10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2002
[  ]	Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934for the transition period from              to

Commission File Number 0-24424

CIMA LABS INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	41-1569769 (I.R.S. Employer Identification Number)
10000 Valley View Road, Eden Prairie, MN 55344-9361 (Address of principal executive offices and zip code)	(952) 947-8700 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes   X   No     

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common Stock, $.01 par value	14,234,244
(Class)	(Outstanding at October 31, 2002)

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements
		Balance Sheets
		Statements of Operations
		Statements of Cash Flows
		Notes to Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risks
	Item 4. Controls and Procedures
PART II — OTHER INFORMATION
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
CERTIFICATIONS
Exhibit Index
EX-10.1 Development and License Agreement
EX-99.1 Certification of Chief Executive Officer
EX-99.2 Certification of Chief Financial Officer

INDEX
CIMA LABS INC.

	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets — September 30, 2002 and December 31, 2001.	3
Statements of Operations — Three and nine months ended September 30, 2002 and September 30, 2001.	4
Statements of Cash Flows — Nine months ended September 30, 2002 and September 30, 2001.	5
Notes to Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3. Quantitative and Qualitative Disclosures about Market Risks	19
Item 4. Controls and Procedures	19
PART II. OTHER INFORMATION
Items 1, 2, 3, 4 and 5 have been omitted since all items are inapplicable or answers negative
Item 6. Exhibits and Reports on Form 8-K	19
Signature and Certifications	21
Exhibit Index	23

All other trademarks used in this report are the property of their respective owners. We have registered “CIMA®,” “CIMA LABS INC.®,” “OraSolv®,” “OraVescent®,” “DuraSolv®” and “PakSolv®” as trademarks with the U.S. Patent and Trademark Office. We also use the trademarks “OraSolv®SR/CR,” “OraVescent®SL/BL” and “OraVescent®SS.” “Triaminic®” and “Softchews®” are trademarks of Novartis. “Zomig®,” “Zomig-ZMT™” and “Rapimelt™” are trademarks of AstraZeneca. “Remeron®” and “SolTab™” are trademarks of Organon. “Tempra®” is a registered trademark of a Canadian affiliate of Bristol-Myers Squibb. “FirsTabs™” is a trademark of Bristol-Myers Squibb. “NuLev™” is a trademark of Schwarz Pharma. “Actiq®” is a registered trademark of Anesta Corporation. “Claritin®” and “Reditabs®” are registered trademarks of Schering Corporation. “Maxalt-MLT®” is a registered trademark of Merck & Co., Inc. “Zydis®” is a registered trademark of Cardinal Health, Inc. “FlashDose®” is a registered trademark of Biovail Corporation. “WOWTab®” is a registered trademark of Yamanouchi Pharma Technologies, Inc. “Flashtab®” is a registered trademark of Ethypharm.

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Balance Sheets
CIMA LABS INC.

		September 30,			December 31,
		2002			2001
		(Unaudited)			(See note)
Assets
Current assets:
	Cash and cash equivalents	$	24,995,305		$	1,879,647
	Available-for-sale securities		48,452,392			20,085,284
	Trade accounts receivable, net		10,243,286			8,963,105
	Interest receivable		1,394,920			2,127,151
	Inventories, net		3,339,561			3,770,807
	Deferred taxes		700,000			700,000
	Prepaid expenses		346,725			170,516
Total current assets			89,472,189			37,696,510
Other assets:
	Available-for-sale securities		67,240,137			127,539,806
	All other, net		9,217,183			5,933,652
Total other assets			76,457,320			133,473,458
Property and equipment:
	Property, plant and equipment		64,431,723			37,490,871
	Accumulated depreciation		(11,966,220	)		(9,729,963	)
			52,465,503			27,760,908
Total assets		$	218,395,012		$	198,930,876
Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable	$	9,164,685		$	1,607,378
	Accrued expenses		2,331,436			1,771,849
	Deferred revenue		423,215			775,000
Total current liabilities			11,919,336			4,154,227
Stockholders’ equity:
	Convertible preferred stock, $.01 par value; 5,000,000 shares authorized; none outstanding		—			—
	Common stock, $.01 par value; 60,000,000 shares authorized; 14,838,234 and 14,739,116 shares issued and outstanding (including 619,425 and 533,700 treasury shares), respectively		148,385			147,391
	Additional paid-in capital		239,514,368			237,271,364
	Accumulated deficit		(15,048,684	)		(27,003,219	)
	Accumulated other comprehensive income		1,861,499			2,217,364
	Treasury stock		(19,999,892	)		(17,856,251	)
Total stockholders’ equity			206,475,676			194,776,649
Total liabilities and stockholders’ equity		$	218,395,012		$	198,930,876

Note: The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

See accompanying notes.

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Statements of Operations
CIMA LABS INC.
(Unaudited)

		For the Three Months Ended						For the Nine Months Ended
		September 30,			September 30,			September 30,			September 30,
		2002			2001			2002			2001
Revenues:
	Net sales	$	6,093,813		$	5,376,046		$	14,970,076		$	13,273,155
	Product development fees and licensing		3,242,478			1,971,880			8,610,079			5,883,197
	Royalties		3,204,544			1,469,448			7,543,560			3,675,859
			12,540,835			8,817,374			31,123,715			22,832,211
Operating expenses:
	Cost of goods sold		4,997,351			4,929,970			12,165,119			11,648,178
	Research and product development		3,388,319			1,550,867			7,927,242			4,400,916
	Selling, general and administrative		1,838,384			1,218,385			5,258,539			3,646,034
			10,224,054			7,699,222			25,350,900			19,695,128
Operating income			2,316,781			1,118,152			5,772,815			3,137,083
Other income:
	Investment income		1,441,695			2,686,047			5,112,968			7,573,770
	Other income (expense)		7,458			(828	)		12,954			(2,074	)
			1,449,153			2,685,219			5,125,922			7,571,696
Income before provision for income taxes			3,765,934			3,803,371			10,898,737			10,708,779
Provision for income taxes (benefit)			(616,500	)		(38,439	)		(1,055,797	)		196,482
Net income		$	4,382,434		$	3,841,810		$	11,954,534		$	10,512,297
Net income per share:
	Basic	$	.31		$	.26		$	.84		$	.72
	Diluted	$	.30		$	.24		$	.82		$	.68
Weighted average shares outstanding:
	Basic		14,209,190			14,715,046			14,172,006			14,564,167
	Diluted		14,598,300			15,699,443			14,597,730			15,556,711

     See accompanying notes.

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Statements of Cash Flows
CIMA LABS INC.

(Unaudited)

				For the Nine Months Ended
				September 30,
				2002			2001
Operating activities:
Net income				$	11,954,534		$	10,512,297
Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			2,348,611			1,857,910
		Income tax benefit on stock options exercised			1,677,000			4,100,000
		Deferred income taxes			(3,275,458	)		(4,300,000	)
		Gain on sale of investment securities			(638,889	)		(578,491	)
		Changes in operating assets and liabilities:
			Accounts receivable		(1,280,181	)		(105,651	)
			Interest receivable		732,231			(1,354,751	)
			Inventories		431,246			(1,582,378	)
			Other assets		(148,084	)		(13,464	)
			Accounts payable		7,557,307			846,790
			Accrued expenses and other		559,588			362,625
			Deferred revenue		(351,785	)		20,833
Net cash provided by operating activities					19,566,120			9,765,720
Investing activities:
	Purchases of property, plant and equipment				(26,940,852	)		(12,224,989	)
	Patents and trademarks				(148,552	)		(221,376	)
	Purchases of available-for-sale securities				(73,132,659	)		(127,798,338	)
	Proceeds from sales of available-for-sale securities				105,348,244			55,581,249
Net cash used in investing activities					5,126,181			(84,663,454	)
Financing activities:
	Proceeds from exercises of stock options				430,036			2,877,093
	Purchases of treasury stock				(2,143,641	)		—
	Issuance of common stock related to employee stock purchase plan				136,962			—
Net cash (used in) provided by financing activities					(1,576,643	)		2,877,093
Increase (decrease) in cash and cash equivalents					23,115,658			(72,020,641	)
Cash and cash equivalents at beginning of period					1,879,647			91,587,716
Cash and cash equivalents at end of period				$	24,995,305		$	19,567,075

See accompanying notes.

5

CIMA LABS INC.

Notes to Financial Statements
(Unaudited)

1.	Basis of Presentation CIMA LABS INC. (the “Company”), a Delaware corporation, develops and manufactures fast-dissolve and enhanced-absorption oral drug delivery systems. OraSolv and DuraSolv, the Company’s leading proprietary fast-dissolve technologies, are oral dosage forms incorporating active drug ingredients, which we frequently taste-mask, into tablets that dissolve quickly in the mouth without chewing or the need for water. The Company develops applications for technologies that are licensed to pharmaceutical company partners. The Company currently manufactures and packages five pharmaceutical brands incorporating its proprietary fast-dissolve technologies. Revenues are comprised of three components: net sales of products it manufactures; product development fees and licensing revenues for development activities conducted through collaborative agreements with pharmaceutical companies; and royalties on the sales of products sold by pharmaceutical companies under license from the Company.
	The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, which are considered necessary for fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2002, are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, you should refer to the audited financial statements and accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2001.
2.	Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that may affect the amounts we report in our financial statements and accompanying notes. Actual results could differ from those estimates.
3.	Cash Equivalents and Investments The Company’s investments in available-for-sale securities are carried at fair value, with unrealized gains and losses included in accumulated other comprehensive income as a separate component of stockholders’ equity. As of September 30, 2002, the amortized cost and estimated market value of available-for-sale securities, which essentially all have contractual maturities of three years or less, are as follows:

				Gross		Gross		Estimated
		Amortized		Unrealized		Unrealized		Market
		Cost		Gains		Losses		Value
As of September 30, 2002:
	Asset backed securities	$	29,224,439	$	418,793	$	—	$	29,643,232
	Foreign government securities		2,290,028		1,597		—		2,291,625
	Corporate bonds and notes		66,733,617		1,295,311		31,020		67,997,908
	Euro notes		6,756,035		101,704		—		6,857,739
	Floating rate notes		3,260,651		2,051		10,222		3,252,480
	U.S. government securities		5,566,260		83,285		—		5,649,545
Totals — September 30, 2002		$	113,831,030	$	1,902,741	$	41,242	$	115,692,529
As of December 31, 2001:
	Asset backed securities	$	30,476,440	$	377,781	$	14,235	$	30,839,986
	Corporate bonds and notes		85,770,912		1,371,649		52,536		87,090,025
	Euro notes		14,392,231		537,290		—		14,929,521
	Floating rate notes		12,696,395		17,283		—		12,713,678
	U.S. government securities		2,071,748		—		19,868		2,051,880
Totals — December 31, 2001		$	145,407,726	$	2,304,003	$	86,639	$	147,625,090

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4. Income Per Share
Income per share for the three and nine months ended September 30, 2002, and 2001 are summarized in the following table:

		Three Months Ended				Nine Months Ended
		Sept. 30, 2002		Sept. 30, 2001		Sept. 30, 2002		Sept. 30, 2001
Numerator:
	Net income	$	4,382,434	$	3,841,810	$	11,954,534	$	10,512,297
Denominator:
	Denominator for basic earnings per share — weighted average shares outstanding		14,209,190		14,715,046		14,172,006		14,564,167
	Effect of dilutive stock options		389,110		984,397		425,724		992,544
Denominator for diluted earnings per share — weighted average shares outstanding			14,598,300		15,699,443		14,597,730		15,556,711
Basic earnings per share		$	.31	$	.26	$	.84	$	.72
Diluted earnings per share		$	.30	$	.24	$	.82	$	.68

5. Comprehensive Income
Comprehensive income consists of net income and net unrealized gains (losses) on available-for-sale securities.

	Three Months Ended				Nine Months Ended
	Sept. 30, 2002		Sept. 30, 2001		Sept. 30, 2002			Sept. 30, 2001
Net income	$	4,382,434	$	3,841,810	$	11,954,534		$	10,512,297
Unrealized gain (loss) on available-for-sale securities		854,042		1,341,554		(355,865	)		3,008,582
Total comprehensive income	$	5,236,476	$	5,183,364	$	11,598,669		$	13,520,879

6. Inventories
Inventories are stated at the lower of cost (first in, first out) or fair market value.

	September 30, 2002		December 31, 2001
Raw materials	$	2,479,499	$	3,659,288
Work in process		138,244		—
Finished products		721,818		111,519
	$	3,339,561	$	3,770,807

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

Forward-Looking Statements

We make many statements in this Quarterly Report on Form 10-Q under the captions Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Factors That Could Affect Future Results and elsewhere, which are forward-looking and are not based on historical facts. These statements relate to our future plans, objectives, expectations and intentions. We may identify these statements by the use of words such as believe, expect, will, anticipate, intend, plan and other similar expressions. These forward-looking statements involve a number of risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those we discuss in Factors That Could Affect Future Results and elsewhere in this report. These forward-looking statements speak only as of the date of this report, and we caution you not to rely on these statements without considering the risks and uncertainties associated with these statements and our business that are addressed in this report.

These forward-looking statements include statements relating to the expected growth in operating revenues for 2002; the expected increases of gross profits and gross profit margins; the expected decrease in other income; the timing for recognition of our remaining tax benefits; the timing for completion of improvements to our Brooklyn Park R&D center, including the construction and operation of a second site for manufacturing; future expense levels; the timing of availability and expected mix of products; expected demand for products using our technologies; the adequacy of our production capacity; the adequacy of our cash and cash reserves; and future research and development activities and funding relating to our current or new technologies. We are not under any duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results, except as required by law.

Overview

We develop and manufacture pharmaceutical products based on our proprietary OraSolv and DuraSolv fast dissolve technologies. We currently manufacture five pharmaceutical brands utilizing our fast dissolve technologies: three prescription and two over-the-counter brands. These products include Triaminic Softchews for Novartis, Tempra FirsTabs for a Canadian affiliate of Bristol-Myers Squibb, AstraZeneca’s Zomig-ZMT and its equivalent for non-U.S. markets, Remeron SolTab for Organon and NuLev for Schwarz Pharma. The FDA is currently reviewing Wyeth’s (formerly known as American Home Products) regulatory submission for an orally disintegrating dosage form of loratadine that we developed. We are also currently developing other oral drug delivery technologies for ourselves and for others. We operate within a single business segment, the development and manufacture of fast dissolve and enhanced-absorption oral drug delivery systems. Our revenues are comprised of three components, including net sales of products we manufacture for pharmaceutical companies using our proprietary fast dissolve technologies, product development fees and licensing revenues for development activities we conduct through collaborative agreements with pharmaceutical companies, and royalties on the sales of our products which are sold by pharmaceutical companies under licenses from us.

Revenues from product sales and from royalties will fluctuate from quarter to quarter and from year to year depending on, among other factors, demand by consumers for the products we produce, new product introductions, the seasonal nature of some of the products we produce to treat seasonal ailments, pharmaceutical company ordering patterns and our production schedules. Revenues from product development fees and licensing revenue will fluctuate depending on, among other factors, the number of new collaborative agreements that we enter into, the number and timing of product development milestones that we achieve under our collaborative agreements and the level of our development activity conducted for pharmaceutical companies.

Critical Accounting Policies and Estimates

General

The following discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for

8

making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We recognize revenue in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No. 101, or SAB 101, “Revenue Recognition in Financial Statements.” SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an agreement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Revenues from our business activities are recognized from net sales of manufactured products upon shipment; from product development fees as the contracted services are rendered; from product development milestones upon completion; from up-front product development license fees as they are amortized over the expected development term of the proposed products; and from royalties on the sales of products sold by pharmaceutical companies under license from us. The determination of SAB 101 criteria (3) and (4) for each source of revenue is based on our judgments regarding the fixed nature and collectibility of each source of revenue. Revenue recognized for any reporting period could be adversely affected should changes in conditions cause us to determine that these criteria are not met for certain future transactions.

Deferred Taxes

The carrying value of our net deferred tax assets assumes that we will be able to generate sufficient taxable income in the United States, based on management’s current estimates and assumptions. We record a valuation allowance to reduce the carrying value of our net deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the requirements for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax asset would increase net income in the period such determination is made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the net deferred tax asset would decrease net income in the period such determination is made. On a quarterly basis, we evaluate the realizability of our deferred tax assets and assess the requirements for a valuation allowance. For the nine months ended September 30, 2002, we have recorded a $9.5 million valuation allowance related to our net deferred tax assets of $19.0 million, compared to a valuation allowance of $16.2 million related to our net deferred tax assets of $22.4 million for the year ended December 31, 2001.

Results of Operations

Three and Nine Month Periods Ended September 30, 2002 and 2001

Components of revenue, expenses, and net income as a percentage of total operating revenue for the three and nine month periods ended September 30 were as follows:

	Three months ended						Nine months ended
	September 30,						September 30,
	2002			2001			2002			2001
Net sales		49	%		61	%		48	%		58	%
Product development fees & licensing revenues		25	%		22	%		28	%		26	%
Royalty revenues		26	%		17	%		24	%		16	%
Cost of goods sold		40	%		56	%		39	%		51	%
Research & product development expenses		27	%		18	%		25	%		19	%
Selling, general & administrative expenses		15	%		14	%		17	%		16	%
Net income		35	%		44	%		38	%		46	%

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Operating Revenues. Total operating revenues for the third quarter ended September 30, 2002, were $12.5 million, an increase of $3.7 million, or 42%, over the same period in 2001, and for the first nine months of 2002, total operating revenues were $31.1 million, an increase of $8.3 million, or 36%, over the same period in 2001. The third quarter and year-to-date increases in total operating revenues resulted from increases in all three of our revenue components: (1) revenues from the sales of products we manufacture, (2) product development fees and licensing revenue, and (3) royalties on the sales of our products which are sold by pharmaceutical companies under licenses from us.

Revenues from net sales of products we manufacture in the third quarter of 2002 were $6.1 million, an increase of $718,000, or 13%, over the same period of 2001, and for the first nine months of 2002, revenues from net sales of products we manufacture were $15.0 million, an increase of $1.7 million, or 13%, over the same period of 2001. The third quarter and year-to-date increases were primarily due to higher manufacturing volumes of Remeron SolTab for Organon, partially offset by lower sales of Triaminic Softchews for Novartis. This year, sales of branded prescription products increased and represented 76% of our total product sales in both the third quarter and first nine months of 2002, compared with 36% and 50% for the corresponding periods of 2001. We expect over-the-counter product sales to account for a higher proportion of our manufacturing volume in the fourth quarter due to pre-launch shipments of DuraSolv loratadine and expect such shipments to contribute to continued product sales growth in the fourth quarter.

Revenues from product development fees and licensing were $3.2 million in the third quarter of 2002, an increase of $1.3 million, or 64%, from the same period of 2001, and for the first nine months of 2002, revenues from product development fees and licensing were $8.6 million, an increase of $2.7 million, or 46%, from the same period of 2001. These increases resulted from agreements for proposed new products, our achievement of certain milestones under existing agreements, and an overall increase in development activity. Revenues from product development fees and licensing included amortization of deferred revenue of $120,000 and $402,000 in the third quarter and first nine months of 2002, respectively, compared to $138,000 and $229,000 in the same periods of 2001. For 2002, we expect combined revenues attributable to product development fees and licensing revenues to increase by approximately 25% from 2001 levels.

Revenues from royalties were $3.2 million in the third quarter of 2002, an increase of $1.7 million or 118% over the same period of 2001, and for the first nine months of 2002, revenues from royalties were $7.5 million, an increase of $3.9 million, or 105%, over the same period of 2001. The increases were due primarily to increased end-customer sales by AstraZeneca of Zomig Rapimelt (the non-U.S. equivalent of Zomig-ZMT) in Europe and Zomig-ZMT in the United States and increased end-customer sales by Organon of Remeron SolTab. For 2002, we expect royalties to increase by approximately 100% from 2001 levels.

Cost of goods sold. Cost of goods sold was $5.0 million in the third quarter of 2002 compared to $4.9 million in the third quarter of 2001, and cost of goods sold in the first nine months of 2002 increased to $12.2 million from $11.6 million for the same period of 2001. These increases were primarily due to additional labor and materials related to higher production volumes over the same periods in 2001. For 2002, we expect cost of goods sold to increase from 2001 levels in terms of dollar amount, but decrease as a percentage of net sales.

Gross profits on product sales were $1.1 million and $2.8 million in the third quarter and first nine months of 2002, respectively, compared to $446,000 and $1.6 million in the same periods of 2001. Gross profits on product sales were 18% and 19% of total product sales in the third quarter and first nine months of 2002, respectively, compared to 8% and 12% for the same periods in 2001. These improvements were primarily due to increased production volumes of higher margin branded prescription products. For 2002, we expect gross profits on product sales to increase from 2001 levels in terms of dollar amounts and as a percentage of product sales.

