay the consummation of the transactions contemplated hereby.

                    (b) Neither the execution and delivery of this Agreement or the Quality Agreement by either Party, nor the performance by such Party of its obligations hereunder or thereunder, will (i) violate the organizational documents of such Party; or (ii) violate or conflict in any material respect with any Law, rule, regulation, judgment, order or decree of any court or Governmental Authority applicable to such Party or any Product, except for violations, breaches or defaults which would not have a material adverse effect on such Party’s ability to consummate the transactions contemplated hereby.

     6.2 Additional Purdue Representations and Warranties. Purdue represents and warrants to Distributor that:

                    (a) Purdue or one of its Affiliates owns and possesses all right, title and interest in, to and under the NDA.

                    (b) The NDA has been approved by the FDA, and neither Purdue nor any of its Affiliates has received any notice in writing that has, or reasonably should have, led Purdue to believe that such NDA is not currently effective or not currently in material compliance with all material Laws.

                    (c) Neither the execution and delivery of this Agreement nor the performance of Purdue’s obligations hereunder will conflict in any material respect with or result in a material violation or breach of, or constitute a material default under, any contract, agreement or instrument to which Purdue is bound.

                    (d) None of Purdue nor any of its Affiliates providing services to Distributor in connection with this Agreement has ever been:

                    (i) debarred, under Section 306(a) or 306(b) of the Generic Drug Enforcement Act of 1992, or under 42 U.S.C. Section 1320-7;

                    (ii) sanctioned by, suspended, excluded or otherwise ineligible to participate in any federal health care program, including Medicare and Medicaid or in Federal procurement or non-procurement programs; or

                    (iii) charged with or Convicted of any felony or misdemeanor under 42 U.S.C. Section 1320a-7(a) or 42 U.S.C. Section 1320a-7(b)(1)-(3), or otherwise proposed for exclusion.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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     6.3 Additional Distributor Representations and Warranties. Distributor represents and warrants to Purdue that:

               (a) Distributor has utilized its own marketing and distribution expertise and experience to analyze and evaluate the commercial value of the Product and has solely relied on such analysis and evaluations in deciding to enter into this Agreement.

               (b) Neither Distributor nor any of its Affiliates is a party to or otherwise bound by any oral or written contract or agreement that will result in any Person obtaining any interest in, or that would give to any Person any right to assert any claim in or with respect to, any of Distributor’s rights under this Agreement.

               (c) Neither the execution and delivery of this Agreement or the Quality Agreement nor the performance of its obligations hereunder or thereunder will conflict in any material respect with or result in a material violation or breach of, or constitute a material default under, any contract, agreement or instrument to which Distributor is bound, or result in the creation or imposition of any lien upon any Product.

               (d) None of Distributor nor any of its Affiliates providing services to Purdue in connection with this Agreement has ever been:

               (i) debarred, under Section 306(a) or 306(b) of the Generic Drug Enforcement Act of 1992, or under 42 U.S.C. Section 1320-7;

               (ii) sanctioned by, suspended, excluded or otherwise ineligible to participate in any federal health care program, including Medicare and Medicaid or in Federal procurement or non-procurement programs; or

               (iii) charged with or Convicted of any felony or misdemeanor under 42 U.S.C. Section 1320a-7(a) or 42 U.S.C. Section 1320a-7(b)(1)-(3), or otherwise proposed for exclusion.

               (e) None of Distributor nor any of its Affiliates has made any offers for sales or customer solicitations for any AB rated generic version of the Branded Product prior to the date of the Settlement Agreement.

     6.4 No Reliance by Third Parties. The representations and warranties of each Party set forth in this Agreement are intended for the sole and exclusive benefit of the other Party hereto, and may not be relied upon by any Third Party.

     6.5 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE SETTLEMENT AGREEMENT, NEITHER PARTY NOR THEIR AFFILIATES MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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OR NON-INFRINGEMENT, INCLUDING (1) FOR PURDUE WITH RESPECT TO PURDUE’S PATENTS, (2) ANY MATERIALS OR INFORMATION PROVIDED BY SUCH PARTY OR ANY OF ITS AFFILIATES UNDER THIS AGREEMENT OR THE SETTLEMENT AGREEMENT, OR (3) WITH RESPECT TO ANY PRODUCTS OR SERVICES OF EITHER PARTY HERETO OR THEIR AFFILIATES. FURTHERMORE, UNLESS EXPRESSLY STATED IN THIS AGREEMENT OR THE SETTLEMENT AGREEMENT, NOTHING IN THIS AGREEMENT OR THE SETTLEMENT AGREEMENT SHALL BE CONSTRUED AS A WARRANTY THAT ANY OF PURDUE’S PATENTS, THE PRACTICE OF ANY INVENTION CLAIMED IN ANY OF PURDUE’S PATENTS OR OTHER PROPRIETARY RIGHTS INCLUDED IN ANY OF PURDUE’S PATENTS OR ANY RIGHTS GRANTED BY PURDUE DO NOT, OR THE MAKING, HAVING MADE, USING, SELLING, OFFERING FOR SALE OR IMPORTING OF DISTRIBUTOR’S PRODUCTS BY ANY PERSON DOES NOT, INFRINGE ANY PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. IT IS HEREBY AGREED AND ACKNOWLEDGED BY DISTRIBUTOR THAT PURDUE IS GIVING NO GUARANTEE OR WARRANTY, EXPRESS OR IMPLIED, TO DISTRIBUTOR IN RELATION TO THE SAFETY OR THERAPEUTIC EFFECTIVENESS OF THE DISTRIBUTOR’S PRODUCTS OR THE VALIDITY OR ENFORCEABILITY OF ANY INTELLECTUAL PROPERTY RIGHTS. FURTHER, DISTRIBUTOR WILL NOT GIVE ANY SUCH GUARANTEE OR WARRANTY TO ANY THIRD PARTIES ON BEHALF OF PURDUE.

