10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

þ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2002

or
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from          to

Commission File Number 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)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value

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   þ    No   o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    þ

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

The aggregate market value of common stock held by non-affiliates of the registrant, based upon the last sale price of the common stock reported on the Nasdaq National Market tier of The Nasdaq Stock Market on June 28, 2002 was $246,960,821. Common stock outstanding at March 24, 2003 was 14,308,612 shares.

Documents Incorporated by Reference

Portions of the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the Registrant’s Annual Meeting of Stockholders to be held on May 21, 2003 are incorporated by reference in Part III, Items 10, 11, 12 and 13, of this Form 10-K.

TABLE OF CONTENTS

PART I.
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II.
	ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III.
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. CONTROLS AND PROCEDURES
PART IV.
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATIONS
CERTIFICATIONS
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
EX-10.24 Master Development, License & Supply Agmt
EX-10.29 Development, License and Supply Agreement
Ex-10.30 First Amendment to Employment Agreement
Ex-10.31 Letter Agreement with David Feste
Ex10.32 Employment Agreement - James C Hawley
Ex-23.1 Consent of Ernst & Young LLP
EX-24.1 Powers of Attorney
EX-99.1 Certification of Chief Executive Officer
EX-99.2 Certification of Chief Financial Officer

PART I.

Forward-Looking Statements

     We make many statements in this Annual Report on Form 10-K under the captions Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Factors That Could Affect Future Results and elsewhere that 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 and plan and 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 under the caption 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, without limitation, statements relating to expected growth in operating revenues and income; the expected decline in other income; utilization of remaining tax assets; future expense levels; the adequacy and use of our capital resources; the timing of availability of our products and our competitors’ products; expected demand for products using our technologies; the expansion and adequacy of our production capacity and facilities; and future research and development activities 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.

     Information regarding market and industry statistics contained in the Business section is included based on information available to us that we believe is accurate. It is generally based on academic and other publications that are not produced for purposes of economic analysis. We have not reviewed or included data from all sources and cannot assure you of the accuracy of the data we have included.

ITEM 1. BUSINESS

Company Overview

     We were incorporated in Delaware in 1986. Our executive offices are located at 10000 Valley View Road, Eden Prairie, Minnesota 55344-9361. Our telephone number is (952) 947-8700 and our website is www.cimalabs.com. The information on our website is not incorporated into and is not intended to be a part of this report. We make available free of charge on or through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission. Unless the context otherwise indicates, all references to the “Registrant,” the “Company,” or “CIMA” in this Form 10-K relate to CIMA LABS INC.

     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.” All other trademarks used in this report are the property of their respective owners. “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. “Alavert^™” is a trademark of Wyeth. “Allegra®” is a registered trademark of Aventis Pharmaceuticals Inc. “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. “Zyprexa® Zydis” is a registered trademark of Eli Lilly and Company. “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. “OraQuick^™” is a trademark of KV Pharmaceutical Company. “Pharmaburst^™” is a trademark of SPI Pharma, Inc.

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     We develop and manufacture fast dissolve and enhanced-absorption oral drug delivery systems. OraSolv and DuraSolv, our proprietary fast dissolve technologies, are oral dosage forms that dissolve quickly in the mouth without chewing or the need for water. We currently manufacture six pharmaceutical brands utilizing our DuraSolv and OraSolv fast dissolve technologies: three prescription brands and three over-the counter brands. The three over-the-counter brands include Triaminic Softchews for Novartis, Tempra FirsTabs for Bristol-Myers Squibb, and Alavert for Wyeth; and the three prescription brands include AstraZeneca’s Zomig-ZMT and its equivalent for markets outside the U.S., Organon’s Remeron SolTab and its equivalent for markets outside the U.S., and NuLev for Schwarz Pharma.

     We believe that the attributes of our OraSolv and DuraSolv fast dissolve technologies may enable consumers in certain age groups or with limited ability to swallow conventional tablets to receive medication in an oral dosage form that is more convenient than traditional tablet-based oral dosage forms. Both OraSolv and DuraSolv technologies are capable of incorporating taste masked active drug ingredients into tablets that have the following potential benefits:

• ease of administration;

• improved dosing compliance; and

• increased dosage accuracy compared to liquid formulations.

     We generate revenue from 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 products we manufacture, which are sold by pharmaceutical companies under licenses from us. Net sales of products we manufacture for and the royalties we receive from Novartis for Triaminic Softchews are seasonal in nature and can be affected by the strength and duration of the cough and cold season in the U.S.

     Our proprietary technologies enable our pharmaceutical company partners to differentiate their products from competing products. In addition to providing a competitive advantage in the marketplace, our proprietary technologies also may enable our pharmaceutical company partners to extend the product life cycles of their patented drug compounds beyond existing patent expiration dates of those compounds. Our technologies may also provide benefits to the healthcare system more generally. For example, improved compliance with prescribed drug regimens can enhance therapeutic outcomes and potentially reduce overall costs.

     In addition to our proprietary OraSolv and DuraSolv fast dissolve technologies, we are developing several new drug delivery technologies. One new technology is our sustained release technology, which adds sustained release properties to the fast dissolve and taste masking attributes available with our DuraSolv and OraSolv technologies. We also are developing new OraVescent drug delivery technologies that include OraVescent SL for drug delivery under the tongue and OraVescent BL for drug delivery between the gum and the cheek. An additional OraVescent technology, OraVescent SS, is designed for site-specific administration, which may allow an active drug ingredient to be transported to a specific part of the gastrointestinal tract where it is released for absorption. We originally designed and continue to design our OraVescent technologies to improve the transport of active drug ingredients that are poorly absorbed across mucosal membranes in the oral cavity or the gastrointestinal tract. In addition, our microemulsions technology is a proprietary technology that we are evaluating which may improve the bioavailability of a wide range of active drug ingredients, which may otherwise not be suitable for administration in a solid oral dosage form.

Industry Overview

Drug Delivery Methods

     Historically, pharmaceutical products were available primarily through two delivery methods, oral dosage forms or injections. Recently, drug delivery technologies have been developed for a variety of therapeutic compounds, improving safety, efficacy, ease of patient use and patient compliance. In addition, drug delivery technologies can be used to expand markets for existing products, as well as to develop new products. Industry experts have noted that the global drug delivery market reached $39.5 billion in 2000 sales, with oral drug delivery technologies accounting for approximately 56% of sales.

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     Fast dissolve technology has recently emerged as an important type of drug delivery technology that enables tablets to dissolve quickly in the mouth without the use of water or chewing. Children and the elderly, as well as others with certain physiological or medical conditions, frequently experience difficulty in swallowing tablets. Our fast dissolve technology may improve compliance with a prescribed drug regimen, as fast dissolve medications are easier to swallow and may taste better than non-taste masked alternatives. In addition, fast dissolve technology may improve dosing accuracy relative to liquid formulations. Finally, and most importantly, fast dissolve technology may provide a significant commercial benefit, as studies we have conducted indicate that patients often prefer it to conventional tablets and other formulations.

Trends Affecting the Drug Delivery Industry

     Several significant trends in the health care industry have important implications for drug delivery companies. These trends include:

     Drug Patent Expirations. Based on an industry source, twenty-seven prescription brands with annual worldwide sales exceeding $37.0 billion will lose patent protection by 2005. In order to maintain their revenues, many large pharmaceutical companies are defending against generic competition by enhancing existing drug products with innovative drug delivery technologies. These enhancements may include increased efficacy, reduced side effects and more convenient administration. We believe that pharmaceutical companies will use drug delivery systems to preserve or increase market share, enhance therapeutic performance and, in some cases, extend product life cycles.

     Direct-to-Consumer Marketing. In the first six months of 2002, industry sources estimate that pharmaceutical companies spent approximately $2.4 billion in the U.S. on direct-to-consumer advertising of prescription medications, a $1.0 billion increase from the $1.4 billion spent during the comparable six-month period of 2001. We expect direct-to-consumer marketing and promotion spending by pharmaceutical companies to increase in the future. We also believe that the significant trend towards direct-to-consumer marketing may focus consumers on patient-friendly pharmaceutical products, including products that incorporate innovative drug delivery technologies, such as fast dissolve technology. This focus may encourage pharmaceutical companies to develop products incorporating these technologies.

     Influence of Managed Care. Many managed care plans and other insurers actively manage the costs of prescription drugs for their clients by monitoring patient dosing compliance as well as the efficacy, quality and cost of medications. Payors have demonstrated acceptance of drug delivery technologies, such as fast dissolve and taste masking, that improve patient compliance.

Our Oral Drug Delivery Products and Technologies

     Our proprietary products and technologies focus on innovative oral drug delivery methods that meet the needs of consumers for convenient and effective medications and the needs of pharmaceutical companies for differentiated products and accurate dosing methods. We have developed all of our fast dissolve technologies internally. Our most developed technologies are our OraSolv and DuraSolv fast dissolve drug delivery technologies. We currently manufacture six pharmaceutical brands incorporating our proprietary fast dissolve technologies, of which three products use our OraSolv technology and three products use our DuraSolv technology. We are also developing innovative transmucosal oral drug delivery technologies. These technologies include OraVescent SL for drug delivery under the tongue, OraVescent BL for drug delivery between the gum and the cheek and OraVescent SS for swallowable site-specific drug delivery in the gastrointestinal tract. In addition, we are evaluating our microemulsions technology, which may be useful in improving the bioavailability of a wide range of active drug ingredients that may otherwise not be suitable for oral administration in a solid oral dosage form.

Fast Dissolve Technologies

     Our two primary fast dissolve oral drug delivery technologies are OraSolv and DuraSolv. Our OraSolv technology incorporates active drug ingredients in lightly compacted fast dissolve tablets. The low level of compaction pressure applied to OraSolv tablets allows larger amounts of taste masked active drug ingredients to be

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compressed into the tablets without damage to the taste masked active drug ingredients. The low level of compaction pressure applied to OraSolv tablets also allows for a minimal portion of the tablet’s contents to be dedicated to effervescent and other fast dissolve agents, allowing for high doses of taste masked active ingredients. Our DuraSolv technology uses higher compaction pressures to produce fast dissolve tablets incorporating active drug ingredients in a more durable fast dissolve tablet. Due to their greater durability, DuraSolv tablets are easier to handle and package, and may cost less to produce, than OraSolv tablets.

     OraSolv. Our OraSolv technology is an oral dosage form that combines taste masked drug ingredients with a fast dissolving, low-effervescence system. The OraSolv tablet dissolves quickly in the mouth without chewing or the need for water. To create our fast dissolving tablets, we combine the taste masked active drug ingredients with fast dissolving tablet materials, which can include a variety of flavoring, coloring and sweetening agents, all of which are generally recognized as safe materials, and commonly used tablet ingredients, such as binding agents and lubricants. We add an effervescent system, composed of a dry acid and a dry base, to the tablet formulation to cause a mild effervescent reaction when the tablet contacts saliva. This reaction accelerates the disintegration of the tablet through the release of carbon dioxide. As our OraSolv tablet dissolves, it releases the coated particles of the drug into the saliva, forming a suspension of the drug in the saliva, which is then swallowed. The core U.S. patent for our OraSolv technology was granted in 1993.

     We mask the taste of the active drug ingredients in our OraSolv products to prevent or minimize unpleasant tastes. The active drugs are taste masked using a variety of coating techniques. The coating materials prevent the active drug substance in the OraSolv tablet from contacting the patient’s taste buds, and provide for the immediate or controlled release of the active ingredient in the stomach. The taste masking process is effective with a wide variety of active ingredients, in both prescription and non-prescription products.

     We have developed and manufacture several important OraSolv formulations, which include Triaminic Softchews for Novartis, Tempra FirsTabs for Bristol-Myers Squibb and Remeron SolTab for Organon. In addition, we are developing OraSolv formulations of Allegra for Aventis Pharmaceuticals, an undisclosed prescription product for Schering-Plough and an undisclosed prescription product for Alamo Pharmaceuticals, LLC.

     DuraSolv. The fast dissolve, taste masking and sustained release attributes of OraSolv are also available with our DuraSolv technology. DuraSolv is a fast dissolve oral dosage system that we designed to improve manufacturing efficiency, provide more packaging options and reduce production costs. DuraSolv is a higher compaction, more durable, solid oral dosage system formulated to achieve the primary benefits of the OraSolv fast dissolve dosage form. However, DuraSolv is capable of being packaged in conventional packaging such as foil pouches or bottles at much higher production rates and with lower packaging costs. DuraSolv is an appropriate technology for drug products requiring lower levels of active drug ingredient. Consumer testing by us and our pharmaceutical company partners has demonstrated high acceptability of this technology. The core U.S. patent for our DuraSolv technology was granted in 2000.

     We have developed and manufacture several important DuraSolv formulations, which include Alavert for Wyeth, AstraZeneca’s Zomig-ZMT and its equivalents marketed outside the U.S. and Nulev for Schwarz Pharma. In addition, we are developing seven new prescription products based on our DuraSolv fast dissolve drug delivery system for Schwarz Pharma.

     Sustained Release. Our OraSolv and DuraSolv technologies may be combined with a sustained release formulation to extend the period of an active drug ingredient’s effectiveness. We incorporate time-release beads into our tablets, to provide the benefits of a sustained release of an active drug ingredient with the improved convenience of a fast dissolve dosage form. To date, we have not commercialized a product incorporating our sustained release technology. In 2002, the U.S. Patent and Trademark Office issued a patent covering the use of OraSolv fast dissolve technology and our proprietary sustained release drug delivery technology with the active ingredient potassium chloride. Potassium chloride is typically prescribed as an adjunct therapy for the treatment of hypertension.

     PakSolv. PakSolv is our proprietary packaging system for soft, brittle tablets. PakSolv is a light and moisture-proof packaging system that is used for all of our OraSolv products. The U.S. Patent and Trademark Office issued two patents for our PakSolv packaging system in 2001.

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Transmucosal Technologies

     Our proprietary OraVescent technologies are designed to increase absorption of active drug ingredients across the mucosal membranes lining the oral cavity, gastrointestinal tract and colon. The enhanced absorption characteristics of an OraVescent formulation may improve the safety and efficacy of some active drug ingredients. Since 2001, the U.S. Patent and Trademark Office has issued four patents for our OraVescent technologies. We also have several foreign patent applications pending for our OraVescent technologies.

Microemulsions Technology

     Microemulsions technology is a proprietary technology that may improve the bioavailability (the rate at which a drug is absorbed or becomes available at the site of physiological activity after administration) of a wide range of active drug ingredients, which otherwise may not be suitable for administration in a solid oral dosage form. The U.S. Patent and Trademark Office issued a patent for our microemulsions technology in 2002. We are currently evaluating applications for this new technology.

Business Strategy

     Our objective is to become a leader in fast dissolve and other innovative oral drug delivery technologies. Our strategy to achieve this objective incorporates the following principal elements:

     Partner with pharmaceutical companies to develop and market new products based on our technologies. Our core business is to pursue collaborative relationships that leverage the sales and marketing capability of our pharmaceutical company partners, allowing us to focus on technology development and manufacturing. In these collaborative relationships, our partners pay us to develop new products for them based on our drug delivery technologies. We believe that pharmaceutical companies are attracted to our technologies for their significant advantages over our competition. Those advantages include excellent taste masking, applicability to a wide range of pharmaceutical compounds, enhanced convenience and other patient benefits. Our technologies also may enable pharmaceutical companies to differentiate their products in the market, facilitating the extension of product life cycles. By demonstrating the advantages and benefits of our technologies through our collaborations with leading pharmaceutical companies, we intend to establish our technology as the preferred fast dissolve drug delivery solution.

     Maximize the value of our drug delivery technologies by developing new products. Our proprietary products business is based on leveraging our technologies by actively identifying prescription products that could be differentiated or improved by incorporating our drug delivery technologies. We believe there are a large number of pharmaceutical products that are in the public domain or are about to lose patent protection that could benefit from our technologies. In these cases we may develop a new prescription product without a collaborative partner and ultimately seek FDA approval for what we believe will be promising applications of our drug delivery technologies and active drug ingredients. If our efforts are successful, we may license these new products to pharmaceutical companies with appropriate sales and marketing capabilities.

     Develop and commercialize new, innovative drug delivery technologies. We intend to develop new drug delivery technologies based on our expertise in fast dissolve, taste masking and sustained release technologies. Our OraVescent and microemulsions technologies represent an extension of this expertise, and we intend to continue developing these and other novel drug delivery technologies. We also intend to acquire or license attractive new technologies as we encounter such opportunities. In addition, we will seek patents and other intellectual property protection for new technologies to enhance our ability to commercialize them.

     Enhance and expand our manufacturing capabilities. In an effort to control our technologies and the quality of our products, we manufacture all of our products internally. We currently have two manufacturing lines at our Eden Prairie facility for product requiring blister packaging, which we expect will be adequate to meet our needs through 2003. On the basis of expected increased requirements for products that we manufacture for our current pharmaceutical partners, we have (1) added granulation capabilities and expanded taste masking capacity at our Eden Prairie facility, (2) ordered a new manufacturing line for blistered product at our Eden Prairie facility, which

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will either replace an older and less efficient manufacturing line or be added as a third production line and (3) ordered a new manufacturing line to be installed at our Brooklyn Park facility for bottled product. We expect that these expansions and enhancements will help mitigate manufacturing risks and increase our manufacturing capacity and will enhance our ability to market our products and services to pharmaceutical companies that require granulation or bottling capabilities.

Collaborations With Pharmaceutical Company Partners

     Our core business is focused on entering into collaborative development, licensing and manufacturing supply agreements with pharmaceutical companies. These agreements provide that the collaborating pharmaceutical company is responsible for marketing and distributing the developed products either worldwide or in specified markets or territories. Our collaborative agreements typically begin with a product prototyping phase. If successful, this phase may be followed by an agreement to complete development of the product. We subsequently enter into license and manufacturing supply agreements to commercialize the product. In some cases, we may develop product prototypes prior to being engaged by a pharmaceutical company and enter directly into development, manufacturing or license agreements for commercialization of those products.

     We currently have development and license agreements with AstraZeneca, Alamo Pharmaceuticals, Aventis Pharmaceuticals, Bristol-Myers Squibb, Organon, Novartis, Schering-Plough, Schwarz Pharma and Wyeth. In each of these agreements, we have received an up-front fee, which is typically a non-refundable payment for future product development activities. We have also received milestone and development payments under each of these agreements for achieving certain product development milestone events and for completing certain predetermined product development activities, as defined in the agreements. In the aggregate for all of our agreements with pharmaceutical companies, we recognized revenue of approximately $23.2 million, $14.3 million and $10.5 million in 2002, 2001 and 2000, respectively, for up-front fees, milestone and development payments and royalties.

     We have manufacturing supply agreements with Organon for Remeron SolTab, Novartis for Softchews, Wyeth for Alavert, Schering-Plough for an undisclosed prescription product, Schwarz Pharma for NuLev and seven undisclosed prescription products, Alamo Pharmaceuticals for an undisclosed prescription product and AstraZeneca for fast dissolve dosage forms of Zomig. We are currently negotiating a supply agreement with Aventis Pharmaceuticals for a fast dissolve dosage form of Allegra. Due to the small production requirements for Tempra, we do not have, nor do we expect to enter into, a manufacturing supply agreement with Bristol-Myers Squibb. Generally, the supply agreements define (1) the terms by which we will manufacture and release for shipment a product for a pharmaceutical company partner, (2) obligations relating to payment for products and services, (3) the communication process, (4) expected production requirements and (5) other economic terms for product supply. These agreements have varying terms of duration ranging from three to ten years. In general, our pharmaceutical company partners direct our production and shipments. In the pharmaceutical industry, parties to manufacturing supply agreements generally consider these arrangements long-term due to the complexity and lead-time required to qualify a new manufacturer with the FDA. The qualification of a new manufacturer can take up to a year while the new manufacturer completes scale-up, produces validation lots and implements stability programs. We do not consider the backlog for our products to be significant.

     We currently manufacture six pharmaceutical brands using our fast dissolve technologies for six major pharmaceutical company partners. Revenues from sales of our products were approximately 50%, 55% and 56% of our total revenue in 2002, 2001 and 2000, respectively. We also receive revenue from royalties on product sales from these six pharmaceutical company partners, which were approximately 25%, 17% and 7% of our total revenue in 2002, 2001 and 2000, respectively. Finally, our revenue also includes product development fees and licensing revenue for development activities from a number of pharmaceutical companies, constituting approximately 25%, 28% and 37% of our total revenue in 2002, 2001 and 2000, respectively. See Note 10 to the financial statements contained elsewhere in this report for details regarding the distribution of revenue by geographical area for each of 2002, 2001 and 2000.

     The table below sets forth the partner, product brand name or active ingredient, therapeutic application, technology and current status for each of our major collaborative agreements.

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	PRODUCT
	BRAND NAME
PHARMACEUTICAL	OR ACTIVE	THERAPEUTIC		CURRENT
COMPANY PARTNER	INGREDIENT	APPLICATION	TECHNOLOGY	STATUS
Alamo Pharmaceuticals, LLC	Undisclosed	Undisclosed	OraSolv	In development
AstraZeneca	Zomig-ZMT and equivalents outside the U.S.	Anti-migraine	DuraSolv	Commercially available in the U.S., Europe and Japan
Aventis Pharmaceuticals	Allegra	Non-sedating antihistamine	OraSolv	In development
Bristol-Myers Squibb	Tempra FirsTabs	Pediatric pain reliever	OraSolv	Commercially available in Canada
Organon	Remeron SolTab	Anti-depression	OraSolv	Commercially available in the U.S. and Europe
Novartis	Triaminic Softchews	Pediatric cold, cough and allergy	OraSolv	Commercially available in the U.S. and Canada
Schering-Plough	Undisclosed	Undisclosed	OraSolv	In development
Schwarz Pharma	1) NuLev 2) Seven undisclosed products	1) Gastrointestinal 2) Undisclosed	1)DuraSolv 2) DuraSolv	1) Commercially available in the U.S. 2) In development
Wyeth	Alavert	Non-sedating antihistamine	DuraSolv	Commercially available in the U.S.

Alamo Pharmaceuticals

     In March 2001, we entered into a product development, worldwide license and supply agreement for an OraSolv formulation of an undisclosed prescription product. At the time of entering into this collaborative agreement, we did not consider the revenues to be generated under this agreement to be material, and chose not to disclose the arrangement until we had successfully developed a fast dissolve product and Alamo Pharmaceuticals had submitted a regulatory submission for this product. In February 2003, Alamo Pharmaceuticals informed us that a regulatory submission for the fast dissolve product we developed had been submitted to the FDA. Under the agreement, we receive license and product development fees, milestone payments upon achieving specific milestones, and will receive manufacturing revenues and royalties on any sales of the undisclosed prescription product. The license agreement expires upon expiration of all patents covered under the agreement, the first of which expires in the U.S. in 2010. However, the license agreement may be terminated by either party upon the occurrence of a default event, such as a material breach of the agreement, which is not cured by the defaulting party within 60 days. For the three years ended December 31, 2002, we recognized revenue of approximately $2.3 million in up-front fees and milestone and development payments attributable to our agreement with Alamo Pharmaceuticals. In 2002, these revenues represented about 3% of our total revenues.

AstraZeneca

     In May 1999, we entered into a definitive global license agreement with an affiliate of AstraZeneca for a DuraSolv formulation of AstraZeneca’s Zomig (zolmitriptan) tablets. Under the license agreement, which is exclusive for the class of anti-migraine compounds of which Zomig is a member, we receive license and product development fees, payments upon achieving specific milestones, and royalties on any sales of the prescription

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product. The license agreement expires upon expiration of all patents covered under the agreement, the first of which expires in the U.S. in 2018. However, the license agreement may be terminated by AstraZeneca for any reason after notice of 180 days or by either party upon the occurrence of a default event, such as a material breach of the agreement, that is not cured by the defaulting party within 30 days. If AstraZeneca fails to meet minimum sales requirements or to pay the difference between the royalty amount due on the minimum sales requirements and the royalty amount due on actual sales, we may convert AstraZeneca’s exclusive license into a non-exclusive license. In August 2001, we entered into a supply agreement with an affiliate of AstraZeneca, which expires on a country-by-country basis at the same time as the definitive global license agreement expires. Under the supply agreement, we receive payments for manufacturing fast-dissolve versions of Zomig. The supply agreement may be terminated by either party upon the occurrence of a default event, such as a material breach of the agreement, which is not cured by the defaulting party within 45 days of notice, or by CIMA in the event AstraZeneca commercializes another fast dissolve formulation of Zomig (zolmitriptan) with a third party. For the three years ended December 31, 2002, we recognized revenue of approximately $18.7 million in net sales of products, up-front fees, milestone and development payments, and royalties attributable to our agreements with AstraZeneca. In 2002, these revenues represented about 19% of our total revenues.

Aventis Pharmaceuticals

     In September 2002, we announced the signing of a product development and worldwide license agreement for an OraSolv formulation of Allegra (fexofenadine), a prescription non-sedating antihistamine. Under the agreement, we receive license and product development fees, milestone payments upon achieving specific milestones, and will receive royalties on any sales of the prescription product. The license agreement expires upon expiration of all patents covered under the agreement, the first of which expires in the U.S. in 2010. However, the license agreement may be terminated by Aventis for any reason after notice of 60 days, or 180 days if the product is being manufactured by CIMA or by either party upon the occurrence of a default event, such as a material breach of the agreement, which is not cured by the defaulting party within 60 days. We are currently negotiating a manufacturing and supply agreement with Aventis. For the three years ended December 31, 2002, we recognized revenue of approximately $2.0 million in up-front fees and milestone and development payments attributable to our agreements with Aventis Pharmaceuticals. In 2002, these revenues represented less than 3% of our total revenues.

Bristol-Myers Squibb

     In June 1997, we entered into a multi-country, non-exclusive license agreement with Bristol-Myers Squibb, covering multiple products to be developed using our OraSolv technology. Tempra FirsTabs is the only product we developed under this agreement and no other new products are expected. The license agreement provides that upon the occurrence of a default event, such as a material breach of the agreement, which is not cured by the defaulting party within 60 days, either party may terminate the agreement. In November 2000, we amended the license agreement to provide that Bristol-Myers Squibb may not terminate the license agreement before December 31, 2005, and afterwards may terminate for any reason by giving us 60 days written notice and paying us any royalty payments accruing through the termination date. We expect to continue to receive at least minimum royalty payments through 2005. We do not have a supply agreement with Bristol-Myers Squibb, but we receive payments for manufacturing Tempra FirsTabs. For the three years ended December 31, 2002, we recognized revenue of approximately $1.4 million in net sales of products and royalties attributable to our agreement with Bristol-Myers Squibb. In 2002, these revenues represented less than 1% of our total revenues.

Novartis

     In July 1998, we entered into a license and a supply agreement with Novartis Consumer Health, granting to Novartis exclusive rights to use our OraSolv technology with Novartis’ Triaminic non-prescription pediatric cold, cough and allergy product line in the U.S. and Canada. Triaminic products that have been formulated using our OraSolv fast dissolve delivery system are marketed under the tradename Softchews. The license agreement, which was amended in April 2001, expires on a country-by-country basis upon the later of January 12, 2010 or the expiration of all patents covered by the agreement, the first of which expires in the U.S. in 2010. The July 1998 supply agreement was superseded by a new supply agreement in 2001, which has a term of five years and includes an automatic renewal provision subject to agreement on product pricing for the renewal periods. Under the supply agreement, we receive payments for manufacturing Triaminic Softchews. Novartis may terminate the supply

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agreement by providing 90 days notice to CIMA prior to the end of the initial five year term or any renewal period. In addition, either of the license or the supply agreement may be terminated by either party upon the occurrence of a default event, such as a material breach, which is not cured by the defaulting party within 90 days for the license agreement or within 60 days for the supply agreement. In addition, Novartis may terminate the license agreement on or after July 1, 2003, after giving us a notice of nine months and paying us a termination fee of $200,000 plus all accrued amounts owed to us under the agreement. Under various individual product development agreements, which apply to specific Triaminic products, we receive product development payments. We also receive royalties on sales of Softchews products under the license agreement. For the three years ended December 31, 2002, we recognized revenue of approximately $24.9 million in net sales of products, development payments and royalties attributable to these agreements with Novartis. In 2002, these revenues represented less than 13% of our total revenues.