Research and product development expenses. Research and product development expenses were $3.4 million in the third quarter of 2002, an increase of $1.8 million, or 119%, over the same period of 2001, and for the first nine months of 2002, these expenses were $7.9 million, an increase of $3.5 million, or 80%, over the same period of 2001. These increases were due primarily to additional staffing, development activity for our proprietary products, including OraVescent fentanyl, and infrastructure investments. For the first nine months of this year expenses related to development of our proprietary products were approximately $700,000. For 2002, we expect research and product development expenses to increase by more than 50% from 2001 levels due to a significant increase in

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development work for our collaborative pharmaceutical company partners, as well as development efforts related to our proprietary products.

Selling, general and administrative expenses. Selling, general and administrative expenses were $1.8 million in the third quarter of 2002, an increase of $620,000, or 51%, over the same period of 2001. Selling, general and administrative expenses were $5.3 million for the first nine months of 2002, an increase of $1.6 million, or 44%, over the same period of 2001. These increases were due primarily to costs associated with increased professional staffing. For 2002, we expect selling, general and administrative expenses to increase by more than 40% from 2001 levels as we continue to make investments in people and systems to support our anticipated growth.

Other income (expense). Other income was $1.4 million in the third quarter of 2002, a decrease of $1.2 million over the same period of 2001. For the first nine months of 2002 other income was $5.1 million, a decrease of $2.4 million from the same period of 2001. Other income consists primarily of investment income comprised of interest earned on securities and gains realized on the sale of securities. The decreases from 2001 levels were due primarily to lower interest rates on our investments and lower levels of cash available for investment. For 2002, we expect other income to decrease by 35 to 40% from 2001 levels due to lower interest rates and expected capital expenditures which will reduce the level of cash available for investment.

Provision for income tax benefits. Since turning profitable in the fourth quarter of 1999, we have not incurred income tax expense due to the recognition of approximately $13.1 million of U.S. tax credits carried over from the years when we were not profitable. Without these credits, our cumulative tax expense for this period of time would have been approximately $11.9 million, based on a tax rate of 40%. For the first nine months of 2002, we have reported a $1.1 million bottom-line tax benefit. We expect to recognize our remaining tax benefits in the fourth quarter of 2002.

Liquidity and Capital Resources

We have financed our operations to date primarily through private and public sales of equity securities, other income, and from operating revenues consisting of product sales, product development fees and licensing revenues, and royalties.

Working capital increased from $33.5 million at December 31, 2001, to $77.6 million at September 30, 2002. The increase of $44.1 million was due primarily to the reclassification of approximately $50 million of non-current available-for-sale securities to current available-for-sale securities or cash. Cash and available-for-sale securities, including both current and non-current securities, were $140.7 million at September 30, 2002, compared to $149.5 million at December 31, 2001. This decrease of $8.8 million was due primarily to $26.9 million of capital expenditures made by the Company (including expenditures for expanding the R&D center and manufacturing capacity) and to $2.1 million of common stock repurchases made by the Company. These expenditures were partially offset by $19.6 million of cash generated from operating activities. We invest excess cash in interest-bearing money market accounts and investment grade securities.

During the remainder of this year, we plan to spend approximately $10.0 to $12.0 million to expand and renovate our Brooklyn Park R&D center and initiate work on a second manufacturing site, which will be located at our Brooklyn Park R&D center. We expect this second manufacturing site, which will include a bottling production line, to be operational in the second half of 2003. In addition, we expect to fund additional product development activities related to our OraVescent technology and to develop proprietary products using our OraSolv and DuraSolv technologies. We may also acquire technologies that complement our current portfolio of oral drug delivery technologies. We believe that our cash and cash equivalents and available-for-sale securities, together with expected revenues from operations, will be sufficient to meet our anticipated capital requirements for the foreseeable future. However, we may require additional funds to support our working capital requirements or for other purposes and may seek to raise such additional funds through public or private equity financings or from other sources. We cannot be certain that additional financing will be available on terms favorable to us, or at all, or that any additional financing will not be dilutive.

Factors That Could Affect Future Results

Certain statements made in this Quarterly Report on Form 10-Q are forward-looking statements based on our current expectations, assumptions, estimates and projections about our business and our industry. These forward-looking

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statements involve risks and uncertainties. Our business, financial condition and results of operations could differ materially from those anticipated in these forward-looking statements as a result of certain factors, as more fully described below and elsewhere in this Form 10-Q. You should consider carefully the risks and uncertainties described below, which are not the only ones facing our company. Additional risks and uncertainties also may impair our business operations.

The Loss Of One Of Our Major Customers Could Reduce Our Revenues Significantly.
Revenues from Organon, AstraZeneca, Schwarz, and Novartis together represented approximately 89% and 90% of our total operating revenues for the quarter ended September 30, 2002, and for the nine months ended September 30, 2002, respectively, compared to 88% and 90% for the corresponding periods in 2001. The loss of any one of these customers could cause our revenues to decrease significantly, resulting in losses from our operations. If we cannot broaden our customer base, we will continue to depend on a few customers for the majority of our revenues. We may be unable to negotiate favorable business terms with customers that represent a significant portion of our revenues. If we cannot, our revenues and gross profits may not grow as expected and may be insufficient to allow us to achieve sustained profitability.

We Rely On Third Parties To Market, Distribute And Sell The Products Incorporating Our Drug Delivery Technologies And Those Third Parties May Not Perform.
Our pharmaceutical company partners market and sell the products we develop and manufacture. If one or more of our pharmaceutical company partners fails to pursue the marketing of our products as planned, our revenues and gross profits may not reach our expectations, or may decline. We often cannot control the timing and other aspects of the development of products incorporating our technologies because our pharmaceutical company partners may have priorities that differ from ours. Therefore, our commercialization of products under development may be delayed unexpectedly. Because we incorporate our drug delivery technologies into the oral dosage forms of products marketed and sold by our pharmaceutical company partners, we do not have a direct marketing channel to consumers for our drug delivery technologies. The marketing organizations of our pharmaceutical company partners may be unsuccessful, or they may assign a low level of priority to the marketing of our products that is different from our priorities. Further, they may discontinue marketing the products that incorporate our drug delivery technologies. If marketing efforts for our products are not successful, our revenues may fail to grow as expected or may decline.

If We Do Not Enter Into Additional Collaborative Agreements with Pharmaceutical Companies, We May Not Be Able To Achieve Sustained Profitability.
We primarily depend upon collaborative agreements with pharmaceutical companies to develop, test and obtain regulatory approval for, and commercialize oral dosage forms of, active pharmaceutical ingredients using our drug delivery technologies. The number of products that we successfully develop under these collaborative agreements will affect our revenues. If we do not enter into additional agreements in the future, or if our current or future agreements do not result in successful marketing of our products, our revenues and gross profits may be insufficient to allow us to achieve sustained profitability.

We face additional risks related to our collaborative agreements, including the risks that:

• any existing or future collaborative agreements may not result in additional commercial products;

• additional commercial products that we may develop may not be successful;

• we may not be able to meet the milestones established in our current or future collaborative agreements;

• we may not be able to successfully develop new drug delivery technologies that will be attractive in the future to potential pharmaceutical company partners; and

• our pharmaceutical company partners may exercise their rights to terminate their collaborative agreement with us.

If We Cannot Increase Our Production Capacity, We May Be Unable To Meet Expected Demand For Our Products And We May Lose Revenues.
We must increase our production capacity to meet expected demand for our products. We currently have two production lines and are planning to add a bottling line and other manufacturing equipment in 2003. If we are unable to increase our production capacity as scheduled, we may be unable to meet expected demand for our products, we may lose revenues and we may not be able to maintain our relationships with our pharmaceutical company partners. Production lines in the pharmaceutical industry generally take 16 to 24 months to complete due to the long lead times required for precision production equipment to be manufactured and installed, as well as the required testing and validation process that must be completed once the equipment is installed. We may not be able

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to increase our production capacity quickly enough to meet the requirements of our pharmaceutical company partners.

If We Do Not Properly Manage Our Growth, We May Be Unable To Sustain The Level Of Revenues We Have Attained Or Effectively Pursue Additional Business Opportunities.
Compared to the corresponding periods a year earlier, our operating revenues increased 34% and 36% for the year ended December 31, 2001, and for the nine month period ended September 30, 2002, respectively, placing significant strain on our management, administrative and operational resources. If we do not properly manage the growth we have recently experienced and expect in the future, our revenues may decline or we may be unable to pursue sources of additional revenues. To properly manage our growth, we must, among other things, implement additional (and improve existing) administrative, financial and operational systems, procedures and controls on a timely basis. We also need to expand our finance, administrative and operations staff. We may not be able to complete the improvements to our systems, procedures and controls necessary to support our future operations in a timely manner. We may not be able to hire, train, integrate, retain, motivate and manage required personnel and may not be able to successfully identify, manage and pursue existing and potential market opportunities. Improving our systems and increasing our staff will increase our operating expenses. If we fail to generate additional revenue in excess of increased operating expenses in any fiscal period we may incur losses, or our losses may increase in that period.

We May Be Unable To Achieve Our Anticipated Revenues and Profits Because The Markets For The Products We Develop And Manufacture For Our Pharmaceutical Company Partners Are Subject To Market Risks From The Introduction of Generic Prescription Products, The Pricing Strategies Of Generic Competitors And From Regulatory Strategies That Could Switch A Prescription Product To An Over-The-Counter Product.
In January 2002, Mylan Laboratories and Teva Pharmaceutical Industries announced that they received tentative approval from the FDA for mirtazapine tablets, which are expected to be generic substitutes for Organon’s Remeron standard tablets. In March 2002, Akzo Nobel NV, Organon’s parent company, reported that Organon sued seven generic pharmaceutical companies, including Teva and Mylan, for the infringement of Organon’s U.S. patent for Remeron (mirtazapine standard tablets). In May 2002, Organon announced that it sued Barr Laboratories, Inc. for infringing on its U.S. patent for Remeron SolTab (mirtazapine orally disintegrating tablets). The U.S. market launch of generic mirtazapine standard tablets by Mylan Laboratories, Teva Pharmaceutical Industries, and five other unnamed generic pharmaceutical companies, as well as the U.S. market launch of generic orally disintegrating mirtazapine tablets by Barr Laboratories, is subject to final FDA approval, which could occur after the resolution of all legal issues related to Organon’s patent rights. Organon is vigorously defending its patent rights, which it believes apply through June 2017. There can be no assurance that Organon’s market for Remeron SolTab would not be negatively affected by the introduction by competitors of generic standard or orally disintegrating mirtazapine tablets, which would be expected to lower product pricing. Due to the large number of variables and high degree of uncertainty, we are unable to predict the timing for the market introduction of a generic mirtazapine standard tablet or a generic mirtazapine orally disintegrating tablet, or the effect of such generic product introductions on our business.

Another pharmaceutical active ingredient that involves a high degree of uncertainty is loratadine, which is currently a prescription product. We have developed for Wyeth (formerly known as American Home Products) a fast dissolve formulation of loratadine for both the prescription pharmaceutical and the over-the-counter markets. Wyeth expects to market our fast dissolve formulation of loratadine to compete with Claritin Reditabs in 2003, unless Schering Corporation, the loratadine patent holder, is successful in its efforts to secure extended exclusive rights to market Claritin. In August 2002, a United States District Court granted summary judgment against Schering Corporation invalidating its patent claims against generic competitors. Schering Corporation announced that it would appeal the Court’s decision.

In May 2001, a joint committee of the FDA’s Nonprescription Drugs Advisory Committee and Pulmonary-Allergy Drugs Advisory Committee made a non-binding recommendation that loratadine, the active drug ingredient in Claritin, has a safety profile acceptable for over-the-counter marketing. In March 2002, Schering Corporation announced that the FDA has accepted for filing its application to switch all formulations of Claritin to over-the-counter products. In April 2002, the FDA’s Nonprescription Advisory Committee endorsed Claritin (loratadine) for over-the-counter treatment in chronic idiopathic urticaria, or chronic hives of unknown cause. We have developed for Wyeth a fast dissolve formulation of loratadine for the over-the-counter market, which Wyeth is expected to launch in the U.S. market, subject to the FDA’s approval to switch loratadine to the over-the-counter market and the

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resolution of certain legal and patent issues brought by Schering Corporation in their efforts to secure extended exclusive rights to market loratadine.

The ongoing litigation against Wyeth and others by Schering Corporation to prevent or delay the market entry of alternative loratadine products, as well as Schering Corporation’s application to switch loratadine to the over-the-counter market, could affect our anticipated revenues and profits. The potential switch of loratadine from the prescription market to the over-the-counter market affects pricing, distribution channels, advertising, insurance reimbursement and a variety of other marketing and regulatory factors. The effects of a delayed market entry of Wyeth’s generic alternative to Claritin Reditabs and the potential switch from the prescription market to the over-the-counter market involve a high degree of uncertainty and we are unable to predict the effect of such changes on our business.

We May Experience Significant Delays In Expected Product Releases While We And Our Pharmaceutical Company Partners Seek Regulatory Approvals For The Products We Develop And Manufacture And, If Either Of Us Are Not Successful In Obtaining The Approvals, We May Be Unable To Achieve Our Anticipated Revenues And Profits.
The federal government, principally the U.S. Food and Drug Administration, and state and local government agencies regulate all new pharmaceutical products, including our existing products and those under development. Our pharmaceutical company partners may experience significant delays in expected product releases while attempting to obtain regulatory approval for the products we develop. If they are not successful, our revenues and profitability may decline. We cannot control, and our pharmaceutical company partners cannot control, the timing of regulatory approval for the products we develop.

Applicants for FDA approval often must submit extensive clinical data and supporting information to the FDA. Varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of a drug product. Changes in FDA approval policy during the development period, or changes in regulatory review for each submitted new drug application, also may cause delays or rejection of an approval. In addition, prior to obtaining FDA approval for a product, the manufacturing facility for the product must be pre-approved by the FDA. Failure by us to obtain FDA pre-approval of our manufacturing facilities could significantly delay or cause the rejection of FDA approval for products we and our pharmaceutical company partners intend to manufacture and sell. Even if the FDA approves a product, the approval may limit the uses or “indications” for which a product may be marketed, or may require further studies. The FDA also can withdraw product clearances and approvals for failure to comply with regulatory requirements or if unforeseen problems follow initial marketing.

Manufacturers of drugs also must comply with applicable good manufacturing practices requirements. If we cannot comply with applicable good manufacturing practices, we may be required to suspend the production and sale of our products, which would reduce our revenues and gross profits. We may not be able to comply with the applicable good manufacturing practices and other FDA regulatory requirements for manufacturing as we expand our manufacturing operations. We cannot guarantee that any future inspections will proceed without any compliance issues requiring time and resources to resolve.

If our products are marketed in foreign jurisdictions, we, and the pharmaceutical company partners with which we are developing our technologies, must obtain required regulatory approvals from foreign regulatory agencies and comply with extensive regulations regarding safety and quality. If approvals to market our products are delayed, if we fail to receive these approvals, or if we lose previously received approvals, our revenues would be reduced. We may be required to incur significant costs in obtaining or maintaining foreign regulatory approvals.

We May Be Exposed To Liability Claims Associated With The Use Of Hazardous Materials And Chemicals.
Our research and development and manufacturing activities involve the controlled use of hazardous materials and chemicals. Although we believe that our safety procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our business, financial condition and results of operations. In addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business and financial condition.

Our Products May Contain Controlled Substances, The Supply Of Which May Be Limited By U.S. Government Policy.
The active ingredients in some of our current and proposed products, including OraVescent fentanyl, are controlled substances under the Controlled Substances Act of 1970 and are regulated by the U.S. Drug Enforcement Agency, or DEA. These products are subject to DEA regulations relating to manufacturing, storage, distribution and physician prescription procedure. Products containing controlled substances may generate public controversy. Opponents of these products may seek restrictions on marketing and withdrawal of any regulatory approvals. In addition, these opponents may seek to generate negative publicity in an effort to persuade the medical community to reject these products. Political pressures and adverse publicity could lead to delays in, and increased expenses for, and limit or restrict the introduction and marketing of products containing controlled substances. Furthermore, the DEA could impose significant penalties and fines against us and our pharmaceutical company partners for violating the Controlled Substances Act and DEA regulations.

Our Commercial Products Are Subject To Continuing Regulations And We May Be Subject To Adverse Consequences If We Fail To Comply With Applicable Regulations.
Even if our products receive regulatory approval, either in the U.S. or internationally, we will continue to be subject to extensive regulatory requirements. These regulations are wide-ranging and govern, among other things:

• adverse drug experience reporting regulations;

• product promotion;

• product manufacturing, including good manufacturing practice requirements; and

• product changes or modifications.

If we fail to comply or maintain compliance with these laws and regulations, we may be fined or barred from selling our products. If the FDA determines that we are not complying with the law, it can:

• issue warning letters;

• impose fines;

• seize products or order recalls;

• issue injunctions to stop future sales of products;

• refuse to permit products to be imported into, or exported out of, the U.S.;

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• totally or partially suspend our production;

• withdraw previously approved marketing applications; and

• initiate criminal prosecutions.

We Have A Single Manufacturing Facility And We May Lose Revenues And Be Unable To Maintain Our Relationships With Our Pharmaceutical Company Partners If We Lose Its Production Capacity.
We manufacture all our products on our existing production lines in our Eden Prairie facility. If our existing production lines or facility becomes incapable of manufacturing products for any reason, we may be unable to meet production requirements, we may lose revenues and we may not be able to maintain our relationships with our pharmaceutical company partners. Without our existing production lines, we would have no other means of manufacturing products incorporating our drug delivery technologies until we were able to restore the manufacturing capability at our facility or develop an alternative manufacturing facility. Although we carry business interruption insurance to cover lost revenues and profits in an amount we consider adequate, this insurance does not cover all possible situations. In addition, our business interruption insurance would not compensate us for the loss of opportunity and potential adverse impact on relations with our existing pharmaceutical company partners resulting from our inability to produce products for them. Although we currently plan to add a second manufacturing site at our Brooklyn Park, Minnesota facility to reduce this risk, we may encounter unforeseen difficulties or delays in doing so.

We Rely On Single Sources For Some Of Our Raw Materials And We May Lose Revenues And Be Unable To Maintain Our Relationships With Our Pharmaceutical Company Partners If Those Materials Were Not Available.
We rely on single suppliers for some of our raw materials and packaging supplies. If these raw materials or packaging supplies were no longer available we may be unable to meet production requirements, we may lose revenues and we may not be able to maintain our relationships with our pharmaceutical company partners. Without adequate supplies of raw materials or packaging supplies, our manufacturing operations may be interrupted until another supplier could be identified, its products validated and trading terms with it negotiated. We may not be able to identify an alternative supplier in a timely manner, or at all. Furthermore, we may not be able to negotiate favorable terms with an alternative supplier. Any disruptions in our manufacturing operations from the loss of a supplier could potentially damage our relations with our pharmaceutical company partners.

If We Cannot Develop Additional Products, Our Ability To Increase Our Revenues Would Be Limited.
We intend to continue to enhance our current technologies and pursue additional proprietary drug delivery technologies. If we are unable to do so, we may be unable to achieve our objectives of revenue growth and sustained profitability. Even if enhanced or additional technologies appear promising during various stages of development, we may not be able to develop commercial applications for them because:

• the potential technologies may fail clinical studies;

• we may not find a pharmaceutical company willing to adopt the technologies;

• it may be difficult to apply the technologies on a commercial scale; or

• the technologies may be uneconomical to market.

If We Cannot Keep Pace With The Rapid Technological Change And Meet The Intense Competition In Our Industry, We May Lose Business.
Our success depends, in part, on maintaining a competitive position in the development of products and technologies in a rapidly evolving field. If we cannot maintain competitive products and technologies, our current and potential pharmaceutical company partners may choose to adopt the drug delivery technologies of our competitors. Fast dissolve tablet technologies that compete with our OraSolv and DuraSolv technologies include the Zydis technology developed by R.P. Scherer Corporation, a wholly-owned subsidiary of Cardinal Health, Inc., the WOWTab technology developed by Yamanouchi Pharma Technologies, the Flashtab technology developed by Ethypharm and the FlashDose technology developed by Fuisz Technologies Ltd., a wholly-owned subsidiary of Biovail Corporation. We also compete generally with other drug delivery, biotechnology and pharmaceutical companies engaged in the development of alternative drug delivery technologies or new drug research and testing. Many of these competitors have substantially greater financial, technological, manufacturing, marketing, managerial and research and development resources and experience than we do and represent significant competition for us.

Our competitors may succeed in developing competing technologies or obtaining governmental approval for products before us. The products of our competitors may gain market acceptance more rapidly than our products. Developments by competitors may render our products, or potential products, noncompetitive or obsolete.

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If We Cannot Adequately Protect Our Technology And Proprietary Information, We May Be Unable To Sustain A Competitive Advantage.
Our success depends, in part, on our ability to obtain and enforce patents for our products, processes and technologies and to preserve our trade secrets and other proprietary information. If we cannot do so, our competitors may exploit our innovations and deprive us of the ability to realize revenues and profits from our developments. We have been granted seventeen patents on our drug delivery and packaging systems in the U.S., which will expire beginning in 2010.