ARTICLE VII

INTELLECTUAL PROPERTY

     7.1 Limited Intellectual Property Rights. Distributor acknowledges that by entering into this Agreement, Distributor will not have, assert or acquire any right, title, license, interest, waiver, release, right of reference, authorization or covenant, express or implied, in or to any Purdue intellectual property or other proprietary rights of Purdue, except as may be necessary for Distributor to distribute the Product as explicitly provided for in this Agreement.

     7.2 No Improvements. Distributor will not make any improvements or modifications to the Products.

     7.3 Improvements. Any improvements to the Branded Products or the Products will be the sole and exclusive property of Purdue, and Purdue will have the exclusive right to file for intellectual property protection for such improvements.

ARTICLE VIII

INDEMNIFICATION; LIMITATIONS ON LIABILITY

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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     8.1 Purdue Indemnity. Purdue will indemnify, defend, save, protect, and hold harmless Distributor and its Affiliates and their respective directors, officers, employees, and agents (“Distributor Indemnitees”) from and against any and all losses, claims, damages, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses and court costs) (collectively, “Losses”) resulting or arising from any Third Party claims, suits, actions, proceedings or litigation (“Third Party Claims”) arising from or in connection with:

               (a) Purdue’s negligence or willful misconduct in performing any of its obligations under this Agreement; or

               (b) a breach by Purdue of any of its representations, warranties, covenants or agreements under this Agreement;

provided, however, that in all cases referred to in this Section 8.1, Purdue will not be liable to indemnify Distributor for any Losses of Distributor to the extent that such Losses of Distributor were caused by: (i) the negligence or willful misconduct or wrongdoing of Distributor or (ii) any breach by Distributor of its representations, warranties, covenants or agreements under this Agreement.

     8.2 Distributor Indemnity. Distributor will indemnify, defend, save, protect, and hold harmless Purdue and its Affiliates and their respective directors, officers, employees, and agents (collectively, the “Purdue Indemnitees”) from and against any and all Losses resulting or arising from any Third Party Claims arising from or in connection with:

               (a) Distributor’s negligence or willful misconduct in performing any of its obligations under this Agreement;

               (b) a breach by Distributor of any of its representations, warranties, covenants or agreements under this Agreement; or

               (c) any action against Purdue based upon dissemination of information by Distributor or its Affiliates concerning any product which contains oxycodone;

provided, however, that in all cases referred to in this Section 8.2, Distributor will not be liable to indemnify Purdue for any Losses of Purdue to the extent that such Losses of Purdue were caused by: (i) the negligence or willful misconduct or wrongdoing of Purdue or (ii) any breach by Purdue of its representations, warranties, covenants or agreements under this Agreement.

     8.3 Procedure for Indemnification.

          8.3.1 Notice. In the case of a Third Party Claim as to which a Party (the “Indemnifying Party”) may be obligated to provide indemnification pursuant to this Agreement, such Party seeking indemnification hereunder (the “Indemnitee”) will notify the Indemnifying Party in writing of the Third Party Claim (and specifying in reasonable detail the factual basis for the Third Party Claim and, to the extent known, the amount of the Third Party Claim) promptly

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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after becoming aware of such Third Party Claim; provided, however, that failure to give such notification will not affect the indemnification provided hereunder except to the extent the Indemnifying Party will have been actually prejudiced as a result of such failure.

          8.3.2 Defense of Claim.

               (a) If a Third Party Claim is made against an Indemnitee, the Indemnifying Party will be entitled to assume the defense of the Indemnitee by providing written notice to the Indemnitee of its intention to assume the defense of such Third Party Claim (at the expense of the Indemnifying Party) within thirty (30) calendar days after receipt of written notice from the Indemnitee of such Third Party Claim, with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnitee for so long as the Indemnifying Party is conducting a good faith and diligent defense.

               (b) Should the Indemnifying Party so elect to assume the defense of the Indemnitee, the Indemnifying Party will not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, that if under applicable standards of professional conduct a conflict of interest exists between the Indemnifying Party and the Indemnitee in respect of such claim, such Indemnitee will have the right to employ separate counsel to represent such Indemnitee with respect to the matters as to which a conflict of interest exists, and in that event the reasonable fees and expenses of such separate counsel will be paid by such Indemnifying Party; provided, further, that the Indemnifying Party will only be responsible for the reasonable fees and expenses of one separate counsel for such Indemnitee.

               (c) If the Indemnifying Party assumes the defense of the Indemnitee, the Indemnitee will have the right to participate in such defense and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party.

               (d) If the Indemnifying Party assumes the defense of the Indemnitee, the Indemnifying Party will promptly supply to the Indemnitee copies of all correspondence and documents relating to or in connection with such Third Party Claim and keep the Indemnitee informed of developments relating to or in connection with such Third Party Claim, as may be reasonably requested by the Indemnitee (including providing to the Indemnitee on reasonable request updates and summaries as to the status thereof).