Organon

     In December 1999, we entered into a definitive global license agreement with two affiliates of Akzo Nobel NV, Organon International AB and NV Organon, for an OraSolv formulation of Remeron (mirtazapine), a prescription anti-depression product. Under the license agreement, we receive license and product development fees, milestone payments upon achieving specific milestones, and royalties on any sales of the prescription product. The license agreement expires upon expiration of all patents covered under the agreement, the first of which expires in the U.S. in 2010. However, the license agreement may be terminated by either party upon the occurrence of a default event, such as a material breach of the agreement, which is not cured by the defaulting party within 90 days. In July 2000, we entered into a supply agreement with Organon Inc., a U.S. affiliate Akzo Nobel NV, which has an initial term of five years and automatic renewal provisions. Under the supply agreement, we receive payments for manufacturing Remeron SolTab. The supply agreement may be terminated by either party upon the occurrence of a default event, such as a material breach of the agreement, which is not cured by the defaulting party within 60 days of notice. For the three years ended December 31, 2002, we recognized revenue of approximately $30.4 million in net sales of products, up-front fees, milestone and development payments, and royalties attributable to these agreements with Organon. In 2002, these revenues represented more than 32% of our total revenues.

Schering-Plough

     In May 2002, we announced the signing of a product development, license and supply agreement for an OraSolv formulation of an undisclosed prescription product. Under the agreement, we receive license and product development fees, milestone payments upon achieving specific milestones, and will receive manufacturing revenues and royalties on any sales of the prescription product. The agreement expires upon expiration of all patents covered under the agreement, the first of which expires in the U.S. in 2010. However, the agreement may be terminated by Schering-Plough for any reason after notice of 90 days, or 180 days if the product is being manufactured by CIMA or by either party upon the occurrence of a default event, such as a material breach of the agreement, which is not cured by the defaulting party within 90 days. For the three years ended December 31, 2002, we recognized revenue of approximately $1.6 million in up-front fees and milestone and development payments attributable to our agreements with Schering-Plough. In 2002, these revenues represented about 1% of our total revenues.

Schwarz Pharma

     In June 2000, we entered into an exclusive development, license and supply agreement with Schwarz Pharma, Inc. to develop and manufacture NuLev, our DuraSolv formulation of a hyoscyamine sulfate prescription product, which is used to treat irritable bowel syndrome. The June 2000 agreement allows us, upon the failure of Schwarz Pharma to meet minimum sales requirements, to convert Schwarz Pharma’s exclusive license into a non-exclusive license. The June 2000 agreement expires upon the expiration of all patents covered by the agreement, the first of which expires in the U.S. in 2018. However, the June 2000 agreement may be terminated by either party upon the occurrence of a default event, such as a material breach of the agreement, which is not cured by the defaulting party within 60 days. Under the June 2000 agreement, we receive milestone payments upon achieving specific milestones as well as payments for manufacturing NuLev and royalties on Schwarz Pharma’s sales of NuLev.

     In December 2001, we entered into an exclusive development, license and supply agreement with Schwarz Pharma to develop and manufacture an additional seven undisclosed prescription products based primarily on our

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DuraSolv fast dissolve drug delivery system. Based on confidentiality concerns of Schwarz Pharma, we previously agreed to keep confidential the identity of Schwarz Pharma as a party to this agreement, and referred to Schwarz Pharma as an unnamed pharmaceutical company in our previous filings and public statements. The expiration and termination provisions of the December 2001 agreement are comparable to the expiration and termination provisions of the June 2000 agreement. In addition, Schwarz Pharma may unilaterally terminate the December 2001 agreement, in its entirety or in part, at any time prior to the market launch of any or all of the seven products by providing notice to CIMA and reimbursing CIMA for its development activities. Under the December 2001 agreement, we receive license and product development fees, milestone payments upon achieving specific milestones, and will receive manufacturing revenues and royalties on any sales of the seven undisclosed prescription products. Schwarz Pharma will be required to obtain FDA approval for each of the seven undisclosed products prior to the marketing of such products.

     For the three years ended December 31, 2002, we recognized revenue of approximately $12.1 million in net sales of products, up-front fees, milestone and development payments, and royalties attributable to the June 2000 and December 2001 agreements with Schwarz Pharma. In 2002, these revenues represented less than 18% of our total revenues. The December 2001 agreement with Schwarz Pharma provides for license and product development fees and milestone payments in the aggregate amount of $15.0 million. This is the greatest amount of such fees and payments that we may receive under this agreement. We could receive a substantially smaller amount of fees and payments for many reasons, including if we fail to achieve certain milestones or if Schwarz Pharma exercises its option to terminate the agreement. The aggregate amount of development fees and milestone payments set forth in the December 2001 agreement should not be viewed as guaranteed future payments.

Wyeth

     In January 2000, we entered into an exclusive development and license agreement and a supply agreement with Wyeth for a DuraSolv formulation of prescription loratadine, a non-sedating antihistamine. Under the January 2000 development and license agreement, we received development and milestone payments upon achieving specific milestones. Schering-Plough has several U.S. patents for loratadine, the active drug compound in both Claritin and Claritin Reditabs. In August 2002, a federal district court ruled that claims by Schering-Plough alleging that generic versions of loratadine violated Schering-Plough’s patent were not valid. This ruling permitted the production and sale of generic versions of loratadine after December 19, 2002. In November 2002, the FDA approved over-the-counter sales of prescription formulations of Claritin at their original prescription strengths. In response to the foregoing events, Wyeth desired to produce and sell an over-the-counter loratadine product instead of a prescription loratadine product. Because our January 2000 agreements with Wyeth related solely to development of a loratadine prescription product, we do not anticipate any additional revenues from those agreements.

     In anticipation of the events described above, in May 2002 we entered into a development and license agreement and a supply agreement with Wyeth for an over-the-counter version of Claritin Reditabs using our DuraSolv formulation. In December 2002, we announced that Wyeth received FDA approval of its New Drug Application for Alavert, an over-the-counter equivalent to Claritin Reditabs, using our DuraSolv formulation. In February 2003, Wyeth received its second FDA approval for its Abbreviated New Drug Application for a DuraSolv loratadine product, which is identical to Alavert, but was initially intended for the prescription market. We believe that this second FDA approval of a DuraSolv loratadine product may prevent other pharmaceutical companies from receiving final FDA approval based on an Abbreviated New Drug Application for a competitive fast-dissolve formulation of loratadine until at least 180 days after Wyeth’s launch of Alavert on December 20, 2002. The May 2002 development and license agreement expires upon the expiration of all patents covered by the agreement, the first of which expires in the U.S. in 2018. The May 2002 supply agreement expires in December 2012. However, both of these agreements may be terminated by Wyeth for any reason after a six month notice or by either party upon the occurrence of a default event, such as a material breach of the agreement, which is not cured by the defaulting party within 60 days. Under the May 2002 development and license agreement, we receive development payments and royalties on any sales of Alavert. Under the May 2002 supply agreement, we receive payments for manufacturing Alavert.

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     For the three years ended December 31, 2002, we recognized revenue of approximately $6.6 million in net sales of products, up-front fees, milestone and development payments and royalties attributable to the January 2000 and May 2002 agreements with Wyeth. In 2002, these revenues represented more than 10% of our total revenues.

Proprietary Product Development

     In addition to entering into collaborations with pharmaceutical companies, we also expect to leverage our oral drug delivery technologies by actively identifying promising applications using active drug ingredients that have already been successfully marketed by leading pharmaceutical companies. We are selecting, funding and developing products on an internal basis and will be responsible for securing FDA approvals for such products. We plan to sell or license the marketing rights to these products to pharmaceutical companies with the appropriate sales and marketing organizations. We believe this strategy represents an important opportunity for CIMA because it eliminates the need for a collaborative agreement before developing additional products for our product pipeline. Equally important, we expect to retain a greater proportion of the economic value of those proprietary products that we successfully develop.

     To date, we have selected five proprietary products based on major active drug ingredients that are either off-patent or expected to become off-patent within the next few years. These proprietary products fall within the therapeutic categories of anti-infectives, cardiovascular, gastrointestinal and pain.

     We have conducted four studies in humans with OraVescent fentanyl, a potential proprietary product for the treatment of breakthrough cancer pain. Our first study in humans compared our OraVescent BL formulation to a similar formulation without absorption enhancing characteristics and to Actiq, a commercially available prescription product. Actiq (oral transmucosal fentanyl citrate) is indicated for breakthrough cancer pain in patients already receiving, and tolerant to, opioid therapy for underlying, persistent cancer pain. We believe this first study in humans demonstrates OraVescent BL’s superior absorption enhancing characteristics across mucosal membranes when compared to Actiq and to the other formulation without absorption enhancing characteristics. Our second study in humans compared our OraVescent SL to our OraVescent BL formulation using the same active drug ingredient contained in Actiq. We believe this second study demonstrates a quicker onset of action with OraVescent SL when compared to our OraVescent BL formulation. Our third study in humans compared Actiq with OraVescent BL and OraVescent SL under simulated self-administration conditions. We believe preliminary results from the third study confirmed the results from our first two studies in humans. In November 2001, we participated in a pre-Investigational New Drug meeting with the FDA to discuss our OraVescent fentanyl human data and a possible clinical development path. In 2002, we submitted our Investigational New Drug submission to the FDA, and we completed our first pharmacokinetic clinical study designed to compare OraVescent fentanyl and Actiq at a low and high dosage level. In 2003, based on the outcome of these clinical studies, we expect to perform formulation activities to optimize the product, to conduct additional studies in humans and to complete our assessment of the commercial manufacturability of this product.

     Fentanyl citrate, the active drug ingredient in our OraVescent fentanyl product, is classified as Schedule II substance under the Controlled Substances Act and regulated by the U.S. Drug Enforcement Agency, or DEA. Schedule I substances are considered to present the highest risk of substance abuse and Schedule V substances the lowest. In addition, regulations under the Occupational Safety and Health Act establish certain standards related to safety in handling and manufacturing potent substances, such as fentanyl citrate. Under these regulations, we believe fentanyl citrate would require a specialized manufacturing environment that prevents fentanyl citrate from coming in contact with humans. None of our existing production lines could be used to manufacture OraVescent fentanyl, or any other product with a similar safety profile. We are presently assessing the feasibility of contracting with a third party manufacturer capable of manufacturing products containing potent substances or developing these capabilities internally. If we decide to manufacture OraVescent fentanyl in our facilities, we will be required to add potent substance manufacturing capabilities that comply with these safety regulations, which could require capital expenditures in excess of $10.0 million.

     In April 2002, we announced the issuance of a patent by the U.S. Patent and Trademark Office for a fast dissolve, sustained release potassium chloride product, which is typically prescribed as an adjunct therapy for the treatment of hypertension. The patent covers the use of our OraSolv SR/CR fast dissolve, sustained release drug delivery technology with the active ingredient potassium chloride. This is our first patent covering both an active

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ingredient and our drug delivery technology. We are currently evaluating potential business opportunities for a proprietary product based on this patent.

     Our progress to date on the three other proprietary products has not gone beyond the pilot study phase, which includes acquiring active drug ingredients and preliminary planning. We expect to begin work on one or more of these three proprietary products in 2003. These proprietary products are expected to incorporate active drug ingredients with one of our proprietary oral drug delivery technologies. However, the active drug ingredients for these three products are currently protected by U.S. patents registered to third parties, the first of which expires in early 2005.

Intellectual Property

     We actively seek, when appropriate, to protect our products and proprietary information by means of U.S. and foreign patents, trademarks and contractual arrangements. We hold 17 issued U.S. patents and 18 issued foreign patents covering our technologies. The core U.S. and European patents relate to our fast dissolve and taste masking technologies. We also have over 45 U.S. and foreign patent applications pending.

     A description of our more important issued U.S. patents and their dates of expiration are set forth in the table below. The majority of these patents are composition-of-matter patents. The actual scope of coverage for a patent is governed by the specific claims applicable to the patent. The descriptions set forth below are intended solely to identify patents relevant to various technologies and are not intended to represent the scope of these patents.

	EXPIRATION DATE
PATENTED TECHNOLOGIES
Core OraSolv fast dissolve and taste masking technology		2010
The production of compressed effervescent and non-effervescent tablets using a tableting aid developed by us.		2010   and 2012
The formulation of a base coated, acid effervescent mixture manufactured by controlled acid base reaction. The obtained mixture can be used in the formulation of acid sensitive compounds with OraSolv technology or other effervescent based products		2013
Taste masking of micro-particles for oral dosage forms		2015
Core DuraSolv fast dissolve and taste masking technology		2018
Blister package and packaged tablet		2018
Fast dissolve oral dosage form containing potassium chloride		2018
Core OraVescent oral transmucosal drug delivery technology		2019
Core OraVescent gastrointestinal drug delivery technology		2019
Microemulsions as solid oral dosage forms		2019
PakSolv technology covering part of packaging system		2019
PakSolv technology covering additional aspects of packaging system		2019
Orally disintegrating tablet that forms a viscous slurry of microcapsules or powder		2019

     Our success will depend in part on our ability to obtain and enforce patents for our products, processes and technology, to preserve our trade secrets and other proprietary information and to avoid infringing the patents or proprietary rights of others.

     In addition to patents, we rely on trade secrets and proprietary know-how to protect our products, processes and technologies. To protect our rights to trade secrets and proprietary know-how, we require all employees, consultants and advisors to sign confidentiality agreements that prohibit the disclosure or use of confidential information to or by any third party. These agreements also require disclosure and assignment to us of discoveries and inventions made by these individuals while devoted to our activities.

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Research and Development

     Our research and product development efforts are focused on developing new product applications for our drug delivery technologies and expanding our technology platform to new areas of drug delivery. As of December 31, 2002, we had 74 scientists and other technicians working on research and product development. In August 2001, we purchased for $5.2 million a building in Brooklyn Park, Minnesota, which we currently use for our research and development center and will use as a second manufacturing site in 2003. During 2003, we expect to complete the renovation and expansion of our Brooklyn Park research and development facility, which was begun in 2002, at an estimated capital cost of $18.3 million, exclusive of capital costs to add a second manufacturing site.

     Our research and product development personnel, support systems and facilities are organized to develop drug delivery formulations from bench-scale through one-tenth of the commercial scale production under current good manufacturing practices conditions. The key goals for our research and product development efforts include:

• developing innovative drug delivery products and systems that fulfill pharmaceutical companies’ needs;

• developing, expanding and supporting systems to fulfill good manufacturing practices production at commercial levels required by pharmaceutical company partners;

• recruiting and training high-quality technical and scientific personnel; and

• supporting our intellectual property portfolio development.

     For the years ended December 31, 2002, 2001 and 2000, we spent approximately $10.9 million, $6.4 million and $5.0 million, respectively, on research and product development. We estimate that most of these expenditures were directly related to product development activities for which we received fees and licensing revenues from our pharmaceutical company partners.

Business Development

     We market directly to leading pharmaceutical companies for products that we believe would benefit from our fast dissolve technologies. Our strategy has been to leverage the brand names, marketing and sales capabilities of these pharmaceutical companies to maximize the value of our fast dissolve drug delivery technologies. We build our credibility with major pharmaceutical companies by speaking at technical seminars, publishing in technical journals and exhibiting at pharmaceutical and drug delivery conferences.

     We pursue agreements with leading pharmaceutical companies to fund the development of new products incorporating our drug delivery technologies. Once specific milestones have been met under these agreements, we generally enter into license and supply agreements.

Manufacturing

     Currently, our only manufacturing facility is located at our headquarters in Eden Prairie, Minnesota. We have two production lines for product requiring blister packaging, which collectively have an estimated production capacity in excess of 500 million tablets a year. We anticipate that our existing manufacturing capacity is adequate to meet the production requirements of our pharmaceutical partners in 2003. We plan to either replace the oldest of our two Eden Prairie based production lines or to add a third production line at our Eden Prairie facility, and expect the replaced or additional manufacturing line to be completed and commissioned in the first half of 2004. We plan to construct a second manufacturing site at our Brooklyn Park facility, which we expect to be completed and commissioned in the fourth quarter of 2003.

     In 2002, we commissioned a high shear granulation unit and a second coating unit at a total capital cost of $7.9 million. We expect that the high shear granulation unit, coupled with the additional coating unit, will enable us to develop, and ultimately commercialize, a broader range of prescription products. The products we are developing for Aventis Pharmaceuticals and Schering-Plough will require these additional manufacturing capabilities. In addition, we may require these capabilities in the future for those products we may develop that have taste masking challenges based on the particle size of the active drug ingredient or require a high dose of active drug ingredient relative to the desired tablet size.

     The decision to replace an existing production line or add a third line at our Eden Prairie facility will depend on our order position at the time we take delivery of the new equipment. We ordered the new production

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equipment during the fourth quarter of 2002, and we expect to take delivery of this equipment in the second half of 2003. The new production equipment we have ordered will be identical to the production line we added in 2000, which is expected to result in greater efficiencies in terms of using common supplies, parts and operating procedures, as well as increase manufacturing capacity of blister packaged tablets. Upon delivery of the new equipment, if we decide to replace an existing production line, the older line will be removed, and we will renovate the manufacturing suite in which the new equipment will be installed. In addition, should we decide to replace one of our two existing production lines, we are currently assessing the feasibility of utilizing the old production line in our Brooklyn Park research and development center for scale-up activities for products under development. Once the new production line is commissioned, which is expected to occur in the first half of 2004, we estimate that our total annualized capacity in Eden Prairie will increase from approximately 500 million to more than 700 million tablets if we replace an existing production line, or to approximately 1.0 billion tablets if we add a new production line to the two existing production lines.

     We currently purchase from single sources of supply, or our collaborative partners provide to us without charge, the active drug ingredients that are required to manufacture our products. The inactive drug ingredients and packaging materials used to manufacture our products are generally readily available from multiple suppliers. If we are unable to purchase adequate supply of active drug ingredients, inactive drug ingredients and packaging materials from our current suppliers, our manufacturing operations could be interrupted. We may be unable to identify alternative sources of supply, and even if we do identify alternative sources of supply, our manufacturing operations may be interrupted until we successfully complete a validated qualification process of those sources and negotiate trading terms.

     We are assessing the feasibility of adding capacity for the manufacture of products containing potent substances, such as fentanyl citrate. In the event we decide to add such capacity, we estimate that the capital expenditure required to construct and install a manufacturing line for potent substances could exceed $10.0 million and take up to 24 months to fully implement. Our capital expenditure plans for 2003 do not currently include this investment, and we do not expect to make a decision regarding potent substance manufacturing capability before the second half of 2003.

     PakSolv, our proprietary packaging process, allows high-speed packing of soft, brittle tablets without breakage into specially designed protective, child resistant packages and normal blister packages. We believe that this technology, which has two issued patents, gives us a competitive advantage.

     We plan our manufacturing cycles in advance of actual production in order to address lead times our suppliers may require. We generally do not stock significant quantities of raw materials for a product in excess of a partner’s orders nor do we manufacture finished product in excess of a partner’s orders.

Competition

     Competition among pharmaceutical products and drug delivery systems is intense. Our primary competitors for developing drug delivery systems and manufacturing the products we develop include other drug delivery, biotechnology and pharmaceutical companies. Many of these competitors have substantially greater financial, technological, manufacturing, marketing, managerial and research and development resources and experience than we have. Our products compete not only with products employing advanced drug delivery systems, but also with products employing conventional dosage forms. These competing products may obtain governmental approval or gain market acceptance more rapidly than our products. New drugs or future developments in alternative drug delivery technologies also may provide therapeutic or cost advantages over our current or future products.

     Many of our pharmaceutical company partners face intense competition from manufacturers of generic drugs. Generic competition may reduce the demand and/or price for our partners’ products. Products that our pharmaceutical company partners produce may also be subject to regulatory actions that result in prescription products becoming available to consumers over-the-counter. Such a change could also reduce the demand and/or price for our partners’ products. Because we derive a significant portion of our revenue from manufacturing products for and receipt of royalties from our pharmaceutical company partners, a decline in the sales of products that we produce for our partners, whether as a result of the introduction of competitive generic products or other competitive factors, could have a material adverse effect on our revenues and profitability.

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     Fast dissolve tablet technologies that compete with our OraSolv and DuraSolv technologies include the Zydis technology developed by an affiliate of Cardinal Health, Inc., the WOWTab technology developed by Yamanouchi Pharma Technologies, the Flashtab technology developed by Ethypharm, the FlashDose technology developed by an affiliate of Biovail Corporation and OraQuick technology developed by KV Pharmaceutical Company. The Zydis technology is a fast dissolving oral drug delivery system based on a freeze-dried gelatin tablet. The WOWTab, Flashtab and OraQuick technologies are fast dissolving technologies used in an oral fast dissolving tablet, which are similar to our DuraSolv tablet. The FlashDose technology is used in an oral fast dissolve tablet, which is similar to our OraSolv tablet, but has not yet been commercialized with an FDA approved prescription product. Cardinal Health has commercialized its Zydis technology in several major prescription products in the U.S., including Claritin Reditabs, Maxalt-MLT and Zyprexa Zydis. KV Pharmaceutical Company has announced that they will commercialize their first OraQuick technology product with the introduction in 2003 of a product that is generically equivalent to Schwarz Pharma’s NuLev, which we developed based on our DuraSolv technology. On March 17, 2003, CIMA and Schwarz Pharma filed a complaint in federal district court against KV Pharmaceutical Company alleging infringement of one or more of our patents covering our DuraSolv technology. SPI Pharma, Inc., a wholly-owned subsidiary of Associated British Foods plc, recently announced Pharmaburst, a specially engineered excipient system that is capable of rapid disintegration. At this time, we are not aware of any pharmaceutical products that are based on SPI Pharma’s Pharmaburst fast dissolve tablet delivery system. In addition, Eurand, a private specialty pharmaceutical company, recently announced that it has licensed a marketed, fast dissolve drug delivery technology, which is expected to be fully integrated into Eurand’s business in the second half of 2003. We believe there may be other pharmaceutical companies that are developing fast dissolve tablet technologies, which may compete with our technologies in the future.

     The principal competitive factors in the market for fast dissolving tablet technologies are compatibility with taste masking techniques, packaging, dosage capacity, drug compatibility, cost, ease of manufacture, patient acceptance and required capital investment for manufacturing. We believe that our fast dissolving tablet technologies compete favorably with respect to each of these factors. In a 1997 quantitative consumer study that we conducted, consumers generally preferred the OraSolv formulation to the Cardinal Health Zydis’ formulation of the same active drug ingredient. Our 1997 study was confirmed by an August 2001 study we sponsored that measured migraine sufferers’ preferences between Zomig-ZMT, a CIMA DuraSolv formulation, and Maxalt-MLT, a Cardinal Health Zydis formulation. The 2001 study indicated that 70% of the study subjects preferred CIMA’s DuraSolv formulation, compared to 27% favoring the Zydis formulation. We also believe that we offer pharmaceutical companies the largest selection of oral fast dissolve drug delivery technologies.

Government Regulation

     Numerous governmental authorities in the U.S. and other countries extensively regulate the activities of pharmaceutical manufacturers. In the U.S., pharmaceutical products are subject to rigorous regulation by the Food and Drug Administration. The Federal Food, Drug, and Cosmetic Act and other federal and state statutes and regulations govern, among other things, the research, development, testing, manufacture, safety, storage, record keeping, labeling advertising, promotion, marketing and distribution of pharmaceutical products. If we fail to comply with the applicable requirements, we may be subject to administrative or judicially imposed sanctions such as warning letters, fines, injunctions, product seizures or recalls, total or partial suspension of production, or FDA refusal to approve pending pre-market approval applications or supplements to approved applications, as well as criminal prosecution.

     FDA approval generally is required before a new drug product may be marketed in the U.S. Many over-the-counter, or OTC, drug products are exempt, however, from the FDA’s pre-marketing approval requirements. Whether or not products require FDA approval, drug products remain subject to various ongoing FDA regulations, including good manufacturing practices, labeling requirements and warning statements, advertising restrictions related to product labeling and drug ingredient specifications. Products and their manufacturing facilities are subject to FDA inspection, and failure to comply with applicable regulatory requirements may lead to administrative or judicially imposed penalties.

     We expect that our pharmaceutical company partners will seek any required FDA approvals in connection with the introduction of new products we develop for them under a collaborative agreement. The FDA submission

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and approval process may require significant commitments of our time and resources. The FDA approval process may delay or prevent the marketing of our products. We cannot be sure that approvals will be obtained, or that any such approvals will have the scope necessary for successful commercialization of these products. Even after an addendum or supplement to a new drug application is approved, existing FDA procedures may delay initial product shipment and materially reduce the period during which there is an exclusive right to exploit patented products or technologies.

     Prior to marketing a product internationally, we are likely to be required to obtain foreign regulatory approval. Foreign approval procedures vary from country to country and the time required for approval may result in delays in, or ultimately prevent, the marketing of a product. We expect our pharmaceutical company partners to obtain any necessary government approvals in foreign countries in connection with the introduction of new products we develop for them under a collaborative agreement. However, we may have to spend considerable amounts of time and resources to support the submission and approval of these foreign filings. In addition, our manufacturing facility may be subject to inspections by foreign agencies, similar to the FDA, to allow for the marketing of our products in a foreign country.

     Our manufacturing facility is registered with the FDA. We must inform the FDA of every drug product we have in commercial distribution and keep an updated list of those drugs. Our manufacturing facility also is inspected by the FDA and must comply with good manufacturing practices regulations at all times during the manufacture and processing of drug products. The FDA completed pre-approval inspections of our Eden Prairie and Brooklyn Park facilities in August 2000. We were not cited for any significant shortcomings relating to the pre-approval inspections nor were we cited for any significant shortcomings in compliance with good manufacturing practices regulations. We cannot guarantee that any future FDA inspections will proceed without any compliance issues requiring time and resources to resolve. Our facilities also must be inspected by, and we have received a license from, the Minnesota Board of Pharmacy for the manufacture of drug products.

     The Controlled Substances Act imposes various registration, record-keeping and reporting requirements, procurement and manufacturing quotas, labeling and packaging requirements, security controls and a restriction on prescription refills on certain pharmaceutical products. A principal factor in determining the particular requirements of this act, if any, applicable to a product is its actual or potential abuse profile. A pharmaceutical product may be listed as a Schedule I, II, III, IV or V substance, with Schedule I substances considered to present the highest risk of substance abuse and Schedule V substances the lowest. None of our current commercialized products are listed substances. However, fentanyl citrate, the active ingredient in OraVescent fentanyl, is a Schedule II controlled substance. Schedule II substances are subject to strict handling and record keeping requirements and prescribing restrictions. In addition, should we successfully develop an OraVescent fentanyl product that is approved for marketing by the FDA, we believe it is possible that it could be subject to state controlled substance regulation, and may be placed in more restrictive schedules than those determined by the U.S. Drug Enforcement Agency and FDA.

     In addition to the statutes and regulations described above, we also are subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other federal, state and local regulations. We believe that we have complied with these laws and regulations in all material respects, and we have not been required to take any action to correct any material noncompliance. We are unable to predict, however, the impact on our business of any changes that may be made in these laws or of any new laws or regulations that may be imposed in the future. We cannot be sure that we will not be required to incur significant compliance costs or be held liable for damages resulting from any violation of these laws and regulations.