Any patent applications we may have made or may make relating to our potential products, processes and technologies may not result in patents being issued. Our current patents may not be valid or enforceable. They may not protect us against competitors that challenge our patents, obtain patents that may have an adverse effect on our ability to conduct business or are able to circumvent our patents. Further, we may not have the necessary financial resources to enforce our patents.

To protect our trade secrets and proprietary technologies and processes, we rely, in part, on confidentiality agreements with our employees, consultants and advisors. These agreements may not provide adequate protection for our trade secrets and other proprietary information in the event of any unauthorized use or disclosure, or if others lawfully develop the information.

Third Parties May Claim That Our Technologies, Or The Products In Which They Are Used, Infringe On Their Rights And We May Incur Significant Costs Resolving These Claims.
Third parties may claim that the manufacture, use or the sale of our drug delivery technologies infringe on their patent rights. If such claims are asserted, we may have to seek licenses, defend infringement actions or challenge the validity of those patents in court. If we cannot obtain required licenses, are found liable for infringement or are not able to have these patents declared invalid, we may be liable for significant monetary damages, encounter significant delays in bringing products to market or be precluded from participating in the manufacture, use or sale of products or methods of drug delivery covered by the patents of others. We may not have identified, or be able to identify in the future, U.S. and foreign patents that pose a risk of potential infringement claims.

We enter into collaborative agreements with pharmaceutical companies to apply our drug delivery technologies to drugs developed by others. Ultimately, we receive license revenues and product development fees, as well as revenues from, and royalties on, the sale of products incorporating our technology. The drugs to which our drug delivery technologies are applied are generally the property of the pharmaceutical companies. Those drugs may be the subject of patents or patent applications and other forms of protection owned by the pharmaceutical companies or third parties. If those patents or other forms of protection expire, are challenged or become ineffective, sales of the drugs by the collaborating pharmaceutical company may be restricted or may cease.

Because We Have A Limited Operating History, Potential Investors In Our Stock May Have Difficulty Evaluating Our Prospects.
We recorded the first commercial sales of products using our fast dissolve technologies in early 1997. Accordingly, we have only a limited operating history, which may make it difficult for you and other potential investors to evaluate our prospects. The difficulty investors may have in evaluating our prospects may cause volatile fluctuations, including decreases, in the market price of our common stock as investors react to information about our prospects. Since 1997, we have generated revenues from product development fees and licensing arrangements, sales of products using our fast dissolve technologies and royalties. We are currently making the transition from research and product development operations with limited production to commercial operations with expanding production capabilities in addition to research and product development activities. Our business and prospects, therefore, must be evaluated in light of the risks and uncertainties of a company with a limited operating history and, in particular, one in the pharmaceutical industry.

If We Are Not Profitable In The Future, The Value Of Our Stock May Fall.
Although we were profitable for the year ended December 31, 2001, and the nine months ended September 30, 2002, we have accumulated aggregate net losses from inception of approximately $15.0 million. If we are unable to sustain profitable operations in future periods, the market price of our stock may fall. The costs for research and product development of our drug delivery technologies and general and administrative expenses have been the principal causes of our losses. Our ability to achieve sustained profitable operations depends on a number of factors, many of which are beyond our direct control. These factors include:

• the demand for our products;

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• our ability to manufacture our products efficiently and with the required quality;

• our ability to increase our manufacturing capacity;

• the level of product and price competition;

• our ability to develop additional commercial applications for our products;

• our ability to control our costs; and

• general economic conditions.

We May Require Additional Financing, Which May Not Be Available On Favorable Terms Or At All And Which May Result In Dilution Of The Equity Interest Of An Investor.
We may require additional financing to fund the development and possible acquisition of new drug delivery technologies and to increase our production capacity beyond what is currently anticipated. If we cannot obtain financing when needed, or obtain it on favorable terms, we may be required to curtail any plans to develop or acquire new drug delivery technologies or may be required to limit the expansion of our manufacturing capacity. We believe our cash and cash equivalents, and expected revenues from operations will be sufficient to meet our anticipated capital requirements for the foreseeable future. However, we may elect to pursue additional financing at any time to more aggressively pursue development of new drug delivery technologies and expand manufacturing capacity beyond that currently planned.

Other factors that will affect future capital requirements and may require us to seek additional financing include:

• the level of expenditures necessary to develop and, or, acquire new products or technologies;

• the progress of our research and product development programs;

• the need to construct a larger than currently anticipated manufacturing facility, or additional manufacturing facilities, to meet demand for our products;

• the results of our collaborative efforts with current and potential pharmaceutical company partners; and

• the timing of, and amounts received from, future product sales, product development fees and licensing revenue and royalties.

Demand For Some Of Our Products Is Seasonal, And Our Sales And Profits May Suffer During Periods When Demand Is Light.
Certain non-prescription products that we manufacture for our pharmaceutical company partners treat seasonal ailments such as colds, coughs and allergies. Our pharmaceutical company partners may choose to not market those products in off-seasons and our sales and profits may decline in those periods as a result. For 2001 and for the first nine months of 2002, operating revenues from Novartis, which included revenues related to Triaminic, a seasonal cold, cough and allergy product, represented 33% and 15%, respectively, of our total operating revenues for such periods. We may not be successful in developing a mix of products to reduce these seasonal variations.

If The Marketing Claims Asserted About Our Products Are Not Approved, Our Revenues May Be Limited.
Once a drug product incorporating our technologies is approved by the FDA, the Division of Drug Marketing, Advertising and Communication, the FDA’s marketing surveillance department within the Center for Drug Evaluation and Research, must approve marketing claims asserted about it by our pharmaceutical company partners. If our pharmaceutical company partners fail to obtain from the Division of Drug Marketing acceptable marketing claims for a product incorporating our drug technology, our revenues from that product may be limited. Marketing claims are the basis for a product’s labeling, advertising and promotion. The claims our pharmaceutical company partners are asserting about our drug delivery technology, or the drug product itself, may not be approved by the Division of Drug Marketing.

We May Face Product Liability Claims Related To Participation In Clinical Trials Or The Use Or Misuse Of Our Products.
The testing, manufacturing and marketing of products using our drug delivery technologies may expose us to potential product liability and other claims resulting from their use. If any such claims against us are successful, we may be required to make significant compensation payments. Any indemnification that we have obtained, or may obtain, from contract research organizations or pharmaceutical companies conducting human clinical trials on our behalf may not protect us from product liability claims or from the costs of related litigation. Similarly, any indemnification we have obtained, or may obtain, from pharmaceutical companies with which we are developing our drug delivery technologies may not protect us from product liability claims from the consumers of those products or from the costs of related litigation. If we are subject to a product liability claim, our product liability insurance may not reimburse us, or be sufficient to reimburse us, for any expenses or losses we may suffer. A successful product liability claim against us, if not covered by, or if in excess of, our product liability insurance, may

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require us to make significant compensation payments, which would be reflected as expenses on our statement of operations and reduce our earnings.

Anti-Takeover Provisions Of Our Corporate Charter Documents, Delaware Law And Our Stockholders’ Rights Plan May Affect The Price Of Our Common Stock.
Our corporate charter documents, Delaware law and our stockholders’ rights plan include provisions that may discourage or prevent parties from attempting to acquire us. These provisions may have the effect of depriving our stockholders of the opportunity to sell their stock at a price in excess of prevailing market prices in an acquisition of us by another company. Our board of directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the rights, preferences and privileges of those shares without any further vote or action by our stockholders. The rights of holders of our common stock may be adversely affected by the rights of the holders of any preferred stock that may be issued in the future. Additional provisions of our certificate of incorporation and bylaws could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting common stock. These include provisions that limit the ability of stockholders to call special meetings or remove a director for cause.

We are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, either alone or together with affiliates and associates, owns (or within the past three years, did own) 15% or more of the corporation’s voting stock.

We also have a stockholders’ rights plan, commonly referred to as a poison pill, which makes it difficult, if not impossible, for a person to acquire control of us without the consent of our board of directors.

Our Stock Price Has Been Volatile And May Continue To Be Volatile.
The trading price of our common stock has been, and is likely to continue to be, highly volatile. The market value of your investment in our common stock may fall sharply at any time due to this volatility. In the year ended December 31, 2001, the closing sale price for our common stock ranged from $30.05 to $85.75. For the nine months ended September 30, 2002, the closing sale price for our common stock ranged from $16.06 to $35.45. The market prices for securities of drug delivery, biotechnology and pharmaceutical companies historically have been highly volatile. Factors that could adversely affect our stock price include:

• fluctuations in our operating results;

• announcements of technological collaborations, innovations or new products by us or our competitors;

• governmental regulations;

• developments in patent or other proprietary rights owned by us or others;

• public concern as to the safety of drugs developed by us or others;

• the results of pre-clinical testing and clinical studies or trials by us or our competitors;

• litigation;

• decisions by our pharmaceutical company partners relating to the products incorporating our technologies;

• actions by the FDA in connection with submissions related to the products incorporating our technologies; and

• general market conditions.

Our Operating Results May Fluctuate, Causing Our Stock Price To Fall.
Fluctuations in our operating results may lead to fluctuations, including declines, in our stock price. Our operating results may fluctuate from quarter to quarter and from year to year depending on:

• demand by consumers for the products we produce;

• new product introductions;

• the seasonal nature of the products we produce to treat seasonal ailments;

• pharmaceutical company ordering patterns;

• our production schedules;

• the number of new collaborative agreements that we enter into;

• the number and timing of product development milestones that we achieve under collaborative agreements;

• the level of our development activity conducted for, and at the direction of, pharmaceutical companies under collaborative agreements; and

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• the level of our spending on new drug delivery technology development and technology acquisition, and internal product development.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

The Company is subject to interest rate and foreign currency risks. Our investments in fixed-rate debt securities, which are classified as available-for-sale at September 30, 2002, have remaining maturities, for essentially all securities, of 36 months or less and thus are exposed to the risk of fluctuating interest rates. Available-for-sale securities had a market value of $115.7 million at September 30, 2002, and represented 53% of total assets. The primary objective of our investment activities is to preserve capital. We have not used derivative financial instruments in our investment portfolio.

We performed a sensitivity analysis assuming a hypothetical 10% adverse movement in interest rates applicable to fixed rate investments maturing during the next twelve months that are subject to reinvestment risk. As of September 30, 2002, the analysis indicated that these hypothetical market movements would not have a material effect on our financial position, results of operations or cash flow.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. Based on their evaluation as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.

PART II — OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit	Description of Document	Method of Filing
3.1	Fifth Restated Certificate of Incorporation of CIMA, as amended		(1)
3.2	Third Restated Bylaws of CIMA		(2)
4.1	Form of Certificate for Common Stock		(3)
4.2	Amended and Restated Rights Agreement dated June 26, 2001, between CIMA and Wells Fargo Bank Minnesota, N.A. as Rights Agent.		(4)
10.1	Development and License Agreement by and between CIMA and Aventis Pharmaceuticals Inc. dated as of August 1, 2001, and Amendment dated November 30, 2001, Amendment #2 dated December 20, 2001, Amendment #3 dated January 18, 2002, and Amendment #4 dated February 15, 2002, thereto*		Filed herewith
99.1	Certification of Chief Executive Officer		Filed herewith
99.2	Certification of Chief Financial Officer		Filed herewith

19

*	Denotes confidential information that has been omitted from the exhibit and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.
(1)	Filed as an exhibit to CIMA’s Registration Statement on Form S-8, filed June 13, 2001, File No. 333-62954, and incorporated herein by reference.
(2)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the period ended June 30, 1999, File No. 333-62954, and incorporated herein by reference.
(3)	Filed as an exhibit to CIMA’s Registration Statement on Form S-1, File No. 33-80194, and incorporated herein by reference.
(4)	Incorporated by reference to Exhibit 1 to CIMA’s Amendment No. 1 to Registration Statement on Form 8-A/A, filed July 18, 2001, File No. 0-24424.
(b)	Reports on Form 8-K

No reports on Form 8-K were filed for the quarter ended September 30, 2002.

20

SIGNATURE

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

	CIMA LABS INC.         Registrant
Date: November 14, 2002	By /s/ David A. Feste         David A. Feste         Chief Financial Officer         (principal financial and accounting         officer, duly authorized to sign on         behalf of the registrant)

CERTIFICATIONS

     I, John M. Siebert, certify that:

          1.     I have reviewed this quarterly report on Form 10-Q of CIMA LABS INC.;

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

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

          4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

     (b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     (c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

          5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

21

          6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002 By: /s/ John M. Siebert
John M. Siebert, Chief Executive Officer

     I, David A. Feste, certify that:

          1.     I have reviewed this quarterly report on Form 10-Q of CIMA LABS INC.;

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

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

          4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

     (b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     (c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

          5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

          6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002 By: /s/ David A. Feste
David A. Feste, Chief Financial Officer

22

Exhibit Index

Exhibit	Description of Document	Method of Filing
3.1	Fifth Restated Certificate of Incorporation of CIMA, as amended.		(1)
3.2	Third Restated Bylaws of CIMA		(2)
4.1	Form of Certificate for Common Stock		(3)
4.2	Amended and Restated Rights Agreement dated June 26, 2001, between CIMA and Wells Fargo Bank Minnesota, N.A. as Rights Agent.		(4)
10.1	Development and License Agreement by and between CIMA and Aventis Pharmaceuticals Inc. dated as of August 1, 2001, and Amendment dated November 30, 2001, Amendment #2 dated December 20, 2001, Amendment #3 dated January 18, 2002, and Amendment #4 dated February 15, 2002, thereto. *		Filed herewith
99.1	Certification of Chief Executive Officer		Filed herewith
99.2	Certification of Chief Financial Officer		Filed herewith

*	Denotes confidential information that has been omitted from the exhibit and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.
(1)	Filed as an exhibit to CIMA’s Registration Statement on Form S-8, filed June 13, 2001, File No. 333-62954, and incorporated herein by reference.
(2)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the period ended June 30, 1999, File No. 333-62954, and incorporated herein by reference.
(3)	Filed as an exhibit to CIMA’s Registration Statement on Form S-1, File No. 33-80194, and incorporated herein by reference.
(4)	Incorporated by reference to Exhibit 1 to CIMA’s Amendment No. 1 to Registration Statement on Form 8-A/A, filed July 18, 2001, File No. 0-24424.