               (e) If the Indemnifying Party assumes the defense of the Indemnitee, the Indemnitee will, and will cause all Distributor Indemnitees or Purdue Indemnitees, as the case may be, to reasonably cooperate with the Indemnifying Party in the defense thereof (including making documents and records available for review and copying and making Persons within its/his/her control available for pertinent testimony).

               (f) If the Indemnifying Party does not elect to assume the defense of the Indemnitee or does not provide written acknowledgement of the defense of the Indemnitee within the 30-day period set forth in Section 8.3.2(a), or if a good faith and diligent defense is not being or

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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ceases to be conducted by the Indemnifying Party, the Indemnitee will have the right, at the reasonable expense of the Indemnifying Party, after three (3) Business Days’ notice to the Indemnifying Party of its intent to do so, to undertake the defense of the Indemnitee (at the reasonable expense of the Indemnifying Party) with counsel reasonably selected by the Indemnitee, and to compromise or settle such Third Party Claim, with the Indemnifying Party’s reasonable consent (which consent will not be unreasonably withheld, delayed or conditioned).

          8.3.3 Settlement of Claims. If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnitee for a Third Party Claim, the Indemnitee will agree (which agreement will not be unreasonably withheld, delayed or conditioned) to a reasonable settlement, compromise or discharge of such Third Party Claim that the Indemnifying Party may recommend; provided, however, that, without the Indemnitee’s prior written consent, the Indemnifying Party will not consent to any settlement, compromise or discharge (including the consent to entry of any judgment), and the Indemnitee may refuse to agree to any such settlement, compromise or discharge, that provides for injunctive or other non-monetary relief affecting the Indemnitee. If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnitee for a Third Party Claim, the Indemnitee will not (unless required by law) admit any liability with respect to, or settle, compromise or discharge (“Indemnitee Settlement”), such Third Party Claim without the Indemnifying Party’s prior written consent (which consent will not be unreasonably withheld, delayed or conditioned) and if such consent is not received, then the Indemnifying Party will have no obligation or liability under this Article VIII for any Indemnitee Settlement.

     8.4 Limitations on Liability. Nothing in this Article VIII will act to negate any obligation under common law of either Party to mitigate damages with respect to any Third Party Claim for which such Party is seeking indemnification from the other Party hereunder.

ARTICLE IX

COMPLIANCE WITH GOVERNMENTAL AUTHORITY REGULATIONS

     9.1 Governmental Authority Communications. Purdue will be responsible for all communications with any Governmental Authority relating to Purdue’s manufacturing activities under this Agreement and will have the responsibility to communicate with any Governmental Authority concerning the marketing, distribution, or sale of the Products (except as otherwise required by applicable Law); provided, however, Distributor will have the responsibility (a) to communicate with any Governmental Authority concerning all obligations for federal or state governmental rebate reporting and payments required thereunder, (b) for all price reporting for the Products to any and all Governmental Authorities, as well as to any Third Party pricing publications, and (c) for all rebates, price protection claims and payments to Medicaid, Medicare, PBMs (pharmacy benefit managers) and other payors under Distributor’s NDC number, whether required by contract or Law, for the Products, and Purdue will provide Distributor with copies of all correspondence from the FDA authorizing the marketing, distribution or sale of the Products. In addition to the foregoing, Purdue will be responsible for reviewing, processing, and responding

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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to all regulatory communications relevant to Product quality, including communications relating to product defects, adverse event reports and medical inquiries relating to product complaints.

     9.2 Governmental and Regulatory Inspections. Each Party will notify the other Party of any inspections by any Governmental Authorities of the premises where the Product is being manufactured, tested or stored, to the extent such inspection relates to the manufacture, storage or distribution of the Products, within five Business Days after such inspection, and will provide to the other Party copies of all Forms 483 or other similar notifications of observations relating to the production, testing, storage, use or sale of the Products, redacted as necessary with respect to any portions of the Form 483 not pertaining to the Products, within five Business Days after they are received by or on behalf of a Party from the FDA or any Governmental Authority. All notices sent to a Party pursuant to this Section 9.2 will be sent to such Party in accordance with the Quality Agreement.

          9.2.1 Voluntary Recalls. Each Party will notify the other Party in the event that such Party determines that any Product already in interstate commerce in the Territory presents a risk of injury or gross deception or is otherwise defective and that recall of such Product is appropriate (a “Voluntary Recall”), and Purdue solely, after consultation with Distributor, will make the decision whether to initiate a Voluntary Recall and will control all recall activities and the Parties will follow the Product recall procedure set forth in the Quality Agreement.

               (a) If Distributor requests a Voluntary Recall, Distributor will be responsible for all expenses incurred by Purdue in connection with its cooperation in facilitating such Voluntary Recall, except to the extent that such Voluntary Recall is attributable to a breach by Purdue of its representations, warranties, covenants or agreements under this Agreement (in which case, to such extent, Purdue will be responsible for the expenses associated with any such Voluntary Recall, including any reasonable out of pocket expenses incurred by Distributor in connection with its cooperation in facilitating such Voluntary Recall).

               (b) If Purdue requests a Voluntary Recall, Purdue will be responsible for all expenses of such Voluntary Recall (including any reasonable out of pocket expenses incurred by Distributor in connection with its cooperation in facilitating such Voluntary Recall), except to the extent that such Voluntary Recall is attributable to a breach by Distributor of its representations, warranties, covenants or agreements under this Agreement (in which case, to such extent, Distributor will be responsible for the expenses associated with any such Voluntary Recall, including any reasonable out of pocket expenses incurred by Purdue in connection with its cooperation in facilitating such Voluntary Recall).