Employees

     As of January 20, 2003, we had 219 full-time employees, with 118 engaged in manufacturing and quality assurance, 74 in research and development and 27 in executive management and office support. None of our employees is subject to a collective bargaining agreement nor have we ever experienced a work stoppage. We believe our employee relations are good.

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Executive Officers of the Registrant

     Our executive officers and their ages as of March 31, 2003 are as follows:

Name	Age		Title
John M. Siebert, Ph.D.		63	President and Chief Executive Officer
John Hontz, Ph.D.		46	Chief Operating Officer
David A. Feste		52	Vice President, Chief Financial Officer and Secretary until March 31, 2003
James C. Hawley		49	Vice President, Chief Financial Officer and Secretary, effective April 1, 2003

     Each of our executive officers has an employment agreement. There are no family relationships between or among any of our executive officers or directors.

     John M. Siebert, Ph.D. has been our President and Chief Executive Officer since September 1995, President and Chief Operating Officer from July 1995 to September 1995, and has served as a director since May 1992. From 1992 to 1995, Dr. Siebert was Vice President, Technical Affairs at Dey Laboratories, Inc., a pharmaceutical company. From 1988 to 1992, Dr. Siebert worked at Bayer Corporation. Dr. Siebert has also been employed by E.R. Squibb & Sons, Inc., G.D. Searle & Co. and The Procter & Gamble Company. On March 18, 2002, Dr. Siebert announced that he will retire from the Company. Our Board of Directors has appointed a search committee to identify and recruit a new President and Chief Executive Officer.

     John Hontz, Ph.D. has been our Chief Operating Officer since January 2000. From 1997 to January 2000, Dr. Hontz was our Vice President of Research and Development. From 1995 to 1997, Dr. Hontz was senior Group Leader of Product Development at Glaxo Wellcome plc, a pharmaceutical company. From 1987 to 1995, Dr. Hontz was with Burroughs-Wellcome, which was acquired by Glaxo in 1995, most recently as Section Head of Product Development.

     David A. Feste will resign as our Vice President, Chief Financial Officer and Secretary effective March 31, 2003, but has agreed to remain on staff through June 30, 2003 to facilitate the transition of his duties. Mr. Feste has been our Vice President, Chief Financial Officer and Secretary since February 2000. From 1995 to 1999, Mr. Feste was Vice President and Chief Financial Officer for Orphan Medical, Inc., a pharmaceutical company. From 1992 to 1995, Mr. Feste was self-employed as a financial consultant. From 1985 to 1991, Mr. Feste was with Tonka Corporation, most recently as its Corporate Vice President of Financial Services and Audit.

     James C. Hawley will become our Vice President, Chief Financial Officer and Secretary effective April 1, 2003. From 2000 to March 2003, Mr. Hawley was a Principal and Vice President of Manchester Companies, Inc., an investment banking and management advisory firm. From 1999 to 2000, Mr. Hawley served as Chief Executive Officer of CARA Collision & Glass, a consolidator in the damaged vehicle repair business. From 1995 to 1998, Mr. Hawley served as President & Chief Executive Officer, as well as Executive Vice President of Operations and Finance, for Harmony Brook Inc., a developer and marketer of water purification systems. From 1991 to 1994, Mr. Hawley served as Executive Vice President, as well as Vice President of Finance & Operations and Chief Financial Officer of Orthomet Inc., a developer of implantable medical devices. Prior to 1991, Mr. Hawley spent 12 years at 3M Company in various positions culminating in his role as group controller of the pharmaceutical and dental products group.

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ITEM 2. PROPERTIES

     Prior to March 2002, we leased our 75,000 square foot facility in Eden Prairie, Minnesota, which houses our corporate headquarters, manufacturing facility and warehouse space. In March 2002, we purchased this facility at a capital cost of approximately $5.7 million pursuant to the terms of an option under our lease. The facility is currently our sole manufacturing facility and contains two production lines, a granulation suite, two coating units and a warehouse. In 2003, we expect to either replace one of our two production lines or to add a third production line at an estimated capital cost of $9.3 million. We ordered the production line equipment for this project in 2002 and we expect it to be delivered in the second half of 2003.

     In August 2001, we purchased a 107,000 square foot facility in Brooklyn Park, Minnesota at a capital cost of approximately $5.2 million. This facility currently houses our research and product development center. In 2002, we commenced a $10.0 million capital expenditure program to expand the research and product development capabilities of this facility, which we expect to complete in the first quarter of 2003 at a total capital cost of $18.3 million. The capital cost for this project exceeded our initial estimates by $8.3 million principally as a result of our decision to expand the Brooklyn Park facility from a 107,000 square foot to a 150,000 square foot facility in order to accommodate future growth. In 2003, we also expect to complete the addition of manufacturing capabilities to the Brooklyn Park facility, including a tablet press and a bottling line for products utilizing our DuraSolv fast dissolve delivery system, at an estimated capital cost of $8.3 million. We ordered the production line equipment for this project in 2002, and we expect it to be delivered in the first half of 2003.

     We believe that both of these facilities are adequate to meet our foreseeable requirements.

ITEM 3. LEGAL PROCEEDINGS

     On March 17, 2003, CIMA and Schwarz Pharma filed a complaint in the United States District Court for the District of Minnesota against KV Pharmaceutical Company and its wholly owned subsidiary Ethex Corporation. The complaint alleges that KV Pharmaceutical and Ethex are manufacturing and selling orally disintegrating hyoscyamine sulfate (0.125 mg) tablets in violation of one or more of CIMA’s patents covering its DuraSolv technology. CIMA manufactures NuLev, an orally disintegrating hyoscyamine sulfate (0.125 mg) product, for Schwarz pursuant to an exclusive license agreement. CIMA and Schwarz are seeking an injunction against further infringement of the patent and compensatory damages.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     Our common stock is traded on the Nasdaq National Market under the symbol CIMA. The following table presents, for the periods indicated, the range of high and low closing sale prices for our common stock as reported on the Nasdaq National Market.

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	High		Low
Year ended December 31, 2002:
First Quarter	$	35.45	$	19.60
Second Quarter		28.60		18.94
Third Quarter		25.15		16.06
Fourth Quarter		28.58		22.10
Year ended December 31, 2001:
First Quarter	$	73.38	$	46.75
Second Quarter		85.75		43.05
Third Quarter		81.35		47.97
Fourth Quarter		62.40		30.05

Holders

     On March 24, 2003 the last reported bid price of our common stock was $20.10 per share. We had 75 stockholders of record and an estimated 6,650 beneficial owners of our common stock as of March 24, 2003.

Dividends

     We have never declared or paid any dividends. We anticipate that all of our earnings, if any, will be retained for development of our business, and we do not anticipate paying any cash dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

     This section presents our historical financial data. You should read carefully the financial statements included in this Annual Report, including the notes to the financial statements, and Management’s Discussion and Analysis of Financial Condition and Results of Operations. The income statement data for the years ended December 31, 2002, 2001 and 2000 and the balance sheet data as of December 31, 2002 and 2001 have been derived from our financial statements that have been audited by Ernst & Young LLP, independent auditors, and are included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the years ended December 31, 1999 and 1998 and the balance sheet data as of December 31, 2000, 1999 and 1998 have been derived from financial statements that have been audited by Ernst & Young LLP, and are not included elsewhere in this Annual Report. Historical results are not necessarily indicative of future performance. See the notes to the financial statements for an explanation of the method used to determine the number of shares used in computing basic and diluted net income (loss) per share, and see Item 7 of this report for an explanation of accounting changes regarding revenue recognition under the caption “Recent Accounting Pronouncements.”

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Selected Financial Data

			(in thousands, except per share data)
			Year Ended December 31,
			2002		2001		2000			1999			1998
Statement of Operations Data:
Operating revenues:
	Net sales		$	23,391	$	17,756	$	13,407		$	4,839		$	1,097
	Product development fees and licensing			11,496		8,867		8,817			7,818			6,141
	Royalties			11,738		5,403		1,695			735			374
Total operating revenues				46,625		32,026		23,919			13,392			7,612
Operating expenses:
	Costs of goods sold			18,797		16,001		12,410			7,546			4,476
	Research and product development			10,869		6,385		4,958			4,388			3,307
	Selling, general and administrative			7,166		5,090		3,880			2,836			3,138
Total operating expenses				36,832		27,476		21,248			14,770			10,921
Operating income (loss)				9,793		4,550		2,671			(1,378	)		(3,309	)
Other income, net				6,383		10,334		2,114			116			122
Income (loss) before cumulative effect of a change in accounting principle and income tax benefit				16,176		14,884		4,785			(1,262	)		(3,187	)
Cumulative effect of a change in accounting principle				—		—		(799	)		—			—
Income tax benefit				2,441		104		—			—			—
Net income (loss)			$	18,617	$	14,988	$	3,986		$	(1,262	)	$	(3,187	)
Net income (loss) per share:
	Basic
		Net income (loss) per share before cumulative effect of a change in accounting principle	$	1.31	$	1.03	$	.43		$	(.13	)	$	(.33	)
		Net loss per share from cumulative effect of a change in accounting principle		—		—		(.07	)		—			—
	Net income (loss) per basic share		$	1.31	$	1.03	$	.36		$	(.13	)	$	(.33	)
	Diluted
		Net income (loss) per share before cumulative effect of a change in accounting principle	$	1.28	$	.97	$	.39		$	(.13	)	$	(.33	)
		Net loss per share from cumulative effect of a change in accounting principle		—		—		(.07	)		—			—
	Net income (loss) per diluted share		$	1.28	$	.97	$	.32		$	(.13	)	$	(.33	)
Weighted average of number of shares:
	Basic			14,193		14,559		11,151			9,615			9,610
	Diluted			14,599		15,503		12,385			9,615			9,610

	As of December 31,
Balance Sheet Data:	2002			2001			2000			1999			1998
Cash and investments	$	131,681		$	149,504		$	163,162		$	2,481		$	2,723
Total assets		225,353			198,931			189,462			19,270			14,916
Accumulated deficit		(8,386	)		(27,003	)		(41,991	)		(45,977	)		(44,715	)
Total stockholders’ equity		213,301			194,777			186,925			11,574			12,656

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis of our financial condition and results of operations should be read together with “Selected Financial Data” and our financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as

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a result of many factors, including but not limited to those set forth under “Factors That Could Affect Future Results” and elsewhere in this report.

Overview

     We develop and manufacture pharmaceutical products based on our proprietary OraSolv and DuraSolv fast dissolve technologies. We currently manufacture six pharmaceutical brands utilizing our fast dissolve technologies: three prescription and three over-the-counter brands. The three over-the-counter brands are Triaminic Softchews for Novartis, Tempra FirsTabs for a Canadian affiliate of Bristol-Myers Squibb and Alavert for Wyeth. The three prescription brands are AstraZeneca’s Zomig-ZMT and its equivalent for markets outside the U.S., Remeron SolTab for Organon and NuLev for Schwarz Pharma. We are currently developing other oral drug delivery technologies for ourselves and 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 (1) net sales of products we manufacture for pharmaceutical companies using our proprietary fast dissolve technologies, (2) product development fees and licensing revenues for development activities we conduct through collaborative agreements with pharmaceutical companies, and (3) royalties on the sales of products we manufacture, 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 collaborative agreements and the level of our development activity conducted for pharmaceutical companies.

     Components of revenue, expenses, operating income, other income, tax benefits and net income as a percentage of total operating revenue for the years ending December 31:

	2002			2001			2000
Net sales		50.2	%		55.4	%		56.0	%
Product development fees & licensing revenues		24.7	%		27.7	%		36.9	%
Royalty revenues		25.2	%		16.9	%		7.1	%
Cost of goods sold		40.3	%		50.0	%		51.9	%
Research & product development expense		23.3	%		19.9	%		20.7	%
Selling, general & administrative expense		15.4	%		15.9	%		16.2	%
Operating income		21.0	%		14.2	%		11.2	%
Other income, net		13.7	%		32.3	%		8.8	%
Tax benefit		5.2	%		0.3	%		0.0	%
Net income		39.9	%		46.8	%		16.7	%

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 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.

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     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 of milestones; from up-front product development license fees as fees are amortized over the expected development term of the proposed products; and from royalties on the sales of products that we manufacture, which are 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 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 year ended December 31, 2002, we have recorded a $6.4 million valuation allowance related to our net deferred tax assets of $17.8 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

Years Ended December 31, 2002, 2001 and 2000

     Operating Revenues. Our total operating revenues were $46.6 million in 2002, compared to $32.0 million in 2001 and $23.9 million in 2000. Operating revenues from AstraZeneca, Organon and Schwarz Pharma, our three largest pharmaceutical company partners in 2002, together represented approximately 69%, 55% and 52% of our total revenues in 2002, 2001 and 2000, respectively. In 2002, Schwarz Pharma replaced Novartis as one of our three largest pharmaceutical company partners. Novartis accounted for approximately 13% and 33% of total operating revenues in 2002 and 2001, respectively. The increases in total operating revenues in each year were due to sequentially increasing development activity for new products that resulted in higher product development fees and licensing revenue, as well as sequentially increasing sales of products we manufacture and royalties on sales by our pharmaceutical company partners under license from us.

     We are paid by our collaborative partners for the fast dissolve products that we manufacture and ship to them. These activities resulted in net sales of fast dissolve products of $23.4 million in 2002, compared to $17.8 million in 2001 and $13.4 million in 2000. The $5.6 million increase from 2001 to 2002 was primarily attributable to a net increase of $6.1 million in shipments of branded prescription products, which was partially offset by a net reduction in shipments of over-the-counter products that was caused by a year-over-year drop off in shipments of Triaminic Softchews. The $4.4 million increase from 2000 to 2001 was attributable to higher levels of shipments of both our brand prescription and over-the-counter products. In 2003, net sales of fast dissolve products are expected to increase in the range of 50% to 70% from 2002 levels.

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     We are paid product development and licensing revenues for our activities performed under collaborative agreements with pharmaceutical companies. These activities resulted in product development fees and licensing revenues of $11.5 million in 2002, compared to $8.9 million in 2001 and $8.8 million in 2000. The $2.6 million increase from 2001 to 2002 was primarily attributable to an increase in the number of collaborative projects in our product development portfolio, which included the achievement of certain milestones for Aventis and Schwarz Pharma. The $100,000 increase from 2000 to 2001 was not significant, with similar levels of development activity for proposed new products as well as the achievement of certain milestones for AstraZeneca, Novartis and Organon. Product development fees and licensing revenues include amortization of deferred revenue of $606,000, $400,000 and $1.3 million in 2002, 2001 and 2000, respectively. In 2003, product development fees and licensing revenues are expected to be slightly above 2002 levels.

     We are paid royalties based on our collaborative partners’ sales of fast dissolve products developed and manufactured by CIMA. Our collaborative partners’ sales of CIMA manufactured fast dissolve products amounted to approximately $236.0 million in 2002, up from nearly $103.0 million in 2001 and up from about $19.0 million in 2000. As a result, we recognized royalties of $11.7 million in 2002, compared to $5.4 million in 2001 and $1.7 million in 2000. The $6.3 million increase in royalties from 2001 to 2002 was attributable to strongly growing worldwide sales of fast dissolve versions of Zomig and Remeron SolTab, as well as the U.S. market introduction of Alavert by Wyeth late in the fourth quarter of 2002. The $3.7 million increase in royalties from 2000 to 2001 was attributable to the U.S. market launch of our first three branded prescription products, AstraZeneca’s Zomig-ZMT, Organon’s Remeron SolTab and Schwarz Pharma’s NuLev. In 2003, we expect royalties to increase from 50% to 70% from 2002 levels, based on anticipated sales of CIMA fast dissolve products by our collaborative partners in the range of $360.0 to $400.0 million.

     Cost of goods sold. We incurred cost of goods sold of $18.8 million in 2002, compared to $16.0 million in 2001 and $12.4 million in 2000. The $2.8 million increase from 2001 to 2002 was primarily due to manufacturing more of our fast dissolve products, except for Triaminic Softchews, and from higher indirect labor costs associated with the expansion of our manufacturing and quality control infrastructures. The $3.6 million increase from 2000 to 2001 was primarily due to manufacturing higher levels of over-the-counter products, principally Triaminic Softchews, higher direct labor costs to staff multiple production lines for a multiple shift operation, and from higher depreciation costs associated with new manufacturing equipment.

     Research and product development expenses. We incurred research and product development expenses of $10.9 million in 2002, compared to $6.4 million in 2001 and $5.0 million in 2000. The $4.5 million increase from 2001 to 2002 was primarily due to an increase in the number of collaborative projects in our product development portfolio, including development activity for recent collaborative agreements with Aventis, Schering-Plough and Schwarz Pharma, higher payroll costs associated with increases in professional staffing levels, and higher depreciation costs associated with the newly renovated R&D center. The $1.4 million increase from 2000 to 2001 was primarily due to increased development activity for AstraZeneca, Organon, Novartis and Schwarz Pharma, as well as higher payroll costs associated with increases in professional staffing levels.

     Selling, general and administrative expenses. We incurred selling, general and administrative expenses of $7.2 million in 2002, compared to $5.1 million in 2001 and $3.9 million in 2000. The $2.1 million increase from 2001 to 2002 was primarily due to increased recruiting and relocation costs, corporate incentive payments and higher levels of staffing and consulting in support of our computer and information systems. The increase from 2000 to 2001 was primarily due to marketing and related consulting costs associated with our business development efforts, higher payroll costs associated with increased professional staffing, and higher levels of staffing and consulting in support of our computer and information systems.

     Operating income. We recognized operating income of $9.8 million in 2002, compared to $4.6 million in 2001 and $2.7 million in 2000. The $5.2 million increase from 2001 to 2002 was primarily due to the growth in operating revenues as well as significantly higher gross profit margins of the fast dissolve product we manufacture for our collaborative partners. The $1.9 million increase from 2000 to 2001 was primarily due to the growth in operating revenues as well as nominally higher gross profit margins of the fast dissolve product we manufacture for our collaborative partners. In 2003, we expect operating income to be at least 85% higher than the operating income recognized for 2002 due to anticipated operating revenues in the range of $70.0 to $75.0 million.

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     Other income, net. We recognized other income of $6.4 million in 2002, compared to $10.3 million in 2001 and $2.1 million in 2000. Other income consists primarily of investment income on invested funds and gains or losses on asset dispositions. The $3.9 million decrease from 2001 to 2002 was primarily due to the lower interest rates on funds reinvested during the year. The $8.2 million increase from 2000 to 2001 was primarily due to the full-year effect of investing the $150.3 million cash proceeds from our November 2000 public offering. In 2003, we expect other income to decrease to under $5.0 million primarily from the impact of lower interest rates on funds that we expect to reinvest during the year.

     Tax benefit. We recognized a tax benefit, or negative tax expense, of $2.4 million in 2002, compared to a tax benefit of $104,000 in 2001 and no tax benefit/expense in 2000. The $2.3 million increase of tax benefit from 2001 to 2002 was due to the recognition of approximately $8.9 million in tax credits related to the utilization of net operating loss carryforwards, which offset the tax expense we would otherwise incur. The $104,000 increase of tax benefit from 2000 to 2001 was due to the recognition of approximately $6.1 million in tax credits related to the utilization of net operating loss carryforwards, which offset the tax expense we would otherwise incur. In 2003, we expect to recognize our remaining tax benefits related to the utilization of net operating loss and tax credit carryforwards, which have a value of approximately $2.0 million, and are expected to result in a full-year effective tax rate in the range of 31% to 33%.

Liquidity and Capital Resources

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

     Working capital, which is defined as current assets less current liabilities, increased by $50.2 million from $33.5 million at December 31, 2001 to $83.7 million at December 31, 2002. The increase was primarily due to $20.1 million in net cash provided by operating activities and the sale or redemption of $67.1 million of non-current available-for-sale securities, partially offset by the use of $36.6 million for capital expenditures and the use of $2.1 million to repurchase approximately 86,000 shares of common stock. We invest excess cash in interest-bearing money market accounts and investment grade securities.

     During 2003, we plan to spend approximately $24.0 to $27.0 million, exclusive of potential capital expenditures to add capacity for the manufacture of products containing potent substances, to complete various improvements to our Eden Prairie manufacturing facility and Brooklyn Park R&D center, including a second site of manufacturing. Our second manufacturing site in our Brooklyn Park facility will be equipped to provide bottling production line capabilities and is expected to be operational late in 2003. We also expect to substantially complete either the replacement or the addition of a production line in Eden Prairie for fast dissolve product requiring blister packaging. In addition, we expect to fund additional product development activities related to our OraVescent technology, which may include adding capacity for the manufacture of products containing potent substances, 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 Annual Report on Form 10-K are forward-looking statements based on our current expectations, assumptions, estimates and projections about our business and our industry. These forward-looking 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-K. 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.

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The Loss Of One Of Our Top Three Major Customers Could Reduce Our Revenues Significantly.

     Revenues from AstraZeneca, Organon and Schwarz Pharma together represented approximately 69% of our total operating revenues for the year ended December 31, 2002, compared to 55% for the corresponding period 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, Or The Sales Of Those Products May Be Affected By Factors Beyond The Control Of Those Third Parties.

     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. 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.

     For the year ended December 31, 2002, net sales from manufacturing and royalties from our partners’ sales of our top three products accounted for approximately 60% of our operating revenues. Our top three products are AstraZeneca’s Zomig-ZMT and its equivalent for markets outside the U.S., Organon’s Remeron SolTab and its equivalent for markets outside the U.S., and Wyeth’s Alavert. We cannot be certain that these products will continue to be accepted in their markets. Specifically, the following factors, among others, could affect the level of market acceptance of Remeron SolTab and its non-U.S. equivalents, Zomig-ZMT and its non-U.S. equivalents, and Alavert:

• the perception of the healthcare community of their safety and efficacy, both in an absolute sense and relative to that of competing products;

• unfavorable publicity regarding these products or similar products;

• product price relative to other competing products or treatments;

• changes in government and third-party payor reimbursement policies and practices; and

• regulatory developments affecting the manufacture, marketing or use of these products.

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 agreements with us.

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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 for product requiring blister packaging, which collectively have an estimated annualized production capacity in excess of 500 million tablets. In 2003, we plan to either replace the oldest of our two production lines or retain both of these production lines and add a third production line at our Eden Prairie facility, which is expected to be completed and commissioned in the first half of 2004. We also plan to add a production line for bottled product at our Brooklyn Park facility, which is expected to be completed and commissioned in the fourth quarter of 2003. We estimate that our total annualized capacity for the two production lines in Eden Prairie will increase from approximately 500 million to more than 700 million tablets, or to approximately 1.0 billion tablets if we add the new production line to our two existing production lines. The estimated total annualized capacity of the production line in Brooklyn Park will be approximately 700 million bottled tablets. If we are unable to increase our production capacity as scheduled or if our partners significantly increase their requirements for product deliveries prior to completing the scheduled increases in capacity, we may be required to allocate our production capacity until we have completed these capacity improvements. If this should happen, 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 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.

     Our operating revenues increased 46% for the year ended December 31, 2002, compared to an increase of 34% for the year ended December 31, 2001, 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.

Sales Of Our Pharmaceutical Company Partners’ Products May Decline As A Result Of Competition From Generic Prescription Products And Regulatory Actions That Could Switch A Prescription Product To An Over-The-Counter Product, Which May Result In A Decline In Our Revenues.

     Many of our pharmaceutical company partners face intense competition from manufacturers of generic drugs. Generic competition may reduce the demand and/or price for our partners’ products. Products that our pharmaceutical company partners produce may also be subject to regulatory actions that result in prescription products becoming available to consumers over-the-counter. Such a change could also reduce the demand and/or price for our partners’ products. Because we derive a significant portion of our revenue from manufacturing products for and receipt of royalties from our pharmaceutical company partners, a decline in the sales of products that we produce for our partners, whether as a result of the introduction of competitive generic products or other competitive factors, could have a material adverse effect on our revenues and profitability.

     In January 2002, Mylan Laboratories and Teva Pharmaceutical Industries announced that they received tentative approval from the FDA to sell mirtazapine tablets, which are expected to be generic substitutes for Organon’s Remeron standard tablets. We developed and manufacture an OraSolv formulation of Remeron for Organon. 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 its U.S. patent for Remeron SolTab (mirtazapine orally disintegrating tablets). On December 18, 2002, a federal

27

district court ruled that the generic version of mirtazapine developed by Teva did not infringe Organon’s patent covering Remeron. As a result of this ruling, we expect that Teva will launch its generic form of mirtazapine in the U.S. market in 2003. We expect other generic manufacturers, including Mylan Laboratories, to launch their generic versions of mirtazapine, subject to FDA approval, after Teva’s 180 day marketing exclusivity period expires. In addition, the U.S. market launch of generic orally disintegrating mirtazapine tablets developed by Barr Laboratories is expected to occur after it receives FDA approval. Although Organon has appealed this court’s ruling, it is unlikely that the appeals court will reverse or delay the trial court’s ruling. Organon’s market for Remeron SolTab may be affected negatively by the introduction of generic versions of standard or orally disintegrating mirtazapine tablets. The introduction of these generic tablets could be expected to lower Organon’s pricing for Remeron. Due to the large number of variables and high degree of uncertainty, we are unable to predict the timing of the market introduction of a generic orally disintegrating mirtazapine tablet or the effect that the introduction of generic mirtazapine may have on our business.

     On January 15, 2003, KV Pharmaceutical Company announced that it will begin marketing the first product utilizing its OraQuick fast dissolve technology. Hyoscyamine Sulfate Orally Disintegrating Tablets, 0.125mg, is a prescription anticholinergic/antispasmodic product. This product is expected to be equivalent to and substitutable for NuLev, which we developed and manufacture for Schwarz Pharma. Due to the large number of variables, we are unable to predict the effect of such a product introduction by KV Pharmaceutical on our business.

     On January 27, 2003, Andrx Corporation and Perrigo Company announced that they have entered into a multi-year agreement for Andrx to supply Perrigo with Andrx’s over-the-counter fast dissolve formulation of loratadine, which is expected to be equivalent to and substitutable for Schering-Plough’s Claritin RediTabs and Wyeth’s Alavert. We developed and manufacture Alavert for Wyeth. Andrx has received tentative FDA approval of its Abbreviated New Drug Application for a fast dissolve formulation of loratadine. In February 2003, Wyeth received its second FDA approval for a DuraSolv loratadine product, which is identical to Alavert, but was initially intended for the prescription market. We believe that Wyeth’s second FDA approval of a DuraSolv loratadine product may prevent Andrx from receiving final FDA approval of its competitive fast-dissolve formulation of loratadine, until at least 180 days after Wyeth’s launch of Alavert on December 20, 2002. Due to the large number of variables, we are unable to predict the effect of Perrigo’s product introduction of a fast dissolve loratadine product 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, 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

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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.

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, financial condition and results of operations.

Our Products May Contain Controlled Substance And Or Potent Substances, The Supply And Manufacture Of Which May Be Limited Or Regulated By U.S. Government Agencies.

     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. 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.

     Regulations under the Occupational Safety and Health Act establish certain standards related to safety in handling and manufacturing potent substances, such as fentanyl citrate. Under these regulations, we believe that our production of fentanyl citrate would require a specialized manufacturing environment that prevents fentanyl citrate from coming in contact with humans. We may develop other products that would require a specialized manufacturing environment. Currently, none of our existing production lines in Eden Prairie nor our planned production line in Brooklyn Park are capable of manufacturing potent substances. In the event we pursue the development of our OraVescent fentanyl product through regulatory submission or other potential products with a comparable safety profile to fentanyl, we will be required to identify a manufacturer with appropriate resources to manufacture potent substances or to develop those capabilities internally. We are presently assessing the feasibility of contracting with third party manufacturers that have these specialized manufacturing capabilities and of developing these capabilities internally. In the event we decide to manufacture OraVescent fentanyl or other potent products in our facilities, we will be required to add potent substance manufacturing capabilities that comply with these safety regulations, which could require capital expenditures in the excess of $10 million. If we choose not to invest in potent substance manufacturing capabilities, our future revenues may not grow as fast because we will be unable to compete in certain important therapeutic markets for our technologies.