23 EX-10.1 3 c72927exv10w1.txt EX-10.1 DEVELOPMENT AND LICENSE AGREEMENT EXHIBIT 10.1 DEVELOPMENT AND LICENSE AGREEMENT BY AND BETWEEN CIMA LABS INC. AND AVENTIS PHARMACEUTICALS INC. DATED AS OF AUGUST 1, 2001 August 1, 2001 DEVELOPMENT AND LICENSE AGREEMENT This DEVELOPMENT AND LICENSE AGREEMENT ("this Agreement"), dated as of August 1, 2001 is by and between CIMA LABS INC., a Delaware corporation ("CIMA"), and AVENTIS PHARMACEUTICALS Inc., a Delaware corporation ("AVENTIS"). WITNESSETH WHEREAS, CIMA is engaged, among other things, in the business of research, development, manufacturing and commercialization of pharmaceutical products through its proprietary drug delivery technologies; WHEREAS, AVENTIS is engaged, among other things, in the business of researching, developing, manufacturing, marketing and commercializing of pharmaceutical products; WHEREAS, subject to the terms and conditions set forth in this Agreement, CIMA and AVENTIS wish to collaborate in the development and manufacture of a certain prescription product owned by AVENTIS; and WHEREAS, subject to the terms and conditions set forth in this Agreement, CIMA wishes to license to AVENTIS and AVENTIS wishes to license from CIMA rights to CIMA's OraSolv(R) technology for use with such prescription product. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1 DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings set forth below: "Activities" shall mean the development of the Product in the Territory as contemplated by this Agreement. "Affiliates" shall mean, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For purposes hereof, the term "controlled" (including the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the direct or indirect ability or power to direct or cause the direction of management policies of such Person or otherwise direct the affairs of such Person, whether through ownership of voting securities or otherwise. "Annual Net Sales" shall mean, for any Year, the Net Sales for such Year. "Active Pharmaceutical Ingredient or API" shall mean the active ingredient fexofenadine. "AVENTIS" shall have the meaning given in the preamble and shall include its Affiliates. 2 "AVENTIS Trademarks" shall have the meaning given in Section 8.9(c). "cGMP" shall mean current Good Manufacturing Practices, as determined by the FDA from time to time. "CIMA" shall have the meaning given in the preamble and shall include its Affiliates. "CIMA Intellectual Property" shall mean, collectively, 1) the CIMA Patents, and 2) the CIMA Technology. "CIMA Patents" shall mean U.S. Patents 5,178,878, 6,024,981, 6,155,423, and 6,221,392 (entitled 'Effervescent Dosage Form with Microparticles', 'Rapidly Dissolving Robust Dosage Form', 'Blister Package and Packaged Tablet' and 'Rapidly Dissolving Robust Dosage Form' respectively) and any patents and patent applications resulting therefrom, including any foreign counterparts, extension, reissue, renewal, reexamination or continuation-in-part of such patent or patent application. "CIMA Technology" shall mean all of CIMA's trade secrets, technology, know-how and all other information necessary or desirable for the manufacture of the Product including, without limitation, that related to CIMA's OraSolv(R) and PakSolv(TM) technologies. "CIMA Trademarks" shall mean the CIMA(R), the CIMA(TM), DuraSolv(TM), OraSolv(R), and PakSolv(TM) trademarks. "Damages" shall mean any and all actions, costs, losses, claims, liabilities, fines, penalties, demands, damages and expenses, court costs, and reasonable fees and disbursements of counsel, consultants and expert witnesses incurred by a party hereto (including interest which may be imposed in connection therewith) but shall not include incidental, consequential, special or punitive damages. "Defective" shall mean, as to the Product, the failure of such to strictly conform to the Specifications and all applicable laws and regulations, including, without limitation, FDA regulatory filings and cGMP. "Development Schedule" shall mean the schedule of development activities set forth on Schedule A hereto. "Effective Date" shall mean the date of this Agreement. "FDA" shall mean the United States Food and Drug Administration. "Force Majeure" shall mean acts of God, explosion, fire, flood, tornadoes, thunderstorms, earthquake or tremor, war whether declared or not, civil strife, riots, embargo, losses or shortages of power, labor stoppage, substance shortages, currency restrictions, or events caused by reason of laws, regulations or orders by any government, governmental agency or instrumentality or by any other supervening or unforeseeable circumstances reasonably beyond the control of each party. "Indemnified Party" shall have the meaning given in Section 9.2 hereof. 3 "Indemnifying Party" shall have the meaning given in Section 9.2 hereof. "Launch" shall mean the date when the Product is first made commercially available by AVENTIS within the Territory. "Licensed Assets" shall have the meaning set forth in Section 2.1 hereof. "Net Sales" shall mean gross sales of Products sold by AVENTIS and its respective Affiliates and licensees to third parties in the Territory, less the total of (a) trade, cash, and/or quantity discounts; (b) excise, sales and other consumption taxes and customs duties to the extent included in the invoice price; (c) freight, insurance and other transportation charges to the extent included in the invoice price; (d) amounts repaid or credited by reason of rejections and defects; (e) returns and retroactive price reductions; and (f) compulsory payments and rebates, accrued, paid or deducted pursuant to agreements (including, but not limited to, managed care agreements). "OraSolv(R)" shall mean CIMA's orally disintegrating tablet formulations and related technology as described in the CIMA Patents. "PDMA" shall mean the Prescription Drug Marketing Act of 1987, as amended from time to time, together with any rules or regulations promulgated thereunder. "Person" shall mean a natural person, a corporation, a partnership, a trust, a joint venture, a limited liability company, any governmental authority or any other entity or organization. "Product" shall mean pharmaceutical preparations containing the Active Pharmaceutical Ingredient as the sole ingredient formulated with the OraSolv(R) technology in final packaged form ready for sale to customers in the Territory. "Quarter" shall mean, as the case may be, the three months ending on March 31, June 30, September 30 or December 31 in any Year. "Specifications" shall mean, at any time, the specifications for the Product that are agreed to from time to time by AVENTIS and CIMA. "Territory" shall mean the entire world. "Valid Claim" shall mean a claim which, but for the license granted hereunder, would be infringed by AVENTIS' use, manufacture or sale of a Product, and which is covered by an issued unexpired patent included within the CIMA Patents which has not been held invalid or unenforceable by a decision of a court or governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been disclaimed, denied or admitted to be invalid or unenforceable by the owner through reissue , disclaimer or otherwise. "Year" shall mean a calendar year during the term of this Agreement. 4 SECTION 2 GRANT OF LICENSES; LICENSE OPTION 2.1 Grant of Licenses. (a) CIMA hereby grants to AVENTIS an exclusive license, even as to CIMA (except to the extent necessary for CIMA to fulfill its responsibilities under this Agreement, including without limitation in connection with the Activities and to make or have made Product for Aventis or its Affiliates or sublicensees), to the following assets (such assets are referred to herein collectively as the "Licensed Assets"): (i) all current and future regulatory filings, approvals, registrations and governmental authorizations obtained by CIMA that relate to the Product in the Territory; (ii) the CIMA Intellectual Property; and (iii) the CIMA Trademarks, for the term of this Agreement to make, have made, use, market, distribute, import, sell, have sold or offer for sale the Product in the Territory . (b) The license to AVENTIS will be exclusive in that (i) CIMA will not grant to any Person in the Territory during the term of this Agreement any licenses for the Licensed Assets with respect to products containing the Active Pharmaceutical Ingredient, and (ii) CIMA will not itself use the Licensed Assets in the Territory during the term of this Agreement to make, have made, use , import, sell, have sold or offer for sale any product containing the Active Pharmaceutical Ingredient except as permitted in Section 2.1 above. 2.2 Sublicenses. AVENTIS shall have the right to extend the licenses granted pursuant to this Section 2 in whole or in part to any Affiliate of AVENTIS, provided that AVENTIS is not then in default with respect to any of its obligations to CIMA under this Agreement. All the terms and provisions of this Agreement shall apply to the Affiliate to which this license has been extended to the same extent as they apply to AVENTIS, and the operations of the Affiliate shall be deemed to be the operations of AVENTIS and AVENTIS shall account therefore and be responsible for the performance by such Affiliate of all of its obligations hereunder. In addition, AVENTIS shall have the right to extend the licenses granted pursuant to this Section 2 in whole or in part to Persons who are not Affiliates of AVENTIS with the prior written consent of CIMA, such consent not to be unreasonably withheld or delayed, provided that AVENTIS is not then in default with respect to any of its material obligations to CIMA under this Agreement. All the terms and provisions of this Agreement shall apply to such sublicensee to the same extent as they apply to AVENTIS and the operations of any such authorized Person shall be deemed to be the operations of AVENTIS and AVENTIS shall account therefore and be responsible for the performance of such Person of all of its obligations hereunder. 5 2.3 Development, Marketing, Distribution and Sale. Prior to and after the Launch, AVENTIS shall use its commercially reasonable efforts to market, distribute and sell the Product in the Territory. Such efforts shall be consistent with industry norms, given the product profile, product potential and the state of the market at Launch and as it develops after Launch. SECTION 3 PRODUCT DEVELOPMENT 3.1 Obligations of CIMA. CIMA shall use commercially reasonable efforts to satisfactorily perform each of the development activities set forth on Schedule A and shall complete such activities within the timeframes set forth on Schedule A. 3.2 Obligations of AVENTIS. AVENTIS shall, in a timely fashion, pay CIMA the development fees noted in Schedule A. 3.3 Regulatory Matters. All Product supplied to AVENTIS shall be produced under cGMP and in accordance with the Specifications. CIMA shall furnish AVENTIS with a Certificate of Analysis with a cGMP statement to demonstrate that each shipment of Product has been manufactured under cGMP and in accordance with the Specifications. In addition, AVENTIS reserves the right, at its own expense, to audit the facility of CIMA, including its processes, records and other facets of the operation as may be necessary to assure that all applicable regulations have been complied with and the Specifications have been met. CIMA shall permit duly authorized representatives of AVENTIS to audit all manufacturing and processing operations related to this Agreement at reasonable times with a prior appointment. The right to audit shall commence with the Effective Date. These audits will be conducted to assure compliance with all pertinent acts, regulations, and guidelines promulgated by the FDA and other regulatory authorities, as well as standards then in effect in the regulatory environment. Such audits will be permitted during normal business hours and will be performed with a minimum of disruption. SECTION 4 ROYALTY, TECHNOLOGY DEVELOPMENT AND MILESTONE PAYMENTS 4.1 Royalty, Technology Development and Milestone Payments. (a) In partial consideration of the licenses granted in Section 2.1, AVENTIS shall make royalty payments to CIMA in the amounts set forth on Schedule B. (b) In partial consideration of the licenses granted in Section 2.1 and the Activities performed by CIMA, AVENTIS shall make the technology development and milestone payments to CIMA as set forth on Schedule C. (c) In the event that sales of Product in the United States are to be made through [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED 6 SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], rather than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] as currently contemplated by the Parties, AVENTIS and CIMA agree to re-negotiate in good faith the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] this Agreement. 4.2 Records and Audit. AVENTIS and its Affiliates shall keep true and accurate books of account containing all particulars that may be necessary for the purpose of showing the amounts payable to CIMA hereunder. Such books and the supporting data shall be open, at all reasonable times and upon reasonable notice during the term of this Agreement and for two (2) Years after its termination, to the inspection by a firm of certified public accountants selected by CIMA and reasonably acceptable to AVENTIS, for the limited purpose of verifying AVENTIS' royalty statements; provided, however, that such examination shall not take place more often than once each Year and shall not cover more than the preceding two (2) Years, with no right to audit any period previously audited. Except as otherwise provided in this Section, the cost of any such examination shall be paid by CIMA. In the event that any such inspection reveals a deficiency in excess of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the reported royalty for the period covered by the inspection, AVENTIS shall promptly pay CIMA the deficiency, plus interest at the rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] per annum (which interest shall accrue from the date any such payment was originally due) and shall reimburse CIMA for the reasonable fees and expenses paid to such accountants in connection with their inspection. In the event that any such inspection reveals a deficiency of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the reported royalty for the period covered by the inspection, AVENTIS shall promptly pay CIMA the deficiency, plus interest at the rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] per annum (which interest shall accrue from the date any such payment was originally due) and shall reimburse CIMA for [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] the reasonable fees and expenses paid to such accountants in connection with their inspection. In the event that any such inspection reveals a deficiency that is less than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the reported royalty for the period covered by the inspection, AVENTIS shall promptly pay CIMA the deficiency, plus interest at the rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] per annum (which interest shall accrue from the date any such payment was originally due). In the event that any such inspection reveals any overpayment by AVENTIS to CIMA, CIMA shall promptly pay AVENTIS the difference between what was due and the overpayment, plus interest at the rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] per annum (which interest shall accrue from the date any such payment was 7 originally due). The parties agree that neither party shall be required to retain books and records with respect to the above other than books and records relating to the current Year and the immediately preceding two (2) Years. 4.3 Quarterly Reports and Payment of Royalties. AVENTIS shall, within forty-five (45) days after the end of each Quarter, deliver to CIMA a written report (the "Royalty Statement") describing: (i) the Net Sales during the Quarter; and 2) the calculation used to determine the total royalties due for the Quarter pursuant to Section 4.1 (a). AVENTIS shall pay such royalties in United States dollars within sixty (60) days after the end of each Quarter by wire transfer or such other method as CIMA may designate. If no royalties are due, AVENTIS shall so report. In those cases where the amount due is calculated based on one or more currencies other than the US dollar, the amount due in US dollars shall be calculated using the average rate of exchange for such currencies, as quoted in the Financial Times, for the last business day of each of the three months in the calendar quarter to which such payment pertains. 4.4 Term of Royalty. AVENTIS' royalty obligations to CIMA hereunder shall terminate upon the later of (i) ten (10) years from the Effective Date of this Agreement or (ii) on a country-by-country basis, on the expiration date in such country of the last to expire of issued CIMA Patents which include at least one Valid Claim covering the manufacture, sale or use of the Product in such country. Notwithstanding anything to the contrary contained in the previous sentence, the Parties agree that in the event that (a) the ten (10) year period referred to in (i) above has not expired and a Valid Claim does not exist covering the manufacture, sale or use of the Product and (b) a third party commences the sale of a product containing the API and CIMA Technology in a country where a Valid Claim does not exist, then AVENTIS shall not owe CIMA any royalties for its sale of Products in such country until the third party sale ceases. Upon expiration or termination of AVENTIS' royalty obligation in any country, AVENTIS shall have the royalty-free right in that country to continue using the CIMA Technology furnished hereunder in that country. SECTION 5 SUPPLY OF PRODUCT 5.1 Supply Agreement. After the Effective Date hereof, the parties shall enter into good faith negotiations for commercial supply of Product by CIMA to AVENTIS. The supply agreement shall have an initial term of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], which term shall commence from the first shipment of commercial Product (the "Initial Term"). On the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] anniversary of the Initial Term, AVENTIS shall notify CIMA whether it (i) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product, (ii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] 8 after the expiration of the Initial Term or (iii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], or other period of time as the parties shall mutually agree, after the expiration of the Initial Term. When AVENTIS notifies CIMA that it desires to proceed with either (i), (ii) or (iii), then AVENTIS shall pay CIMA the technology transfer fee(s) set forth in Section 5.2 below. During the term of the supply agreement, AVENTIS shall provide the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] for the manufacturing of tablets of Product. The supply agreement will contain provisions consistent with CIMA's supply agreements between CIMA and its other major pharmaceutical partners and otherwise acceptable to the parties. CIMA's prices for supplying Product to Aventis shall not exceed the prices in Schedule D; provided however such prices may be increased annually based upon increases in a Producer Price Index (details to be included in the Supply Agreement) not to exceed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] per year. 5.2 [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] AVENTIS. When AVENTIS notifies CIMA that it intends to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product pursuant to Section 5.1 (i) or (ii) above, AVENTIS shall pay CIMA the following: (i) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] at the time AVENTIS notifies CIMA of its [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product (which payment shall be refundable to AVENTIS if CIMA does not adhere to the below mentioned schedule other than by reason of a Force Majeure event or the actions or inactions of AVENTIS) and (ii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] upon the successful completion of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Product and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] upon the successful completion of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Product pursuant to the schedule agreed to between the parties, which, in any event, shall not exceed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] from the date AVENTIS first notifies CIMA of its [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product. In the event that AVENTIS notifies CIMA that it [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product pursuant to Section 5.1 (iii) above, AVENTIS shall pay CIMA the following: (i) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] at the time 9 AVENTIS notifies CIMA of its [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product and (ii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] upon the successful completion of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Product and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] upon the successful completion of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Product, pursuant to the schedule agreed between the parties, which, in any event, shall not exceed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] from the date AVENTIS first notifies CIMA of it's [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product. . The parties agree that successful completion of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Product shall include, inter alia, at least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] batches, manufactured according to the manufacturing batch record and meeting the requirement of the validation protocol for certain critical parameters that may affect Product safety, quality or efficacy. In addition, AVENTIS shall pay to CIMA 100% of CIMA's reasonable expenses for activities requested by AVENTIS related to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] including CIMA's personnel time for [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. CIMA's personnel will be charged out at a daily full time equivalent rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], which shall include at least an [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. SECTION 6 REPRESENTATIONS AND WARRANTIES OF CIMA CIMA hereby represents and warrants to AVENTIS that: 6.1 Organization, Power and Authority. CIMA is a corporation duly organized and validly existing under the laws of the State of Delaware. CIMA has all necessary corporate power and authority to enter into, and be bound by the terms and conditions of, this Agreement, and to license the Licensed Assets to AVENTIS pursuant hereto. 10 6.2 Due Authority; No Breach. The execution, delivery and performance by CIMA of this Agreement and the performance of the transactions contemplated hereby, have been duly authorized by all necessary corporate action by CIMA. Neither the execution and delivery of this Agreement, nor the performance of the obligations contemplated hereby, will (i) conflict with or result in any violation of or constitute a breach of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of the articles of incorporation or by-laws of CIMA or any material contract or any other material obligation to which CIMA is a party or to which it is subject or bound, or (ii) violate any judgment, order, injunction, decree or award of any court, administrative agency, arbitrator or governmental body against, or affecting or binding upon, CIMA or upon the securities, property or business of CIMA, or (iii) constitute a violation by CIMA of any applicable law or regulation of any jurisdiction as such law or regulation relates to CIMA, or to the property or business of CIMA except for such conflict, acceleration, default, breach or violation that is not reasonably likely to have a material adverse effect on CIMA's ability to perform its obligations under this Agreement. 6.3 Intellectual Property. CIMA is the lawful owner of the Licensed Assets and CIMA can license the Licensed Assets without the consent of any third party. There is no pending or, to its knowledge, overtly threatened claim against CIMA asserting that any of the Licensed Assets infringes or violates the rights of third parties or that AVENTIS, by practicing under the Licensed Assets in performing the Activities, would violate any of the intellectual property rights of any third party, and nothing has come to the attention of CIMA which has, or reasonably should have, led CIMA to believe that any of the Licensed Assets infringes or violates the right of third parties. CIMA is not aware of and has not received any communications challenging the ownership, validity or effectiveness of any of the Licensed Assets. CIMA has not granted any right to any third party relating to the Activities which would violate the terms of or conflict with the rights granted to AVENTIS pursuant to this Agreement. 6.4 Technology Rights. The CIMA Intellectual Property, when combined with the Active Pharmaceutical Ingredient, to the best of CIMA's knowledge, includes all the technology, patents, know-how, trade secrets and other intellectual property necessary or desirable to manufacture the Product. 6.5 Litigation. As of the Effective Date of this Agreement, CIMA is not aware of any pending or threatened judicial, administrative or arbitral actions, claims, suits or proceedings against CIMA relating to the Activities or the Licensed Assets which, either individually or together with any other, would have a material adverse effect on the Activities or the Licensed Assets or the ability of CIMA to perform its obligations under this Agreement. 6.6 Governmental Approval. No consent, approval, waiver, order or authorization of, or registration, declaration or filing with, any governmental authority is required in connection with the execution and delivery of this Agreement by CIMA. 11 SECTION 7 REPRESENTATIONS AND WARRANTIES OF AVENTIS AVENTIS represents and warrants to CIMA that: 7.1 Organization, Power and Authority. AVENTIS is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. AVENTIS has all necessary corporate power and authority to enter into, and be bound by the terms and conditions of, this Agreement and to license the Licensed Assets from CIMA. 7.2 Due Authority; No Breach. The execution, delivery and performance by AVENTIS of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all necessary corporate action by AVENTIS. Neither the execution and delivery of this Agreement by AVENTIS, nor the performance of the obligations contemplated hereby, will (i) conflict with or result in any violation of or constitute a breach of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of its articles of incorporation or by-laws or any material contract or any other material obligation to which AVENTIS is a party or to which it is subject or bound, or (ii) violate any judgment, order, injunction, decree or award of any court, administrative agency, arbitrator or government body against, or affecting or binding upon, AVENTIS or upon the securities, property or business of AVENTIS, or (iii) constitute a violation by AVENTIS of any applicable law or regulation of any jurisdiction as such law or regulation relates to AVENTIS or to the property or business of AVENTIS, except for such conflict, acceleration, default, breach or violation that is not reasonably likely to have a material adverse effect on AVENTIS' ability to perform its obligations under this Agreement. 7.3 Litigation. As of the Effective Date of this Agreement, AVENTIS is not aware of any pending or threatened judicial, administrative or arbitral actions, claims, suits or proceedings against AVENTIS which, either individually or together with any other, will have a material adverse effect on the ability of AVENTIS to perform its obligations under this Agreement or any agreement or instrument contemplated hereby. 7.4 Governmental Approval. No consent, approval, waiver, order or authorization of, or registration, declaration or filing with, any governmental authority is required in connection with the execution and delivery of this Agreement by AVENTIS. SECTION 8 ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES 8.1 Governmental Filings. CIMA and AVENTIS each agree to prepare and file whatever filings, listings, requests or applications are required to be filed with any governmental authority in connection with this Agreement or the Product and to cooperate with one another as reasonably necessary to accomplish the foregoing. 8.2 Compliance with Law. AVENTIS and CIMA shall each comply with all federal, state and local laws and regulations applicable to developing, approving, manufacturing, 12 marketing and selling the Product in the Territory and the Licensed Assets or the performance of their respective obligations hereunder. CIMA and AVENTIS each shall keep all records and reports required to be kept by applicable laws and regulations, and each shall make its facilities available at reasonable times during business hours for inspection by representatives of governmental agencies. CIMA and AVENTIS each shall notify the other within forty-eight (48) hours of receipt of any notice or any other indication whatsoever of any FDA or other governmental agency inspection, investigation or other inquiry, or other material notice or communication of any type, involving the Product. AVENTIS and CIMA shall cooperate with each other during any such inspection, investigation or other inquiry including, but not limited to, allowing upon request a representative of the other to be present during the applicable portions of any such inspection, investigation or other inquiry and providing copies of all relevant documents. AVENTIS and CIMA shall discuss any written response to observations or notifications received in connection with any such inspection, investigation or other inquiry and each shall give the other an opportunity to comment upon any proposed response before it is made. In the event of disagreement concerning the form or content of such response, however, CIMA shall be responsible for deciding the appropriate form and content of any response with respect to any of its cited activities and AVENTIS shall be responsible for deciding the appropriate form and content of any response with respect to any of its cited activities. 8.3 Recall. AVENTIS shall advise CIMA of its decision concerning any recall or withdrawal of the Product from the market. CIMA shall bear the costs (including but not limited to, shipping and product replacement) for any recall or withdrawal due to CIMA's failure to comply with this Agreement. The costs for any other recall or withdrawal shall be the responsibility of AVENTIS. 8.4 Confidentiality. AVENTIS shall treat as confidential the Licensed Assets and all other confidential or proprietary information of CIMA of which AVENTIS becomes aware in connection with this Agreement (collectively, "CIMA Proprietary Information"). AVENTIS shall neither disclose CIMA Proprietary Information to any third party nor use CIMA Proprietary Information for any purpose other than as set forth in this Agreement. CIMA shall treat as confidential all confidential or proprietary information of AVENTIS of which CIMA becomes aware in connection with this Agreement (collectively, "AVENTIS Proprietary Information"). CIMA shall neither disclose AVENTIS Proprietary Information to any third party nor use AVENTIS Proprietary Information for any purpose other than as set forth in this Agreement. Nothing contained herein will in any way restrict or impair either party's (the "Using Party's") right to use, disclose or otherwise deal with any Proprietary Information of the other party which: (a) at the time of disclosure is known to the public or thereafter becomes known to the public by publication or otherwise through no fault of the Using Party; (b) the Using Party can establish was in its possession prior to the time of the disclosure and was not obtained directly or indirectly from the other party; (c) is independently made available as a matter of right to the Using Party by a third party who is not thereby in violation of a confidential relationship with the other party; 13 (d) is developed by the Using Party independently of the Proprietary Information received from the other party and the Using Party can establish such development; or (e) is information required to be disclosed by legal or regulatory process; provided, in each case the Using Party timely informs the other party and uses reasonable efforts to limit the disclosure and maintain confidentiality to the extent possible and permits the other party to intervene and contest or attempt to limit the disclosure. AVENTIS shall obtain no right or license of any kind under the CIMA Proprietary Information except as set forth in this Agreement. CIMA shall obtain no right or license of any kind under the AVENTIS Proprietary Information except as set forth in this Agreement. 8.5 Expenses. CIMA and AVENTIS shall each bear their own direct and indirect expenses incurred in connection with the negotiation and preparation of this Agreement and, except as set forth in this Agreement, the performance of the obligations contemplated hereby. 8.6 Publicity. The parties agree that no publicity release or announcement concerning the transactions contemplated hereby shall be issued without the advance written consent of the other, except as such release or announcement may be required by law, including but not limited to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in which case the party making the release or announcement shall, before making any such release or announcement, afford the other party a reasonable opportunity to review and comment upon such release or announcement. 14 8.7 Cooperation. If either party shall become engaged in or participate in any investigation, claim, litigation or other proceeding with any third party, including the FDA, relating in any way to the Product or any of the Licensed Assets, the other party shall cooperate in all reasonable respects with such party in connection therewith, including, without limitation, using its reasonable efforts to make available to the other such employees who may be helpful with respect to such investigation, claim, litigation or other proceeding. 8.8 Conflicting Rights. CIMA shall not grant any right to any third party relating to the Activities which would violate the terms of or conflict with the rights granted to AVENTIS pursuant to this Agreement. 8.9 Patent and Trademark Maintenance. (a) CIMA shall be solely responsible for filing, prosecuting, and maintaining all of the CIMA Patents, and CIMA shall pay the costs associated therewith. CIMA shall file, prosecute, and maintain all CIMA Patents so as to fully continue the benefits under the licenses granted to AVENTIS hereunder. CIMA may, however, discontinue prosecuting and maintaining any CIMA Patent if (i) CIMA has a valid business reason to do so, and (ii) obtains the prior written approval of AVENTIS, such approval not to be unreasonably withheld or delayed. (b) CIMA shall be solely responsible for filing, prosecuting, and maintaining all CIMA Trademarks, and CIMA shall pay the costs associated therewith. All registrations, variations, logos, goodwill and other rights under or acquired through use of the CIMA Trademarks shall accrue and belong to CIMA. Except as provided herein, AVENTIS shall have no rights to use the CIMA Trademarks. AVENTIS will not use in its business, in or outside of the Territory, any other mark or name which is similar to or nearly resembles any of the CIMA Trademarks as to be likely to cause deception or confusion. AVENTIS recognizes that CIMA is the owner of all CIMA Trademarks used in commerce to indicate the source of the CIMA Intellectual Property and agrees that the CIMA Trademarks shall remain vested in CIMA both during the term of this Agreement and thereafter. AVENTIS shall not contest the validity of the CIMA Trademarks or CIMA's ownership of the CIMA Trademarks. Use of the CIMA Trademarks by AVENTIS in conjunction with the development, marketing, selling and distribution of the Product and all goodwill related thereto shall inure to the benefit of CIMA for purposes of building the longevity and extent of use of the CIMA Trademarks. (c) AVENTIS shall be solely responsible for filing, prosecuting, and maintaining all trademarks it develops or owns for the Product (the "AVENTIS Trademarks"), and AVENTIS shall pay the costs associated therewith. All registrations, variations, logos, goodwill and other rights under or acquired through use of the AVENTIS Trademarks shall accrue and belong to AVENTIS. CIMA shall have no rights to use the AVENTIS Trademarks. CIMA will not use in its business, in or outside of the Territory, any other mark or name which is similar to or nearly resembles the AVENTIS Trademarks in use by AVENTIS in a manner that is likely to cause deception or confusion. CIMA recognizes that AVENTIS is the owner of all of the AVENTIS Trademarks used in commerce to indicate the source of the Product and agrees that the AVENTIS Trademarks shall remain vested in AVENTIS both during the term of this 15 Agreement and thereafter. CIMA shall not contest the validity of the AVENTIS Trademarks or AVENTIS' ownership of the AVENTIS Trademarks. Use of the AVENTIS Trademarks by AVENTIS in conjunction with the manufacture, use, and sale of the Product and all goodwill related thereto shall inure to the benefit of AVENTIS for purposes of building the longevity and extent of use of the AVENTIS Trademarks. (d) AVENTIS and CIMA agree that, where applicable, all packaging of the Product shall: (i) identify the number of the CIMA Patents and CIMA as the owner thereof; and (ii) include CIMA's logo on the front, back or either side of the carton for Product for sale in the United States. 8.10 Infringement; Enforcement of Proprietary Rights. (a) Infringement of Patent Rights. Each party shall promptly notify the other of any alleged infringement by third parties of any CIMA Patent and provide any information available to that party relating to such alleged infringement. CIMA shall investigate such alleged infringement and shall have the first right, but not the obligation, to end any infringement of such rights that materially affect AVENTIS' rights pursuant to this Agreement, including, but not limited to, bringing suit against such third party infringer at its own expense. In the event that CIMA does not bring suit against such third party infringer, AVENTIS may, at its own expense, bring suit against such third party infringer on CIMA's behalf. (b) Procedures. No settlement, consent judgment or other voluntary final disposition of any suit contemplated by Section 8.10(a) may be entered into without the consent of each party, which consent shall not be unreasonably withheld or delayed. Any recovery of damages in any such suit shall be retained by the party bearing the costs of such suit. In the event of any infringement suit against a third party brought by either party pursuant to this Section 8.10, the party not bringing such suit shall cooperate in all respects, execute any documents reasonably necessary to permit the other party to prosecute such suit, and to the extent reasonable shall make available its employees and relevant records to provide evidence for such suit. 8.11 Referral of Orders and Inquiries. CIMA shall refer all Persons sending orders or making inquiries regarding the Product within the Territory to AVENTIS and shall promptly notify AVENTIS of the name of each such Person and the nature of the inquiry of such Person. 8.12 Ownership. (a) Subject to the license rights granted hereunder, ownership of CIMA Proprietary Information, CIMA Intellectual Property and CIMA Trademarks shall remain with CIMA and ownership of AVENTIS Proprietary Information, AVENTIS Intellectual Property and AVENTIS Trademarks shall remain with AVENTIS. Nothing herein is intended to transfer the ownership of any party's confidential information, know-how, or patent rights to the other party. In addition, each party to this Agreement maintains the right to use its own confidential information, know-how, or patent rights, for any purpose, except as 16 specifically restricted herein. (b) Inventorship of inventions arising from the Activities in the development process contemplated by this Agreement shall be determined in accordance with the patent laws of the United States. All employees of either Party who shall be deemed inventors under such law shall be named as inventors on the relevant patent applications. Each Party shall ensure that its employees are under an obligation to properly assign any such invention to the respective Party. (c) AVENTIS and CIMA agree that all right, title and interest to any improvements made to a respective originating party's know-how and/or patent rights by either party under this Agreement shall reside with the originating party of such know-how and/or patent rights. As such, if such improvements are made, conceived, or reduced to practice by such non-originating party, such non-originating party shall assist the originating party in perfecting, where applicable, all right, title and interest, including, but not limited to the prosecution and assignment of any patentable intellectual property rights thereto to such improvements, at the originating party's expense. (d) The parties further agree and acknowledge that any and all data and information generated under the Activities set forth in Schedule A or under the Formulation Agreement shall belong to AVENTIS. SECTION 9 INDEMNIFICATION 9.1 Indemnification. (a) CIMA shall indemnify, defend and hold AVENTIS (and its directors, officers, employees, and Affiliates) harmless from and against any and all Damages incurred or suffered by AVENTIS (and its directors, officers, employees, and Affiliates) as a consequence of: (i) any breach of any representation or warranty made by CIMA in this Agreement; (ii) any failure to perform duly and punctually any covenant, agreement or undertaking on the part of CIMA contained in this Agreement; or (iii) any act or omission of CIMA with respect to the operation of CIMA's business or the handling, manufacturing, or use of the Product by CIMA. (b) AVENTIS shall indemnify, defend and hold CIMA (and its directors, officers, employees, and Affiliates) harmless from and against any and all Damages incurred or suffered by CIMA (and its directors, officers, employees, and Affiliates) as a consequence of: 17 (i) any breach of any representation or warranty made by AVENTIS in this Agreement; (ii) any failure to perform duly and punctually any covenant, agreement or undertaking on the part of AVENTIS contained in this Agreement; or (iii) any act or omission of AVENTIS with respect to the operation of AVENTIS' business or the handling, manufacturing, sale, consumption or use of the Product by AVENTIS. 9.2 Notice and Opportunity To Defend. Promptly after receipt by a party hereto of notice of any claim which could give rise to a right to indemnification pursuant to Section 9.1, such party (the "Indemnified Party") shall give the other party (the "Indemnifying Party") written notice describing the claim in reasonable detail. The failure of an Indemnified Party to give notice in the manner provided herein shall not relieve the Indemnifying Party of its obligations under this Section, except to the extent that such failure to give notice materially prejudices the Indemnifying Party's ability to defend such claim. The Indemnifying Party shall have the right, at its option, to compromise or defend, at its own expense and by its own counsel, any such matter involving the asserted liability of the party seeking such indemnification. If the Indemnifying Party shall undertake to compromise or defend any such asserted liability, it shall promptly (and in any event not less than 10 days after receipt of the Indemnified Party's original notice) notify the Indemnified Party in writing of its intention to do so, and the Indemnified Party agrees to cooperate fully with the Indemnifying Party and its counsel in the compromise or defense against any such asserted liability. All reasonable costs and expenses incurred in connection with such cooperation shall be borne by the Indemnifying Party. If the Indemnifying Party elects not to compromise or defend the asserted liability, fails to notify the Indemnified Party of its election to compromise or defend as herein provided, fails to admit its obligation to indemnify under this Agreement with respect to the claim, or, if in the reasonable opinion of the Indemnified Party, the claim could result in the Indemnified Party becoming subject to injunctive relief or relief other than the payment of money damages that could materially adversely affect the ongoing business of the Indemnified Party in any manner, the Indemnified Party shall have the right, at its option, to pay, compromise or defend such asserted liability by its own counsel and its reasonable costs and expenses shall be included as part of the indemnification obligation of the Indemnifying Party hereunder. Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnified Party may settle or compromise any claim over the objection of the other; provided, however, that consent to settlement or compromise shall not be unreasonably withheld. In any event, the Indemnified Party and the Indemnifying Party may participate, at their own expense, in the defense of such asserted liability. If the Indemnifying Party chooses to defend any claim, the Indemnified Party shall make available to the Indemnifying Party any books, records or other documents within its control that are necessary or appropriate for such defense. Notwithstanding anything to the contrary in this Section 9.2, (i) the party conducting the defense of a claim shall (A) keep the other party informed on a reasonable and timely basis as to the status of the defense of such claim (but only to the extent such other party is not participating jointly in the defense of such claim), and (B) conduct the defense of such claim in a prudent manner, and (ii) the Indemnifying Party shall not cease to defend, settle or otherwise dispose of any claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld). 18 9.3 Indemnification Payment. Upon the final determination of liability and the amount of the indemnification payment under this Section 9, the appropriate party shall pay to the other, as the case may be, within twenty (20) business days after such determination, the amount of any claim for indemnification made hereunder. 9.4 Survival. The provisions of Section 9 shall survive any termination of this Agreement. Each Indemnified Party's rights under Section 9 shall not be deemed to have been waived or otherwise affected by such Indemnified Party's waiver of the breach of any representation, warranty, agreement or covenant contained in or made pursuant to this Agreement, unless such waiver expressly and in writing also waives any or all of the Indemnified Party's rights under Section 9. SECTION 10 TERMINATION 10.1 Term; Termination. The term of this Agreement shall begin on the Effective Date and, unless sooner terminated as hereinafter provided, shall continue until the later of (i) the expiration date of the last to expire CIMA Patent containing a Valid Claim or (ii) for a period of ten (10) years from the first commercial sale by Aventis of a Product to an independent third party. Upon expiration of this Agreement in accordance with the preceding sentence, or pursuant to Section 4.4. AVENTIS shall have the royalty-free right to continue using the CIMA Technology furnished hereunder. Notwithstanding the foregoing, this Agreement may be terminated as follows: (a) Termination for Insolvency. If either AVENTIS or CIMA (i) makes a general assignment for the benefit of creditors or becomes insolvent; (ii) files an insolvency petition in bankruptcy; (iii) petitions for or acquiesces in the appointment of any receiver, trustee or similar officer to liquidate or conserve its business or any substantial part of its assets; (iv) commences under the laws of any jurisdiction any proceeding involving its insolvency, bankruptcy, reorganization, adjustment of debt, dissolution, liquidation or any other similar proceeding for the release of financially distressed debtors; or (v) becomes a party to any proceeding or action of the type described above in (iii) or (iv) and such proceeding or action remains undismissed or unstayed for a period of more than 60 days, then the other party may by written notice terminate this Agreement in its entirety with immediate effect. (b) Termination for Default. AVENTIS and CIMA each shall have the right to terminate this Agreement for default upon the other's failure to comply in any material respect with the terms and conditions of this Agreement. At least 60 days prior to any such termination for default, the party seeking to so terminate shall give the other written notice of its intention to terminate this Agreement in accordance with the provisions of this Section 10.1(b), which notice shall set forth the default(s) which form the basis for such termination. If the defaulting party fails to correct such default(s) within 60 days after receipt of notification, then such party immediately may terminate this Agreement. This Section 10.1(b) shall not be exclusive and shall not be in lieu of any other remedies available to a party hereto for any default hereunder on the part of the other party. 19 (c) Termination by AVENTIS. AVENTIS shall have the right to terminate this Agreement for any reason, upon sixty (60) days written notice to CIMA, provided, however that in the event that CIMA is manufacturing the Product, AVENTIS shall have the right to terminate this Agreement for any reason upon six (6) months written notice to CIMA. In the event that AVENTIS terminates this Agreement under this Section 10.1 (c) after the payment of the entire Technology Development Fee contemplated by Schedule C but prior to Launch of the Product, AVENTIS shall pay CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], provided that CIMA is in compliance with of its obligations under this Agreement at the time of termination. In the event that AVENTIS terminates this Agreement under this Section 10.1 (c), then on the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Effective Date or upon termination if such termination takes place after the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Effective Date, AVENTIS shall grant CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] related to the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] by CIMA under this Agreement to CIMA. AVENTIS shall assist CIMA, at CIMA's expense and on CIMA's behalf, in the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], including but not limited to the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of any [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] relating thereto. For greater certainty, AVENTIS shall [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] by CIMA or AVENTIS related to the Product and shall be a [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] with CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. 10.2 Continuing Obligations. Termination of this Agreement for any reason shall not relieve the parties of any obligation accruing prior thereto with respect to the Product and shall be without prejudice to the rights and remedies of either party with respect to any antecedent breach of the provisions of this Agreement. Without limiting the generality of the foregoing, no termination of this Agreement, whether by lapse of time or otherwise, shall serve to terminate the obligations of the parties hereto under Sections 8.3, 8.4, 8.5, 8.6, 8.12, 9, 10.2 and 11 hereof, and such obligations shall survive any such termination. 20 SECTION 11 MISCELLANEOUS 11.1 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that neither CIMA nor AVENTIS may assign any of its rights, duties or obligations hereunder without the prior written consent of the other, which consent shall not be unreasonably withheld, except that no prior written consent shall be required for (i) assignment to any Affiliate who shall be substituted directly in whole or in part for it hereunder; provided, however, that the assignor shall guarantee the performance of its Affiliate assignee hereunder, or (ii) the successor or assignee of all or substantially all of the Party's business or assets related to the subject matter of this Agreement. 11.2 Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or facsimile and confirmed in writing, or mailed first class, postage prepaid, by registered or certified mail, return receipt requested (mailed notices and notices sent by facsimile shall be deemed to have been given on the date received) as follows: If to CIMA, as follows: CIMA LABS INC. 10000 Valley View Road Eden Prairie, MN 55344 Facsimile: 952-947-8770 Attention: President and CEO If to AVENTIS, as follows: Aventis Pharmaceuticals Inc. Route 202-206 Bridgewater, NJ 08807 Facsimile: 908-231-3619 Attention: Senior Vice President Corporate Development With a copy to Vice President, Legal Corporate Development or in any case to such other address or addresses as hereafter shall be furnished as provided in this Section 11.2 by any party hereto to the other party. 11.3 Waiver; Remedies. Any term or provision of this Agreement may be waived at any time by the party entitled to the benefit thereof by a written instrument executed by such party. No delay on the part of CIMA or AVENTIS in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of either CIMA or AVENTIS of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or 21 privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. 11.4 Independent Contractors. The parties hereto are independent contractors and nothing contained in this Agreement shall be deemed to create the relationship of partners, joint venturers, or of principal and agent, franchisor and franchisee, or of any association or relationship between the parties other than as expressly provided in this Agreement. AVENTIS acknowledges that it does not have, and AVENTIS shall not make representations to any third party, either directly or indirectly, indicating that AVENTIS has any authority to act for or on behalf of CIMA or to obligate CIMA in any way whatsoever. CIMA acknowledges that it does not have, and it shall not make any representations to any third party, either directly or indirectly, indicating that it has any authority to act for or on behalf of AVENTIS or to obligate AVENTIS in any way whatsoever. 11.5 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, including but not limited to a certain Formulation Agreement dated July 31, 2000 ,or understandings of the parties relating thereto. 11.6 Amendment. This Agreement may be modified or amended only by written agreement of the parties hereto. 11.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute a single instrument. 11.8 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York excluding any choice of law rules which may direct the application of the law of another state. 11.9 Dispute Resolution. To the extent that a dispute arises with respect to a term or provision of this Agreement which is not subject to a specific time period or remedy, the parties will use all reasonable efforts to resolve in an amicable fashion any dispute, claim or controversy that may arise relating to the terms or performance of this Agreement. If the parties are unable to resolve such dispute within thirty (30) days after initial notice, either party, by notice to the other, may have such dispute referred to a senior officer of each company. Such officers shall attempt to resolve the dispute by good faith negotiation within thirty (30) days after receipt of such notice. Except where clearly prevented by the area in dispute, both parties agree to continue performing their respective obligations under this Agreement while the dispute is being resolved. 11.10 Captions. All section titles or captions contained in this Agreement, in any Schedule referred to herein or in any Exhibit annexed hereto, and the table of contents, if any, to this Agreement are for convenience only, shall not be deemed a part of this Agreement and shall not affect the meaning or interpretation of this Agreement. 11.11 No Third-Party Rights. Except as contemplated by Section 2.2, no provision of this Agreement shall be deemed or construed in any way to result in the creation of any rights or obligation in any Person not a party or not affiliated with a party to this Agreement. 22 11.12 Severability. If any provision of this Agreement is found or declared to be invalid or unenforceable by any court or other competent authority having jurisdiction, such finding or declaration shall not invalidate any other provision hereof, and this Agreement shall thereafter continue in full force and effect. 11.13 Attachments. All Schedules, Exhibits and other attachments to this Agreement are by this reference incorporated herein and made a part of this Agreement. 11.14 Force Majeure. In the event that a party is prevented from carrying out its obligations under this Agreement by an event of Force Majeure, then such party's performance of its obligations under this Agreement shall be excused during the period of such event and for a subsequent reasonable period of recovery; provided, however, that the party whose performance is excused shall promptly notify the other party of the existence of such cause and shall at all times use commercially reasonable efforts to promptly resume and complete performance. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered on the day and year first above written. CIMA LABS INC. By: /s/ John Siebert, Ph.D. ----------------------------- Name: John Siebert Ph.D. Title: President and CEO AVENTIS PHARMACEUTICALS, INC. By: /s/ Sol Rajfer ----------------------------- Name: Sol Rajfer Title: Senior Vice President 23 SCHEDULE A TO DEVELOPMENT AND LICENSE AGREEMENT DEVELOPMENT SCHEDULE OraSolv(R) Fexofenadine Hydrochloride [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] ANTICIPATED PRODUCT ATTRIBUTES: o Active ingredient and potency Fexofenadine Hydrochloride [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] DEVELOPMENT ACTIVITIES, COSTS AND TIMING