               (c) Any expenses incurred by either Party in connection with a Voluntary Recall will not be included in any calculation of Net Sales for any Product.

          9.2.2 Involuntary Recalls. In the event that any applicable Governmental Authority should issue a request, directive or order that a Product be recalled (“Involuntary

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Recall”), Purdue will control all recall activities and the Parties will follow the Product recall procedure set forth in the Quality Agreement.

               (a) In the event of an Involuntary Recall of any Product inventory (e.g., batch recall), Purdue will be responsible for all expenses of such Involuntary Recall (including any reasonable out-of-pocket expenses incurred by Distributor in connection with its cooperation in facilitating such Involuntary Recall), except to the extent that such Involuntary Recall is attributable to a breach by Distributor of its representations, warranties, covenants or agreements under this Agreement (in which case to such extent Distributor will be responsible for the expenses associated with any such Involuntary Recall, including any reasonable out-of-pocket expenses incurred by Purdue in connection with its cooperation in facilitating such Involuntary Recall).

               (b) Any expenses incurred by either Party in connection with such an Involuntary Recall will not be included in any calculation of Net Sales for any Product.

     9.3 Quality Agreement. The Quality Agreement will include protocols and specific responsibilities for handling all Product quality complaints, adverse event reports and professional medical service inquiries in accordance with Purdue’s standard operating procedures and in conformity with applicable Laws.

ARTICLE X

CONFIDENTIALITY

     10.1 Confidentiality. Except to the extent expressly authorized by this Agreement or otherwise agreed to in writing, Distributor and Purdue each agree that, until the later of (i) the termination of this Agreement and (ii) ten (10) years after the date of disclosure, each of Distributor or Purdue, upon receiving or learning of any Confidential Information of the other Party, will keep such Confidential Information confidential and otherwise will not disclose or use such Confidential Information for any purpose other than as provided for in this Agreement. For the purposes of this Agreement, the existence and terms of this Agreement and the Settlement Agreement shall be deemed Confidential Information. The Receiving Party will advise its Affiliates, directors, officers, employees, agents, consultants, lenders and professional advisors who might have access to the Disclosing Party’s Confidential Information of the confidential nature thereof and agrees that its Affiliates, directors, officers, employees, agents and consultants, lenders and professional advisors will be bound by the terms of this Agreement. The Receiving Party will not disclose any Confidential Information of the Disclosing Party to any Affiliate, director, officer, employee, agent, consultant, lender or professional advisor who does not have a need to know such Confidential Information.

     10.2 Authorized Disclosure. The Receiving Party may disclose Disclosing Party’s Confidential Information to Receiving Party’s Affiliates, directors, officers, employees, agents and consultants, lenders and professional advisors who need to receive the Confidential Information in order to further the activities contemplated in this Agreement, and who are made

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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aware of the confidential nature of the Confidential Information. The Receiving Party must (i) enforce the terms of this Article X as to its respective Affiliates, directors, officers, employees, agents, consultants, lenders and professional advisors; (ii) take such action to the extent reasonably necessary to cause its Affiliates, directors, officers, employees, agents, consultants, lenders and professional advisors to comply with the terms and conditions of this Article X; and (iii) be responsible and liable for any breach of the provisions of this Article X by it or its Affiliates, directors, officers, employees, agents, consultants, lenders and professional advisors. Each Party will take reasonable precautions to safeguard the Confidential Information of the other Party. Each Party will also have the right to make disclosures of such portions of the other Party’s Confidential Information to the DEA or to any other Governmental Authorities where such disclosure is necessary for such Party to perform its obligations under this Agreement. In addition, the Receiving Party may disclose those portions of the Disclosing Party’s Confidential Information required to be disclosed by legal process; provided, in each case the Receiving Party, to the extent it is lawfully able to do so, promptly informs the Disclosing Party, uses reasonable efforts to limit the disclosure and maintains the confidentiality to the extent possible and permits the Disclosing Party to attempt by appropriate legal means to limit such disclosure. Notwithstanding anything to the contrary in this Section 10.2, Purdue may disclose the terms of this Agreement, upon the prior written consent of Distributor (not to be unreasonably withheld, conditioned or delayed), to Third Parties in connection with patent litigation involving the Purdue Patents or the Foreign Patents (each as defined in the Settlement Agreement) or in connection with settlement discussions and agreements with alleged infringers of the Purdue Patents or the Foreign Patents, subject to all such Third Parties keeping the terms of this Agreement strictly confidential in accordance with the terms hereof.

     10.3 Remedies. Each Party understands and agrees that the wrongful disclosure of the other Party’s Confidential Information may result in serious and irreparable damage to the other Party hereto, that the remedy at law for any breach of this covenant may be inadequate, and that the Disclosing Party will be entitled to seek injunctive relief without the posting of any bond or other security, enjoining or restraining any Person from any violation or threatened violation of this Article X, without prejudice to any other rights and remedies to which it may be entitled.

     10.4 Return of Confidential Information. Except as otherwise set forth in this Agreement, upon termination of this Agreement, the Receiving Party will promptly return all of the Disclosing Party’s Confidential Information, including all reproductions and copies thereof in any medium, except that the Receiving Party may retain a reasonable number of archival copies as may be required by law or its standard procedures.

     10.5 Unauthorized Use. If either Party becomes aware or has knowledge of any unauthorized use or disclosure of the other Party’s Confidential Information, it will promptly notify the other Party of such unauthorized use or disclosure.