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 practices 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:

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• 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.;

• totally or partially suspend our production;

• delay pending marketing applications; and

• initiate criminal prosecutions.

We Have A Single Manufacturing Facility For Product Requiring Blister Packaging And We May Lose Revenues And Be Unable To Maintain Our Relationships With Our Pharmaceutical Company Partners If We Lose Production Capacity for Blistered Product.

     We manufacture all our products on two production lines in our Eden Prairie facility. All of our commercialized products, except for Schwarz Pharma’s NuLev, are blister packaged on one or both of our Eden Prairie production lines. 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 to 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. The production line we expect to add at our Brooklyn Park facility will be dedicated to bottled product, which is important for products currently under development, but does not reduce the risk associated with loss of capacity for product requiring blister packaging.

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

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Ethypharm, the FlashDose technology developed by Fuisz Technologies Ltd., a wholly-owned subsidiary of Biovail Corporation, and the OraQuick technology developed by KV Pharmaceutical Company. SPI Pharma, Inc., a wholly-owned subsidiary of Associated British Foods plc, recently announced Pharmaburst, a specially engineered excipient system that is capable of rapid disintegration. In addition, Eurand, a private specialty pharmaceutical company, recently announced that it has licensed a marketed, fast dissolve drug delivery technology, which is expected to be fully integrated into Eurand’s business in the second half of 2003. 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.

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 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

31

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, 2002, we have accumulated aggregate net losses from inception of approximately $8.4 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;

• 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 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 coughs and colds. 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 2002, operating revenues from Novartis, which included revenues related to Triaminic, a seasonal cough and cold product, represented nearly 13% of our total operating revenues. We may not be successful in developing a mix of products to reduce these seasonal variations.

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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, Advertising and Communication acceptable marketing claims for a product incorporating our drug delivery technologies, 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 technologies, or the drug product itself, may not be approved by the Division of Drug Marketing, Advertising and Communication.

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 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, 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;

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• 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

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

Recent Accounting Pronouncements

     In December 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, or SAB 101, “Revenue Recognition in Financial Statements.” SAB 101 requires that up-front license fees received from research collaborators be recognized over the term of the agreement unless the fee is in exchange for products delivered or services performed that represent the culmination of a separate earnings process. We implemented SAB 101 in the quarter ended on June 30, 2000. Implementation of SAB 101 was retroactive to January 1, 2000. We incurred a charge to earnings of $799,000 for the cumulative effect of a change in accounting principle, which is included in income for the year ended December 31, 2000. The effect of the change on the year ended December 31, 2000 was to increase income before cumulative effect of the change in accounting principle by $799,000 or $0.07 per diluted share. For the year ended December 31, 2000, we recognized $799,000 in revenue that is included in the cumulative effect adjustment as of January 1, 2000.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is subject to interest rate risks on cash, cash equivalents and available-for-sale securities. Our investments in fixed-rate debt securities, which are classified as available-for-sale at December 31, 2002, have remaining maturities ranging from 3 to 51 months and are exposed to the risk of fluctuating interest rates. Available-for-sale securities had a market value of $105.6 million at December 31, 2002, and represented 47% of our 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 December 31, 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Our financial statements as of December 31, 2002 and 2001 and for each of the years ended December 31, 2002, 2001 and 2000 begin on page F-1 of this Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Incorporated by reference into this Annual Report on Form 10-K is the information appearing under the headings “Election of Directors” and “Security Ownership of Certain Beneficial Owners and Management” in our Proxy Statement for Annual Meeting of Stockholders to be held on May 21, 2003. Information relating to the company’s executive officers is provided in this Annual Report on Form 10-K under the heading “Business—Executive Officers of the Registrant.”

ITEM 11. EXECUTIVE COMPENSATION

     Incorporated by reference into this Annual Report on Form 10-K is the information appearing under the heading “Executive Compensation” in our Proxy Statement for Annual Meeting of Stockholders to be held on May 21, 2003.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     Incorporated by reference into this Annual Report on Form 10-K is the information appearing under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our Proxy Statement for Annual Meeting of Stockholders to be held on May 21, 2003.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Incorporated by reference into this Annual Report on Form 10-K is the information appearing under the heading “Certain Transactions” in our Proxy Statement for Annual Meeting of Stockholders to be held on May 21, 2003.

ITEM 14. 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 Annual Report on Form 10-K, 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 action taken.

35

PART IV.

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1).   Financial Statements

		Page Number
		in this
Description		Annual Report
Audited Financial Statements:
	Report of Independent Auditors		F-1
	Balance Sheets		F-2
	Income Statements		F-3
	Statements of Cash Flows		F-4
	Statements of Changes in Stockholders’ Equity		F-5
	Notes to Financial Statements	F-6 to F-18

(a)(2).   Financial Statement Schedules

     The following financial statement schedule should be read in conjunction with the Audited Financial Statements referred to under Item 15(a)(1) above. Financial statement schedules not included in this Form 10-K have been omitted because they are not applicable or the required information is shown in the Audited Financial Statement or Notes thereto.

	Page Number
	in this
Description	Annual Report
Schedule II – Valuation and Qualifying Accounts: Years Ended December 31, 2002, 2001 and 2000	F-19

     (a)(3). Listing of Exhibits

Exhibit		Method of
Number	Description	Filing
3.1	Fifth Restated Certificate of Incorporation of CIMA, as amended.	(13)
3.2	Third Restated Bylaws of CIMA.	(8)
4.1	Form of Certificate for Common Stock.	(1)
4.2	Amended and Restated Rights Agreement dated June 26, 2001, between the Registrant and Wells Fargo Bank Minnesota, N.A. as Rights Agent.	(15)
4.3	Form of Stock Purchase Agreement dated March 13, 2000 between CIMA and certain institutional investors.	(9)
10.1	Letter Agreement, dated January 28, 1998, between CIMA and Joseph R. Robinson, Ph.D. *#	(6)
10.2	Equity Incentive Plan, as amended and restated. #	(8)
10.3	1994 Directors’ Stock Option Plan, as amended. #	(2)
10.4	Form of Director and Officer Indemnification Agreement.	(1)
10.5	License Agreement, dated July 1, 1998, between Novartis Consumer Health Inc. and CIMA.*	(7)
10.6	Supply Agreement, dated July 1, 1998, between Novartis Consumer Health Inc. and CIMA. *	(7)
10.7	License Agreement, dated January 28, 1994, between SRI International and CIMA. *	(1)
10.8	Non-Employee Directors’ Fee Option Grant Program. #	(3)
10.9	License Agreement, dated June 26, 1997, between Bristol-Myers Squibb Company and CIMA. *	(4)
10.10	License Agreement dated May 28, 1999, between IPR Pharmaceuticals, Inc. and CIMA. *	(8)
10.11	License Agreement dated December 29, 1999 between Organon International AG and N.V. Organon, and CIMA. *	(9)
10.12	Development and License Agreement dated January 14, 2000 between CIMA and American Home Products Corporation. *	(9)

36

Exhibit		Method of
Number	Description	Filing
10.13	Supply Agreement dated January 14, 2000 between CIMA and American Home Products Corporation. *	(9	)
10.14	Employment Agreement, dated June 30, 2000, between CIMA and John M. Siebert, Ph.D. #	(10	)
10.15	Development, License and Supply Agreement by and between CIMA and Schwarz Pharma, Inc. dated June 30, 2000. *	(10	)
10.16	Employment Agreement, dated August 23, 2000, between CIMA and John Hontz, Ph.D. #	(11	)
10.17	Employment Agreement, dated January 26, 2001, between CIMA and David Feste. #	(12	)
10.18	2001 Stock Incentive Plan, as amended. #	(13	)
10.19	Employee Stock Purchase Plan. #	(14	)
10.20	Toll Manufacturing Agreement between Organon Inc. and CIMA. *	(12	)
10.21	Supply Agreement, dated August 31, 2001, between CIMA and AstraZeneca UK Limited.*	(16	)
10.22	Supply Agreement, dated January 1, 2001, and executed September 2, 2001, between Novartis Consumer Health, Inc. and CIMA. *	(16	)
10.23	License Agreement No. 1, executed September 2, 2001, by and between Novartis Consumer Health, Inc. and CIMA, amending that certain License Agreement dated July 1, 1998, between Novartis and CIMA. *	(16	)
10.24	Master Development, License & Supply Agreement, dated as of December 18, 2001, by and between CIMA and Schwarz Pharma, Inc., as amended by Letter Agreements dated March 1, 2002, October 24, 2002 and February 18, 2003. *	Filed herewith
10.25	Development, License and Supply Agreement made as of May 20, 2002, by and between CIMA and Schering-Plough Ltd. *	(17	)
10.26	Development and License Agreement dated June 18, 2002, between CIMA and WYETH (formerly known as American Home Products Corporation), acting through its Wyeth Consumer Healthcare Division. *	(17	)
10.27	Supply Agreement dated June 18, 2002, between CIMA and WYETH (formerly known as American Home Products Corporation), acting through its Wyeth Consumer Healthcare Division. *	(17	)
10.28	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. *	(18	)
10.29	Development, License and Supply Agreement, dated as of March 2, 2001, by and between CIMA and Alamo Pharmaceuticals, LLC, and Amendment #1 executed on January 4, 2002. *	Filed herewith
10.30	First Amendment to Employment Agreement, dated as of December 31, 2002, by and between CIMA and John Hontz, Ph.D. #	Filed herewith
10.31	Letter Agreement, dated February 27, 2003, between CIMA and David Feste. #	Filed herewith
10.32	Employment Agreement, dated February 19, 2003, by and between CIMA and James C. Hawley. #	Filed herewith
23.1	Consent of Ernst & Young LLP.	Filed herewith
24.1	Powers of Attorney.	Filed Herewith
99.1	Certification of Chief Executive Officer.	Filed Herewith
99.2	Certification of Chief Financial Officer.	Filed Herewith

37

*	Denotes that confidential information 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.
#	Denotes management contract, compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
(1)	Filed as an exhibit to CIMA’s Registration Statement on Form S-1, File No. 33-80194, and incorporated herein by reference.
(2)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, File No. 0-24424, and incorporated herein by reference.
(3)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File No. 0-24424, and incorporated by reference.
(4)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, File No. 0-24424, and incorporated herein by reference.
(5)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 0-24424, and incorporated herein by reference.
(6)	Filed as an exhibit to CIMA’s Annual Report on Form 10-K for the year ended December 31, 1997, File No. 0-24424, and incorporated herein by reference.
(7)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 0-24424, and incorporated herein by reference.
(8)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, File No. 0-24424, and incorporated herein by reference.
(9)	Filed as an exhibit to CIMA’s Annual Report on Form 10-K for the year ended December 31, 1999, File No. 0-24424, and incorporated herein by reference.
(10)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File No. 0-24424, and incorporated herein by reference.
(11)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, File No. 0-24424, and incorporated herein by reference.
(12)	Filed as an exhibit to CIMA’s Annual Report on Form 10-K for the year ended December 31, 2000, File No. 0-24424, and incorporated herein by reference.
(13)	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.
(14)	Filed as an exhibit to CIMA’s Registration Statement on Form S-8, filed June 14, 2001, File No. 333-63026, and incorporated herein by reference.
(15)	Incorporated by reference to Exhibit 1 to the Registrant’s Amendment No. 1 to Registration Statement on Form 8-A/A, filed July 18, 2001, File No. 0-24424.
(16)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 0-24424, and incorporated herein by reference.

38

(17)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the year quarter June 30, 2002, File No. 0-24424, and incorporated herein by reference.
(18)	Filed as an exhibit to CIMA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, File No. 0-24424, and incorporated herein by reference.

     (b). Reports on Form 8-K
     None.

     (c). Exhibits
     See Item 14(a)(3) above.

     (d). Financial Statement Schedules
     See Item 14(a)(2) above.

39

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Eden Prairie, Minnesota, on the 28th day of March, 2003.

CIMA LABS INC.
By:
	/s/ David A. Feste
	David A. Feste Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on March 28, 2003.

SIGNATURE	TITLE
/s/ John M. Siebert John M. Siebert	Chief Executive Officer (Principal Executive Officer) and Director
/s/ David A. Feste David A. Feste	Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
* John F. Chappell	Director
* Steven D. Cosler	Director
* Terrence W. Glarner	Director
* Steven B. Ratoff	Director
* Joseph R. Robinson, Ph.D.	Director

By: /s/ David A. Feste
David A. Feste, Attorney-In-Fact

* David A. Feste, pursuant to the Powers of Attorney executed by each of the directors above whose name is marked by a “*”, by signing his name hereto, does hereby sign and execute this Annual Report on Form 10-K on behalf of each of the directors in the capacities in which the name of each appears above.

40

CERTIFICATIONS

I, John M. Siebert, certify that:

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

2.     Based on my knowledge, this annual 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 annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 have:

a)     designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual 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 annual report (the “Evaluation Date”); and

c)     presented in this annual 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 functions):

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 annual report whether 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:	March 28, 2003	By:	/s/ John M. Siebert
			John M. Siebert, Chief Executive Officer

CERTIFICATIONS

I, David A. Feste, certify that:

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

2.     Based on my knowledge, this annual 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 annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual 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 annual report (the “Evaluation Date”); and

c)    presented in this annual 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 functions):

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 annual report whether 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:	March 28, 2003	By:	/s/ David A. Feste
			David A. Feste, Chief Financial Officer

REPORT OF INDEPENDENT AUDITORS

Board of Directors
CIMA LABS INC.

We have audited the accompanying balance sheets of CIMA LABS INC. as of December 31, 2002 and 2001, and the related income statements, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CIMA LABS INC. at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

	/s/ Ernst & Young LLP
Minneapolis, Minnesota February 14, 2003

F-1

CIMA LABS INC.

BALANCE SHEETS

(in thousands, except per share data)

				As of December 31,
				2002			2001
			ASSETS
Current assets:
	Cash and cash equivalents			$	26,102		$	1,880
	Available-for-sale securities				45,093			20,085
	Trade accounts receivable, net of allowance of $100 and $58				14,621			8,963
	Interest receivable				1,119			2,127
	Inventories, net				4,082			3,771
	Deferred taxes				3,790			700
	Prepaid expenses				944			171
Total current assets					95,751			37,697
Other assets:
	Available-for-sale securities				60,486			127,539
	Lease deposits				—			45
	Patents and trademarks, net				418			389
	Deferred taxes				7,624			5,500
Total other assets					68,528			133,473
Property, plant and equipment:
	Construction in progress				6,673			2,163
	Equipment				27,076			19,588
	Building and improvements				36,064			14,447
	Land				2,059			658
	Furniture and fixtures				1,547			635
					73,419			37,491
	Less accumulated depreciation				(12,345	)		(9,730	)
					61,074			27,761
Total assets				$	225,353		$	198,931
		LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable			$	8,755		$	1,607
	Accrued compensation				2,118			1,021
	Other accrued expenses				637			751
	Deferred revenue				542			775
Total current liabilities					12,052			4,154
Stockholders’ equity:
	Convertible preferred stock, $0.01 par value:
		5,000 shares authorized; none outstanding			—			—
	Common stock, $0.01 par value:
		60,000 shares authorized; 14,870 shares issued (including 619 treasury shares) and outstanding at December 31, 2002 and 14,739 shares issued (including 534 treasury shares) and outstanding at December 31, 2001			149			148
		Additional paid-in capital			240,027			237,270
		Accumulated deficit			(8,386	)		(27,003	)
		Accumulated other comprehensive income			1,511			2,218
		Treasury stock			(20,000	)		(17,856	)
Total stockholders’ equity					213,301			194,777
Total liabilities and stockholders’ equity				$	225,353		$	198,931

See accompanying notes.

F-2

CIMA LABS INC.

INCOME STATEMENTS
(in thousands, except per share data)

			Year Ended December 31,
			2002			2001			2000
Operating revenues:
	Net sales		$	23,391		$	17,756		$	13,407
	Product development fees and licensing			11,496			8,867			8,817
	Royalties			11,738			5,403			1,695
Total operating revenues				46,625			32,026			23,919
Operating expenses:
	Costs of goods sold			18,797			16,001			12,410
	Research and product development			10,869			6,385			4,958
	Selling, general and administrative			7,166			5,090			3,880
Total operating expense				36,832			27,476			21,248
Other income (expense)
	Investment income, net			6,511			10,335			2,172
	Other income (expense)			(128	)		(1	)		(58	)
				6,383			10,334			2,114
Income before cumulative effect of a change in accounting principle and income tax benefit				16,176			14,884			4,785
Cumulative effect of a change in accounting principle				—			—			(799	)
Income tax benefit				2,441			104			—
Net income			$	18,617		$	14,988		$	3,986
Net income per share:
	Basic
		Net income per share before cumulative effect of a change in accounting principle	$	1.31		$	1.03		$	.43
		Net per share from cumulative effect of a change in accounting principle		—			—			(.07	)
	Net income per basic share		$	1.31		$	1.03		$	.36
	Diluted
		Net income per share before cumulative effect of a change in accounting principle	$	1.28		$	.97		$	.39
		Net per share from cumulative effect of a change in accounting principle		—			—			(.07	)
	Net income per diluted share		$	1.28		$	.97		$	.32
Weighted average shares outstanding:
	Basic			14,193			14,559			11,151
	Diluted			14,599			15,503			12,385
Pro forma amounts assuming the accounting change were applied retroactively (unaudited):
		Net income							$	4,785
		Net income per diluted share							$	.39
		Weighted average diluted shares								12,385

See accompanying notes

F-3

CIMA LABS INC.

STATEMENTS OF CASH FLOWS

(in thousands)

			Year Ended December 31,
			2002			2001			2000
Operating activities
Net income			$	18,617		$	14,988		$	3,986
Adjustment to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization			3,294			2,334			1,804
	Income tax benefit of stock options exercised			1,983			5,634			—
	Deferred income taxes			(5,214	)		(6,200	)		—
	Gain on sale of investment securities			(923	)		(1,425	)		—
	Loss on impairment of assets			—			—			375
	Loss on disposal of property, plant, and equipment			155			—			—
	Value of options granted in exchange for services			—			6			186
	Cumulative effect of change in accounting principle			—			—			799
	Changes in operating assets and liabilities:
		Accounts receivable		(5,658	)		(1,283	)		(5,592	)
		Interest receivable		1,008			(1,156	)		—
		Inventories		(311	)		(2,389	)		1,391
		Prepaid expenses		(728	)		40			(154	)
		Accounts payable		7,148			631			(1,426	)
		Accrued expenses		983			287			256
		Deferred revenue		(233	)		700			(861	)
Net cash provided by operating activities				20,121			12,167			764
Investing activities
Purchases of property, plant and equipment				(36,610	)		(14,222	)		(7,470	)
Purchases of available-for-sale securities				(68,287	)		(180,041	)		(77,353	)
Proceeds from sales of available-for-sale securities				110,548			107,491			5,919
Proceeds from sale of property, plant and equipment				—			—			15
Patents and trademarks				(181	)		(262	)		(157	)
Net cash provided by (used in) investing activities				5,470			(87,034	)		(79,046	)
Financing activities
Proceeds from exercises of stock options				590			2,958			1,410
Purchases of treasury stock				(2,144	)		(17,856	)		—
Net proceeds from stock offerings				—			—			169,627
Issuance of common stock related to employee stock purchase plan				185			45			—
Proceeds from (repayment of) long term debt				—			—			(3,500	)
Notes payable				—			—			(196	)
Security deposits on leases				—			12			279
Payments on capital lease obligations				—			—			(231	)
Net cash (used in) provided by financing activities				(1,369	)		(14,841	)		167,389
Increase (decrease) in cash and cash equivalents				24,222			(89,708	)		89,107
Cash and cash equivalents at beginning of year				1,880			91,588			2,481
Cash and cash equivalents at end of year			$	26,102		$	1,880		$	91,588
Supplemental disclosures of cash flow information
Income taxes paid			$	509		$	378		$	32
Interest paid				—			—			205

See accompanying notes.

F-4

CIMA LABS INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

		Common Stock
		Shares		Amount
Balance at Dec. 31, 1999			9,646	$	97
	Net income		—		—
	Unrealized investment gain		—		—
	Comprehensive income
	Issuance of common stock in connection with a private placement, net of offering costs of $1,500		1,100		11
	Issuance of common stock in connection with a public offering, net of offering costs of $10,483		3,197		32
	Stock options exercised in connection with public offering		135		1
	Stock options exercised		280		3
	Value of options granted in exchange for services		—		—
Balance at Dec. 31, 2000			14,358		144
	Net income		—		—
	Unrealized investment gain		—		—
	Comprehensive income
	Stock options exercised		380		4
	Issuance of common stock related to employee stock purchase plan		1		—
	Treasury stock purchased		—		—
	Income tax benefit of stock options exercised		—		—
	Value of options granted in exchange for services		—		—
Balance at Dec. 31, 2001			14,739		148
	Net income		—		—
	Unrealized investment loss		—		—
	Comprehensive income
	Stock options exercised		120		1
	Issuance of common stock related to employee stock purchase plan		11		—
	Treasury stock purchased		—		—
	Income tax benefit of stock options exercised		—		—
Balance at Dec. 31, 2002			14,870	$	149

[Additional columns below]

[Continued from above table, first column(s) repeated]

							Other
				Retained			Compre-
		Additional		Earnings			hensive
		Paid-In Capital		(Deficit)			Income
Balance at Dec. 31, 1999		$	57,455	$	(45,977	)	$	—
	Net income		—		3,986			—
	Unrealized investment gain		—		—			141
	Comprehensive income
	Issuance of common stock in connection with a private placement, net of offering costs of $1,500		19,389		—			—
	Issuance of common stock in connection with a public offering, net of offering costs of $10,483		149,360		—			—
	Stock options exercised in connection with public offering		834		—			—
	Stock options exercised		1,407		—			—
	Value of options granted in exchange for services		186		—			—
Balance at Dec. 31, 2000			228,631		(41,991	)		141
	Net income		—		14,988			—
	Unrealized investment gain		—		—			2,077
	Comprehensive income
	Stock options exercised		2,954		—			—
	Issuance of common stock related to employee stock purchase plan		45		—			—
	Treasury stock purchased		—		—			—
	Income tax benefit of stock options exercised		5,634		—			—
	Value of options granted in exchange for services		6		—			—
Balance at Dec. 31, 2001			237,270		(27,003	)		2,218
	Net income		—		18,617			—
	Unrealized investment loss		—		—			(707	)
	Comprehensive income
	Stock options exercised		589		—			—
	Issuance of common stock related to employee stock purchase plan		185		—			—
	Treasury stock purchased		—		—			—
	Income tax benefit of stock options exercised		1,983		—			—
Balance at Dec. 31, 2002		$	240,027	$	(8,386	)	$	1,511

[Additional columns below]

[Continued from above table, first column(s) repeated]

		Treasury
		Stock			Total
Balance at Dec. 31, 1999		$	—		$	11,575
	Net income		—			3,986
	Unrealized investment gain		—			141
	Comprehensive income					4,127
	Issuance of common stock in connection with a private placement, net of offering costs of $1,500		—			19,400
	Issuance of common stock in connection with a public offering, net of offering costs of $10,483		—			149,392
	Stock options exercised in connection with public offering		—			835
	Stock options exercised		—			1,410
	Value of options granted in exchange for services		—			186
Balance at Dec. 31, 2000			—			186,925
	Net income		—			14,988
	Unrealized investment gain		—			2,077
	Comprehensive income					17,065
	Stock options exercised		—			2,958
	Issuance of common stock related to employee stock purchase plan		—			45
	Treasury stock purchased		(17,856	)		(17,856	)
	Income tax benefit of stock options exercised		—			5,634
	Value of options granted in exchange for services		—			6
Balance at Dec. 31, 2001			(17,856	)		194,777
	Net income		—			18,617
	Unrealized investment gain		—			(707	)
	Comprehensive income					17,910
	Stock options exercised		—			590
	Issuance of common stock related to employee stock purchase plan		—			185
	Treasury stock purchased		(2,144	)		(2,144	)
	Income tax benefit of stock options exercised		—			1,983
Balance at Dec. 31, 2002		$	(20,000	)	$	213,301

See accompanying notes.

F-5

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

1. BUSINESS ACTIVITY

     CIMA LABS INC. (the “Company”), a Delaware corporation, develops and manufactures fast dissolve and enhanced-absorption oral drug delivery systems. The Company operates within a single business segment, the development and manufacture of fast dissolve and enhanced-absorption oral drug delivery systems. OraSolv and DuraSolv, the Company’s leading proprietary fast dissolve technologies, allow an active drug ingredient, which is frequently taste-masked, to be formulated into a new, orally disintegrating dosage form that dissolves quickly in the mouth without chewing or the need for water. The Company is also developing enhanced oral drug delivery technologies and independently developing new products based on its oral drug delivery technologies. The Company enters into collaborative agreements with pharmaceutical companies to develop products based on its oral drug delivery technologies. The Company currently manufactures six 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Cash Equivalents

     The Company considers highly liquid investments with maturities of ninety days or less when purchased to be cash equivalents. Cash equivalents are carried at cost, which approximates fair market value.

     Available-for-sale securities

     The Company classifies its investments with maturities of over ninety days when purchased as available-for-sale. Available-for-sale securities are recorded at fair value with unrealized gains and losses reported as other comprehensive income in stockholders’ equity. Fair values of investments are based on quoted market prices, where available, and include accrued interest, if applicable. Dividend and interest income is recognized when earned. Gains and losses on securities sold are determined based on the specific identification method and are included in investment income. As of December 31, 2002, $60,486 of available-for-sale securities had remaining maturities of twelve to fifty-one months, while the balance, $45,093 had remaining maturities of less than twelve months.

     Patents and Trademarks

     Costs incurred in obtaining patents and trademarks are amortized on a straight-line basis over sixty months. Accumulated amortization was approximately $444 at December 31, 2002 and $966 at December 31, 2001. The Company wrote off some fully amortized patents and trademarks in 2002. The Company periodically reviews its patents and trademarks for impairment in value. Any adjustment from the analysis is charged to operations.

     Property, Plant and Equipment

     Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives ranging from three to thirty-five years. Depreciation expense was approximately $3,142 in 2002; $2,203 in 2001; and $1,698 in 2000.

F-6

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Inventories

     Inventories are valued at cost using the first-in first-out (FIFO) basis for inventory turn over and control. Inventories are shown net of reserves for obsolescence of approximately $320 at December 31, 2002, and $235 at December 31, 2001. Significant components of inventory as of December 31 are as follows:

	2002		2001
Finished Goods	$	1,252	$	112
Work-in-process		116		—
Raw Materials		2,714		3,659
Total Inventory	$	4,082	$	3,771

     Impairment of Long-Lived Assets

     The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flow estimated to be generated by those assets are less than the assets’ carrying amount. During the year ended December 31, 2000, the Company recognized approximately $375 of impairment losses on equipment no longer used in operations with an original cost of approximately $557, shown as other expense on the Income Statements. The cost and associated accumulated depreciation were removed from the equipment balances on the December 31, 2000 balance sheet.

     Use of Estimates

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

     Revenue Recognition

     The Company recognizes 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 the Company’s 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 of milestones; from up-front product development license fees as fees are amortized over the expected development term of the proposed products; and from royalties on the sales of products manufactured by the Company, which are sold by pharmaceutical companies under licenses from the Company. The determination of SAB 101 criteria (3) and (4) for each source of revenue is based on the Company’s judgment regarding the fixed nature and collectibility of each source of revenue.