- -------------------------------------------------------------------------------- PHASE ACTIVITY TIMING COSTS($) - ----- -------- ------ --------

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. FIVE PAGES OMITTED***] - -------------------------------------------------------------------------------- 24 SCHEDULE B TO DEVELOPMENT AND LICENSE AGREEMENT ROYALTY RATES Pursuant to Sections 4.3 and 4.4, AVENTIS shall pay to CIMA a percentage of Annual Net Sales, if any, actually recorded during such Year, as indicated on the following schedules: All of the Territory except [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] Net Sales of Product in the Territory Except Royalty Rate* [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Net Sales [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Net Sales [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Net Sales [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] The parties shall discuss and agree upon the royalty rate for [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]as soon as practicable after the Effective Date but no later than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] prior to the expected launch of the Product in [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. The agreed upon royalty rate for [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall take 25 into consideration Aventis' [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. The parties agree that the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] as set forth above. [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] 26 SCHEDULE C TO DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT TECHNOLOGY DEVELOPMENT AND MILESTONE PAYMENTS Pursuant to Section 4.1 (b), AVENTIS shall pay CIMA: [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Technology Development Fee upon signature of this Agreement and the remaining [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of successful completion of AVENTIS' [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] Product. In the event, that (i) this Agreement is terminated under 10.1 (c) or (ii) AVENTIS notifies CIMA that the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] were unsuccessful and AVENTIS nevertheless desires CIMA to continue the Activities in Schedule A (which the Parties shall amend as appropriate) Aventis shall pay CIMA the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] no later than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. Pursuant to Section 4.1 (b), AVENTIS shall pay CIMA the milestone payments set forth below (each a "Milestone Payment") within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] days of completion of the research and development milestones (each a "Milestone") set forth opposite such Milestone Payment: Technology Development Fee: [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] MILESTONE ACTIVITY MILESTONE PAYMENT [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] 27 SCHEDULE D TO DEVELOPMENT AND LICENSE AGREEMENT COST OF GOODS Formulation Cost per Tablet [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] *Assumptions: 1) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] campaigns. 2) No costs related to the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] are included, other than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] and its release by CIMA for use in tablets. 3) AVENTIS' Packaging uses CIMA's standard [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] tablets per card and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] cards per carton format. 28 AMENDMENT This Amendment dated November 30, 2001 is to amend the Development and License Agreement between Cima Labs Inc. ("Cima") and Aventis Pharmaceuticals Inc. ("Aventis") dated August 1, 2001 (the "Development and License Agreement"). The terms used in this Amendment, which are defined in the Development and License Agreement, shall have the same meanings as set forth therein. Cima and Aventis hereby agree to make the following amendment to the Development and License Agreement: 1. In the second sentence of the first paragraph of Schedule C, the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be deleted and the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be inserted in their place. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized representatives, effective as of the day and year first written above. CIMA LABS INC. AVENTIS PHARMACEUTICALS INC. By: /s/ John M. Siebert By: /s/ Thomas Hofstaetter --------------------- --------------------------------- Name: John M. Siebert Name: Thomas Hofstaetter ------------------- ------------------------------- Title: President & CEO Title: SR. VP, CORPORATE DEVELOPMENT ----------------- ------------------------------ 29 AMENDMENT #2 This Amendment #2 dated December 20, 2001 is to further amend the Development and License Agreement between Cima Labs Inc. ("Cima") and Aventis Pharmaceuticals Inc. ("Aventis") dated August 1, 2001, as amended by the November 30, 2001 Amendment (the "Development and License Agreement"). The terms used in this Amendment, which are defined in the Development and License Agreement, shall have the same meanings as set forth therein. Cima and Aventis hereby agree to make the following amendment to the Development and License Agreement: In Schedule C in the second sentence of the first paragraph the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be deleted and the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be inserted in their place. In all other respects, the terms and conditions of the Development and License Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have cause this Amendment #2 to be executed by their duly authorized representatives, effective as of the day and year first written above. CIMA LABS INC. AVENTIS PHARMACEUTICALS INC. By: /s/ John Hontz By: /s/ Michael Yeomans --------------- --------------------- Name: John Hontz Name: Michael Yeomans Title: Chief Operating Officer Title: V.P., Global Business Development 30 AMENDMENT #3 This Amendment #3 dated January 18, 2002 is to further amend the Development and License Agreement between Cima Labs Inc. ("Cima") and Aventis Pharmaceuticals Inc. ("Aventis") dated August 1, 2001, as amended by the November 30, 2001 and December 19, 2001 Amendments (the "Development and License Agreement"). The terms used in this Amendment, which are defined in the Development and License Agreement, shall have the same meanings as set forth therein. Cima and Aventis hereby agree to make the following amendment to the Development and License Agreement: 1. In Schedule C in the second sentence of the first paragraph the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be deleted and the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be inserted in their place. In all other respects, the terms and conditions of the Development and License Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment #3 to be executed by their duly authorized representatives, effective as of the day and year first written above. CIMA LABS INC. AVENTIS PHARMACEUTICALS INC. By: /s/ John M. Siebert By: /s/ Michael Yeomans ------------------------------- -------------------------------------- 18 Jan 2002 18 Jan 2002 Name: John Siebert Name: Michael Yeomans Title: Chief Executive Officer Title: V.P., Global Business Development 31 AMENDMENT #4 This Amendment #4 dated February 15, 2002 is to further amend the Development and License Agreement between Cima Labs Inc. ("Cima") and Aventis Pharmaceuticals Inc. ("Aventis") dated August 1, 2001 (the "Development and License Agreement"), as amended. The terms used in this Amendment, which are defined in the Development and License Agreement, shall have the same meanings as set forth therein. Cima and Aventis hereby agree to make the following amendments to the Development and License Agreement: 1. Schedule A shall be deleted in its entirety and replaced with Exhibit 1 attached hereto; 2. In Schedule C in the first sentence of the first paragraph the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be deleted and the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be inserted in their place; 3. In Schedule C in the second sentence of the first paragraph the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] no later than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be deleted and the words "[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] no later than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be inserted in their place; and 4. In Schedule C in the fourth line of the second paragraph the words "Technology Development Fee: [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]" shall be deleted and the words "Technology Development Fee: [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]" shall be inserted in their place; In all other respects, the terms and conditions of the Development and License Agreement remain in full force and effect. 32 IN WITNESS WHEREOF, the parties have caused this Amendment #4 to be executed by their duly authorized representatives, effective as of the day and year first written above. CIMA LABS INC. AVENTIS PHARMACEUTICALS INC. By: /s/ John M. Siebert By: /s/ Lawrence M. Schwartz --------------------------------- ------------------------------------ 15 Feb 2002 15-Feb-2002 Name: John M. Siebert Name: Lawrence M. Schwartz ------------------------------- ---------------------------------- Title: President & CEO Title: Head, Technology Outsourcing Mgmt. 33 EXHIBIT 1 OraSolv(R)Fexofenadine Hydrochloride [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] ANTICIPATED PRODUCT ATTRIBUTES: o Active ingredient and potency Fexofenadine Hydrochloride [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] EXHIBIT 1 (Cont'd) DEVELOPMENT ACTIVITIES, COSTS AND TIMING