     10.6 Exclusive Property. All Confidential Information is the sole and exclusive property of the Disclosing Party and the permitted use thereof by the Receiving Party for purposes

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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of its performance hereunder will not be deemed a right, license or covenant, either express or implied, of the Receiving Party to use any such Confidential Information for any other purpose.

ARTICLE XI

TERM; TERMINATION

     11.1 Term. This Agreement will become effective as of the Effective Date and will expire upon the later of (i) Purdue’s receipt of the final Net Sales Payment, and (ii) delivery to Purdue of the last of the certificates required to be delivered pursuant to Sections 4.2 and 4.6, in each case unless this Agreement is terminated earlier (the “Term”). This Agreement shall automatically terminate and shall be of no further force and effect if (a) FDA Approval is granted before or on the same day that either Party has made an election to commence this Agreement, (b) neither Party has made such election prior to ***, (c) the Settlement Agreement is no longer in full force or effect or (d) Distributor or any party acting on its behalf or succeeding to its rights attempts to reject or disavow the Settlement Agreement or any of the other Settlement Documents.

     11.2 Termination. This Agreement may be terminated under any of the following circumstances:

          11.2.1 Material Breach. Failure by either Party to comply in any material respect with any of its obligations contained in this Agreement with respect to a Product will entitle the other Party, if it is not in material default hereunder, to give to the Party in default notice specifying the nature of the default and requiring it to cure such default. If such default is not cured within fifteen (15) calendar days after the receipt of such notice, the notifying Party will be entitled, without prejudice to any of its other rights conferred on it by this Agreement, and in addition to any other remedies available to it at law or in equity, to terminate this Agreement by giving written notice, to take effect immediately upon delivery of such notice. For purposes of this Section 11.2.1, a material breach of this Agreement will include sales of any AB rated generic version of Branded Product by Distributor other than during the Selling Period.

          11.2.2 Bankruptcy and Certain Other Events. This Agreement may be terminated, prior to the expiration of the Term, immediately by either Party upon written notice to the other Party in the event that the other Party hereto (a) applies for, consents to, becomes the subject of the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (b) makes a general assignment for the benefit of its creditors, (c) commences a voluntary case under the United States Bankruptcy Code, as now or hereafter in effect (the “Bankruptcy Code”) or (d) becomes the subject of an involuntary case under the Bankruptcy Code or similar insolvency proceeding, which case or proceeding has not been dismissed or otherwise stayed within ninety (90) calendar days.

          11.2.3 Occurrence of Serious Safety Event. If there occurs a serious and unexpected event with respect to safety issues involving any Product, as a result of which the NDA has been terminated or suspended in the Territory or any Governmental Authority has directed

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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discontinuance of development, use or sale of the Product in the Territory, then either Party may terminate this Agreement by giving written notice, to take effect immediately upon delivery of such notice to the other Party.

          11.2.4 Settlement Agreement. In the event Distributor fails to comply with any of the terms or conditions of the Settlement Agreement or this Agreement, including (i) prohibitions on Distributor and its Affiliates shipping, or causing to be shipped, any AB rated generic version of Branded Product into interstate commerce for commercial sale in the Territory or (ii) prohibitions on making offers for sales or customer solicitations for any AB rated generic version of Branded Product, other than during the Selling Period, then notwithstanding any other provision contained in this Agreement, Purdue will have the right to terminate this Agreement by giving written notice to Distributor, such termination to take effect immediately upon the delivery of such notice to Distributor.

     11.3 Effect of Termination.

          11.3.1 In the event this Agreement is terminated pursuant to Section 11.1 or 11.2, the termination notice provisions, if any, of such Sections will apply. Upon the effectiveness of termination pursuant to Section 11.1 or 11.2, Distributor will not solicit offers for sale, offer to sell, sell, ship, or cause to be shipped, the Product into interstate commerce for commercial sale in the Territory. At Purdue’s option, Distributor will within five Business Days after the related termination effective date (a) return all remaining inventory to Purdue, or (b) destroy all remaining inventory, in each case at Distributor’s sole cost and expense.

          11.3.2 In the event of any termination, Distributor will be responsible to pay Purdue its Initial Cost of Goods Sold Payment, Final Cost of Goods Sold Payment, Initial Net Sales Payment and Final Net Sales Payment, as applicable, on any sales of such Products during the Selling Period. Upon the conclusion of the Selling Period or upon the termination of this Agreement, Distributor will immediately stop marketing, selling and distributing Product to the Trade.

          11.3.3 Without limiting either Party’s right to damages for any breach of this Agreement, neither Purdue nor Distributor will incur any liability to the other solely by reason of the termination of this Agreement as provided herein, whether for loss of goodwill, anticipated profits or otherwise.

          11.3.4 Upon termination of this Agreement, the rights granted to Distributor pursuant to Section 2.1.1 with respect to Products will immediately terminate and each Party and its respective Affiliates and agents will cease any and all use of Confidential Information of the other Party relating to the Products.

     11.4 Accrued Rights; Surviving Obligations.

          11.4.1 Termination or relinquishment of this Agreement for any reason will be without prejudice to any rights that will have accrued to the benefit of either Party prior to such

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

32

termination or relinquishment, and such termination or relinquishment will not relieve either Party from obligations which are expressly indicated to survive termination of this Agreement.