F-7

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Stock-Based Compensation

     At December 31, 2002, the Company has stock-based employee compensation plans, which are described more fully in Note 7. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income for 2002 and 2001, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. During 2000, the Company granted options to non-employee directors at a price below market and recognized compensation expense of $72. The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation (“Statement 123”), to stock-based compensation.

		Year Ended December 31,
		2002			2001			2000
Net income, as reported		$	18,617		$	14,988		$	3,986
Add: Stock-based non-employee compensation expense included in reported net income			—			—			72
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards			(3,904	)		(8,851	)		(1,887	)
Pro forma net income		$	14,713		$	6,137		$	2,171
Net income per share:
	Basic—as reported	$	1.31		$	1.03		$	.36
	Basic—pro forma	$	1.04		$	.42		$	.19
	Diluted—as reported	$	1.28		$	.97		$	.32
	Diluted—pro forma	$	1.01		$	.40		$	.18

     Income Taxes

     Income taxes are accounted for under the liability method. Deferred income taxes are provided for temporary differences between financial reporting and tax bases of assets and liabilities. A valuation reserve has been established to adjust the value of deferred income taxes. The carrying value of our net deferred tax assets assumes that the Company will be able to generate sufficient taxable income in the United States, based on estimates and assumptions. The Company records 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.

F-8

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Research and Development Costs

     All costs of research and development activities are expensed as incurred. Research and development activities are performed under collaborative agreements with pharmaceutical partners to adapt the Company’s fast dissolve technology to specific active drug ingredients. In addition, the Company incurs research and development expenses relating to the development of new oral drug delivery technologies and new pharmaceutical products based on our oral drug delivery technologies, which are not performed under a collaborative agreement. Revenues earned from activities performed pursuant to a collaborative agreement with a pharmaceutical company are reported as product development fees, licensing revenues and royalties in the Income Statements, and the related costs are expensed as incurred as research and development expense. These costs include salaries, building costs, utilities, depreciation on equipment used for research and development, and costs of outside contractors.

     Reclassifications

     Certain amounts presented in the 2001 financial statements have been reclassified to conform to the 2002 presentation.

3. ADOPTION OF SAB 101

     The Company implemented SAB 101 in its second quarter ended on June 30, 2000, retroactive to January 1, 2000. The Company reported a charge to earnings of $799 for the cumulative effect of a change in accounting principle, which is included in income for the year ended December 31, 2000. The effect of the change on the year ended December 31, 2000 was to increase income before cumulative effect of the change in accounting principle by $724 or $0.06 per diluted share. The pro forma amounts presented in the Income Statements were calculated assuming the accounting change was made retroactive to prior periods. For the year ended December 31, 2000, the Company recognized $799 in revenue that is included in the cumulative effect adjustment as of January 1, 2000. The effect of that revenue in the year ended December 31, 2000 was to increase income by $799.

F-9

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

4. NET INCOME PER SHARE

     Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period, increased to include dilutive potential common shares issuable upon the exercise of stock options that were outstanding during the period.

		Year Ended December 31,
		2002		2001		2000
Numerator:
	Net income	$	18,617	$	14,988	$	3,986
Denominator:
	Denominator for basic net income per share – weighted average shares outstanding		14,193		14,559		11,151
	Effect of dilutive stock options		406		944		1,234
	Denominator for diluted net income per share – weighted average shares outstanding	$	14,599	$	15,503	$	12,385
Basic net income per share		$	1.31	$	1.03	$	.36
Diluted net income per share		$	1.28	$	.97	$	.32

5. AVAILABLE-FOR-SALE SECURITIES

     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 December 31, 2002 and 2001, the amortized cost and fair value of available-for-sale securities, all of which have contractual maturities of fifty-one months or less, are as follows:

				Gross		Gross
		Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value
As of December 31, 2002
	Asset-backed securities	$	35,230	$	447	$	—	$	35,677
	Corporate bonds and notes		54,311		915		16		55,210
	Non-US corporate obligations		8,997		64		1		9,060
	U.S. government securities		5,530		102		—		5,632
		$	104,068	$	1,528	$	17	$	105,579
As of December 31, 2001
	Asset-backed securities	$	30,476	$	378	$	14	$	30,840
	Corporate bonds and notes		85,771		1,372		53		87,090
	Euro notes		14,392		537		—		14,929
	Floating rate notes		12,696		17		—		12,713
	U.S. government securities		2,071		—		19		2,052
		$	145,406	$	2,304	$	86	$	147,624

F-10

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

6. INCOME TAXES

     The Company’s deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Management believes that it is more likely than not that future taxable income will be sufficient to realize a portion of the tax benefit from future deductible temporary differences and net operating loss carryforwards. Significant components of deferred income taxes as of December 31 are as follows:

		2002			2001
Deferred assets:
	Net operating loss	$	16,024		$	20,889
	Research tax credit		1,176			723
	Foreign tax credit		972			337
	Accrued vacation		237			185
	Inventory reserve		130			95
	Deferred revenue		220			314
	Other		203			64
			18,962			22,607
Deferred liability:
	Depreciation and amortization		1,140			179
	Other		—			1
			1,140			180
Net deferred income tax asset			17,822			22,427
Valuation allowance			(6,408	)		(16,227	)
Net deferred income tax asset		$	11,414		$	6,200

     The income tax benefit consisted of the following for the years ended December 31:

		2002			2001			2000
Current tax provision (benefit):
	Federal	$	2,132		$	5,077		$	—
	State		641			2,042			—
			2,773			7,119			—
Deferred tax provision (benefit):
	Federal		3,869			(860	)		(1,927	)
	State		736			(163	)		(367	)
			4,605			(1,023	)		(2,294	)
Valuation allowance			(9,819	)		(6,200	)		2,294
Total tax provision (benefit)		$	(2,441	)	$	(104	)	$	—

The Company utilized net operating loss carryforwards of $13,300 in 2002 reducing the current tax provision by $4,865.

F-11

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

6. INCOME TAXES (Continued)

     The reconciliation between the statutory federal income tax rate of 34% and the effective rate of income tax expense for the years ended December 31:

	2002			2001			2000
Statutory federal income tax rate		34	%		34	%		34	%
Increase (decrease) in taxes resulting from:
Change in valuation allowance		(26	)		(42	)		(40	)
Utilization of net operating loss carryforward		(30	)
State taxes		7			7			6
Effective income tax rate		(15	%)		(1	%)		—	%

     The Company’s net operating loss carryforwards, foreign tax credits, and research tax credits of approximately $40,700, $972, and $1,176, respectively, may be carried forward to offset future taxable income, limited due to changes in ownership under the net operating loss limitation rules. The net operating loss, foreign tax credit, and research tax credit carryforwards expire in the years 2008 to 2021, the years 2005 to 2007, and the years 2003 to 2017, respectively.

7. STOCK OPTIONS AND PURCHASE PLANS

     Stock Options

     The Company has equity and stock incentive plans (the “Equity Plans”) under which options to purchase up to 4,150 shares of common stock may be granted to employees, directors, consultants and others. The Compensation Committee, established by the Board of Directors, establishes the terms and conditions of all stock option grants, subject to the terms and conditions of the Equity Plans and applicable provisions of the Internal Revenue Code. The options expire ten years from the date of grant and are usually exercisable in annual increments ranging from 25% to 33% beginning one year after the date of grant.

     The Company also has stock option plans for directors (the “Directors’ Plans”), which through October 4, 2001, permitted option grants to non-employee directors of the Company. On October 4, 2001, the Board discontinued the Directors’ Plans and since that date, options issued to non-employee directors have been made under the Equity Plans.

F-12

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

7. STOCK OPTIONS AND PURCHASE PLANS (Continued)

     Shares available for grants and options granted under the Equity Plans are as follows:

														Weighted Average
														Exercise Price
		Shares Available			Incentive Stock			Non-Qualified Stock			Total			Per
		for Grant			Options			Options			Outstanding			Share
Balance at Dec. 31, 1999			417			860			588			1,448		$	5.47
	Granted		(457	)		148			309			457			24.98
	Forfeited		225			(120	)		(105	)		(225	)		4.90
	Exercised		—			(246	)		(143	)		(389	)		5.28
Balance at Dec. 31, 2000			185			642			649			1,291			12.53
	Granted		(797	)		203			594			797			60.98
	Reserved		1,500			—			—			—
	Forfeited		149			(65	)		(84	)		(149	)		42.98
	Exercised		—			(101	)		(94	)		(195	)		6.48
Balance at Dec. 31, 2001			1,037			679			1,065			1,744			32.73
	Granted		(351	)		142			209			351			24.58
	Forfeited		444			(84	)		(360	)		(444	)		56.35
	Exercised		—			(114	)		—			(114	)		5.07
Balance at Dec. 31, 2002			1,130			623			914			1,537		$	26.21
Exercisable:
	December 31, 2000											507		$	5.62
	December 31, 2001											488		$	8.97
	December 31, 2002											761		$	18.62

     The following table summarizes information about option granted under the Equity Plans that were outstanding at December 31, 2002:

							Weighted Average					Weighted
	Range of						Remaining	Weighted Average		Number Exercisable		Average
Exercise Prices					Number Outstanding		Contractual Life	Outstanding Price		at 12/31/02		Exercise Price
	$2.625-$5.00					231	5.1 years	$	4.02		219	$	4.09
	5.01-8.00					191	4.6 years		6.55		187		6.56
	8.01-19.00					171	7.2 years		13.90		117		13.43
	19.01-21.00					173	8.2 years		19.98		33		20.25
	21.01-26.00					152	8.2 years		23.76		53		24.19
	26.01-34.00					223	9.3 years		27.01		11		27.23
	34.01-54.00					131	8.2 years		42.49		39		42.12
	54.01-77.00					265	8.4 years		64.41		102		64.89
$	2.625	-	$	77.00		1,537	7.4 years	$	26.21		761	$	18.62

F-13

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

7. STOCK OPTIONS AND PURCHASE PLANS (Continued)

Shares available for grants and options granted under the Directors’ Plans are as follows:

								Weighted Average
		Shares Available			Non-Qualified Stock			Exercise Price Per
		for Grant			Options			Share
Balance at Dec. 31, 1999			73			331		$	6.10
	Granted		(29	)		29			16.42
	Exercised		—			(26	)		7.39
Balance at Dec. 31, 2000			44			334			6.88
	Reduction in shares available		(21	)		—			—
	Granted		(23	)		23			66.90
	Exercised		—			(185	)		9.17
Balance at Dec. 31, 2001			—			172			12.31
	Exercised		—			(6	)		1.75
Balance at Dec. 31, 2002			—			166		$	12.70

     The following table summarizes information about options granted under the Directors’ Plans that were outstanding at December 31, 2002:

				Weighted Average
Range of				Remaining	Weighted Average		Number Exercisable		Weighted Average
Exercise Prices		Number Outstanding		Contractual Life	Outstanding Price		at 12/31/02		Exercise Price
	$1.083-$2.00		35	5.7 years	$	1.28		35	$	1.28
	2.01-4.00		45	5.9 years		3.50		45		3.50
	4.01-5.00		29	3.5 years		4.79		29		4.79
	5.01-10.00		35	2.8 years		7.61		35		7.61
	10.01-66.90		22	8.4 years		66.90		22		66.90
	$1.083-$66.90		166	5.1 years	$	12.70		166	$	12.70

     Options outstanding under the Equity Plans and Directors’ Plans expire at various dates during the period from March 2004 through September 2012. The weighted average fair values of options granted at market during the years ended December 31, 2002, 2001, and 2000 were $15.98, $51.25, and $15.85, respectively. Shares granted at prices other than market in the year ended December 31, 2000, had a fair value of $15.23, and an exercise price of $4.95.

F-14

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

     7.     STOCK OPTIONS AND PURCHASE PLANS (Continued)

     Pro forma information regarding net income and income per share is required by Statement 123, and has been determined as if the Company had accounted for its stock options under the fair value method of Statement 123. The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 2002, 2001, and 2000 respectively; risk-free interest rates of 4.31%, 5.54%, and 6.50%; volatility factor of the expected market price of the Company’s common stock of .705, .763, and .707; and a weighted-average expected life of the option of 6, 10 and 5 years.

     In management’s opinion, the model does not necessarily provide a reliable measure of the fair value of the Company’s stock options because the Company’s stock options have characteristics significantly different from those of traded options, including limits on transferability and vesting restrictions, and because changes in the subjective input assumptions can materially affect the fair value estimates. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require input of highly subjective assumptions.

     Stock Purchase Plan

     Effective August 1, 2001, the Company adopted an Employee Stock Purchase Plan to provide employees an opportunity to purchase shares of its common stock through accumulated payroll deductions. Under the plan, employees purchase shares of common stock, subject to certain limitations, at 85% of the fair market value of shares on the quarterly enrollment or exercise date, whichever is lower. A total of 200 shares were made available for purchase under the plan. During 2002, 11 shares were issued at an average price of $17.72 per share and 189 shares remained available at December 31, 2002.

F-15

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

8. DEFINED CONTRIBUTION PLAN

     The Company has a 401(k) plan (the “Plan”), which covers substantially all employees of the Company. Contributions to the Plan are made through employee wage deferrals and employer matching contributions. The employer matching contribution percentage is discretionary and determined each year. In addition, the Company may contribute two discretionary amounts; one to non-highly compensated individuals and another to all employees. To qualify for the discretionary amounts, an employee must be employed by the Company on the last day of the Plan year or have been credited with a minimum of 500 hours of service during the Plan year.

     The 401(k) expense for the years ended December 31, 2002, 2001 and 2000 was $168, $83, and $68, respectively.

9. COMMITMENTS

     The Company has future commitments for the purchase of production equipment and remodeling of facilities at December 31, 2002, of approximately $13,600.

10. SEGMENT INFORMATION – MAJOR CUSTOMERS AND GEOGRAPHIC

     The Company operates within a single segment: the development and manufacture of fast dissolve and enhanced-absorption oral drug delivery systems. Revenues are comprised of three components: net sales of products utilizing the Company’s proprietary fast dissolve technologies; product development fees and licensing revenues for development activities conducted by the Company through collaborative agreements with pharmaceutical companies; and royalties on the sales of products manufactured by the Company, which are sold by pharmaceutical companies under licenses from the Company.

     Revenues as a percentage of total revenues from major customers are as follows:

	For the Year Ended December 31,
	2002			2001			2000
Wyeth (formerly, American Home Products)		10	%		1	%		7	%
AstraZeneca		19			22			13
Organon		32			25			33
Novartis		13			33			36
Schwarz Pharma		18			8			6
Other		8			11			5
Total		100	%		100	%		100	%

     Trade accounts receivable at December 31, 2002 of approximately $14,621 were comprised primarily of the following customers: Wyeth (31%), Organon (21%), AstraZeneca (15%), and Schwarz Pharma (13%).

F-16

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

10. SEGMENT INFORMATION – MAJOR CUSTOMERS AND GEOGRAPHIC (Continued)

     All of the Company’s assets and operations are located in the U.S. While the Company does not directly conduct its activities outside the U.S., it considers international revenues to be those arising from shipments ultimately destined for non-U.S. end-users and revenues from royalties generated by non-U.S. sales by partners.

		Year Ended December 31,
		2002		2001		2000
Operating revenues by source:
	U.S.	$	35,425	$	26,540	$	21,292
	International		11,200		5,486		2,627
Total operating revenues		$	46,625	$	32,026	$	23,919

11. QUARTERLY FINANCIAL DATA – UNAUDITED

For the three months ended		March 31		June 30		September 30		December 31
2002
Total operating revenues		$	8,383	$	10,200	$	12,541	$	15,501
Cost of goods sold			3,356		3,812		4,997		6,632
Total operating expenses			3,529		4,431		5,227		4,849
Other income, net			1,907		2,210		2,066		2,642
Net income		$	3,405	$	4,167	$	4,383	$	6,662
Per share amounts:
	Basic — Net income per share	$	.24	$	.29	$	.31	$	.47
	Diluted — Net income per share	$	.23	$	.28	$	.30	$	.47
Range of closing stock prices on NASDAQ		$	19.60 - $35.45	$	18.94 - $28.60	$	16.06 - $25.15	$	22.10 - $28.58
2001
Total operating revenues		$	5,956	$	8,059	$	8,817	$	9,193
Cost of goods sold			2,601		4,117		4,930		4,353
Total operating expenses			2,604		2,674		2,769		3,427
Other income, net			2,425		2,226		2,724		3,063
Net income		$	3,176	$	3,494	$	3,842	$	4,476
Per share amounts:
	Basic — Net income per share	$	.22	$	.24	$	.26	$	.31
	Diluted — Net income per share	$	.20	$	.22	$	.24	$	.29
Range of closing stock prices on NASDAQ		$	46.75 - $73.38	$	43.05 - $85.75	$	47.97 - $81.35	$	30.05 - $62.40

F-17

CIMA LABS INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share data)

     12. QUARTERLY FINANCIAL DATA — UNAUDITED (Continued)

     The following table reconciles previously reported quarterly net income per diluted share to quarterly pro forma net income per diluted share for the reported quarters of 2002 and 2001. Pro forma net income is calculated by applying a normalized tax rate of 40% to the Company’s reported pre tax income for the quarter.

		For the three months ended												Year ended
		March 31			June 30			September 30			December 31			December 31
2002
Net income per diluted share — As reported		$	0.23		$	0.28		$	0.30		$	0.47		$	1.28
Adjust for:
	Normalized tax rate of 40%		(0.10	)		(0.12	)		(0.15	)		(0.25	)		(0.62	)
Net income per diluted share — Pro forma, fully taxed @ 40%		$	0.13		$	0.16		$	0.15		$	0.22		$	0.66
2001
Net income per diluted share — As reported		$	0.20		$	0.22		$	0.24		$	0.29		$	0.97
Adjust for:
	Normalized tax rate of 40%		(0.08	)		(0.08	)		(0.09	)		(0.13	)		(0.39	)
Net income per diluted share — Pro forma, fully taxed @ 40%		$	0.12		$	0.14		$	0.15		$	0.16		$	0.58

F-18

CIMA LABS INC.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
             (all amounts in thousands)

		Balance at		Additions
		Beginning of		Charged to Costs			Less			Balance at End of
		Year		and Expenses			Deductions			Year
Description
Year ended December 31, 2002:
Reserves and allowance deducted
From asset accounts:
	Allowance for doubtful accounts	$	58	$	50		$	(8	)	$	100
	Obsolescence reserve		235		372			(287	)		320
Total		$	293	$	422		$	(295	)	$	420
Year ended December 31, 2001:
Reserves and allowance deducted
From asset accounts:
	Allowance for doubtful accounts	$	0	$	58		$	0		$	58
	Obsolescence reserve		225		302			(292	)		235
Total		$	225	$	360		$	(292	)	$	293
Year ended December 31, 2000:
Reserves and allowance deducted
From asset accounts:
	Allowance for doubtful accounts	$	36	$	(11	)	$	(25	)	$	0
	Obsolescence reserve		536		375			(686	)		225
Total		$	572	$	364		$	(711	)	$	225

F-19 EX-10.24 3 c75663exv10w24.txt EX-10.24 MASTER DEVELOPMENT, LICENSE & SUPPLY AGMT EXHIBIT 10.24 EXECUTION COPY MASTER DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT by and between CIMA LABS INC. and SCHWARZ PHARMA, INC. dated as of December 18, 2001 TABLE OF CONTENTS

PAGE SECTION 1 DEFINITIONS................................................... 1 SECTION 2 GRANT OF LICENSES; LICENSE OPTION............................. 5 2.1 Grant of Licenses................................................. 5 2.2 Sublicenses....................................................... 6 2.3 Marketing, Distribution and Sale.................................. 6 SECTION 3 PRODUCT DEVELOPMENT........................................... 6 3.1 Obligations of CIMA............................................... 6 3.2 Obligations of Schwarz............................................ 7 3.3 License of Schwarz Technology..................................... 7 3.4 Additional Products............................................... 7 3.5 Regulatory Matters................................................ 7 SECTION 4 ROYALTY, COST OF GOODS AND MILESTONE PAYMENTS................. 7 4.1 Royalty and Milestone Payments.................................... 7 4.2 Records and Audit................................................. 8 4.3 Quarterly Reports of Royalties.................................... 9 4.4 Annual Reports of Costs of Goods.................................. 9 4.5 Sales and Marketing Estimates..................................... 9 SECTION 5 SUPPLY OF PRODUCT............................................. 9 5.1 Supply of Product................................................. 9 5.2 Identification.................................................... 10 5.3 Trade, Sample and Placebo Product Price........................... 11 5.4 Forecasts, Delivery and Quality................................... 11 5.5 Rejection and Replacement......................................... 11 5.6 Invoice and Payment............................................... 12 5.7 Supply Disruption; Alternate Manufacturing Site................... 12 5.8 CIMA's Obligation to Continue Manufacture......................... 12 SECTION 6 CONDITIONS PRECEDENT TO THE CLOSING; CLOSING DATE............. 13 6.1 Conditions Precedent to Schwarz's Obligations..................... 13 6.2 Conditions Precedent to CIMA's Obligations........................ 13 6.3 Closing Date...................................................... 14 SECTION 7 REPRESENTATIONS AND WARRANTIES OF CIMA........................ 14 7.1 Organization, Power and Authority................................. 14

- i - TABLE OF CONTENTS

PAGE 7.2 Due Authority; No Breach.......................................... 15 7.3 Intellectual Property............................................. 15 7.4 Technology Rights................................................. 15 7.5 Litigation........................................................ 16 7.6 Governmental Approval............................................. 16 7.7 Brokerage......................................................... 16 7.8 Supply............................................................ 16 SECTION 8 REPRESENTATIONS AND WARRANTIES OF SCHWARZ..................... 16 8.1 Organization, Power and Authority................................. 16 8.2 Due Authority; No Breach.......................................... 16 8.3 Brokerage......................................................... 17 8.4 Litigation........................................................ 17 8.5 Governmental Approval............................................. 17 SECTION 9 ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES............ 17 9.1 Governmental Filings.............................................. 17 9.2 Compliance with Law............................................... 18 9.3 Recall............................................................ 18 9.4 Confidentiality................................................... 18 9.5 Expenses.......................................................... 19 9.6 Reasonable Efforts................................................ 19 9.7 Publicity......................................................... 19 9.8 Cooperation....................................................... 19 9.9 Competition; No Sale for Resale................................... 20 9.10 Conflicting Rights................................................ 20 9.11 Patent and Trademark Maintenance.................................. 20 9.12 Infringement; Enforcement of Proprietary Rights................... 22 9.13 Supply of Products................................................ 22 9.14 Liability Insurance............................................... 22 9.15 Referral of Orders and Inquiries.................................. 22 9.16 Deemed Breach of Covenant......................................... 23 SECTION 10 INDEMNIFICATION............................................... 23

- ii - TABLE OF CONTENTS

PAGE 10.1 Indemnification................................................... 23 10.2 Notice and Opportunity To Defend.................................. 23 10.3 Indemnification Payment Obligation................................ 24 10.4 Indemnification Payment Adjustments............................... 24 10.5 Indemnification Payment........................................... 25 10.6 Survival.......................................................... 25 SECTION 11 TERMINATION................................................... 25 11.1 Termination....................................................... 25 SECTION 12 MISCELLANEOUS................................................. 27 12.1 Successors and Assigns............................................ 27 12.2 Notices........................................................... 27 12.3 Waiver; Remedies.................................................. 28 12.4 Survival of Representations....................................... 28 12.5 Independent Contractors........................................... 28 12.6 Entire Agreement.................................................. 28 12.7 Amendment......................................................... 28 12.8 Counterparts...................................................... 28 12.9 Governing Law..................................................... 28 12.10 Arbitration....................................................... 28 12.11 Captions.......................................................... 29 12.12 No Third-Party Rights............................................. 29 12.13 Severability...................................................... 29 12.14 Attachments....................................................... 29 12.15 Force Majeure..................................................... 29 12.16 Consents.......................................................... 29