- ------------- ------------------------------------------------------- ---------------------- --------------------------- PHASE ACTIVITY TIMING COSTS ($) - ------------- ------------------------------------------------------- ---------------------- --------------------------- [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] - ------------------------------------------------------------------------------------------------------------------------

EX-99.1 4 c72927exv99w1.txt EX-99.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 99.1 CIMA LABS INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of CIMA LABS INC. (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John M. Siebert, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: 11/14/2002 /s/ John M. Siebert ------------------------------------- John M. Siebert, President and Chief Executive Officer (Principal Executive Officer) EX-99.2 5 c72927exv99w2.txt EX-99.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 99.2 CIMA LABS INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of CIMA LABS INC. (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David A. Feste, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: 11/14/2002 /s/ David A. Feste ----------------------------- David A. Feste, Chief Financial Officer (Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    EXHIBIT 10.1






                        DEVELOPMENT AND LICENSE AGREEMENT


                                 BY AND BETWEEN


                                 CIMA LABS INC.



                                       AND



                          AVENTIS PHARMACEUTICALS INC.






                           DATED AS OF AUGUST 1, 2001







August 1, 2001

                        DEVELOPMENT AND LICENSE AGREEMENT

         This DEVELOPMENT AND LICENSE AGREEMENT ("this Agreement"), dated as of
August 1, 2001 is by and between CIMA LABS INC., a Delaware corporation
("CIMA"), and AVENTIS PHARMACEUTICALS Inc., a Delaware corporation ("AVENTIS").

                                   WITNESSETH

         WHEREAS, CIMA is engaged, among other things, in the business of
research, development, manufacturing and commercialization of pharmaceutical
products through its proprietary drug delivery technologies;

         WHEREAS, AVENTIS is engaged, among other things, in the business of
researching, developing, manufacturing, marketing and commercializing of
pharmaceutical products;

         WHEREAS, subject to the terms and conditions set forth in this
Agreement, CIMA and AVENTIS wish to collaborate in the development and
manufacture of a certain prescription product owned by AVENTIS; and

         WHEREAS, subject to the terms and conditions set forth in this
Agreement, CIMA wishes to license to AVENTIS and AVENTIS wishes to license from
CIMA rights to CIMA's OraSolv(R) technology for use with such prescription
product.

         NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

                                    SECTION 1

                                   DEFINITIONS

         For purposes of this Agreement, the following terms shall have the
meanings set forth below:

         "Activities" shall mean the development of the Product in the Territory
as contemplated by this Agreement.

         "Affiliates" shall mean, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with,
such other Person. For purposes hereof, the term "controlled" (including the
terms "controlled by" and "under common control with"), as used with respect to
any Person, shall mean the direct or indirect ability or power to direct or
cause the direction of management policies of such Person or otherwise direct
the affairs of such Person, whether through ownership of voting securities or
otherwise.

         "Annual Net Sales" shall mean, for any Year, the Net Sales for such
Year.

         "Active Pharmaceutical Ingredient or API" shall mean the active
ingredient fexofenadine.

         "AVENTIS" shall have the meaning given in the preamble and shall
include its Affiliates.


                                       2



         "AVENTIS Trademarks" shall have the meaning given in Section 8.9(c).


         "cGMP" shall mean current Good Manufacturing Practices, as determined
by the FDA from time to time.


         "CIMA" shall have the meaning given in the preamble and shall include
its Affiliates.


         "CIMA Intellectual Property" shall mean, collectively, 1) the CIMA
Patents, and 2) the CIMA Technology.


         "CIMA Patents" shall mean U.S. Patents 5,178,878, 6,024,981, 6,155,423,
and 6,221,392 (entitled 'Effervescent Dosage Form with Microparticles', 'Rapidly
Dissolving Robust Dosage Form', 'Blister Package and Packaged Tablet' and
'Rapidly Dissolving Robust Dosage Form' respectively) and any patents and patent
applications resulting therefrom, including any foreign counterparts, extension,
reissue, renewal, reexamination or continuation-in-part of such patent or patent
application.


         "CIMA Technology" shall mean all of CIMA's trade secrets, technology,
know-how and all other information necessary or desirable for the manufacture of
the Product including, without limitation, that related to CIMA's OraSolv(R) and
PakSolv(TM) technologies.


         "CIMA Trademarks" shall mean the CIMA(R), the CIMA(TM), DuraSolv(TM),
OraSolv(R), and PakSolv(TM) trademarks.


         "Damages" shall mean any and all actions, costs, losses, claims,
liabilities, fines, penalties, demands, damages and expenses, court costs, and
reasonable fees and disbursements of counsel, consultants and expert witnesses
incurred by a party hereto (including interest which may be imposed in
connection therewith) but shall not include incidental, consequential, special
or punitive damages.


         "Defective" shall mean, as to the Product, the failure of such to
strictly conform to the Specifications and all applicable laws and regulations,
including, without limitation, FDA regulatory filings and cGMP.


         "Development Schedule" shall mean the schedule of development
activities set forth on Schedule A hereto.


         "Effective Date" shall mean the date of this Agreement.


         "FDA" shall mean the United States Food and Drug Administration.


         "Force Majeure" shall mean acts of God, explosion, fire, flood,
tornadoes, thunderstorms, earthquake or tremor, war whether declared or not,
civil strife, riots, embargo, losses or shortages of power, labor stoppage,
substance shortages, currency restrictions, or events caused by reason of laws,
regulations or orders by any government, governmental agency or instrumentality
or by any other supervening or unforeseeable circumstances reasonably beyond the
control of each party.


         "Indemnified Party" shall have the meaning given in Section 9.2 hereof.



                                       3



         "Indemnifying Party" shall have the meaning given in Section 9.2
hereof.


         "Launch" shall mean the date when the Product is first made
commercially available by AVENTIS within the Territory.


         "Licensed Assets" shall have the meaning set forth in Section 2.1
hereof.


         "Net Sales" shall mean gross sales of Products sold by AVENTIS and its
respective Affiliates and licensees to third parties in the Territory, less the
total of (a) trade, cash, and/or quantity discounts; (b) excise, sales and other
consumption taxes and customs duties to the extent included in the invoice
price; (c) freight, insurance and other transportation charges to the extent
included in the invoice price; (d) amounts repaid or credited by reason of
rejections and defects; (e) returns and retroactive price reductions; and (f)
compulsory payments and rebates, accrued, paid or deducted pursuant to
agreements (including, but not limited to, managed care agreements).


         "OraSolv(R)" shall mean CIMA's orally disintegrating tablet
formulations and related technology as described in the CIMA Patents.


         "PDMA" shall mean the Prescription Drug Marketing Act of 1987, as
amended from time to time, together with any rules or regulations promulgated
thereunder.


         "Person" shall mean a natural person, a corporation, a partnership, a
trust, a joint venture, a limited liability company, any governmental authority
or any other entity or organization.


         "Product" shall mean pharmaceutical preparations containing the Active
Pharmaceutical Ingredient as the sole ingredient formulated with the OraSolv(R)
technology in final packaged form ready for sale to customers in the Territory.


         "Quarter" shall mean, as the case may be, the three months ending on
March 31, June 30, September 30 or December 31 in any Year.


         "Specifications" shall mean, at any time, the specifications for the
Product that are agreed to from time to time by AVENTIS and CIMA.


         "Territory" shall mean the entire world.


         "Valid Claim" shall mean a claim which, but for the license granted
hereunder, would be infringed by AVENTIS' use, manufacture or sale of a Product,
and which is covered by an issued unexpired patent included within the CIMA
Patents which has not been held invalid or unenforceable by a decision of a
court or governmental agency of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, and which has not been
disclaimed, denied or admitted to be invalid or unenforceable by the owner
through reissue , disclaimer or otherwise.


         "Year" shall mean a calendar year during the term of this Agreement.



                                       4



                                    SECTION 2

                        GRANT OF LICENSES; LICENSE OPTION


         2.1 Grant of Licenses.

         (a) CIMA hereby grants to AVENTIS an exclusive license, even as to CIMA
(except to the extent necessary for CIMA to fulfill its responsibilities under
this Agreement, including without limitation in connection with the Activities
and to make or have made Product for Aventis or its Affiliates or sublicensees),
to the following assets (such assets are referred to herein collectively as the
"Licensed Assets"):

              (i)    all current and future regulatory filings, approvals,
                     registrations and governmental authorizations obtained by
                     CIMA that relate to the Product in the Territory;

              (ii)   the CIMA Intellectual Property; and

              (iii)  the CIMA Trademarks,

for the term of this Agreement to make, have made, use, market, distribute,
import, sell, have sold or offer for sale the Product in the Territory .

         (b) The license to AVENTIS will be exclusive in that (i) CIMA will not
grant to any Person in the Territory during the term of this Agreement any
licenses for the Licensed Assets with respect to products containing the Active
Pharmaceutical Ingredient, and (ii) CIMA will not itself use the Licensed Assets
in the Territory during the term of this Agreement to make, have made, use ,
import, sell, have sold or offer for sale any product containing the Active
Pharmaceutical Ingredient except as permitted in Section 2.1 above.

         2.2 Sublicenses. AVENTIS shall have the right to extend the licenses
granted pursuant to this Section 2 in whole or in part to any Affiliate of
AVENTIS, provided that AVENTIS is not then in default with respect to any of its
obligations to CIMA under this Agreement. All the terms and provisions of this
Agreement shall apply to the Affiliate to which this license has been extended
to the same extent as they apply to AVENTIS, and the operations of the Affiliate
shall be deemed to be the operations of AVENTIS and AVENTIS shall account
therefore and be responsible for the performance by such Affiliate of all of its
obligations hereunder. In addition, AVENTIS shall have the right to extend the
licenses granted pursuant to this Section 2 in whole or in part to Persons who
are not Affiliates of AVENTIS with the prior written consent of CIMA, such
consent not to be unreasonably withheld or delayed, provided that AVENTIS is not
then in default with respect to any of its material obligations to CIMA under
this Agreement. All the terms and provisions of this Agreement shall apply to
such sublicensee to the same extent as they apply to AVENTIS and the operations
of any such authorized Person shall be deemed to be the operations of AVENTIS
and AVENTIS shall account therefore and be responsible for the performance of
such Person of all of its obligations hereunder.



                                       5




         2.3 Development, Marketing, Distribution and Sale. Prior to and after
the Launch, AVENTIS shall use its commercially reasonable efforts to market,
distribute and sell the Product in the Territory. Such efforts shall be
consistent with industry norms, given the product profile, product potential and
the state of the market at Launch and as it develops after Launch.

                                    SECTION 3

                               PRODUCT DEVELOPMENT

         3.1 Obligations of CIMA. CIMA shall use commercially reasonable efforts
to satisfactorily perform each of the development activities set forth on
Schedule A and shall complete such activities within the timeframes set forth on
Schedule A.

         3.2 Obligations of AVENTIS. AVENTIS shall, in a timely fashion, pay
CIMA the development fees noted in Schedule A.

         3.3 Regulatory Matters. All Product supplied to AVENTIS shall be
produced under cGMP and in accordance with the Specifications. CIMA shall
furnish AVENTIS with a Certificate of Analysis with a cGMP statement to
demonstrate that each shipment of Product has been manufactured under cGMP and
in accordance with the Specifications. In addition, AVENTIS reserves the right,
at its own expense, to audit the facility of CIMA, including its processes,
records and other facets of the operation as may be necessary to assure that all
applicable regulations have been complied with and the Specifications have been
met. CIMA shall permit duly authorized representatives of AVENTIS to audit all
manufacturing and processing operations related to this Agreement at reasonable
times with a prior appointment. The right to audit shall commence with the
Effective Date. These audits will be conducted to assure compliance with all
pertinent acts, regulations, and guidelines promulgated by the FDA and other
regulatory authorities, as well as standards then in effect in the regulatory
environment. Such audits will be permitted during normal business hours and will
be performed with a minimum of disruption.

                                    SECTION 4

             ROYALTY, TECHNOLOGY DEVELOPMENT AND MILESTONE PAYMENTS


         4.1 Royalty, Technology Development and Milestone Payments.


               (a) In partial consideration of the licenses granted in Section
2.1, AVENTIS shall make royalty payments to CIMA in the amounts set forth on
Schedule B.


               (b) In partial consideration of the licenses granted in Section
2.1 and the Activities performed by CIMA, AVENTIS shall make the technology
development and milestone payments to CIMA as set forth on Schedule C.

               (c) In the event that sales of Product in the United States are
to be made through [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED


                                       6



SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], rather than
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] as currently contemplated by the Parties,
AVENTIS and CIMA agree to re-negotiate in good faith the [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***] this Agreement.


         4.2 Records and Audit. AVENTIS and its Affiliates shall keep true and
accurate books of account containing all particulars that may be necessary for
the purpose of showing the amounts payable to CIMA hereunder. Such books and the
supporting data shall be open, at all reasonable times and upon reasonable
notice during the term of this Agreement and for two (2) Years after its
termination, to the inspection by a firm of certified public accountants
selected by CIMA and reasonably acceptable to AVENTIS, for the limited purpose
of verifying AVENTIS' royalty statements; provided, however, that such
examination shall not take place more often than once each Year and shall not
cover more than the preceding two (2) Years, with no right to audit any period
previously audited. Except as otherwise provided in this Section, the cost of
any such examination shall be paid by CIMA. In the event that any such
inspection reveals a deficiency in excess of [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***] of the reported royalty for the period covered by the inspection,
AVENTIS shall promptly pay CIMA the deficiency, plus interest at the rate of
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] per annum (which interest shall accrue
from the date any such payment was originally due) and shall reimburse CIMA for
the reasonable fees and expenses paid to such accountants in connection with
their inspection. In the event that any such inspection reveals a deficiency of
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] of the reported royalty for the period
covered by the inspection, AVENTIS shall promptly pay CIMA the deficiency, plus
interest at the rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] per annum
(which interest shall accrue from the date any such payment was originally due)
and shall reimburse CIMA for [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] the
reasonable fees and expenses paid to such accountants in connection with their
inspection. In the event that any such inspection reveals a deficiency that is
less than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the reported royalty for the
period covered by the inspection, AVENTIS shall promptly pay CIMA the
deficiency, plus interest at the rate of [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
per annum (which interest shall accrue from the date any such payment was
originally due). In the event that any such inspection reveals any overpayment
by AVENTIS to CIMA, CIMA shall promptly pay AVENTIS the difference between what
was due and the overpayment, plus interest at the rate of [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***] per annum (which interest shall accrue from the date any
such payment was

                                       7



originally due). The parties agree that neither party shall be
required to retain books and records with respect to the above other than books
and records relating to the current Year and the immediately preceding two (2)
Years.

         4.3 Quarterly Reports and Payment of Royalties. AVENTIS shall, within
forty-five (45) days after the end of each Quarter, deliver to CIMA a written
report (the "Royalty Statement") describing: (i) the Net Sales during the
Quarter; and 2) the calculation used to determine the total royalties due for
the Quarter pursuant to Section 4.1 (a). AVENTIS shall pay such royalties in
United States dollars within sixty (60) days after the end of each Quarter by
wire transfer or such other method as CIMA may designate. If no royalties are
due, AVENTIS shall so report. In those cases where the amount due is calculated
based on one or more currencies other than the US dollar, the amount due in US
dollars shall be calculated using the average rate of exchange for such
currencies, as quoted in the Financial Times, for the last business day of each
of the three months in the calendar quarter to which such payment pertains.

         4.4 Term of Royalty. AVENTIS' royalty obligations to CIMA hereunder
shall terminate upon the later of (i) ten (10) years from the Effective Date of
this Agreement or (ii) on a country-by-country basis, on the expiration date in
such country of the last to expire of issued CIMA Patents which include at least
one Valid Claim covering the manufacture, sale or use of the Product in such
country. Notwithstanding anything to the contrary contained in the previous
sentence, the Parties agree that in the event that (a) the ten (10) year period
referred to in (i) above has not expired and a Valid Claim does not exist
covering the manufacture, sale or use of the Product and (b) a third party
commences the sale of a product containing the API and CIMA Technology in a
country where a Valid Claim does not exist, then AVENTIS shall not owe CIMA any
royalties for its sale of Products in such country until the third party sale
ceases. Upon expiration or termination of AVENTIS' royalty obligation in any
country, AVENTIS shall have the royalty-free right in that country to continue
using the CIMA Technology furnished hereunder in that country.




                                    SECTION 5


                                SUPPLY OF PRODUCT


         5.1 Supply Agreement. After the Effective Date hereof, the parties
shall enter into good faith negotiations for commercial supply of Product by
CIMA to AVENTIS. The supply agreement shall have an initial term of
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***], which term shall commence from the first
shipment of commercial Product (the "Initial Term"). On the [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***] anniversary of the Initial Term, AVENTIS shall notify
CIMA whether it (i) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product, (ii)
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***]


                                       8



after the expiration of the Initial Term or (iii) [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***], or other period of time as the parties shall mutually agree,
after the expiration of the Initial Term. When AVENTIS notifies CIMA that it
desires to proceed with either (i), (ii) or (iii), then AVENTIS shall pay CIMA
the technology transfer fee(s) set forth in Section 5.2 below. During the term
of the supply agreement, AVENTIS shall provide the [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***] for the manufacturing of tablets of Product. The supply agreement
will contain provisions consistent with CIMA's supply agreements between CIMA
and its other major pharmaceutical partners and otherwise acceptable to the
parties. CIMA's prices for supplying Product to Aventis shall not exceed the
prices in Schedule D; provided however such prices may be increased annually
based upon increases in a Producer Price Index (details to be included in the
Supply Agreement) not to exceed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] per
year.