          11.4.2 All of the Parties’ rights and obligations under Articles I (Definitions; Interpretations), IV (Payments and Reports) (as applicable), VII (Intellectual Property), VIII (Indemnification; Limitations on Liability), IX (Compliance with Governmental Authority Regulations), X (Confidentiality), and XII (Miscellaneous Provisions), and Sections 2.2, 11.3 (Effect of Termination) (as applicable) and 11.4 (Accrued Rights; Surviving Obligations) will survive termination hereof.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

33

ARTICLE XII

MISCELLANEOUS PROVISIONS

     12.1 Force Majeure. Each Party will be excused from the performance of its obligations under this Agreement to the extent that such performance is prevented by a Force Majeure Event and the non-performing Party promptly provides written notice to the other Party of such inability and of the period for which such inability is expected to continue. Such excused performance will be continued so long as the condition constituting a Force Majeure Event continues and the non-performing Party takes reasonable efforts to remove the condition. For purposes of this Agreement, a Force Majeure Event will include conditions caused by occurrences beyond the control of the Parties affected, including an act of God, an act, pronouncement, omission or delay in acting by any Governmental Authority (including the FDA and the DEA) or the other Party, war, an act of war, terrorism, insurrection, riot, civil commotion, epidemic, failure or default of public utilities or common carriers, unavailability of one or more raw materials, labor strike, lockout, labor disturbance, embargo, fire, earthquake, flood, storm or like catastrophe (each a “Force Majeure Event”). Notwithstanding the foregoing, nothing in this Section 12.1 will excuse or suspend the obligation of either Party to make any payment due under this Agreement or to comply with the Quality Agreement in the manner and at the time provided.

     12.2 Notice. All notices, instructions and other communications hereunder or in connection herewith will be in writing, will be sent to the addresses below and will be: (a) delivered personally; (b) sent by registered or certified mail, return receipt requested, postage prepaid; (c) sent via a reputable nationwide overnight courier service; or (d) sent by facsimile transmission. Any such notice, instruction or communication will be deemed to have been delivered (w) upon receipt if delivered by hand, (x) three (3) Business Days after it is sent by registered or certified mail, return receipt requested, postage prepaid, (y) one (1) Business Day after it is sent via a reputable nationwide overnight courier service, or (z) when transmitted with electronic confirmation of receipt, if transmitted by facsimile (if such transmission is on a Business Day; otherwise, on the next Business Day following such transmission).

For Purdue:
Purdue Pharma L.P.
One Stamford Forum
201 Tresser Boulevard
Stamford, CT 06901-3431
Attention: General Counsel
Fax: (203) 588-6204

with a copy to:

Chadbourne & Parke LLP
30 Rockefeller Plaza

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

34

New York, NY 10112
Attention: Stuart D. Baker
Fax: (212) 541-5369

For Distributor:

KV Pharmaceutical Company
2503 South Hanley Road
St. Louis, Missouri 63144
Attention: Paul Brady
Fax: (314) 644-2419

with a copy to:

Locke Lord Bissell & Liddell
3 World Financial Center
New York, New York 10281-2101
Attention: John F. Sweeney
Fax No.: (212) 303-2754

     12.3 Assignment. This Agreement is binding upon and will inure to the benefit of each Party hereto and each of its successors and permitted assigns. Distributor may not assign (including by way of merger, acquisition, consolidation, sale of stock, sale of assets, operation of law or otherwise) this Agreement without the prior written consent of Purdue which may be withheld in Purdue’s sole discretion; provided, however, that, in the event such consent is granted, no such assignment shall in any manner limit or impair the obligations of Distributor hereunder; and provided further, however, that any party that acquires this Agreement as a result of such assignment and any Affiliate of such party will thereby become subject to the terms and conditions of this Agreement. If notwithstanding the above, there is a Change of Control of Distributor, this Agreement shall be deemed to be assigned and each Person or entity directly or indirectly controlling Distributor and each Affiliate of such Person or entity shall become subject to the terms and conditions of this Agreement and shall agree in writing to be bound hereby, and Distributor shall remain primarily liable for the performance of all its obligations under this Agreement and for causing its assignees to act in a manner consistent herewith. For purposes of this Section 12.2, “Change of Control” shall mean the transfer or disposition (including by way of merger, acquisition, consolidation, sale of stock, sale of assets, operation of law or otherwise) of more than 50% of the total assets, equity interests, or voting power of Distributor or the appointment of a trustee, receiver, examiner or liquidator for Distributor. Any assignment or attempted assignment by Distributor of this Agreement or the rights and obligations granted to Distributor hereunder in contravention of the provisions of this Section 12.3 will be void and will have no force or effect.

     12.4 No Waiver. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver will be effective unless set

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

35

forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, will be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. Except as expressly set forth in this Agreement, all rights and remedies available to a Party, whether under this Agreement or afforded by Law or otherwise, will be cumulative and not in the alternative to any other rights or remedies that may be available to such Party.