Schedule 3.1 Master Development Schedule Schedule 4.1(a) Royalty Rates Schedule 4.1(b) Development Fee and Milestone Payments Schedule 5.1(b) Schwarz Purchase Order Schedule 5.3 Cost of Goods Schedule 5.4(d) Quality Assurance Addendum - iii - MASTER DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT This MASTER DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT (this "Agreement"), dated as of December 18, 2001, is by and between CIMA LABS INC., a Delaware corporation ("CIMA"), and Schwarz Pharma, Inc., a Delaware corporation ("Schwarz"). W I T N E S S E T H 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, Schwarz is engaged, among other things, in the business of marketing and selling of pharmaceutical products; WHEREAS, subject to the terms and conditions set forth in this Agreement, CIMA and Schwarz wish to collaborate in the development, registration, marketing and sale of certain prescription products; and WHEREAS, subject to the terms and conditions set forth in this Agreement, CIMA wishes to license to Schwarz and Schwarz wishes to license from CIMA rights to CIMA's DuraSolv(TM), PakSolv(TM) and OraSolv(TM) technologies for use with such prescription products. 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, manufacturing, marketing, selling and distributing of the Products in the Territory as contemplated by this Agreement. "Affiliates" shall mean, with respect to any Person, any Persons 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. "API" for each Product shall mean the active ingredient specified on Schedule 3.1 hereto with respect to such Product. "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, (i) the CIMA Patents, (ii) the CIMA Technology, (iii) the CIMA Trademarks, and (iv) the CIMA Marketing Materials. "CIMA Marketing and Market Research Data" shall mean, with respect to the Products, all CIMA marketing data, studies, market research data and reports that pertain to the Products, and any further market research data that pertains to the Products whose disclosure to Schwarz is not prohibited by confidentiality obligations under agreements, dated prior to the date hereof, between CIMA and Persons who are not Affiliates of CIMA. "CIMA Marketing Materials" shall mean all labeling, marketing and promotional materials and inserts currently used by CIMA that are useful in connection with the Activities. "CIMA Patents" shall mean United States patent nos. 6,024,981 and 6,221,392 (Rapidly Dissolving Robust Dosage Form) and any patents and patent applications resulting therefrom, including any extension, reissue, renewal, reexamination or continuation-in-part of such patent or patent application. To the extent that the OraSolv(R) and PakSolv(TM) technology is used with respect to any Product pursuant to Schedule 3.1, the term "CIMA Patents" shall, with respect to such Product, be deemed to include United States patent nos. 5,178,878, 6,155,423, 6,269,615 and 6,311,462 and any patents and patent applications resulting therefrom, including any extension, reissue, renewal, reexamination or continuation-in-part of such patent or patent application. "CIMA Technology" shall mean all of the CIMA Patents and all of CIMA's trade secrets, technology, know-how and all other information necessary for the manufacture of the Products including, without limitation, that relate to CIMA's DuraSolv(R), PakSolv(TM) and OraSolv(R) technologies. "CIMA Trademarks" shall mean the CIMA(R), DuraSolv(R), PakSolv(TM), OraSolv(R) and Meltabs(R) trademarks. "Closing Date" shall have the meaning given in Section 6.3 hereof. "Completion Date" shall mean, with respect to any Product, the date on which Schwarz determines, in its reasonable discretion, such Product is ready for submission to the FDA with three months stability data on the pilot scale (equal to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], whichever is greater). "Cost of Goods" shall have the meaning set forth on Schedule 5.3 hereto. - 2 - "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 excluding any punitive, exemplary or consequential damages. "Defective" shall mean, as to the Product, the failure of such to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] conform to the Specifications, this Agreement and all applicable law, including, without limitation, the FFDCA and the PDMA. "Development Schedule" shall mean the schedule of development activities set forth on Schedule 3.1 hereto. "FDA" shall mean the United States Food and Drug Administration. "FFDCA" the United State Federal Food, Drug and Cosmetic Act, as amended from time to time, together with any rules or regulations promulgated thereunder. "Force Majeure" shall mean acts of God, explosion, fire, flood, tornadoes, thunderstorms, earthquake or tremor, war whether declared or not, terrorism, civil strife, riots, embargo, losses or shortages of power, labor stoppage, substance shortages, damage to or loss of product in transit, 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. "GAAP" shall mean generally accepted accounting practices in the United States as in effect from time to time. "Indemnified Party" shall have the meaning given in Section 10.2 hereof. "Indemnifying Party" shall have the meaning given in Section 10.2 hereof. "Latent Defect" shall mean a defect that results in a recall under Section 9.3. "Launch or Launched" shall mean, with respect to each Product, the date when such Product is first made commercially available by Schwarz "Licensed Assets" shall have the meaning set forth in Section 2.1 hereof. "Net Sales" shall mean, with respect to the Products, the gross amount invoiced to unrelated third parties for the Products in the Territory, less: (a) trade and reasonable and customary cash discounts allowed; (b) refunds, rebates, chargebacks, retroactive price adjustments and any other allowances which effectively reduce the net selling price; - 3 - (c) returns, credits and allowances; and (d) freight, taxes and insurance. Such amounts shall be determined from books and records maintained in accordance with GAAP, consistently applied. "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 any of the pharmaceutical products described on Schedule 3.1, it being understood that additional products may be added to Schedule 3.1 after the date hereof in accordance with Section 3.4. "Promotional Materials" shall mean any advertising and promotional labeling bearing a name (trade name or generic name) used in the promotion of any of the Products, including, without limitation, promotional materials produced by or on behalf of Schwarz (examples include, but are not limited to, journal ads, brochures, service items, managed care pull through sheets, formulary presentations, price lists, monographs, Internet pages and telephone or television advertisements) and materials produced by outside sources (examples include, but are not limited to, medical reprints, textbooks and CME materials) to the extent funded by, created in cooperation with, reviewed, or distributed by Schwarz The definition of Promotional Materials shall also include press releases and other releases of information to the media regarding the Products. "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. "Satisfactory Completion" shall mean, with respect to any Development Phase for any Product, the completion of such Development Phase in a manner that is: (i) appropriate to support the commercialization of the Product; (ii) appropriate for the completion of the development of such Product on, prior to, or within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the target Completion Date set forth in respect of such Product on Schedule 3.1; and (iii) consistent with this Agreement. "Schwarz" shall have the meaning given in the preamble and shall include its Affiliates. "Schwarz Technology" shall mean all of Schwarz's patents, trade secrets, technology, know-how and all other information necessary to the manufacture of the Products. "Schwarz Trademarks" shall have the meaning given in Section 9.11(c). - 4 - "Specifications" shall mean with respect to any Product, at any time, the specifications for such Product that are included in the Quality Assurance Addendum set forth on Schedule 5.4(d). "Territory" shall mean Canada, Mexico and the fifty (50) states, the District of Columbia and the territories and possessions comprising the United States of America, including Puerto Rico. "Year" shall mean a calendar year during the term of this Agreement. SECTION 2 GRANT OF LICENSES; LICENSE OPTION 2.1 Grant of Licenses. (a) CIMA hereby grants to Schwarz an exclusive license for the term of this Agreement under the following assets to market, distribute and sell the Products, for all indications and for all agreed upon Product line extensions, in the Territory (such assets are referred to herein collectively as the "Licensed Assets"): (i) all current and future regulatory filings, approvals, registrations and governmental authorizations that relate to the Products in the Territory; (ii) the CIMA Intellectual Property; and (iii) the CIMA Marketing and Market Research Data. (b) CIMA grants to Schwarz an exclusive, royalty bearing license to use the CIMA Trademarks to market, distribute and sell the Products, during the term of this Agreement, for all indications and for all agreed upon Product line extensions in the Territory. (c) The license to Schwarz will be exclusive in that CIMA will not grant any licenses of the Licensed Assets or the CIMA Trademarks (i) in the Territory to any other Person with respect to the Products or any other products containing the same active ingredient [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] as any Product or (ii) anywhere in the world with respect to any products having an identical formulation as any Product, in each case, during the term of this Agreement (d) In the event that a third party is interested in developing, manufacturing or marketing an equivalent formulation of a Product outside the Territory, CIMA and Schwarz agree as follows: - 5 - (i) CIMA shall be entitled to solicit interest and enter initial discussions with any third parties for making a product having a formulation equivalent to that of a Product commercially available in any country or countries outside the Territory; (ii) upon receiving a bona fide proposal from a third party for the development and/or license of a formulation equivalent to that of a Product, but prior to initiating development activities or granting a license to such third party for such equivalent formulation, CIMA shall provide Schwarz a notice (a "License Notice") of its intent to initiate development activities or grant such license in a specific country or countries which shall identify such country or countries and shall describe in detail the formulation proposed to be licensed; and (iii) Schwarz shall provide CIMA a notice within forty-five (45) days of its receipt of the License Notice that either: A) Schwarz does not intend to market the Product in such country or countries, in which case CIMA shall be free to initiate development activities and/or license the formulation described in the License Notice to a third party; or B) Schwarz does intend to market the Product in such country or countries, in which case this Agreement shall be amended to include such country or countries in the Territory and to allow CIMA to perform any necessary development work. Schwarz shall have one (1) year from the date of its notice to CIMA to demonstrate significant progress towards bringing the Product to market in such country or countries. If Schwarz fails to demonstrate significant progress within one (1) year or fails thereafter to demonstrate continued activities to market the Product in such country or countries, Schwarz's license to the Product in that country or countries will terminate in thirty (30) days after re-notification by CIMA that Schwarz is not in compliance with this Section 2.1(d)(iii). 2.2 Sublicenses. Schwarz shall have the right to extend the licenses granted pursuant to this Section 2 in whole or in part to any Affiliate of Schwarz, provided that Schwarz 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 Schwarz, and the operations of the Affiliate shall be deemed to be the operations of Schwarz and Schwarz shall account therefor and be responsible for the performance of such Affiliate of all of its obligations hereunder. In addition, Schwarz 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 Schwarz with the prior written consent of CIMA, which consent shall not unreasonably be withheld or delayed. 2.3 Marketing, Distribution and Sale. After each Launch, Schwarz shall use its commercially reasonable efforts to market, distribute and sell the launched 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. - 6 - SECTION 3 PRODUCT DEVELOPMENT 3.1 Obligations of CIMA. CIMA shall be responsible for the satisfactory performance of each of the development activities set forth on Schedule 3.1 at least by the times set forth on Schedule 3.1. 3.2 Obligations of Schwarz Schwarz shall, in a timely fashion, supply CIMA or cause CIMA to be supplied with sufficient quantities of API for CIMA to perform the development activities described on Schedule 3.1 and the supply activities described in Sections 5.1 and 5.5. 3.3 License of Schwarz Technology. Schwarz hereby grants to CIMA a non-exclusive license under the Schwarz Technology so that CIMA may carry out its obligations under Section 3.1. Such license may not be sublicensed without the prior written consent of Schwarz 3.4 Additional Products. Schwarz may, with the prior written consent of CIMA, such consent not to be unreasonably withheld, supplement Schedule 3.1 after the date hereof by adding additional products thereto in order to increase the number of Products subject to this Agreement or to replace any Product previously terminated under Section 11.1 (c) or (d), in which case each such additional product(s) shall be deemed a "Product" within the meaning hereof, provided that any Product added pursuant to this Section 3.4 shall be subject to terms, including development schedules, comparable to then existing Products. This Agreement shall be amended as necessary to accommodate such additional or replacement Products and terms related thereto. 3.5 Regulatory Matters. All Product, other than Prototypes, supplied to Schwarz shall be produced under cGMP and in accordance with the Specifications. CIMA shall furnish Schwarz with a Certificate of Analysis with a cGMP statement to demonstrate that each shipment of Product has been manufactured under cGMP and other FDA guidelines and in accordance with the Specifications. In addition, Schwarz 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 Schwarz to audit all manufacturing and processing operations at reasonable times with a prior appointment. The right to audit shall commence with the effective date of this Agreement. 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. - 7 - SECTION 4 ROYALTY, COST OF GOODS AND MILESTONE PAYMENTS 4.1 Royalty and Milestone Payments. (a) Schwarz shall make royalty payments to CIMA, at the times, in the amounts and subject to the conditions set forth on Schedule 4.1(a). (b) Schwarz shall make Milestone Payments and Development Fee Payments to CIMA as set forth on Schedule 4.1(b). (c) In the event of (i) any patent infringement of the CIMA Technology that has a materially adverse effect on any Product, and/or (ii) the occurrence of an interruption in the supply of any Product for a period of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] or more, then, in each case, the obligation of Schwarz to make any payments pursuant to Sections 4.1(a) or 4.1(b) or Schedules 4.1(a) or 4.1(b) shall, in each case, terminate with respect to such Product(s) and be deemed waived by CIMA and shall be promptly renegotiated in good faith by Schwarz and CIMA. Any renegotiated obligations pursuant to this Section 4.1(c) shall be retroactively effective to the date the applicable event described above occurred. 4.2 Records and Audit. (a) Schwarz and its Affiliates shall keep full, 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 of account shall be kept at Schwarz's principal place of business or the principal place of business of the appropriate Affiliate of Schwarz to which this Agreement relates. 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 2 years after its termination, to the inspection by a firm of certified public accountants selected by CIMA and reasonably acceptable to Schwarz, for the limited purpose of verifying Schwarz's 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 3 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, Schwarz 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, and shall reimburse CIMA for the fees and expenses paid to such accountants in connection with their 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, Schwarz - 8 - 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. 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 3 Years. (b) CIMA shall keep full, true and accurate books and records that may be necessary for the purpose of determining the actual Costs of Goods incurred by CIMA as contemplated hereunder. Such books and records shall be kept at CIMA's principal place of business. Such books and records and the supporting data shall be open, at all reasonable times and upon reasonable notice during the term of this Agreement and for 2 years after its termination, to inspection by a firm of certified public accountants selected by Schwarz and reasonably acceptable to CIMA, for the limited purpose of verifying CIMA's Costs of Goods; provided, however, that such examination shall not take place more often than once each Year and shall not cover more than the preceding 3 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 Schwarz In the event that any such inspection reveals a discrepancy between CIMA's actual Costs of Goods and that invoiced to Schwarz, in favor of CIMA, in excess of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the reported Costs of Goods for the period covered by the inspection, CIMA shall promptly pay Schwarz the amount of such discrepancy, plus interest at the rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] per annum, and shall reimburse Schwarz for the fees and expenses paid to such accountants in connection with their inspection. In the event that any such inspection reveals a discrepancy between CIMA's actual Costs of Goods and that invoiced to Schwarz, in favor of CIMA, that is less than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the reported Cost of Goods for the period covered by the inspection, CIMA shall promptly pay Schwarz the amount of such discrepancy, plus interest at the rate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] per annum. 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 3 Years. 4.3 Quarterly Reports of Royalties. In any Year, Schwarz shall, within sixty (60) days after the end of each Quarter, deliver to CIMA true and accurate reports, certified by an authorized official of Schwarz, setting forth the actual Annual Net Sales and total royalties due under Section 4.1(a) for such Year. If no royalties are due, Schwarz shall so report. 4.4 Annual Reports of Costs of Goods. CIMA shall, not later than 60 days prior to the Launch of each Product and, thereafter, not later than 60 days after January 1 of each Year, deliver to Schwarz true and accurate reports, certified by an authorized official of CIMA, setting forth in reasonable detail the information necessary to calculate the Cost of Goods for each Product in accordance with Schedule 5.3. Product delivered to Schwarz between January 1 and February 28 each year shall be invoiced to Schwarz at the price applicable to Product delivered - 9 - to Schwarz during the immediately preceding calendar year. Then on or about February 28 of each year CIMA shall transmit to Schwarz a corrected invoice for Product delivered between January 1 and February 28 of each year taking into account the final amount of any such price increase or decrease, and setting forth the applicable additional charges or credits. 4.5 Sales and Marketing Estimates. Schwarz shall provide CIMA with a non-binding estimate of its Annual Net Sales by quarter for each Product [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] prior to the Launch of each Product. Thereafter, prior to September 30th in any year following the Launch of such Product, Schwarz shall provide CIMA with non-binding estimate of its Annual Net Sales of such Product by quarter for the following year. SECTION 5 SUPPLY OF PRODUCT 5.1 Supply of Product. (a) For the term of this Agreement, or for as long as CIMA manufactures any of the Products hereunder, whichever is shorter, Schwarz agrees to purchase from CIMA and CIMA agrees to supply Schwarz with all of Schwarz's requirements for the Products, Product samples and Product placebos for their subsequent use, sale, lease or transfer by Schwarz (b) Schwarz agrees to initiate purchases of the Products, Product samples and Product placebos hereunder by issuing CIMA binding purchase orders not less than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] prior to the required shipping date set forth therein. CIMA agrees to accept any order issued in accordance with this Section 5.1(b) and to meet the delivery dates specified thereon. All purchase orders hereunder shall be on Schwarz's standard purchase order form (a copy of which is attached as Schedule 5.1(b) hereto and which shall not, for purposes of this Agreement only, be modified in any material respect without CIMA's prior written consent, such consent not to be unreasonably withheld or delayed) and shall be directed to CIMA at the address set forth below. The terms and conditions of purchase enumerated on the reverse side of such standard purchase order form shall prevail over any inconsistent or conflicting language as may exist on invoices, confirmation or order acknowledgment forms of CIMA, provided, however, that in the event any terms thereof are in conflict, or are inconsistent with any terms of this Agreement, the terms and conditions hereof shall prevail. No Product delivered by CIMA shall have a shelf life that is more than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] less than the maximum shelf life of such Product (other than batches that were under investigation and batches for validation which shall have not more than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND - 10 - EXCHANGE COMMISSION.***] less than the maximum shelf life of such Product upon delivery to Schwarz). (c) Purchase order quantities shall be in full batch sizes that are mutually agreed by the parties. (d) Schwarz shall cause the amount of API that CIMA requires to perform its obligations pursuant to Schedule 3.1 and Sections 5.1 and 5.5 to be provided at no charge to CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] prior to date of tablet manufacture, as well as [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of safety stock. API must conform to Schwarz's then current raw materials specifications. CIMA shall not be accountable for production or shipment delays due to lack of API. (e) EXCEPT AS SPECIFICALLY PROVIDED HEREIN, INCLUDING, WITHOUT LIMITATION, SECTION 7.8, THE PRODUCT WILL BE SUPPLIED BY CIMA WITH NO WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABLILITY OR FITNESS FOR A PARTICULAR PURPOSE. 5.2 Identification. Schwarz may market the Products under its name, with its packaging and logo; Schwarz will, however, identify CIMA as the supplier in a fair manner, reasonably acceptable to CIMA. CIMA will bear all the costs of labeling the Product so as to appropriately display the Schwarz name provided Schwarz supplies all the appropriate graphics, designs, logos and related and appropriate artwork at least a reasonable amount of time in advance of any Product being manufactured. Schwarz shall reimburse CIMA for any reasonable and documented costs incurred by CIMA in making changes to the packaging required to manufacture the Products in accordance with changes to the PDMA or other applicable law or changes required by Schwarz, including, but not limited to plate and die charges due to label changes and product identification requirements, and for any packaging components rendered obsolete by the changes. In addition, CIMA shall pay for all initial one-time set-up charges incurred by CIMA in respect of packaging each Product. Schwarz may use CIMA's name and derivations thereof in promoting, marketing and selling the Products in the Territory; provided, however, that the particular formulation of any reference to CIMA's name in any Promotional Material shall be subject to CIMA's review and consent; and provided, further, that once the formulation of any such reference has been reviewed and consented to by CIMA, any subsequent reference to CIMA's name using such formulation shall not be subject to the further review or consent of CIMA. All samples shall be clearly marked "for sample use only" or some similar phrasing suggested by Schwarz 5.3 Trade, Sample and Placebo Product Price. CIMA shall supply Products, Product samples and Product placebos to Schwarz at the price set forth on Schedule 5.3. - 11 - 5.4 Forecasts, Delivery and Quality. (a) Schwarz shall provide CIMA with 12-month non-binding forecasts within 15 days after the end of each Quarter. Such forecasts shall be revised and extended in each succeeding Quarter. (b) Delivery of the Products, Product samples and Product placebos shall be in accordance with the means of transportation, destination and dates set forth in Schwarz's purchase order. Delivery shall be EXW (Incoterms 2000) CIMA and CIMA shall load Products on to collecting vehicle at CIMA's risk. (c) All deliveries of the Products hereunder shall include a Certificate of Analysis provided by the quality control manager of CIMA attesting to the fact that such Products (i) have been manufactured by a process which complies with cGMP and (ii) are of quality which is in accordance with criteria established in the Specifications and all FDA requirements. (d) The Products, Product samples and Product placebos supplied hereunder shall have been manufactured by a process which complies with the quality assurance addendum set forth on Schedule 5.4(d). 5.5 Rejection and Replacement. (a) In the event Schwarz determines that any Products, Product samples or Product placebos as manufactured and/or packaged by CIMA is Defective, then, within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] after delivery of such Products, Product samples or Product placebos to Schwarz [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], Schwarz shall provide to CIMA a written notice of rejection, specifying in reasonable detail the manner in which the Products are Defective (the "Notice of Rejection"). If no written Notice of Rejection is given to CIMA by Schwarz within such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period, such Products, Product samples or Product placebos shall be deemed to have been accepted by Schwarz, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]. (b) Upon receipt of a Notice of Rejection from Schwarz and in order to minimize any hardship to Schwarz's customers, CIMA shall use its reasonable best efforts to promptly supply to Schwarz a quantity of replacement Products, Product samples or Product placebos meeting the Specifications equal to the size of the lot or lots which Schwarz claims was Defective so that such replacement Products shall be received by Schwarz within 30 days following CIMA's receipt of Schwarz's Notice of Rejection. If CIMA agrees with Schwarz that such Product is Defective then CIMA shall either replace the Defective Product at no cost to Schwarz, or refund or credit, as designated by Schwarz, the price paid for such Product plus any applicable delivery charges, including, without limitation, shipping, insurance and taxes, and any reasonable and - 12 - documented out-of-pocket expense that Schwarz may have incurred, within thirty (30) days after written notice from Schwarz If CIMA disagrees with Schwarz as to whether such Product is Defective, the parties shall cooperate to have the Product in dispute analyzed by an independent testing laboratory of recognized repute jointly selected by Schwarz and CIMA. If the Product is determined by such laboratory to meet the Specifications, then Schwarz shall bear the cost of the independent laboratory testing and pay for the Product in accordance with this Agreement. If the Licensed Product is determined not to have met the Specifications at time of delivery, then CIMA shall bear the cost of the independent laboratory testing. In addition, CIMA shall either replace the Defective Product within thirty (30) days after the date of such determination, at no cost to Schwarz, or refund or credit, as designated by Schwarz, the price paid for such Product plus any applicable delivery charges, including, without limitation, shipping, insurance and taxes, and any reasonable and documented out-of-pocket expense that Schwarz may have incurred, within thirty (30) days after written notice from Schwarz If CIMA is unable to replace any such Product within thirty (30) days (or at any time that CIMA fails to deliver the replacement Product at an agreed upon date), Schwarz shall have the right, at its sole discretion, to extend the timeframe for delivery of replacement Product to a mutually agreed upon date, or, in the alternative, to require CIMA to reimburse Schwarz for the price paid for such Product plus any applicable delivery charges, including, without limitation, shipping, insurance and taxes and any reasonable and documented out-of-pocket expense Schwarz may have incurred. Such reimbursement shall be made within thirty (30) days of such notice. 5.6 Invoice and Payment. Upon shipment of any Products, Product samples or Product placebos, CIMA shall be entitled to submit invoices therefor to Schwarz, and Schwarz agrees to remit payment within thirty (30) days from CIMA's invoice date. 5.7 Supply Disruption; Alternate Manufacturing Site. (a) CIMA shall use its best efforts to supply Schwarz with the Products in a timely manner in accordance with the orders and forecasts received by CIMA pursuant to Sections 5.1(b) and 5.4(a), respectively. In any consecutive [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period, should CIMA fail to supply Schwarz with a Product ordered for such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period pursuant to Section 5.1(b) (other than for reason of Force Majeure), Schwarz shall have the right to require CIMA to transfer the manufacture of such Product(s) to Schwarz's Seymour facility or other designated Schwarz facility. Should CIMA cure its failure to supply any Product so transferred, CIMA shall have the right to resume the manufacture of such Product and Schwarz and CIMA shall transfer the manufacture of such Product back to CIMA within a commercially reasonable amount of time. (b) CIMA shall, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] establish a second manufacturing plant as an alternate FDA-approved manufacturing site for the Products however, the second manufacturing plant is not required to contain a bottling capability - 13 - 5.8 CIMA's Obligation to Continue Manufacture. If this Agreement terminates or expires through no breach of Schwarz, CIMA shall reasonably cooperate with Schwarz in transferring the manufacture of the Products to Schwarz, its Affiliate or, subject to confidentiality obligations consistent with Section 9.4, a third-party appointed by Schwarz, the parties shall develop a timing and payment schedule for the transfer of the manufacture of the Products and CIMA shall continue to supply the Products to Schwarz pursuant to the terms of this Agreement until [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from the date this Agreement is terminated or expires pursuant to Section 11.1. SECTION 6 CONDITIONS PRECEDENT TO THE CLOSING; CLOSING DATE 6.1 Conditions Precedent to Schwarz's Obligations. Subject to waiver as set forth in Section 12.3, all obligations of Schwarz to close the transactions contemplated under this Agreement are subject to the fulfillment or satisfaction of each of the following conditions precedent: (a) Representations and Warranties True as of the Closing Date. The representations and warranties of CIMA contained in this Agreement or in any schedule, certificate or document delivered by CIMA to Schwarz pursuant to the provisions hereof shall have been true on the date hereof and shall be true on the Closing Date with the same effect as though such representations and warranties were made as of such date. (b) Compliance with this Agreement. CIMA shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or by the Closing Date. (c) Closing Certificate. Schwarz shall have received a certificate from CIMA, executed by an officer of CIMA, certifying in such detail as Schwarz may reasonably request that the conditions specified in Sections 6.1(a) and 6.1(b), above, have been fulfilled and certifying that CIMA has obtained all consents and approvals required hereunder. (d) No Threatened or Pending Litigation. On the Closing Date, no suit, action or other proceeding, or injunction or final judgment relating thereto, shall, to the best of CIMA's knowledge, be threatened or be pending before any court or governmental or regulatory official, body or authority in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, and no investigation that might result in any such suit, action or proceeding shall be pending or, to the best of CIMA's knowledge, threatened. - 14 - 6.2 Conditions Precedent to CIMA's Obligations. Subject to waiver as set forth in Section 12.3, all obligations of CIMA to close the transactions contemplated under this Agreement are subject to the fulfillment or satisfaction of each of the following conditions precedent: (a) Representations and Warranties True as of the Closing Date. The representations and warranties of Schwarz contained in this Agreement or in any schedule, certificate or document delivered by Schwarz to CIMA pursuant to the provisions hereof shall have been true on the date hereof and shall be true on the Closing Date with the same effect as though such representations and warranties were made as of such date. (b) Compliance with this Agreement. Schwarz shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or by the Closing Date. (c) Closing Certificate. CIMA shall have received a certificate from Schwarz, executed by an officer of Schwarz, certifying in such detail as CIMA may reasonably request that the conditions specified in Sections 6.2(a) and 6.2(b), above, have been fulfilled and certifying that Schwarz has obtained all consents and approvals required hereunder. (d) No Threatened or Pending Litigation. On the Closing Date, no suit, action or other proceeding, or injunction or final judgment relating thereto, shall, to the best of Schwarz's knowledge, be threatened or be pending before any court or governmental or regulatory official, body or authority in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, and no investigation that might result in any such suit, action or proceeding shall be pending or, to the best of Schwarz's knowledge, threatened. 6.3 Closing Date. (a) Subject to Section 6.3(b), below, the closing of the transactions contemplated by this Agreement shall take place at 10:00 a.m., local time, on December 18, 2001, or on such other date as may be mutually agreed upon in writing by the parties (the "Closing Date"), at the offices of Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019. (b) Each party hereby agrees to use its best efforts to consummate the transactions contemplated herein, as modified, on or before December 18, 2001; provided, however, that if the parties are unable to close the transactions contemplated hereby by January 31, 2002, or such later date as shall be mutually agreed to in writing by CIMA and Schwarz, then all of the rights and obligations of the parties under this Agreement shall terminate without liability. - 15 - SECTION 7 REPRESENTATIONS AND WARRANTIES OF CIMA CIMA hereby represents and warrants to Schwarz that: 7.1 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 and the CIMA Trademarks to Schwarz pursuant hereto. 