         5.2 [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] AVENTIS. When AVENTIS
notifies CIMA that it intends to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the
Product pursuant to Section 5.1 (i) or (ii) above, AVENTIS shall pay CIMA the
following: (i) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] at the time AVENTIS
notifies CIMA of its [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product (which
payment shall be refundable to AVENTIS if CIMA does not adhere to the below
mentioned schedule other than by reason of a Force Majeure event or the actions
or inactions of AVENTIS) and (ii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] upon
the successful completion of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of
Product and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] upon the successful
completion of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Product pursuant
to the schedule agreed to between the parties, which, in any event, shall not
exceed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION***] from the date AVENTIS first
notifies CIMA of its [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product. In
the event that AVENTIS notifies CIMA that it [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***] of the Product pursuant to Section 5.1 (iii) above, AVENTIS shall
pay CIMA the following: (i) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] at the
time


                                       9



AVENTIS notifies CIMA of its [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the
Product and (ii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] upon the successful
completion of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of Product and
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] upon the successful completion of the
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] of Product, pursuant to the schedule
agreed between the parties, which, in any event, shall not exceed
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] from the date AVENTIS first notifies CIMA
of it's [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the Product. . The parties
agree that successful completion of the [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
of Product shall include, inter alia, at least [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***] batches, manufactured according to the manufacturing batch record
and meeting the requirement of the validation protocol for certain critical
parameters that may affect Product safety, quality or efficacy. In addition,
AVENTIS shall pay to CIMA 100% of CIMA's reasonable expenses for activities
requested by AVENTIS related to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
including CIMA's personnel time for [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***]. CIMA's personnel will be charged out at a daily full time
equivalent rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], which shall include
at least an [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***].


                                    SECTION 6


                     REPRESENTATIONS AND WARRANTIES OF CIMA


         CIMA hereby represents and warrants to AVENTIS that:


         6.1 Organization, Power and Authority. CIMA is a corporation duly
organized and validly existing under the laws of the State of Delaware. CIMA has
all necessary corporate power and authority to enter into, and be bound by the
terms and conditions of, this Agreement, and to license the Licensed Assets to
AVENTIS pursuant hereto.



                                       10



         6.2 Due Authority; No Breach. The execution, delivery and performance
by CIMA of this Agreement and the performance of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action by CIMA.
Neither the execution and delivery of this Agreement, nor the performance of the
obligations contemplated hereby, will (i) conflict with or result in any
violation of or constitute a breach of any of the terms or provisions of, or
result in the acceleration of any obligation under, or constitute a default
under any provision of the articles of incorporation or by-laws of CIMA or any
material contract or any other material obligation to which CIMA is a party or
to which it is subject or bound, or (ii) violate any judgment, order,
injunction, decree or award of any court, administrative agency, arbitrator or
governmental body against, or affecting or binding upon, CIMA or upon the
securities, property or business of CIMA, or (iii) constitute a violation by
CIMA of any applicable law or regulation of any jurisdiction as such law or
regulation relates to CIMA, or to the property or business of CIMA except for
such conflict, acceleration, default, breach or violation that is not reasonably
likely to have a material adverse effect on CIMA's ability to perform its
obligations under this Agreement.


         6.3 Intellectual Property. CIMA is the lawful owner of the Licensed
Assets and CIMA can license the Licensed Assets without the consent of any third
party. There is no pending or, to its knowledge, overtly threatened claim
against CIMA asserting that any of the Licensed Assets infringes or violates the
rights of third parties or that AVENTIS, by practicing under the Licensed Assets
in performing the Activities, would violate any of the intellectual property
rights of any third party, and nothing has come to the attention of CIMA which
has, or reasonably should have, led CIMA to believe that any of the Licensed
Assets infringes or violates the right of third parties. CIMA is not aware of
and has not received any communications challenging the ownership, validity or
effectiveness of any of the Licensed Assets. CIMA has not granted any right to
any third party relating to the Activities which would violate the terms of or
conflict with the rights granted to AVENTIS pursuant to this Agreement.


         6.4 Technology Rights. The CIMA Intellectual Property, when combined
with the Active Pharmaceutical Ingredient, to the best of CIMA's knowledge,
includes all the technology, patents, know-how, trade secrets and other
intellectual property necessary or desirable to manufacture the Product.


         6.5 Litigation. As of the Effective Date of this Agreement, CIMA is not
aware of any pending or threatened judicial, administrative or arbitral actions,
claims, suits or proceedings against CIMA relating to the Activities or the
Licensed Assets which, either individually or together with any other, would
have a material adverse effect on the Activities or the Licensed Assets or the
ability of CIMA to perform its obligations under this Agreement.

         6.6 Governmental Approval. No consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution and delivery of this
Agreement by CIMA.



                                       11



                                    SECTION 7

                    REPRESENTATIONS AND WARRANTIES OF AVENTIS


         AVENTIS represents and warrants to CIMA that:


         7.1 Organization, Power and Authority. AVENTIS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. AVENTIS has all necessary corporate power and authority to enter into,
and be bound by the terms and conditions of, this Agreement and to license the
Licensed Assets from CIMA.


         7.2 Due Authority; No Breach. The execution, delivery and performance
by AVENTIS of this Agreement and the performance of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
by AVENTIS. Neither the execution and delivery of this Agreement by AVENTIS, nor
the performance of the obligations contemplated hereby, will (i) conflict with
or result in any violation of or constitute a breach of any of the terms or
provisions of, or result in the acceleration of any obligation under, or
constitute a default under any provision of its articles of incorporation or
by-laws or any material contract or any other material obligation to which
AVENTIS is a party or to which it is subject or bound, or (ii) violate any
judgment, order, injunction, decree or award of any court, administrative
agency, arbitrator or government body against, or affecting or binding upon,
AVENTIS or upon the securities, property or business of AVENTIS, or (iii)
constitute a violation by AVENTIS of any applicable law or regulation of any
jurisdiction as such law or regulation relates to AVENTIS or to the property or
business of AVENTIS, except for such conflict, acceleration, default, breach or
violation that is not reasonably likely to have a material adverse effect on
AVENTIS' ability to perform its obligations under this Agreement.


         7.3 Litigation. As of the Effective Date of this Agreement, AVENTIS is
not aware of any pending or threatened judicial, administrative or arbitral
actions, claims, suits or proceedings against AVENTIS which, either individually
or together with any other, will have a material adverse effect on the ability
of AVENTIS to perform its obligations under this Agreement or any agreement or
instrument contemplated hereby.


         7.4 Governmental Approval. No consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution and delivery of this
Agreement by AVENTIS.


                                    SECTION 8

               ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES


         8.1 Governmental Filings. CIMA and AVENTIS each agree to prepare and
file whatever filings, listings, requests or applications are required to be
filed with any governmental authority in connection with this Agreement or the
Product and to cooperate with one another as reasonably necessary to accomplish
the foregoing.


         8.2 Compliance with Law. AVENTIS and CIMA shall each comply with all
federal, state and local laws and regulations applicable to developing,
approving, manufacturing,



                                       12



marketing and selling the Product in the Territory and the Licensed Assets or
the performance of their respective obligations hereunder. CIMA and AVENTIS each
shall keep all records and reports required to be kept by applicable laws and
regulations, and each shall make its facilities available at reasonable times
during business hours for inspection by representatives of governmental
agencies. CIMA and AVENTIS each shall notify the other within forty-eight (48)
hours of receipt of any notice or any other indication whatsoever of any FDA or
other governmental agency inspection, investigation or other inquiry, or other
material notice or communication of any type, involving the Product. AVENTIS and
CIMA shall cooperate with each other during any such inspection, investigation
or other inquiry including, but not limited to, allowing upon request a
representative of the other to be present during the applicable portions of any
such inspection, investigation or other inquiry and providing copies of all
relevant documents. AVENTIS and CIMA shall discuss any written response to
observations or notifications received in connection with any such inspection,
investigation or other inquiry and each shall give the other an opportunity to
comment upon any proposed response before it is made. In the event of
disagreement concerning the form or content of such response, however, CIMA
shall be responsible for deciding the appropriate form and content of any
response with respect to any of its cited activities and AVENTIS shall be
responsible for deciding the appropriate form and content of any response with
respect to any of its cited activities.

         8.3 Recall. AVENTIS shall advise CIMA of its decision concerning any
recall or withdrawal of the Product from the market. CIMA shall bear the costs
(including but not limited to, shipping and product replacement) for any recall
or withdrawal due to CIMA's failure to comply with this Agreement. The costs for
any other recall or withdrawal shall be the responsibility of AVENTIS.


         8.4 Confidentiality. AVENTIS shall treat as confidential the Licensed
Assets and all other confidential or proprietary information of CIMA of which
AVENTIS becomes aware in connection with this Agreement (collectively, "CIMA
Proprietary Information"). AVENTIS shall neither disclose CIMA Proprietary
Information to any third party nor use CIMA Proprietary Information for any
purpose other than as set forth in this Agreement. CIMA shall treat as
confidential all confidential or proprietary information of AVENTIS of which
CIMA becomes aware in connection with this Agreement (collectively, "AVENTIS
Proprietary Information"). CIMA shall neither disclose AVENTIS Proprietary
Information to any third party nor use AVENTIS Proprietary Information for any
purpose other than as set forth in this Agreement. Nothing contained herein will
in any way restrict or impair either party's (the "Using Party's") right to use,
disclose or otherwise deal with any Proprietary Information of the other party
which:


                  (a) at the time of disclosure is known to the public or
         thereafter becomes known to the public by publication or otherwise
         through no fault of the Using Party;


                  (b) the Using Party can establish was in its possession prior
         to the time of the disclosure and was not obtained directly or
         indirectly from the other party;


                  (c) is independently made available as a matter of right to
         the Using Party by a third party who is not thereby in violation of a
         confidential relationship with the other party;



                                       13



                  (d) is developed by the Using Party independently of the
         Proprietary Information received from the other party and the Using
         Party can establish such development; or


                  (e) is information required to be disclosed by legal or
         regulatory process; provided, in each case the Using Party timely
         informs the other party and uses reasonable efforts to limit the
         disclosure and maintain confidentiality to the extent possible and
         permits the other party to intervene and contest or attempt to limit
         the disclosure.


AVENTIS shall obtain no right or license of any kind under the CIMA Proprietary
Information except as set forth in this Agreement. CIMA shall obtain no right or
license of any kind under the AVENTIS Proprietary Information except as set
forth in this Agreement.


         8.5 Expenses. CIMA and AVENTIS shall each bear their own direct and
indirect expenses incurred in connection with the negotiation and preparation of
this Agreement and, except as set forth in this Agreement, the performance of
the obligations contemplated hereby.


         8.6 Publicity. The parties agree that no publicity release or
announcement concerning the transactions contemplated hereby shall be issued
without the advance written consent of the other, except as such release or
announcement may be required by law, including but not limited to the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in
which case the party making the release or announcement shall, before making any
such release or announcement, afford the other party a reasonable opportunity to
review and comment upon such release or announcement.



                                       14



         8.7 Cooperation. If either party shall become engaged in or participate
in any investigation, claim, litigation or other proceeding with any third
party, including the FDA, relating in any way to the Product or any of the
Licensed Assets, the other party shall cooperate in all reasonable respects with
such party in connection therewith, including, without limitation, using its
reasonable efforts to make available to the other such employees who may be
helpful with respect to such investigation, claim, litigation or other
proceeding.


         8.8 Conflicting Rights. CIMA shall not grant any right to any third
party relating to the Activities which would violate the terms of or conflict
with the rights granted to AVENTIS pursuant to this Agreement.


         8.9 Patent and Trademark Maintenance.


                  (a) CIMA shall be solely responsible for filing, prosecuting,
         and maintaining all of the CIMA Patents, and CIMA shall pay the costs
         associated therewith. CIMA shall file, prosecute, and maintain all CIMA
         Patents so as to fully continue the benefits under the licenses granted
         to AVENTIS hereunder. CIMA may, however, discontinue prosecuting and
         maintaining any CIMA Patent if (i) CIMA has a valid business reason to
         do so, and (ii) obtains the prior written approval of AVENTIS, such
         approval not to be unreasonably withheld or delayed.


                  (b) CIMA shall be solely responsible for filing, prosecuting,
         and maintaining all CIMA Trademarks, and CIMA shall pay the costs
         associated therewith. All registrations, variations, logos, goodwill
         and other rights under or acquired through use of the CIMA Trademarks
         shall accrue and belong to CIMA. Except as provided herein, AVENTIS
         shall have no rights to use the CIMA Trademarks. AVENTIS will not use
         in its business, in or outside of the Territory, any other mark or name
         which is similar to or nearly resembles any of the CIMA Trademarks as
         to be likely to cause deception or confusion. AVENTIS recognizes that
         CIMA is the owner of all CIMA Trademarks used in commerce to indicate
         the source of the CIMA Intellectual Property and agrees that the CIMA
         Trademarks shall remain vested in CIMA both during the term of this
         Agreement and thereafter. AVENTIS shall not contest the validity of the
         CIMA Trademarks or CIMA's ownership of the CIMA Trademarks. Use of the
         CIMA Trademarks by AVENTIS in conjunction with the development,
         marketing, selling and distribution of the Product and all goodwill
         related thereto shall inure to the benefit of CIMA for purposes of
         building the longevity and extent of use of the CIMA Trademarks.


                  (c) AVENTIS shall be solely responsible for filing,
         prosecuting, and maintaining all trademarks it develops or owns for the
         Product (the "AVENTIS Trademarks"), and AVENTIS shall pay the costs
         associated therewith. All registrations, variations, logos, goodwill
         and other rights under or acquired through use of the AVENTIS
         Trademarks shall accrue and belong to AVENTIS. CIMA shall have no
         rights to use the AVENTIS Trademarks. CIMA will not use in its
         business, in or outside of the Territory, any other mark or name which
         is similar to or nearly resembles the AVENTIS Trademarks in use by
         AVENTIS in a manner that is likely to cause deception or confusion.
         CIMA recognizes that AVENTIS is the owner of all of the AVENTIS
         Trademarks used in commerce to indicate the source of the Product and
         agrees that the AVENTIS Trademarks shall remain vested in AVENTIS both
         during the term of this


                                       15



         Agreement and thereafter. CIMA shall not contest the validity of the
         AVENTIS Trademarks or AVENTIS' ownership of the AVENTIS Trademarks. Use
         of the AVENTIS Trademarks by AVENTIS in conjunction with the
         manufacture, use, and sale of the Product and all goodwill related
         thereto shall inure to the benefit of AVENTIS for purposes of building
         the longevity and extent of use of the AVENTIS Trademarks.


                  (d) AVENTIS and CIMA agree that, where applicable, all
         packaging of the Product shall: (i) identify the number of the CIMA
         Patents and CIMA as the owner thereof; and (ii) include CIMA's logo on
         the front, back or either side of the carton for Product for sale in
         the United States.


         8.10 Infringement; Enforcement of Proprietary Rights.


                  (a) Infringement of Patent Rights. Each party shall promptly
         notify the other of any alleged infringement by third parties of any
         CIMA Patent and provide any information available to that party
         relating to such alleged infringement. CIMA shall investigate such
         alleged infringement and shall have the first right, but not the
         obligation, to end any infringement of such rights that materially
         affect AVENTIS' rights pursuant to this Agreement, including, but not
         limited to, bringing suit against such third party infringer at its own
         expense. In the event that CIMA does not bring suit against such third
         party infringer, AVENTIS may, at its own expense, bring suit against
         such third party infringer on CIMA's behalf.


                  (b) Procedures. No settlement, consent judgment or other
         voluntary final disposition of any suit contemplated by Section 8.10(a)
         may be entered into without the consent of each party, which consent
         shall not be unreasonably withheld or delayed. Any recovery of damages
         in any such suit shall be retained by the party bearing the costs of
         such suit. In the event of any infringement suit against a third party
         brought by either party pursuant to this Section 8.10, the party not
         bringing such suit shall cooperate in all respects, execute any
         documents reasonably necessary to permit the other party to prosecute
         such suit, and to the extent reasonable shall make available its
         employees and relevant records to provide evidence for such suit.


                  8.11 Referral of Orders and Inquiries. CIMA shall refer all
         Persons sending orders or making inquiries regarding the Product within
         the Territory to AVENTIS and shall promptly notify AVENTIS of the name
         of each such Person and the nature of the inquiry of such Person.

                  8.12 Ownership.


                  (a) Subject to the license rights granted hereunder, ownership
                  of CIMA Proprietary Information, CIMA Intellectual Property
                  and CIMA Trademarks shall remain with CIMA and ownership of
                  AVENTIS Proprietary Information, AVENTIS Intellectual Property
                  and AVENTIS Trademarks shall remain with AVENTIS. Nothing
                  herein is intended to transfer the ownership of any party's
                  confidential information, know-how, or patent rights to the
                  other party. In addition, each party to this Agreement
                  maintains the right to use its own confidential information,
                  know-how, or patent rights, for any purpose, except as


                                       16



                  specifically restricted herein.


                  (b) Inventorship of inventions arising from the Activities in
                  the development process contemplated by this Agreement shall
                  be determined in accordance with the patent laws of the United
                  States. All employees of either Party who shall be deemed
                  inventors under such law shall be named as inventors on the
                  relevant patent applications. Each Party shall ensure that its
                  employees are under an obligation to properly assign any such
                  invention to the respective Party.


                  (c) AVENTIS and CIMA agree that all right, title and interest
                  to any improvements made to a respective originating party's
                  know-how and/or patent rights by either party under this
                  Agreement shall reside with the originating party of such
                  know-how and/or patent rights. As such, if such improvements
                  are made, conceived, or reduced to practice by such
                  non-originating party, such non-originating party shall assist
                  the originating party in perfecting, where applicable, all
                  right, title and interest, including, but not limited to the
                  prosecution and assignment of any patentable intellectual
                  property rights thereto to such improvements, at the
                  originating party's expense.


                  (d) The parties further agree and acknowledge that any and all
                  data and information generated under the Activities set forth
                  in Schedule A or under the Formulation Agreement shall belong
                  to AVENTIS.


                                    SECTION 9

                                 INDEMNIFICATION


         9.1 Indemnification.


                  (a) CIMA shall indemnify, defend and hold AVENTIS (and its
         directors, officers, employees, and Affiliates) harmless from and
         against any and all Damages incurred or suffered by AVENTIS (and its
         directors, officers, employees, and Affiliates) as a consequence of:




                           (i) any breach of any representation or warranty made
                  by CIMA in this Agreement;


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


                           (iii) any act or omission of CIMA with respect to the
                  operation of CIMA's business or the handling, manufacturing,
                  or use of the Product by CIMA.


                  (b) AVENTIS shall indemnify, defend and hold CIMA (and its
         directors, officers, employees, and Affiliates) harmless from and
         against any and all Damages incurred or suffered by CIMA (and its
         directors, officers, employees, and Affiliates) as a consequence of:

                                       17



                           (i) any breach of any representation or warranty made
                  by AVENTIS in this Agreement;


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


                           (iii) any act or omission of AVENTIS with respect to
                  the operation of AVENTIS' business or the handling,
                  manufacturing, sale, consumption or use of the Product by
                  AVENTIS.


         9.2 Notice and Opportunity To Defend. Promptly after receipt by a party
hereto of notice of any claim which could give rise to a right to
indemnification pursuant to Section 9.1, such party (the "Indemnified Party")
shall give the other party (the "Indemnifying Party") written notice describing
the claim in reasonable detail. The failure of an Indemnified Party to give
notice in the manner provided herein shall not relieve the Indemnifying Party of
its obligations under this Section, except to the extent that such failure to
give notice materially prejudices the Indemnifying Party's ability to defend
such claim. The Indemnifying Party shall have the right, at its option, to
compromise or defend, at its own expense and by its own counsel, any such matter
involving the asserted liability of the party seeking such indemnification. If
the Indemnifying Party shall undertake to compromise or defend any such asserted
liability, it shall promptly (and in any event not less than 10 days after
receipt of the Indemnified Party's original notice) notify the Indemnified Party
in writing of its intention to do so, and the Indemnified Party agrees to
cooperate fully with the Indemnifying Party and its counsel in the compromise or
defense against any such asserted liability. All reasonable costs and expenses
incurred in connection with such cooperation shall be borne by the Indemnifying
Party. If the Indemnifying Party elects not to compromise or defend the asserted
liability, fails to notify the Indemnified Party of its election to compromise
or defend as herein provided, fails to admit its obligation to indemnify under
this Agreement with respect to the claim, or, if in the reasonable opinion of
the Indemnified Party, the claim could result in the Indemnified Party becoming
subject to injunctive relief or relief other than the payment of money damages
that could materially adversely affect the ongoing business of the Indemnified
Party in any manner, the Indemnified Party shall have the right, at its option,
to pay, compromise or defend such asserted liability by its own counsel and its
reasonable costs and expenses shall be included as part of the indemnification
obligation of the Indemnifying Party hereunder. Notwithstanding the foregoing,
neither the Indemnifying Party nor the Indemnified Party may settle or
compromise any claim over the objection of the other; provided, however, that
consent to settlement or compromise shall not be unreasonably withheld. In any
event, the Indemnified Party and the Indemnifying Party may participate, at
their own expense, in the defense of such asserted liability. If the
Indemnifying Party chooses to defend any claim, the Indemnified Party shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense. Notwithstanding
anything to the contrary in this Section 9.2, (i) the party conducting the
defense of a claim shall (A) keep the other party informed on a reasonable and
timely basis as to the status of the defense of such claim (but only to the
extent such other party is not participating jointly in the defense of such
claim), and (B) conduct the defense of such claim in a prudent manner, and (ii)
the Indemnifying Party shall not cease to defend, settle or otherwise dispose of
any claim without the prior written consent of the Indemnified Party (which
consent shall not be unreasonably withheld).