     12.5 Injunction. Distributor acknowledges and agrees that Distributor’s violation or breach of this Agreement, including by making sales (i) of any AB rated generic version of the Branded Product other than during the Selling Period or (ii) in excess of the Supply Amount or after the conclusion of the Selling Period would cause Purdue to suffer substantial damages and irreparable harm that could not adequately be remedied by an action at law, including causing Purdue to be in violation or breach of, or severely disadvantaged under, certain material agreements Purdue has entered into with Third Parties. Accordingly, Distributor agrees that Purdue will be entitled, without limitation, to specific performance or preliminary or permanent injunctive relief without the requirement of posting a bond in any action, hearing, litigation or suit for violation or breach of this Agreement, such rights and remedies being in addition to all other rights and remedies available to Purdue at law, in equity or otherwise, and Distributor will not assert in opposition to Purdue’s request for any equitable relief that Purdue has an adequate remedy at law. Distributor agrees that jurisdiction and venue for any such action under this Section 12.5 exists in the United States District Court for the Southern District of New York, and waives any and all defenses based on personal jurisdiction, subject matter jurisdiction and venue, or to the extent any such waiver is not enforceable, Distributor agrees not to assert such defense.

     12.6 Governing Law. This Agreement, including the interpretation, performance, enforcement, breach or termination thereof and any remedies relating thereto, will be governed by and interpreted in accordance with the laws of the State of New York, without regard to its conflicts of law rules.

     12.7 Entirety of Agreement. This Agreement, the Quality Agreement and the Settlement Agreement, and all schedules and exhibits attached hereto and thereto, set forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto and supersede and terminate all prior covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as are set forth herein and therein. No subsequent alteration, amendment, change or addition to this Agreement or the Quality Agreement will be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.

     12.8 Public Announcements. The form and content of any public announcement, including any press release, to be made by one Party regarding this Agreement, or the subject matter contained herein, will be subject to the prior written consent of the other Party, provided

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

36

that this provision will not preclude a Party from making disclosures required by applicable Law (including disclosure requirements under federal or state securities laws, NASDAQ or any stock exchange requirements, or otherwise), in which event the disclosing Party will give the other Party reasonable advance notice of at least two (2) Business Days to review and comment on such disclosure. Notwithstanding the foregoing, after the earlier of (i) the date of the Consent Judgment (as such term is defined in the Settlement Agreement) and (ii) ninety (90) days after the date of the Settlement Agreement, either Party may announce that this Agreement has been entered into. The disclosing Party will use Commercially Reasonable Efforts to obtain confidential treatment of such information that is required to be disclosed by Law. The Parties shall also consult with each other with respect to any disclosures required to be made to the FDA as a result of this Agreement.

     12.9 Relationship of the Parties. Neither Party will have any responsibility for the hiring, termination or compensation of the other Party’s employees or for any employee benefits of such employee. No employee or representative of a Party will have any authority to bind or obligate the other Party to this Agreement for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without said Party’s approval. For all purposes, and notwithstanding any other provision of this Agreement to the contrary, Distributor’s legal relationship to Purdue under this Agreement will be that of independent contractor. This Agreement is not a partnership agreement and nothing in this Agreement will be construed to establish a relationship of partners or joint venturers between the Parties.

     12.10 Non-Solicitation of Employees. During the Term of this Agreement, neither Party may, directly or indirectly, recruit or solicit any employee of the other Party who became known to the other Party through contact or interactions for the purposes of performing this Agreement, without the prior consent of the other Party, except pursuant to general solicitations not targeted at such employees.

     12.11 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held to be invalid, illegal or unenforceable in any respect for any reason, the Parties will negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision; provided, however, that the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein will not be in any way impaired thereby, it being intended that all of the rights and privileges of the Parties hereto will be enforceable to the fullest extent permitted by Law.

     12.12 Books and Records. Any books and records to be maintained under this Agreement by a Party or its Affiliates will be maintained in accordance with GAAP.

     12.13 Expenses. Each of Purdue and Distributor will bear its own direct and indirect expenses incurred in connection with the negotiation and preparation of this Agreement and the Quality Agreement and, except as set forth in this Agreement or the Quality Agreement, the performance of the obligations contemplated hereby and thereby.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

37

     12.14 No Third Party Beneficiary. This Agreement will be binding upon and inure solely to the benefit of the Parties hereto, their successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or will confer upon any other Person or Persons any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.

     12.15 Further Actions. Each Party will execute, acknowledge and deliver such further instruments, and do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

     12.16 Counterparts; Facsimile Signatures. This Agreement may be executed in counterparts, each of which counterparts, when so executed and delivered, will be deemed to be an original, and both of which counterparts, taken together, will constitute one and the same instrument even if both Parties have not executed the same counterpart. Signatures provided by facsimile transmission or via pdf copy bearing a signature on behalf of a Party hereto shall be legal and binding on such Party and will be deemed to be original signatures.

     12.17 Headings. The headings for each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section, and will be of no force or effect in construing or interpreting any of the provisions of this Agreement.

[The next page is the signature page.]

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

38

     IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed in multiple counterparts by its duly authorized representative.

PURDUE PHARMA L.P.
By:	Purdue Pharma Inc., its general partner
By:	/s/ Edward B. Mahony
	Name:	Edward B. Mahony
	Title:	EVP, CFO & Treasurer
KV PHARMACEUTICAL COMPANY
By:	/s/ Paul T. Brady
	Name:	Paul T. Brady
	Title:	Corporate Vice President, B.D.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

39

Schedule 1.1A

BRANDED PRODUCTS

OxyContin® (oxycodone hydrochloride controlled-release) Tablets, under NDA number 20-553, together with all amendments and supplements thereto, including all existing or future dosage strengths, all other existing or future formulations, all improvements thereon, and all other existing or future indications.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Schedule 1.1B

COST OF GOODS SOLD

The following table sets forth the cost of goods sold per Bottle in each dosage strength of Product to be supplied under the Distribution and Supply Agreement.