7.2 Due Authority; No Breach. The execution, delivery and performance by CIMA of this Agreement and each agreement or instrument contemplated by this Agreement, and the performance of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action by CIMA. This Agreement is, and each agreement or instrument contemplated by this Agreement, when executed and delivered by CIMA in accordance with the provisions hereof, will be (assuming the due execution and delivery hereof and thereof by Schwarz) the legal, valid and binding obligation of CIMA, in each case enforceable against CIMA in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization, or similar laws from time to time in effect which affect the enforcement of creditors' rights generally and by legal and equitable limitations on the availability of specific performance and other equitable remedies against CIMA. All persons who have executed this Agreement on behalf of CIMA, or who will execute on behalf of CIMA any agreement or instrument contemplated by this Agreement, have been duly authorized to do so by all necessary corporate action. Neither the execution and delivery of this Agreement or any such other agreement or instrument by CIMA, nor the performance of the obligations contemplated hereby or thereby, 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 or under any agreement or instrument contemplated hereby. 7.3 Intellectual Property. CIMA is the lawful owner of the Licensed Assets and CIMA Trademarks, CIMA can license the Licensed Assets and CIMA Trademarks without the consent of any third party in the Territory, there is no pending or overtly threatened claim against CIMA asserting that any of the Licensed Assets or CIMA Trademarks infringes or violates the rights of third parties in the Territory or that Schwarz, by practicing under the Licensed Assets and CIMA Trademarks in performing the Activities, would violate any of the intellectual property rights of any third party in the Territory, 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 and CIMA Trademarks infringes or violates the right of third parties in the Territory. CIMA has not given any notice to any third parties asserting infringement by such third parties upon any of the Licensed Assets and - 16 - CIMA Trademarks. CIMA is not aware of and has not received any communications challenging the ownership, validity or effectiveness of any of the Licensed Assets and CIMA Trademarks. 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 Schwarz pursuant to this Agreement. 7.4 Technology Rights. The CIMA Technology, to the best of CIMA's knowledge, when combined with the Schwarz Technology, includes all the technology, patents, know-how, trade secrets and other intellectual property necessary to manufacture the Products. 7.5 Litigation. There are no pending or, to the best of CIMA's knowledge, threatened judicial, administrative or arbitral actions, claims, suits or proceedings pending as of the date hereof against CIMA relating to the Activities, the Licensed Assets or the CIMA Trademarks which, either individually or together with any other, would have a material adverse effect on the Activities, the Licensed Assets, the CIMA Trademarks or the ability of CIMA to perform its obligations under this Agreement or any agreement or instrument contemplated hereby. There are no pending, and CIMA does not presently contemplate bringing, any actions or suits relating to the Activities, the Licensed Assets or the CIMA Trademarks against others. 7.6 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, delivery and performance of this Agreement, or any agreement or instrument contemplated by this Agreement, by CIMA or the performance by CIMA of its obligations contemplated hereby and thereby. 7.7 Brokerage. No broker, finder or similar agent has been employed by or on behalf of CIMA, and no Person with which CIMA has had any dealings or communications of any kind is entitled to any brokerage commission, finder's fee or any similar compensation, in connection with this Agreement or the transactions contemplated hereby. 7.8 Supply. All finished Products supplied by CIMA under Section 5 shall (i) have been manufactured by a process which complies with cGMP and the Quality Assurance Addendum set forth on Schedule 5.4(d) and (ii) be of a quality which is in accordance with criteria established by the specifications established by the Specifications and all FDA requirements. SECTION 8 REPRESENTATIONS AND WARRANTIES OF SCHWARZ Schwarz represents and warrants to CIMA that: 8.1 Organization, Power and Authority. Schwarz is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Schwarz has all - 17 - necessary corporate power and authority to enter into, and be bound by the terms and conditions of, this Agreement, to license the Licensed Assets, the Patents and the CIMA Technology from CIMA, and to license the Schwarz Technology to CIMA pursuant hereto. 8.2 Due Authority; No Breach. The execution, delivery and performance by Schwarz of this Agreement, and each agreement or instrument contemplated by this Agreement, and the performance of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action by Schwarz This Agreement is, and each agreement or instrument contemplated by this Agreement, when executed and delivered by Schwarz in accordance with the provisions hereof, will be (assuming due execution and delivery hereof and thereof by CIMA) the legal, valid and binding obligation of Schwarz, in each case enforceable against Schwarz in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization, or similar laws from time to time in effect which affect the enforcement of creditors' rights generally and by legal and equitable limitations on the availability of specific performance and other equitable remedies against Schwarz All persons who have executed this Agreement on behalf of Schwarz, or who will execute on behalf of Schwarz any agreement or instrument contemplated by this Agreement, have been duly authorized to do so by all necessary corporate action. Neither the execution and delivery of this Agreement by Schwarz, or any such other agreement or instrument by Schwarz, nor the performance of the obligations contemplated hereby and thereby, 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 Schwarz 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, Schwarz or upon the securities, property or business of Schwarz, or (iii) constitute a violation by Schwarz of any applicable law or regulation of any jurisdiction as such law or regulation relates to Schwarz or to the property or business of Schwarz, except for such conflict, acceleration, default, breach or violation that is not reasonably likely to have a material adverse effect on Schwarz's ability to perform its obligations under this Agreement or any agreement or instrument contemplated hereby. 8.3 Brokerage. No broker, finder or similar agent has been employed by or on behalf of Schwarz and no Person with which Schwarz has had any dealings or communications of any kind is entitled to any brokerage commission, finder's fee or any similar compensation, in connection with this Agreement or the transactions contemplated hereby. 8.4 Litigation. There are no pending or, to the best of Schwarz's knowledge, threatened judicial, administrative or arbitral actions, claims, suits or proceedings pending as of the date hereof against Schwarz which, either individually or together with any other, will have a material adverse effect on the ability of Schwarz to perform its obligations under this Agreement or any agreement or instrument contemplated hereby or affect adversely the grant to CIMA of the non-exclusive license of the Schwarz Technology pursuant to Section 3.3. 8.5 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, delivery and performance of this Agreement, or any agreement or instrument - 18 - contemplated by this Agreement, by Schwarz or the performance by Schwarz of its obligations contemplated hereby and thereby. SECTION 9 ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES 9.1 Governmental Filings. CIMA and Schwarz 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 Products and to cooperate with one another as reasonably necessary to accomplish the foregoing. 9.2 Compliance with Law. Schwarz and CIMA shall each comply with all federal, state and local laws and regulations applicable to developing, approving, manufacturing, marketing and selling the Products in the Territory, the Licensed Assets, the Patents and the Technology or the performance of their respective obligations hereunder. CIMA and Schwarz 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 Schwarz 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 any Product. Schwarz 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. Schwarz 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 Schwarz shall be responsible for deciding the appropriate form and content of any response with respect to any of its cited activities. 9.3 Recall. Schwarz and CIMA shall consult with one another as to all decisions concerning recall or withdrawal of any Product from the market, including, but not limited to, determining whether or not to make any such recall or withdrawal, the timing and scope thereof, and the means of conducting any recall or withdrawal. The party requesting any recall or withdrawal must receive the prior written consent of the other party, such consent not to be unreasonably withheld, prior to initiating such recall or withdrawal. No consent shall be necessary if the recall or withdrawal is requested by the FDA or other governmental authority. CIMA shall bear the costs (including but not limited to, shipping and product credits) for any recall or withdrawal primarily due to CIMA's failure to comply with this Agreement. The costs for any other recall or withdrawal shall be the responsibility of Schwarz. - 19 - 9.4 Confidentiality. Schwarz shall treat as confidential the Licensed Assets, the Patents, the CIMA Technology, and all other information of CIMA of which Schwarz becomes aware in connection with this Agreement (collectively, "CIMA Proprietary Information"). Schwarz 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 the Schwarz Technology and all other information of Schwarz of which CIMA becomes aware in connection with this Agreement (collectively, "Schwarz Proprietary Information"). CIMA shall neither disclose Schwarz Proprietary Information to any third party nor use Schwarz 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; (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. Nothing in the foregoing, however, shall prohibit a party from making such disclosures to the extent deemed necessary under applicable federal or state securities laws or any applicable rule or regulation of any nationally recognized securities exchange including, without limitation, NASDAQ. In such event, however, the disclosing party shall use good faith efforts to consult with the other party prior to such disclosure and, where applicable, shall request confidential treatment to the extent available. Schwarz 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 Schwarz Proprietary Information except as set forth in this Agreement. 9.5 Expenses. CIMA and Schwarz 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. - 20 - 9.6 Reasonable Efforts. CIMA and Schwarz each hereby agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done all things necessary or proper to make effective the transactions contemplated by this Agreement, including such actions as may be reasonably necessary to obtain approvals and consents of governmental Persons and other Persons. 9.7 Publicity. Each of the parties agrees 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, 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. 9.8 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 Products or any of the Licensed Assets, the Patents or the Technology, 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, provided that, for purposes of this provision, reasonable efforts to make available any employee shall be deemed to mean providing a party with reasonable access to any such employee at no cost for a period of time not to exceed 24 hours (e.g., three 8-hour business days). Thereafter, any such employee shall be made available for such time and upon such terms and conditions (including, but not limited to, compensation) as the parties may mutually agree. 9.9 Competition; No Sale for Resale. (a) CIMA agrees that, commencing on the Closing Date and continuing for the period ending [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] after the term of this Agreement, it shall not directly or indirectly, develop or manufacture for sale within the Territory any Product described on Schedule 3.1 on the date hereof or engage in the marketing, selling or distributing of any such Product in the Territory except as contemplated by this Agreement. It is further understood that the remedies at law are inadequate in the case of any breach of this covenant and that Schwarz shall be entitled to equitable relief, including the remedy of specific performance, with respect to any breach of such covenant. (b) Neither Schwarz nor any sublicensee of Schwarz shall knowingly directly or indirectly sell any Product to anyone in the Territory for subsequent distribution or resale outside the Territory and each shall take all reasonable precautions to prevent such distribution or resale outside the Territory. Neither CIMA nor any of its Affiliates shall knowingly directly or indirectly sell any Product to anyone in the Territory or outside the Territory for subsequent distribution or resale in the Territory and each shall take all reasonable precautions to prevent such distribution or resale in the Territory. - 21 - 9.10 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 Schwarz pursuant to this Agreement. 9.11 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 Schwarz 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 Schwarz, 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, Schwarz shall have no rights to use the CIMA Trademarks. Schwarz 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 in use by CIMA to indicate the source and origin of the CIMA Technology as to be likely to cause deception or confusion. Schwarz recognizes that CIMA is the owner of all CIMA Trademarks used in commerce to indicate the source of the CIMA Technology and agrees that the CIMA Trademarks shall remain vested in CIMA both during the term of this Agreement and thereafter. Schwarz shall not contest the validity of the CIMA Trademarks or CIMA's ownership of the CIMA Trademarks. Use of the CIMA Trademarks by Schwarz in conjunction with the manufacture, use, and sale 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) Schwarz shall be solely responsible for filing, prosecuting, and maintaining all trademarks it develops or owns for the Products (the "Schwarz Trademarks"), and Schwarz shall pay the costs associated therewith. All registrations, variations, logos, goodwill and other rights under or acquired through use of the Schwarz Trademarks shall accrue and belong to Schwarz CIMA shall have no rights to use the Schwarz Trademarks, including, without limitation, in connection with any product subsequently developed by CIMA. 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 Schwarz Trademarks in use by Schwarz in a manner that is likely to cause deception or confusion. CIMA recognizes that Schwarz is the owner of all of the Schwarz Trademarks used in commerce to indicate the source of the Product and agrees that the Schwarz Trademarks shall remain vested in Schwarz both during the term of this Agreement and thereafter. CIMA shall not contest the validity of the Schwarz Trademarks or Schwarz's ownership of the Schwarz Trademarks. Use of the Schwarz Trademarks by Schwarz in conjunction with the manufacture, use, and sale of the Product and all goodwill related thereto shall - 22 - inure to the benefit of Schwarz for purposes of building the longevity and extent of use of the Schwarz Trademarks. (d) Schwarz and CIMA agree that, where applicable, all packaging of the Products shall identify (i) the number of the CIMA Patents and CIMA as the owner thereof and (ii) Schwarz as the owner of the Schwarz Trademarks. (e) Any improvements to the CIMA Technology (whether or not patentable) shall be owned solely by CIMA. (f) Any improvements to the Schwarz Technology (whether or not patentable) shall be owned solely by Schwarz (g) Schwarz shall have full ownership rights to the Products with the exception of any improvements to the CIMA Technology as contemplated by Section 9.11(e). (h) Any provisions in this Agreement to the contrary notwithstanding, Schwarz acknowledges that, for all purposes, CIMA is the owner of the CIMA Technology and CIMA acknowledges that, for all purposes, Schwarz is the owner of the Schwarz Technology. 9.12 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 have the responsibility to investigate such alleged infringement and act diligently, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], to end any infringement of such rights that materially affect Schwarz's rights pursuant to this Agreement, including, but not limited to, bringing suit against such third party infringer. In the event that CIMA does not bring suit against such third party infringer, Schwarz 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 9.12(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 9.12, 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. (c) Infringement of Third Party Rights. If, during the term of this Agreement, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED - 23 - SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] Schwarz's marketing or selling of the Product hereunder infringes on a third party patent based upon claims that dominate claims in the CIMA Patents, within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] after notice by Schwarz, CIMA shall use its reasonable best efforts to procure for Schwarz the right to exercise all rights licensed under this Agreement without any additional payment therefor by Schwarz 9.13 Supply of Products. CIMA shall maintain sufficient capacity throughout the term of this Agreement to meet the requirements of Schwarz for the supply of Products hereunder. 9.14 Liability Insurance. At and after each Launch, CIMA shall use its best efforts to obtain and carry in full force and effect product liability insurance in respect of the applicable Product in the amount of $1,000,000 per occurrence and in the aggregate and policies of $10,000,000 of excess coverage in the aggregate. At and after each Launch, Schwarz shall use its best efforts to obtain and carry in full force and effect product liability insurance in respect of the applicable Product in the amount of $1,000,000 per occurrence and in the aggregate and policies of $10,000,000 of excess coverage in the aggregate. 9.15 Referral of Orders and Inquiries. CIMA shall refer all Persons sending orders or making inquiries regarding the Products within the Territory to Schwarz and shall promptly notify Schwarz of the name of each such Person and the nature of the inquiry of such Person. 9.16 Deemed Breach of Covenant. Neither CIMA nor Schwarz shall be deemed to be in breach of any covenant contained in this Section 9 if such party's deemed breach is the result of any action or inaction on the part of the other party. SECTION 10 INDEMNIFICATION 10.1 Indemnification. (a) CIMA shall indemnify, defend and hold Schwarz (and its directors, officers, employees, and Affiliates) harmless from and against any and all Damages incurred or suffered by Schwarz (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 or any agreement, instrument or document delivered by CIMA pursuant to the terms of this Agreement; (ii) any failure to perform duly and punctually any covenant, agreement or undertaking on the part of CIMA contained in this Agreement; - 24 - (iii) any act or omission of CIMA with respect to the operation of CIMA's business, or the handling, manufacturing or development of the Products by CIMA; or (iv) the infringement of the Licensed Assets, the Patent or the Technology of any patent, trademark, copyright, trade secret or other intellectual property right of any person other than CIMA or Schwarz (b) Schwarz 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: (i) any breach of any representation or warranty made by Schwarz in this Agreement or any agreement, instrument or document delivered by Schwarz pursuant to the terms of this Agreement; (ii) any failure to perform duly and punctually any covenant, agreement or undertaking on the part of Schwarz contained in this Agreement; or (iii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of Schwarz with respect to the operation of Schwarz's business or the handling, marketing or sale of the Products by Schwarz, including Schwarz's supply of API hereunder. 10.2 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 10.1. 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 - 25 - 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 10.2, (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). 10.3 Indemnification Payment Obligation. No Indemnifying Party will have any obligations under Sections 10.1(a) or 10.1(b) until the cumulative aggregate amount of Damages incurred or suffered by the Indemnified Party which the Indemnifying Party is otherwise subject to under this Agreement exceeds [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] at which time the entire cumulative aggregate amount of such Damages shall be covered. The provisions of this Section 10.3 shall not limit or otherwise affect the obligations of any Indemnifying Party under any other Section of this Agreement. 10.4 Indemnification Payment Adjustments. The amount of any Damages for which indemnification is provided under this Section 10 shall be reduced to take account of any net tax benefit and shall be increased to take account of any net tax detriment arising from the incurrence or payment of any such Damages or from the receipt of any such indemnification payment and shall be reduced by the insurance proceeds received and any other amount recovered, if any, by the Indemnified Party with respect to any Damages; provided, however, that an Indemnified Party shall not be subject to an obligation to pursue an insurance claim relating to any Damages for which indemnification is sought hereunder. If any Indemnified Party shall have received any payment pursuant to this Section 10 with respect to any Damages and shall subsequently have received insurance proceeds or other amounts with respect to such Damages, then such Indemnified Party shall pay to the Indemnifying Party an amount equal to the difference (if any) between (i) the sum of the amount of those insurance proceeds or other amounts received and the amount of the payment by such Indemnifying Party pursuant to this Section 10 with respect to such Damages and (ii) the amount necessary to fully and completely indemnify and hold harmless such Indemnified Party from and against such Damages; provided, however, in no event will such Indemnified Party have any obligation pursuant to this sentence to pay to such Indemnifying Party an amount greater than the amount of the payment by such Indemnifying Party pursuant to this Section 10 with respect to such Damages. 10.5 Indemnification Payment. Upon the final determination of liability and the amount of the indemnification payment under this Section 10, the appropriate party shall pay to - 26 - the other, as the case may be, within 10 business days after such determination, the amount of any claim for indemnification made hereunder. 10.6 Survival. The provisions of Section 10 shall survive any termination of this Agreement. Each Indemnified Party's rights under Section 10 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 this Agreement, unless such waiver expressly and in writing also waives any or all of the Indemnified Party's right under Section 10. SECTION 11 TERMINATION 11.1 Termination. The term of this Agreement shall begin upon the Closing Date and, unless sooner terminated as hereinafter provided, shall end with respect to each Product upon the expiration of the last CIMA Patent applicable to such Product to expire or, if later, the expiration of any other patent resulting from the development process contemplated hereby. Notwithstanding the foregoing, this Agreement may be terminated as follows: (a) Termination for Insolvency. If either Schwarz 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. Schwarz 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 ninety (90) 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 11.1(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 ninety (90) days after receipt of notification, then such party immediately may terminate this Agreement. This Section 11.1(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. (c) Unilateral Termination by Schwarz Prior to Launch. Prior to the Launch of any Product, Schwarz will have the right to unilaterally terminate this Agreement - 27 - either in its entirety or with respect to one or more specific Products at any time and in its sole discretion upon the delivery of written notice to CIMA. Any provision herein notwithstanding, in the event that Schwarz terminates this Agreement pursuant to this Section 11.1(c), Schwarz's sole obligation under this Agreement shall be to reimburse CIMA for the costs and expenses actually incurred by CIMA (i) in performing the development activities set forth on Schedule 4.1(b) hereto in respect of such terminated Product(s) prior to CIMA's receipt of such notice of termination and (ii) in connection with the orderly close out of such development activities; provided, however, that Schwarz's reimbursement obligations pursuant to this Section 11.1(c) in respect of any terminated Product(s) shall exclude the costs and expenses incurred by CIMA in connection with any Development Phase for which Schwarz has made a Development Fee Payment and shall in no event exceed the Development Fee Payment associated with the Development Phase on which CIMA is then working, as set forth on Schedule 4.1(b). (d) Unilateral Termination by Schwarz After Launch. Following the Launch of any Product, Schwarz will have the right to unilaterally terminate this Agreement either in its entirety or with respect to one or more specific Products and in its sole discretion upon the delivery of written notice to CIMA. Termination of the Agreement either in its entirety or with respect to one or more specific Products will be effective with respect to such Product or Products one hundred eighty (180) days following such written notice to CIMA. (e) Continuing Obligations. Termination of this Agreement for any reason shall not relieve the parties of any obligation accruing prior thereto with respect to any Product and any ongoing obligations hereunder with respect to the remaining Products 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 5.8, 9.3, 9.4, 9.5, 9.7, 9.9(a), 10, 11.1(c), 11.1(d), 11.1(e) and 12 hereof, and such obligations shall survive any such termination. SECTION 12 MISCELLANEOUS 12.1 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 Schwarz 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 in the event that a third party acquires substantially all of the assets or outstanding shares of, or merges with, Schwarz or CIMA, as the case may be. - 28 - 12.2 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: Chief Executive Officer If to Schwarz, as follows: Schwarz Pharma, Inc. 6140 West Executive Drive Mequon, Wisconsin 53092 Facsimile: 262-242-1641 Attention: General Counsel with a copy to: Mayer, Brown & Platt 1675 Broadway New York, New York 10019 Facsimile: 212-262-1910 Attention: Philip O. Brandes or in any case to such other address or addresses as hereafter shall be furnished as provided in this Section 12.2 by any party hereto to the other party. 12.3 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 Schwarz 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 Schwarz 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 privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The indemnification provided in Section 10 shall be the sole remedy available for any Damages arising out of or in connection with this Agreement except for any rights or remedies which the parties hereto may otherwise have in equity. 12.4 Survival of Representations. Each of the representations and warranties made in this Agreement shall continue for the term of this Agreement and shall thereafter be extinguished. - 29 - 12.5 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. Schwarz acknowledges that it does not have, and Schwarz shall not make representations to any third party, either directly or indirectly, indicating that Schwarz 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 Schwarz or to obligate Schwarz in any way whatsoever. 12.6 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements including, without limitation the Feasibility Agreement entered by CIMA and Schwarz on November 30, 2001, or understandings of the parties relating thereto. 12.7 Amendment. This Agreement may be modified or amended only by written agreement of the parties hereto. 12.8 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. 12.9 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. 12.10 Arbitration. Any dispute, controversy or claim arising out of or in connection with this Agreement shall be determined and settled by arbitration in New York, New York, pursuant to the Rules of Arbitration then in effect of the American Arbitration Association. Any award rendered shall be final and conclusive upon the parties and a judgment thereon may be entered in a court having competent jurisdiction. Any arbitration hereunder shall be (i) submitted to an arbitration tribunal comprised of three (3) independent members knowledgeable in the pharmaceutical industry, one of whom shall be selected by Schwarz, one of whom shall be selected by CIMA, and one of whom shall be selected by the other two arbitrators; (ii) allow for the parties to request discovery pursuant to the rules then in effect under the Federal Rules of Civil Procedure for a period not to exceed 90 days; and (iii) require the award to be accompanied by findings of fact and a statement of reasons for the decision. Each party shall bear its own costs and expenses, including attorney's fees incurred in any dispute which is determined and/or settled by arbitration pursuant to this Section. 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. Arbitration shall not prevent any party from seeking injunctive relief where such remedy is an appropriate form of remedy under the circumstances. 12.11 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 - 30 - 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. 12.12 No Third-Party Rights. No provision of this Agreement shall be deemed or construed in any way to result in the creation of any rights or obligation in any Person not a party or not affiliated with a party to this Agreement. 12.13 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. 12.14 Attachments. All Schedules, Exhibits and other attachments to this Agreement are by this reference incorporated herein and made a part of this Agreement. 12.15 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. 12.16 Consents. Where this Agreement requires the consent of any party and specifies that such consent is not to be unreasonably withheld, the determination of whether such consent may be withheld shall be based upon the facts and circumstances of the business of the party whose consent is requested, it being understood that it is reasonable to withhold the requested consent if granting the requested consent would have an adverse impact on such party's business activities. - 31 - 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 Hontz ----------------------------------- Name: John Hontz Title: Chief Operating Officer SCHWARZ PHARMA, INC. By: /s/ Ron Stratton ------------------------------------ Name: Ron Stratton, Ph.D. Title: President and COO - 32 - Schedule 3.1 to Master Development License and Supply Agreement Master Development Schedule [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] Schedule 4.1(a) to Master Development, License and Supply Agreement Royalty Rates In any Year, Schwarz shall pay to CIMA a royalty in the amount of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the Annual Net Sales, if any, actually recorded during such Year. Schwarz shall pay the royalty payment due in respect of any Quarter (a "Quarterly Installment") by remitting a check, together with the report required by Section 4.3, to CIMA within 60 days after the end of each Quarter during such Year. For purposes of determining the royalty payment pursuant to this Schedule 4.1(a) the amount of each Quarterly Installment shall be calculated based on actual Net Sales recorded during such Quarter. Schedule 4.1(b) to Master Development, License and Supply Agreement Development Fee And Milestone Payments (a) Subject to paragraph (b) of this Schedule 4.1(b), Schwarz shall pay to CIMA any of the milestone payments set forth below (each a "Milestone Payment") promptly after CIMA demonstrates the Satisfactory Completion (as defined below) of the research and development phases (each a "Development Phase") set forth opposite such Milestone Payment: [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] (b) Promptly after the completion of each Development Phase, CIMA shall notify Schwarz of such completion and shall provide Schwarz sufficient written materials (a "Development Phase Notice") to allow Schwarz to evaluate whether or not such Development Phase has been Satisfactorily Completed. [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] (c) In addition to the Milestone Payments described above, in connection with each Product, Schwarz shall pay CIMA an amount equal to (i) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] in the event the actual Completion Date for such Product precedes the target Completion Date therefor set forth on Schedule 3.1 by at least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] or (ii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] in the event the actual Completion Date for such Product precedes the target Completion Date therefor set forth on Schedule 3.1 by at least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]. (d) Schwarz shall also pay to CIMA the development fee payments set forth below (each a "Development Fee Payment") within thirty (30) days of CIMA's invoice for development work performed in accordance with this Agreement during the applicable Quarter. - -------------------------------------------------------------------------------- TIME PERIOD DEVELOPMENT FEE - -------------------------------------------------------------------------------- [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] - -------------------------------------------------------------------------------- Quarter ending December 31, 2001 $500,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] - -------------------------------------------------------------------------------- Schedule 5.1(b) to Master Development License and Supply Agreement Schwarz Purchase Order [See Attached] ================================================================================ SCHWARZ SCHWARZ PHARMA MANUFACTURING, INC. PURCHASE ORDER NO. PHARMA 1101 C AVENUE WEST PURCHASE ORDER DATE PO BOX 328 SEYMOUR, IN 47274 812-523-3457 PAGE ------------------------------ ------------------------------ VENDOR: SHIP TO: ------------------------------ ------------------------------