                                       18




         9.3 Indemnification Payment. Upon the final determination of liability
and the amount of the indemnification payment under this Section 9, the
appropriate party shall pay to the other, as the case may be, within twenty (20)
business days after such determination, the amount of any claim for
indemnification made hereunder.


         9.4 Survival. The provisions of Section 9 shall survive any termination
of this Agreement. Each Indemnified Party's rights under Section 9 shall not be
deemed to have been waived or otherwise affected by such Indemnified Party's
waiver of the breach of any representation, warranty, agreement or covenant
contained in or made pursuant to this Agreement, unless such waiver expressly
and in writing also waives any or all of the Indemnified Party's rights under
Section 9.


                                   SECTION 10

                                   TERMINATION


         10.1 Term; Termination. The term of this Agreement shall begin on the
Effective Date and, unless sooner terminated as hereinafter provided, shall
continue until the later of (i) the expiration date of the last to expire CIMA
Patent containing a Valid Claim or (ii) for a period of ten (10) years from the
first commercial sale by Aventis of a Product to an independent third party.
Upon expiration of this Agreement in accordance with the preceding sentence, or
pursuant to Section 4.4. AVENTIS shall have the royalty-free right to continue
using the CIMA Technology furnished hereunder. Notwithstanding the foregoing,
this Agreement may be terminated as follows:


                  (a) Termination for Insolvency. If either AVENTIS or CIMA (i)
         makes a general assignment for the benefit of creditors or becomes
         insolvent; (ii) files an insolvency petition in bankruptcy; (iii)
         petitions for or acquiesces in the appointment of any receiver, trustee
         or similar officer to liquidate or conserve its business or any
         substantial part of its assets; (iv) commences under the laws of any
         jurisdiction any proceeding involving its insolvency, bankruptcy,
         reorganization, adjustment of debt, dissolution, liquidation or any
         other similar proceeding for the release of financially distressed
         debtors; or (v) becomes a party to any proceeding or action of the type
         described above in (iii) or (iv) and such proceeding or action remains
         undismissed or unstayed for a period of more than 60 days, then the
         other party may by written notice terminate this Agreement in its
         entirety with immediate effect.

                  (b) Termination for Default. AVENTIS and CIMA each shall have
         the right to terminate this Agreement for default upon the other's
         failure to comply in any material respect with the terms and conditions
         of this Agreement. At least 60 days prior to any such termination for
         default, the party seeking to so terminate shall give the other written
         notice of its intention to terminate this Agreement in accordance with
         the provisions of this Section 10.1(b), which notice shall set forth
         the default(s) which form the basis for such termination. If the
         defaulting party fails to correct such default(s) within 60 days after
         receipt of notification, then such party immediately may terminate this
         Agreement. This Section 10.1(b) shall not be exclusive and shall not be
         in lieu of any other remedies available to a party hereto for any
         default hereunder on the part of the other party.



                                       19



                  (c) Termination by AVENTIS. AVENTIS shall have the right to
         terminate this Agreement for any reason, upon sixty (60) days written
         notice to CIMA, provided, however that in the event that CIMA is
         manufacturing the Product, AVENTIS shall have the right to terminate
         this Agreement for any reason upon six (6) months written notice to
         CIMA. In the event that AVENTIS terminates this Agreement under this
         Section 10.1 (c) after the payment of the entire Technology Development
         Fee contemplated by Schedule C but prior to Launch of the Product,
         AVENTIS shall pay CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
         OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
         COMMISSION***], provided that CIMA is in compliance with of its
         obligations under this Agreement at the time of termination. In the
         event that AVENTIS terminates this Agreement under this Section 10.1
         (c), then on the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
         FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the
         Effective Date or upon termination if such termination takes place
         after the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
         SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of the
         Effective Date, AVENTIS shall grant CIMA [***CONFIDENTIAL TREATMENT
         REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
         EXCHANGE COMMISSION***] related to the [***CONFIDENTIAL TREATMENT
         REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
         EXCHANGE COMMISSION***] of the Product [***CONFIDENTIAL TREATMENT
         REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
         EXCHANGE COMMISSION***] by CIMA under this Agreement to CIMA. AVENTIS
         shall assist CIMA, at CIMA's expense and on CIMA's behalf, in the
         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION***], including but not
         limited to the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
         FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] of any
         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION***] relating thereto. For
         greater certainty, AVENTIS shall [***CONFIDENTIAL TREATMENT REQUESTED,
         PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
         COMMISSION***] by CIMA or AVENTIS related to the Product and shall be a
         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION***] with CIMA
         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION***].


         10.2 Continuing Obligations. Termination of this Agreement for any
reason shall not relieve the parties of any obligation accruing prior thereto
with respect to the Product and shall be without prejudice to the rights and
remedies of either party with respect to any antecedent breach of the provisions
of this Agreement. Without limiting the generality of the foregoing, no
termination of this Agreement, whether by lapse of time or otherwise, shall
serve to terminate the obligations of the parties hereto under Sections 8.3,
8.4, 8.5, 8.6, 8.12, 9, 10.2 and 11 hereof, and such obligations shall survive
any such termination.


                                       20



                                   SECTION 11

                                  MISCELLANEOUS


         11.1 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns; provided, however, that neither CIMA nor AVENTIS may
assign any of its rights, duties or obligations hereunder without the prior
written consent of the other, which consent shall not be unreasonably withheld,
except that no prior written consent shall be required for (i) assignment to any
Affiliate who shall be substituted directly in whole or in part for it
hereunder; provided, however, that the assignor shall guarantee the performance
of its Affiliate assignee hereunder, or (ii) the successor or assignee of all or
substantially all of the Party's business or assets related to the subject
matter of this Agreement.


         11.2 Notices. All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand or facsimile and confirmed in writing, or mailed
first class, postage prepaid, by registered or certified mail, return receipt
requested (mailed notices and notices sent by facsimile shall be deemed to have
been given on the date received) as follows:


                  If to CIMA, as follows:

                     CIMA LABS INC.
                     10000 Valley View Road
                     Eden Prairie, MN  55344
                     Facsimile:  952-947-8770
                     Attention:  President and CEO


                  If to AVENTIS, as follows:

                     Aventis Pharmaceuticals Inc.
                     Route 202-206
                     Bridgewater, NJ 08807
                     Facsimile:  908-231-3619
                     Attention:  Senior Vice President Corporate Development


           With a copy to Vice President, Legal Corporate Development


or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Section 11.2 by any party hereto to the other
party.


         11.3 Waiver; Remedies. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument executed by such party. No delay on the part of CIMA or AVENTIS in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either CIMA or AVENTIS of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or


                                       21



privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.


         11.4 Independent Contractors. The parties hereto are independent
contractors and nothing contained in this Agreement shall be deemed to create
the relationship of partners, joint venturers, or of principal and agent,
franchisor and franchisee, or of any association or relationship between the
parties other than as expressly provided in this Agreement. AVENTIS acknowledges
that it does not have, and AVENTIS shall not make representations to any third
party, either directly or indirectly, indicating that AVENTIS has any authority
to act for or on behalf of CIMA or to obligate CIMA in any way whatsoever. CIMA
acknowledges that it does not have, and it shall not make any representations to
any third party, either directly or indirectly, indicating that it has any
authority to act for or on behalf of AVENTIS or to obligate AVENTIS in any way
whatsoever.


         11.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, including but not limited to a certain Formulation Agreement
dated July 31, 2000 ,or understandings of the parties relating thereto.


         11.6 Amendment. This Agreement may be modified or amended only by
written agreement of the parties hereto.


         11.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute a single instrument.


         11.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York excluding any choice of law
rules which may direct the application of the law of another state.


         11.9 Dispute Resolution. To the extent that a dispute arises with
respect to a term or provision of this Agreement which is not subject to a
specific time period or remedy, the parties will use all reasonable efforts to
resolve in an amicable fashion any dispute, claim or controversy that may arise
relating to the terms or performance of this Agreement. If the parties are
unable to resolve such dispute within thirty (30) days after initial notice,
either party, by notice to the other, may have such dispute referred to a senior
officer of each company. Such officers shall attempt to resolve the dispute by
good faith negotiation within thirty (30) days after receipt of such notice.
Except where clearly prevented by the area in dispute, both parties agree to
continue performing their respective obligations under this Agreement while the
dispute is being resolved.


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


         11.11 No Third-Party Rights. Except as contemplated by Section 2.2, no
provision of this Agreement shall be deemed or construed in any way to result in
the creation of any rights or obligation in any Person not a party or not
affiliated with a party to this Agreement.



                                       22



         11.12 Severability. If any provision of this Agreement is found or
declared to be invalid or unenforceable by any court or other competent
authority having jurisdiction, such finding or declaration shall not invalidate
any other provision hereof, and this Agreement shall thereafter continue in full
force and effect.


         11.13 Attachments. All Schedules, Exhibits and other attachments to
this Agreement are by this reference incorporated herein and made a part of this
Agreement.


         11.14 Force Majeure. In the event that a party is prevented from
carrying out its obligations under this Agreement by an event of Force Majeure,
then such party's performance of its obligations under this Agreement shall be
excused during the period of such event and for a subsequent reasonable period
of recovery; provided, however, that the party whose performance is excused
shall promptly notify the other party of the existence of such cause and shall
at all times use commercially reasonable efforts to promptly resume and complete
performance.


         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.


                                     CIMA LABS INC.


                                     By: /s/ John Siebert, Ph.D.
                                        -----------------------------
                                        Name:   John Siebert Ph.D.
                                        Title:  President and CEO



                                     AVENTIS PHARMACEUTICALS, INC.


                                     By: /s/ Sol Rajfer
                                        -----------------------------
                                        Name:   Sol Rajfer
                                        Title:  Senior Vice President


                                       23



                                                                   SCHEDULE A TO
                                                         DEVELOPMENT AND LICENSE
                                                                       AGREEMENT


                              DEVELOPMENT SCHEDULE

OraSolv(R) Fexofenadine Hydrochloride [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]


ANTICIPATED PRODUCT ATTRIBUTES:

         o Active ingredient and potency


Fexofenadine Hydrochloride [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]


                    DEVELOPMENT ACTIVITIES, COSTS AND TIMING




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

PHASE               ACTIVITY                   TIMING              COSTS($)
- -----               --------                   ------              --------
                                                          





           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
       SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. FIVE PAGES
                                   OMITTED***]

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



                                       24



                                  SCHEDULE B TO
                             DEVELOPMENT AND LICENSE
                                    AGREEMENT



                                  ROYALTY RATES



         Pursuant to Sections 4.3 and 4.4, AVENTIS shall pay to CIMA a
percentage of Annual Net Sales, if any, actually recorded during such Year, as
indicated on the following schedules:


         All of the Territory except [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]

                                                            
    Net Sales of Product in the Territory Except               Royalty Rate*
    [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
    OMITTED FILED SEPARATELY WITH THE SECURITIES
    AND EXCHANGE COMMISSION***]

    [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
    OMITTED FILED SEPARATELY WITH THE SECURITIES
    AND EXCHANGE COMMISSION***] of Net Sales

    [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
    OMITTED FILED SEPARATELY WITH THE SECURITIES
    AND EXCHANGE COMMISSION***] of Net Sales

    [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
    OMITTED FILED SEPARATELY WITH THE SECURITIES
    AND EXCHANGE COMMISSION***] of Net Sales





         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION***]


         The parties shall discuss and agree upon the royalty rate for
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***]as soon as practicable after the Effective
Date but no later than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] prior to the
expected launch of the Product in [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. The
agreed upon royalty rate for [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall
take


                                       25



into consideration Aventis' [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. The
parties agree that the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] as set forth
above.


[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***]





                                       26


                                                                   SCHEDULE C TO
                                                            DEVELOPMENT, LICENSE
                                                            AND SUPPLY AGREEMENT


                  TECHNOLOGY DEVELOPMENT AND MILESTONE PAYMENTS


         Pursuant to Section 4.1 (b), AVENTIS shall pay CIMA: [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***] of the Technology Development Fee upon signature of this
Agreement and the remaining [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] within
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] of successful completion of AVENTIS'
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] Product. In the event, that (i) this
Agreement is terminated under 10.1 (c) or (ii) AVENTIS notifies CIMA that the
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***] were unsuccessful and AVENTIS
nevertheless desires CIMA to continue the Activities in Schedule A (which the
Parties shall amend as appropriate) Aventis shall pay CIMA the [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***] of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] no
later than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***].


         Pursuant to Section 4.1 (b), AVENTIS shall pay CIMA the milestone
payments set forth below (each a "Milestone Payment") within [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***] days of completion of the research and development
milestones (each a "Milestone") set forth opposite such Milestone Payment:

          Technology Development Fee:      [***CONFIDENTIAL TREATMENT REQUESTED,
                                           PORTION OMITTED FILED SEPARATELY
                                           WITH THE SECURITIES AND EXCHANGE
                                           COMMISSION***]

          MILESTONE ACTIVITY               MILESTONE PAYMENT

           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
           SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]



                                       27







                                                                   SCHEDULE D TO
                                                         DEVELOPMENT AND LICENSE
                                                                       AGREEMENT



                                  COST OF GOODS






Formulation                                    Cost per Tablet [***CONFIDENTIAL
                                            TREATMENT REQUESTED, PORTION OMITTED
                                            FILED SEPARATELY WITH THE SECURITIES
                                            AND EXCHANGE COMMISSION***]

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION***]

*Assumptions:


1)       [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION***] of [***CONFIDENTIAL
         TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
         SECURITIES AND EXCHANGE COMMISSION***] campaigns.


2)       No costs related to the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
         OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
         COMMISSION***] are included, other than [***CONFIDENTIAL TREATMENT
         REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
         EXCHANGE COMMISSION***] and its release by CIMA for use in tablets.


3)       AVENTIS' Packaging uses CIMA's standard [***CONFIDENTIAL TREATMENT
         REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
         EXCHANGE COMMISSION***] tablets per card and [***CONFIDENTIAL TREATMENT
         REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
         EXCHANGE COMMISSION***] cards per carton format.




                                       28




                                    AMENDMENT


This Amendment dated November 30, 2001 is to amend the Development and License
Agreement between Cima Labs Inc. ("Cima") and Aventis Pharmaceuticals Inc.
("Aventis") dated August 1, 2001 (the "Development and License Agreement"). The
terms used in this Amendment, which are defined in the Development and License
Agreement, shall have the same meanings as set forth therein.

Cima and Aventis hereby agree to make the following amendment to the Development
and License Agreement:

          1.   In the second sentence of the first paragraph of Schedule C, the
               words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
               SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall
               be deleted and the words [***CONFIDENTIAL TREATMENT REQUESTED,
               PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
               COMMISSION***] shall be inserted in their place.

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by
their duly authorized representatives, effective as of the day and year first
written above.

CIMA LABS INC.                        AVENTIS PHARMACEUTICALS INC.

By:  /s/ John M. Siebert              By:  /s/ Thomas Hofstaetter
   ---------------------                 ---------------------------------
Name:  John M. Siebert                Name:  Thomas Hofstaetter
     -------------------                   -------------------------------
Title: President & CEO                Title: SR. VP, CORPORATE DEVELOPMENT
       -----------------                    ------------------------------



                                       29



                                  AMENDMENT #2


This Amendment #2 dated December 20, 2001 is to further amend the Development
and License Agreement between Cima Labs Inc. ("Cima") and Aventis
Pharmaceuticals Inc. ("Aventis") dated August 1, 2001, as amended by the
November 30, 2001 Amendment (the "Development and License Agreement"). The terms
used in this Amendment, which are defined in the Development and License
Agreement, shall have the same meanings as set forth therein.

Cima and Aventis hereby agree to make the following amendment to the Development
and License Agreement:

          In Schedule C in the second sentence of the first paragraph the words
          [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
          WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be deleted and
          the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be
          inserted in their place.

In all other respects, the terms and conditions of the Development and License
Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have cause this Amendment #2 to be executed by
their duly authorized representatives, effective as of the day and year first
written above.

CIMA LABS INC.                          AVENTIS PHARMACEUTICALS INC.

By: /s/ John Hontz                      By: /s/ Michael Yeomans
   ---------------                         ---------------------

Name:   John Hontz                      Name:  Michael Yeomans

Title:  Chief Operating Officer         Title: V.P., Global Business Development



                                       30



                                  AMENDMENT #3


This Amendment #3 dated January 18, 2002 is to further amend the Development and
License Agreement between Cima Labs Inc. ("Cima") and Aventis Pharmaceuticals
Inc. ("Aventis") dated August 1, 2001, as amended by the November 30, 2001 and
December 19, 2001 Amendments (the "Development and License Agreement"). The
terms used in this Amendment, which are defined in the Development and License
Agreement, shall have the same meanings as set forth therein.

Cima and Aventis hereby agree to make the following amendment to the Development
and License Agreement:

     1.   In Schedule C in the second sentence of the first paragraph the words
          [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
          WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be deleted and
          the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
          SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] shall be
          inserted in their place.

In all other respects, the terms and conditions of the Development and License
Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have caused this Amendment #3 to be executed by
their duly authorized representatives, effective as of the day and year first
written above.

CIMA LABS INC.                        AVENTIS PHARMACEUTICALS INC.



By: /s/ John M. Siebert               By:  /s/ Michael Yeomans
   -------------------------------       --------------------------------------
                       18 Jan 2002                                  18 Jan 2002

Name:   John Siebert                  Name:  Michael Yeomans

Title:  Chief Executive Officer       Title:  V.P., Global Business Development



                                       31



                                  AMENDMENT #4


This Amendment #4 dated February 15, 2002 is to further amend the Development
and License Agreement between Cima Labs Inc. ("Cima") and Aventis
Pharmaceuticals Inc. ("Aventis") dated August 1, 2001 (the "Development and
License Agreement"), as amended. The terms used in this Amendment, which are
defined in the Development and License Agreement, shall have the same meanings
as set forth therein.

Cima and Aventis hereby agree to make the following amendments to the
Development and License Agreement:

         1.       Schedule A shall be deleted in its entirety and replaced with
                  Exhibit 1 attached hereto;

         2.       In Schedule C in the first sentence of the first paragraph the
                  words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                  FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION***] shall be deleted and the words [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION***] shall be inserted in
                  their place;

         3.       In Schedule C in the second sentence of the first paragraph
                  the words [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION***] no later than [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION***] shall be deleted and
                  the words "[***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION***] no later than [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION***] shall be inserted in
                  their place; and

         4.       In Schedule C in the fourth line of the second paragraph the
                  words "Technology Development Fee: [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION***]" shall be deleted and
                  the words "Technology Development Fee: [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION***]" shall be inserted in
                  their place;

In all other respects, the terms and conditions of the Development and License
Agreement remain in full force and effect.


                                       32



IN WITNESS WHEREOF, the parties have caused this Amendment #4 to be executed by
their duly authorized representatives, effective as of the day and year first
written above.

CIMA LABS INC.                        AVENTIS PHARMACEUTICALS INC.



By: /s/ John M. Siebert               By:  /s/ Lawrence M. Schwartz
   ---------------------------------     ------------------------------------
                         15 Feb 2002                              15-Feb-2002

Name:   John M. Siebert               Name:  Lawrence M. Schwartz
     -------------------------------       ----------------------------------
Title:  President & CEO               Title:  Head, Technology Outsourcing Mgmt.



                                       33




                                    EXHIBIT 1

OraSolv(R)Fexofenadine Hydrochloride [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]

ANTICIPATED PRODUCT ATTRIBUTES:

     o    Active ingredient and potency

Fexofenadine Hydrochloride [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]


                               EXHIBIT 1 (Cont'd)

                    DEVELOPMENT ACTIVITIES, COSTS AND TIMING



- ------------- ------------------------------------------------------- ---------------------- ---------------------------
   PHASE                             ACTIVITY                                TIMING                  COSTS ($)
- ------------- ------------------------------------------------------- ---------------------- ---------------------------
                                                                                    
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
- ------------------------------------------------------------------------------------------------------------------------

EX-99.1

                                                                    EXHIBIT 99.1

                                 CIMA LABS INC.

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

         In connection with the Quarterly Report of CIMA LABS INC. (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
John M. Siebert, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

         (1)      The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

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


Date: 11/14/2002                          /s/ John M. Siebert
                                           -------------------------------------
                                           John M. Siebert,
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)

EX-99.2

                                                                    EXHIBIT 99.2

                                 CIMA LABS INC.

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

         In connection with the Quarterly Report of CIMA LABS INC. (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
David A. Feste, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

         (1)      The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

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


Date: 11/14/2002                                /s/ David A. Feste
                                                -----------------------------
                                                David A. Feste,
                                                Chief Financial Officer
                                                (Principal Financial Officer)