Dosage
Strength	Cost Per Bottle
10 mg	$***
15 mg	$***
20 mg	$***
30 mg	$***
40 mg	$***
60 mg	$***
80 mg	$***

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Schedule 1.1C

PRODUCTS

Product definition: Authorized generic versions of 10 mg, 20 mg, 40 mg and 80 mg OxyContin^® (oxycodone hydrochloride controlled-release) Tablets, under NDA number 20-553, together with all amendments and supplements thereto, but specifically excluding all other existing or future dosage strengths.

NDC	Description
58177-677-04	10 mg 100 ct
58177-678-04	15 mg 100 ct
58177-679-04	20 mg 100 ct
58177-680-04	30 mg 100 ct
58177-681-04	40 mg 100 ct
58177-682-04	60 mg 100 ct
58177-683-04	80 mg 100 ct

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Schedule 1.1D

RISK MANAGEMENT PROGRAM

Distributor must comply with the following Risk Management Program activities prior to and at all times during all marketing, making arrangements for selling or distributing of the Products in the Territory:

               (a) Distributor will provide to Purdue’s Corporate Security Department (contact information below in clause (k)) a detailed report of any disruption to, loss from or imminent threat to supply chain integrity, from receipt of Product from Purdue to distribution of Product to the Trade, upon becoming aware of such event, including:

               (i) Attempted or actual theft or loss of any controlled substance, or packaging materials, such as bottles, Labels, etc. relating to Product; and

               (ii) Counterfeit Product or packaging for Product;

               (b) Distributor will provide to Purdue’s Controlled Substance Act Compliance Officer (contact information below in clause (k)):

               (i) Reports of any variances to Distributor’s standard operating procedures for Product handling or record keeping within facilities under Distributor’s control; and

               (ii) Results of DEA inspections of Distributor’s facilities that contain Product (provided that Distributor will not be required to provide the results of any inspection that is unrelated, in whole or in part, to Product or any scheduled products and that could not reasonably be construed to affect Product in any manner whatsoever).

               (c) Upon Purdue’s request, Distributor will produce as soon as possible, but in no event later than three Business Days after such request, a complete and accurate listing of all distribution facilities/entities to which Product has been shipped, including legible copies of the relevant DEA 222 forms.

               (d) If Distributor telemarkets the Product directly to any pharmacy, Distributor will distribute to these pharmacies Purdue’s written materials dealing with prevention of abuse and diversion, and materials for education on the proper management of pain.

               (e) Distributor will only market or sell the Product to buying officers of wholesalers, pharmacy retailers and other distribution channels such as mail order pharmacies, long-term care facilities and closed provider pharmacies.

               (f) Distributor will not market or sell the Product to health care professionals, hospitals or any patient setting that would be equivalent to a pharmaceutical sales representative detail call.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

               (g) Distributor will not market the Product to consumers, patients, or potential patients, directly or indirectly, or through any direct-to-consumer advertising.

               (h) Distributor will make available to its customers for the Product the “Patient Package Insert” or “Medication Guide”, whichever is applicable.

               (i) Distributor will cooperate with Purdue in the timely adoption and implementation of security features for the Product as they are developed and implemented in Purdue’s risk management program for its Branded Products.

               (j) If Distributor becomes aware of any abuse or diversion of Product, Distributor will notify Purdue’s Department of Risk Management & Health Policy (contact information below in clause (k)).

               (k) Contact information:

(i) Purdue’s Corporate Security Department
Mark Geraci
Vice President, Chief Security Officer
Tel: (203) 588-8454
Fax: (203) 588-6035

(ii) Purdue’s Controlled Substance Act Compliance Officer
John Crowley
Executive Director, Controlled Substance Act Compliance
Tel: (203) 588-8613
Fax: (203) 588-6204

(iii) Purdue’s Department of Risk Management & Health Policy
J. David Haddox, D.D.S., M.D.
Vice President, Risk Management & Health Policy
Tel: (203) 588-7667
Fax: (203) 588-6242

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Schedule 3.1.1

SUPPLY AMOUNT

		Approximate
NDC	Description	Number of Bottles
58177-677-04	10 mg 100 ct	***
58177-678-04	15 mg 100 ct	***
58177-679-04	20 mg 100 ct	***
58177-680-04	30 mg 100 ct	***
58177-681-04	40 mg 100 ct	***
58177-682-04	60 mg 100 ct	***
58177-683-04	80 mg 100 ct	***

INITIAL SUPPLY AMOUNT

		Approximate
NDC	Description	Number of Bottles
58177-677-04	10 mg 100 ct	***
58177-678-04	15 mg 100 ct	***
58177-679-04	20 mg 100 ct	***
58177-680-04	30 mg 100 ct	***
58177-681-04	40 mg 100 ct	***
58177-682-04	60 mg 100 ct	***
58177-683-04	80 mg 100 ct	***

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

REMAINDER SUPPLY AMOUNT

		Approximate
NDC	Description	Number of Bottles
58177-677-04	10 mg 100 ct	***
58177-678-04	15 mg 100 ct	***
58177-679-04	20 mg 100 ct	***
58177-680-04	30 mg 100 ct	***
58177-681-04	40 mg 100 ct	***
58177-682-04	60 mg 100 ct	***
58177-683-04	80 mg 100 ct	***

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Schedule 3.1.4

INITIAL LABEL

INDICIA

Each tablet will be marked “AG” on one side and the dosage strength (e.g. 10) on the other.

*** Certain confidential information contained in this document, marked with three asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.