ORIGINAL COPY - -------------------------------------------------------------------------------- SHIP VIA TAXABLE TERMS DESCRIPTION FOB DESCRIPTION - -------------------------------------------------------------------------------- RESOURCE NUMBER RESOURCE DESCRIPTION QUANTITY UM UNIT PRICE AMOUNT ================================================================================

THE TERMS AND CONDITIONS ON THE REVERSE SIDE ARE PART OF THIS PURCHASE ORDER. BY:__________________________ TERMS AND CONDITIONS 1. Definitions. (a) Buyer means Schwarz Pharma Manufacturing, Inc. (b) Seller means any person, firm, or corporation to whom this Purchase Order is directed. 2. Terms: This Purchase Order constitutes any order to buy goods, equipment, material, supplies, or services according to the description and other terms set forth on its face and reverse side. No additional or different terms offered by the Seller shall be or become part of this order, nor shall this order be modified without the express written approval of Buyer. 3. Shipping Instructions: All shipments must contain packing lists giving descriptions of material, quantity and purchase order number. If shipment is not made F.O.B. destination, the original bill of lading must be furnished with invoices. Buyer's count will be accepted as final on all shipments not accompanied by packing lists. 4. Risk of Loss: The risk of loss from any casualty to the goods regardless of the cause, shall be on Seller until the goods have been received, inspected and accepted by the company. 5. Delays in Delivery: Time is of the essence. If Seller for any reason does not comply with the buyer's delivery schedule, Buyer in addition to remedies provided by law, at its option may either approve and revise delivery schedule or, may terminate the order without liability on account thereof. 6. Warranty: Seller expressly warrants that all goods, equipment, material, supplies or services covered by this order will conform to the specification, drawings, samples or other description furnished or specified by the Buyer, shall be of good material and workmanship and free from defects. 7. Rejections: If any of the goods, equipment, material or supplies are found within a reasonable time after delivery to the Buyer to be defective in material or workmanship or otherwise not in conformity with the requirements of the order, Buyer, in addition to any other rights which it may have under warranties or otherwise, shall have the right to reject and return such goods at Seller's expense, such goods not to be replaced without suitable written authorization from Buyer. 8. Patent Infringements: Seller shall pay costs and damages finally awarded in any suit against the Buyer or its vendees to the extent based upon a finding that the design or construction of articles as furnished infringes a United States Patent (except infringement occurring as a result of incorporating a design or modification at the request of Buyer); provided the Buyer promptly notifies Seller of any charge of such infringement and the Seller is given the right at its expense to settle such charge and to defend or control the defense of any suit based upon such charge, this paragraph sets forth the Seller's exclusive liability with respect to patents. 9. Compliance with Laws: Seller shall comply with all applicable State, Federal and local laws, rules and regulations. 10a. Termination: The Buyer may terminate work on this order for its own convenience in whole or in part by written or telegraphic notice at any time. In the event, any claim arising out of such termination shall be settled by negotiation on the basis of the Seller's costs and commitments properly incurred or made, with due allowance for salvage value. 10b. If the Seller ceases to conduct its operations in the normal course of business including liability to meet its obligations as they mature of if any proceeding under the bankruptcy or insolvency laws is brought by or against the Seller, a receiver for the Seller is appointed or applied for or an assignment for the benefit of Creditors is made by the Seller, Buyer may terminate order without liability except for the deliveries previously made or for goods covered by the order then completed and subsequently delivered in accordance with the terms of the order. 11. Nondiscrimination in Employment. Seller will not discriminate against any employee or applicant for employment because of race, religion, color, sex, age, or national origin. 12. Non-Waiver. Any waiver of strict compliance with the provisions of this order shall not be deemed a waiver of the Buyer's rights to insist upon strict compliance thereafter. 13. Subcontracting. In the event the Seller subcontracts all or any part of this order, Seller remains completely responsible for price, delivery and quality. Schedule 5.3 to Master Development, License and Supply Agreement Cost of Goods [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] Schedule 5.4(d) to Master Development License and Supply Agreement Quality Assurance Addendum [To be mutually agreed by parties on or prior to each Launch] SCHWARZ PHARMA, INC. 6140 West Executive Drive Mequon, Wisconsin 53092 March 1, 2002 CIMA LABS INC. 10000 Valley View Road Eden Prairie, Minnesota 55344 Attention: Chief Executive Officer Ladies and Gentlemen: Reference is made to the Master Development, License and Supply Agreement, dated as of December 18, 2001 (as amended, restated or otherwise modified from time to time, the "License Agreement"), by and between CIMA LABS INC., a Delaware corporation ("CIMA") and Schwarz Pharma, Inc., a Delaware corporation ("Schwarz"). Capitalized terms that are used but not defined in this letter agreement (this "Letter Agreement") shall have the meanings given them in the License Agreement. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the undersigned hereby agrees to modify the License Agreement as follows: 1. In order to (i) memorialize the final agreement of the parties regarding the Milestone Payments applicable to Product #3 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) and Product #2 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) and (ii) replace certain of the Products, as contemplated by Section 3.4 of the License Agreement, (a) Schedule 3.1 of the License Agreement is hereby amended by replacing the Products numbered 5, 6 and 7 in the table therein with the following (the "Replacement Products") and by replacing the relevant portions of the table in Schedule 3.1 that relate to the Products numbered 5, 6 and 7 with the information set forth below: [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] Schwarz and CIMA hereby agree that each of the Replacement Products shall be deemed to be a Product under and as defined in the License Agreement. (b) Schedule 4.1(b) of the License Agreement is hereby amended such that the table included in paragraph (a) therein shall be deleted in its entirety and replaced with the table set forth in Exhibit A hereto. 2. Schwarz and CIMA further agree that, anything to the contrary herein or in the License Agreement notwithstanding, with respect to Product #7 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) only, the date after which the Development Phase relating to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], as contemplated by paragraph (b) of Schedule 4.1(b) of the License Agreement, shall be [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] after deadline therefor. In addition, should CIMA determine, in its reasonable discretion, that a [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] is not suitable and a [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] is required for the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] referred to in this paragraph 2 shall be extended to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]. 3. Schwarz and CIMA further agree that, anything to the contrary herein or in the License Agreement notwithstanding, Product #5 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) will be developed to be packaged in bottles and blisters; provided, however, that if, for technical or stability reasons, bottles are not suitable, such Product may be developed to be packaged in blisters only. 4. Schwarz and CIMA further agree that, anything to the contrary herein or in the License Agreement notwithstanding, with respect to Product # 6 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) only, CIMA will perform an initial formulation feasibility study ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) and provide a report its findings to Schwarz no later than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]. At the time of such report, should either party not want to proceed with the development of such Product, Schwarz will pay CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]. If such Product is canceled, Schwarz may replace Product #6 with a new -2- Product in accordance with the License Agreement. Any such replacement Product will be assigned a Completion Date to be agreed upon by the parties. 5. Section 12 of the License Agreement is hereby, mutatis mutandis, incorporated by reference as though specifically set forth herein. 6. This Letter Agreement is binding and enforceable against CIMA and Schwarz notwithstanding any provision to the contrary in the License Agreement, and, in the event of a conflict between this Letter Agreement and the License Agreement, the terms of this Letter Agreement shall control. 7. Each of the undersigned hereby ratifies the License Agreement, as modified by this License Agreement, and agrees that the License Agreement, as modified hereby, shall continue in full force and effect. [Signatures next page] -3- IN WITNESS WHEREOF, this Agreement is entered into by the duly authorized representatives of CIMA and Schwarz as of the date first set forth above. SCHWARZ PHARMA, INC. By: /s/ Klaus Veitinger ----------------------------- Name: Klaus Veitinger Title: CEO ACKNOWLEDGED AND AGREED: CIMA LABS INC. By: /s/ John M. Siebert ----------------------------- Name: John M. Siebert Title: President & CEO CC: Mayer, Brown, Rowe & Maw 1675 Broadway New York, New York 10019 Attention: Philip O. Brandes -4- EXHIBIT A [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] SCHWARZ PHARMA, INC. 6140 West Executive Drive Mequon, Wisconsin 53092 October 24, 2002 CIMA LABS INC. 10000 Valley View Road Eden Prairie, Minnesota 55344 Attention: Chief Executive Officer Ladies and Gentlemen: Reference is made to the Master Development, License and Supply Agreement, dated as of December 18, 2001 (as amended, restated or otherwise modified from time to time, the "License Agreement"), by and between CIMA LABS INC., a Delaware corporation ("CIMA") and Schwarz Pharma, Inc., a Delaware corporation ("Schwarz"). Capitalized terms that are used but not defined in this letter agreement (this "Letter Agreement") shall have the meanings given them in the License Agreement. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the undersigned hereby agrees to modify the License Agreement as follows: 3. In order to memorialize (a) the replacement of the Product numbered 7 with the pharmaceutical product [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] (the "Replacement Product"), (b) the agreement of the parties regarding changes to the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the Products numbered 4 and 5, and (c) the actual delivery dates of certain API, Schedule 3.1 of the License Agreement is hereby deleted in its entirety and replaced with Exhibit A hereto. Schwarz and CIMA agree that the Replacement Product shall be deemed to be a Product under and within the meaning of the License Agreement. 4. Schedule 4.1(b) to the License Agreement is hereby amended as follows: (a) In order to memorialize (i) the final agreement of the parties regarding the Milestone Payments applicable to Product #1 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]), Product #4 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]), Product #5 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) and Product #6 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]), (ii) the agreement of the parties regarding certain additional amounts that shall be payable to CIMA in respect of the Milestone [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], as set forth in the table included in paragraph (a) therein (the "Milestone Table") and (iii) the estimated Milestone Payments applicable to the Replacement Product, Schedule 4.1(b) to the License Agreement is amended such that the Milestone Table shall be deleted in its entirety and replaced with the table set forth in Exhibit B hereto. (b) In order to memorialize the agreement of the parties regarding an increase in the Development Fee Payments in respect of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], Schedule 4.1(b) to the License Agreement is amended such that the table included in paragraph (d) therein shall be deleted in its entirety and replaced with the table set forth in Exhibit C hereto. 5. Anything to the contrary herein or in the License Agreement notwithstanding, the parties agree that the development activities described on the Development Schedule and the payments to be made by Schwarz in respect of such development activities contemplate CIMA conducting up to an aggregate total of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] stability study pulls (the "Expected Stability Work"). In the event that such development activities require more than the Expected Stability Work, the parties shall negotiate in good faith additional compensation to be paid to CIMA on a per-pull basis. 6. Anything to the contrary in the License Agreement notwithstanding, Schwarz and CIMA hereby agree that Schwarz will pay CIMA the sum of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] promptly upon receipt of CIMA's invoice therefore, which amount shall satisfy in full Schwarz's obligations to CIMA in respect of CIMA's development efforts in connection with the pharmaceutical product [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] pursuant to the License Agreement. 5. In order to memorialize certain agreements of the parties regarding modifications to Schwarz's obligations to supply API, the License Agreement is hereby amended as follows: (a) Section 1 of the License Agreement is amended by adding the following defined term thereto: "'Provide' shall have the meaning given in Section 3.2 hereof." (b) Section 3.2 of the License Agreement is deleted in its entirety and replaced with the following: "3.2 Supply of API. (a) The parties shall be responsible for Providing API as follows: (i) CIMA shall be responsible for Providing all API consisting of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] and all API that is classified as a "controlled substance" by the United States Drug Enforcement Agency ("DEA API"); provided, however, that CIMA shall notify Schwarz, at least forty-eight (48) hours prior to any order, of the quantity of such API that CIMA proposes to order. If Schwarz notifies CIMA within such forty-eight (48) hour period that Schwarz disagrees with the amount of API that CIMA proposes to order, CIMA shall postpone such order until such time as the parties shall agree upon the appropriate amount of such API. (ii) Schwarz shall be responsible for Providing all API not required to be provided by CIMA pursuant to clause (i), above. (b) The parties shall each be responsible for the costs of Providing API incurred by them; provided, however, that within thirty (30) days from CIMA invoice date therefor, Schwarz shall, except as set forth in Section 3.2(e), below, (i) reimburse CIMA for the purchase price (excluding any costs described in Section 3.2(b)(iv), below) of any API purchased by CIMA; (ii) pay CIMA a sourcing fee equal to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the aggregate purchase price of any API consisting of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] purchased by CIMA as contemplated hereby; (iii) pay CIMA a sourcing fee in respect of any DEA API equal to (A) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the aggregate purchase price of such DEA API, until such aggregate purchase price reaches [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES -3- AND EXCHANGE COMMISSION.***] in any Year and (B) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the aggregate purchase price of such DEA API, to the extent that such aggregate purchase price exceeds [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] in any Year; and (iv) reimburse CIMA for [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] which CIMA incurs in connection with Providing API in accordance with Section 3.2(a)(i). (c) As used herein, "Provide" means that the applicable party shall be responsible, in respect of the API which it is responsible for Providing, for ordering, receiving and testing such API, paying supplier invoices therefor, releasing such API for use, auditing suppliers thereof for cGMP compliance and keeping Schwarz's Regulatory Affairs department apprised of the status of the Drug Master Files in respect of such API. (d) CIMA shall, promptly following the end of each Quarter, furnish to Schwarz a written report of the total amount of each type of API in CIMA's inventory as of the final day of such Quarter, as reflected on CIMA's books and records. (e) Schwarz agrees and acknowledges that it shall be responsible to CIMA for the amounts described in this Section 3.2 that CIMA incurs in respect of any API that is used, lost, destroyed or otherwise consumed in connection with the development activities described on the Development Schedule. In the event, however, that any API is lost, stolen, destroyed, or otherwise consumed at CIMA's facilities other than in connection with such development activities ("Lost API"), CIMA agrees to (i) file and pursue a claim for the value of such Lost API under its applicable insurance policy and (ii) promptly remit to Schwarz any proceeds received from its insurers in respect of such Lost API." (c) Section 12.3 of the License Agreement is amended by deleting the last sentence thereof and replacing the same with the following: "Except as set forth in Section 3.2(e), the indemnification provided in Section 10 shall be the sole remedy available for any Damages arising out of or in connection with this Agreement except for any rights or remedies which the parties hereto may otherwise have in equity." (d) Section 5.1(d) of the License Agreement is deleted in its entirety and replaced with the following: -4- "(d) The parties shall be responsible for Providing, in accordance with Section 3.2 and with Schwarz's forecasts provided in accordance with Section 5.4, quantities of API sufficient for (i) for CIMA to perform its obligations pursuant to Schedule 3.1 and Sections 5.1 and 5.5 at least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] prior to the date of tablet manufacture and (ii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of safety stock. All API not Provided by Schwarz must conform to Schwarz's then current raw materials specifications. CIMA shall not be accountable for any production or shipment delays due to lack of any API that Schwarz is required to Provide pursuant to Section 3.2." 6. The parties hereby agree that, anything to the contrary in the License Agreement notwithstanding, any Products that are contemplated in the License Agreement as being packaged using "CIMA Standard" packaging and/or "CIMA Standard" tablet size, may, at Schwarz's sole option, be packaged using child resistant packaging ("CR Packaging") and/or utilize non-standard tablet size tooling ("Off-Size Tooling"). In accordance with such agreement, in the event that Schwarz elects to have any Products packaged in CR Packaging and/or utilize Off-Size Tooling, the parties further agree as follows: (a) CIMA shall be solely responsible for the development of CR Packaging and/or Off-Size Tooling for each applicable Product in accordance with specifications to be provided by Schwarz; provided, however, that Schwarz shall reimburse CIMA, on a Quarterly basis and, within thirty (30) days after receipt of invoices from CIMA, for all costs incurred by CIMA in connection with any design and testing activities in respect of the CR Packaging that are conducted by third parties and which are approved in advance by Schwarz. (b) CIMA shall be responsible, subject to Schwarz's approval, not to unreasonably be withheld, for the purchase of any equipment needed for CR Packaging and Off-Size Tooling that is not then owned or leased by CIMA. The aggregate purchase price (the "Equipment Costs") of the equipment to be purchased by CIMA in order to perform its obligations under this paragraph 6 (the "Optional Equipment") [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]. Such Equipment Costs shall be included, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] cost included in the calculation of the Cost of Goods of each Product in accordance with Schedule 5.3 of the License Agreement; provided, however, that the portion of the Equipment Cost allocable to Schwarz during any Year shall be determined [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] for the Product(s) requiring CR Packaging or Off-Size Tooling, as applicable, in accordance with [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND -5- EXCHANGE COMMISSION.***] for such Year and; provided further, that Schwarz shall not be responsible, during any Year, for any Equipment Costs to the extent that the Optional Equipment is used for products other than Products, determined [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] in accordance with [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] during such Year. In the event that Schwarz cancels all Products requiring CR Packaging or Off-Size Tooling in accordance with the terms of the License Agreement, within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the cancellation of the last such Product requiring such packaging, Schwarz shall pay to CIMA the amount of the Equipment Costs related to the CR Packaging or the Off-Size Tooling, as applicable, that have not theretofore been reimbursed by Schwarz or a third party. 7. The parties hereby agree that Schwarz shall have the right, exercisable by delivering written notice to CIMA at any time on or prior to the date that is [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] after the date of this Letter Agreement, to initiate negotiations with CIMA for the development and supply of the pharmaceutical product [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] (the "Option Product") in accordance with this paragraph 7. Upon Schwarz's exercise of such option, the parties shall negotiate in good faith the specific terms applicable to the Option Product, which terms shall thereupon be memorialized in a formal license and supply agreement (the "New Agreement"); provided, however that the terms of the New Agreement shall be similar to the terms of the License Agreement. The foregoing notwithstanding, CIMA shall be obligated to commence development of the Option Product no later than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from the later of (i) the effective date of the New Agreement and (ii) CIMA's receipt of the active ingredient required for the Option Product. 8. Section 12 of the License Agreement is hereby, mutatis mutandis, incorporated by reference as though specifically set forth herein. 9. This Letter Agreement is binding and enforceable against CIMA and Schwarz notwithstanding any provision to the contrary in the License Agreement, and, in the event of a conflict between this Letter Agreement and the License Agreement, the terms of this Letter Agreement shall control. 10. Each of the undersigned hereby ratifies the License Agreement, as modified by this Letter Agreement, and agrees that the License Agreement, as modified hereby, shall continue in full force and effect. [Signatures next page] -6- IN WITNESS WHEREOF, this Agreement is entered into by the duly authorized representatives of CIMA and Schwarz as of the date first set forth above. SCHWARZ PHARMA, INC. By: /s/ Klaus Veitinger -------------------------- Name: Klaus Veitinger Title: CEO ACKNOWLEDGED AND AGREED: CIMA LABS INC. By: /s/ John M. Siebert ---------------------------- Name: John M. Siebert Title: President & CEO CC: Mayer, Brown, Rowe & Maw 1675 Broadway New York, New York 10019 Attention: Philip O. Brandes -7- Exhibit A Master Development Schedule [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] EXHIBIT B [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] Exhibit C

- -------------------------------------------------------------------------------- TIME PERIOD DEVELOPMENT FEE - -------------------------------------------------------------------------------- [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] - -------------------------------------------------------------------------------- Quarter ending December 31, 2001 $500,000 - -------------------------------------------------------------------------------- [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] - --------------------------------------------------------------------------------

SCHWARZ PHARMA, INC. 6140 West Executive Drive Mequon, Wisconsin 53092 February 18, 2003 CIMA LABS INC. 10000 Valley View Road Eden Prairie, Minnesota 55344 Attention: Chief Executive Officer Ladies and Gentlemen: Reference is made to the Master Development, License and Supply Agreement, dated as of December 18, 2001 (as amended, restated or otherwise modified from time to time, the "License Agreement"), by and between CIMA LABS INC., a Delaware corporation ("CIMA") and Schwarz Pharma, Inc., a Delaware corporation ("Schwarz"). Capitalized terms that are used but not defined in this letter agreement (this "Letter Agreement") shall have the meanings given them in the License Agreement. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the undersigned hereby agrees to modify the License Agreement as follows: 7. In order to memorialize the agreement of the parties regarding changes to the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the Products numbered 1, 4, 5 and 6 and the final determination of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of Product number 7, the table set forth on Schedule 3.1 of the License Agreement is hereby deleted in its entirety and replaced with Exhibit A hereto. 8. In order to memorialize the agreement of the parties that [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], Schedule 4.1(b) to the License Agreement is hereby amended by deleting the definition of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] and replacing such definition with the following: [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] 9. The parties hereby agree that, anything to the contrary in the License Agreement notwithstanding, in addition to blisters and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] bottles, CIMA will develop Product # 5 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) for packaging in [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] bottles. In consideration of the costs associated with such additional development work, Schwarz shall pay to CIMA a supplemental development fee equal to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] upon execution of this Letter Agreement. 10. Whereas, the parties have mutually determined that the development activities heretofore completed in respect of Product # 1 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) have been unsuccessful, the parties hereby agree that such Product shall be redeveloped in accordance with the Master Development Schedule contemplated therefore in the License Agreement; provided, however, that anything to the contrary in the License Agreement notwithstanding, the parties hereby agree that (a) as part of the development activities in respect of the New Formulation (as defined below), CIMA shall prepare two batches of each strength of the New Formulation for filing with the FDA, each of which batches shall be packaged in both CIMA standard blisters and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] bottles, (b) notwithstanding the Milestone Payments that Schwarz has heretofore made to CIMA pursuant to Schedule 4.1(b) of the License Agreement in respect of Product #1, but in lieu of any other Milestone Payments that Schwarz may be required to make in respect of Product #1 pursuant to the License Agreement, Schwarz shall make the following Milestone Payments to CIMA in accordance with the License Agreement and this Letter Agreement with respect to the development of the New Formulation:

- ----------------------------------------------------- Milestone Development Phase Payment - ----------------------------------------------------- [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], and - -----------------------------------------------------

(c) CIMA shall not be eligible to receive the payment referred to in Section (c)(ii) on Schedule 4.1(b) of the License Agreement in respect of the New Formulation. For purposes hereof, Product #1 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]), redeveloped as contemplated in this paragraph 4 shall be referred to herein as the "New Formulation". The parties agree and acknowledge that the New -2- Formulation shall for all purposes be Product # 1 and a Product within the meaning of the License Agreement. 11. Section 12 of the License Agreement is hereby, mutatis mutandis, incorporated by reference as though specifically set forth herein. 12. This Letter Agreement is binding and enforceable against CIMA and Schwarz notwithstanding any provision to the contrary in the License Agreement, and, in the event of a conflict between this Letter Agreement and the License Agreement, the terms of this Letter Agreement shall control. 13. Each of the undersigned hereby ratifies the License Agreement, as modified by this Letter Agreement, and agrees that the License Agreement, as modified hereby, shall continue in full force and effect. [Signatures next page] -3- IN WITNESS WHEREOF, this Agreement is entered into by the duly authorized representatives of CIMA and Schwarz as of the date first set forth above. SCHWARZ PHARMA, INC. By: /s/ Ron Stratton ---------------------------------- Name: Ron Stratton Title: President & COO ACKNOWLEDGED AND AGREED: CIMA LABS INC. By: /s/ John M. Siebert ------------------------------ Name: John M. Siebert Title: President & CEO CC: Mayer, Brown, Rowe & Maw 1675 Broadway New York, New York 10019 Attention: Philip O. Brandes -4- Exhibit A [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] EX-10.29 4 c75663exv10w29.txt EX-10.29 DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT EXHIBIT 10.29 DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT by and between CIMA LABS INC. and ALAMO PHARMACEUTICALS, LLC dated as of March 2, 2001 DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT This DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT ("this Agreement"), dated and effective as of March 2, 2001 (the "Effective Date"), is by and between CIMA LABS INC., a Delaware corporation ("CIMA"), and ALAMO PHARMACEUTICALS, LLC, a California Limited Liability Company ("Alamo"). W I T N E S S E T H 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, Alamo is engaged, among other things, in the business of developing, marketing and selling of pharmaceutical products; WHEREAS, subject to the terms and conditions set forth in this Agreement, CIMA and Alamo wish to collaborate in the development, registration, marketing and sale of a certain prescription product; and WHEREAS, subject to the terms and conditions set forth in this Agreement, CIMA wishes to license to Alamo and Alamo wishes to license from CIMA rights to CIMA's DuraSolv(TM) 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, manufacturing, marketing, selling and distributing of the Product in the Territory as contemplated by this Agreement. "Affiliates" shall mean, with respect to any Person, any Persons 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. "Alamo" shall have the meaning given in the preamble and shall include its Affiliates. "Alamo Trademarks" shall have the meaning given in Section 9.11(d). "Annual Net Sales" shall mean, for any Calendar Year, the Net Sales for such Year. "Active Pharmaceutical Ingredient (API) "shall mean the active ingredient [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]. "cGMP" shall mean the then-current standards for the manufacture of pharmaceuticals, as set forth in the United States Federal Food, Drug and Cosmetics Act and applicable regulations promulgated thereunder, as amended from time to time, and such standards of good manufacturing practice as are required by the European Union and other organizations and governmental agencies in countries in which Product is intended to be sold, to the extent such standards are not inconsistent with United States cGMP. "CIMA" shall have the meaning given in the preamble and shall include its Affiliates. "CIMA Intellectual Property" shall mean, collectively, 1) the CIMA Patents, 2) the CIMA Technology and 3) the CIMA Trademarks. "CIMA Patents" shall mean United States Patent No. 6,024,981 (entitled "Rapidly Dissolving Robust Dosage Form") and any patents, patent applications, and foreign counterparts or equivalents relating thereto, including any extension, reissue, renewal, reexamination, divisional, continuation or continuation-in-part of such patents or patent applications. "CIMA Technology" shall mean all of CIMA's Patents, trade secrets, technology, know-how and all other information necessary for the manufacture of the Product including, without limitation that related to CIMA's DuraSolv(TM) technology. "CIMA Trademarks" shall mean the CIMA(R) (logo), CIMA LABS INC.(R), DuraSolv(TM), and Meltabs(R) 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 -2- (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, Product samples or Product placebos, as the case may be, the failure of such to strictly conform to the Specifications, this Agreement and all applicable law, including, without limitation, all FDA regulatory filings and regulations. "Development Schedule" shall mean the schedule of development activities set forth on Schedule B hereto. "DuraSolv(TM)" shall mean CIMA's orally disintegrating tablet formulations as described in the CIMA Patents "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 or embargo, or changes in applicable laws, regulations or orders by any government, governmental agency or instrumentality, or other similar circumstances beyond the control of each party, in each case having the effect of preventing or prohibiting a party from performing its obligations hereunder. "GAAP" shall mean generally accepted accounting principles in the United States as in effect from time to time. "Indemnified Party" shall have the meaning given in Section 10.2 hereof. "Indemnifying Party" shall have the meaning given in Section 10.2 hereof. "Launch" shall mean the date of first commercial shipment of the Product by Alamo or its sublicensees to any unaffiliated third party. "Licensed Assets" shall have the meaning set forth in Section 2.1 hereof. "Net Sales" means the gross invoice price for Product sold by Alamo or its sublicensees or subcontractors to a third party customer less the reasonable and customary accrual-basis deductions from such gross amounts for: (i) normal and customary trade, cash and other discounts, allowances and credits actually allowed and taken directly with respect to sales of Product, (ii) credits of allowances actually granted for damaged goods, returns or rejections of Product; (iii) sales or similar taxes (including duties or other governmental charges levied on, absorbed or otherwise imposed directly on the sales of Product, including, without limitation, value added taxes or other governmental charges otherwise measured by -3- the billing amount) which are included in any billing amount, and excluding any taxes imposed on or measured by the net income or profits of the selling party; (iv) uncollectable accounts; (v) charge back payments and rebates granted to managed health care organizations or to federal, state and local governments, their agencies, and purchasers and reimbursers or to trade customers, including but not limited to, wholesalers and chain and pharmacy buying groups; and (vi) rebates (or equivalents thereof) that are granted to or charged by national, state, provincial or local governmental authorities in countries other than the United States. Such amounts shall be determined from the books and records of Alamo and its sublicensees and subdistributors maintained in accordance with U.S. GAAP consistently applied, and such amounts shall be calculated using the same accounting principles used for other Alamo products. Sales between or among Alamo, its Affiliates and its sublicensees and subdistributors shall be excluded from the computation of Net Sales if such Affiliates or sublicensees and subdistributors are not end-users, but Net Sales shall include the subsequent final sales to third parties by any such Affiliates or sublicensees and subdistributors. Where (i) Product is sold by Alamo, its Affiliates or their respective sublicensees and subdistributors other than in an arms-length sale or as one of a number of items without a separate invoiced price; or (ii) consideration for Product shall include any non-cash element, the Net Sales applicable to any such transaction shall be deemed to be Alamo's average Net Sales price for the applicable quantity of to the Product at that time. "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 a pharmaceutical product containing [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] or such other amounts as may be requested by Alamo, as the case may be, of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] formulated in DuraSolv(TM). "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 included in the Technical Agreement Addendum set forth on Schedule F. "Territory" shall mean the world. "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 Alamo an exclusive license for the term of this Agreement under the following assets to market, distribute and sell the Product in the Territory (such assets are referred to herein collectively as the "Licensed Assets"): (i) all current and future regulatory filings, approvals, registrations and governmental authorizations that relate to the Product in the Territory; and (ii) the CIMA Intellectual Property. (b) The license to Alamo will be exclusive in that CIMA will not grant any licenses of the Licensed Assets to any other Person with respect to the Product during the term of this Agreement, except as provided in Section 2.1(c). (c) In the event that Product is not commercially available in any country of the Territory [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from the date of Launch of the Product in the United States, CIMA and Alamo agrees as follows: (i) CIMA shall be entitled to solicit interest of third parties in making the Product commercially available in any such country or countries; (ii) prior to granting a license to a third party for Product, CIMA shall provide Alamo a notice of its intent to grant such license ("License Notice") in a specific country or countries and shall identify such country or countries in the License Notice; (iii) Subject to the provisions of clauses (iv) and (v) below, Alamo shall provide CIMA a notice within forty-five (45) days of the License Notice that either: A) Alamo does not intend to market the Product in such country or countries, in which case Alamo's license to that country or countries shall terminate and CIMA shall be free to license the Product to such third party; or B) Alamo does intend to market the Product in such country or -5- countries, in which case Alamo shall have [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from the date of its notice to CIMA to demonstrate significant progress in developing the Product to market in such country or countries. If Alamo fails to demonstrate significant progress within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] or fails thereafter to demonstrate continued active development in such country or countries, Alamo's license to the Product in that country or countries will terminate in 30 days after re-notification by CIMA that they desire to solicit interested third parties in such country or countries and with written agreement by Alamo, such agreement shall not be unreasonably withheld. (iv) In the event that CIMA licenses the product to a third party under this Section 2.1(c), Alamo shall be entitled to receive reimbursement of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of its out-of-pocket cost for developing the Product (as determined in accordance with sub paragraph (v) below, including amounts paid to CIMA) and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of any royalties received by CIMA from sales of the Product under such license to a third party, provided that Alamo cooperates with CIMA and such third party in obtaining regulatory approval for the Product, including providing access to any clinical data available to Alamo and any patent or other licenses necessary to commercialize the Product in any country or countries covered under the license from CIMA. (v) CIMA and Alamo shall negotiate in good faith the total amount of Alamo's out-of-pocket cost for developing the Product and a schedule for reimbursement of such costs. The reimbursement schedule shall be based on the scope of the license or licenses granted by CIMA to the third party or parties and the potential market for the Product in the country or countries. -6- 2.2 Sublicenses. Alamo shall have the right to extend the licenses granted pursuant to this Section 2 in whole or in part to any Affiliate of Alamo, provided that Alamo is not then in material 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 Alamo, and the operations of the Affiliate shall be deemed to be the operations of Alamo. In addition, Alamo 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 Alamo with the prior written consent of CIMA, such consent not to be unreasonably withheld or delayed. 2.3 Developments, Marketing, Distribution and Sale. After the Launch, Alamo 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, in each case, as existing from time to time. 2.4 Minimum Annual Royalties. Alamo shall endeavor to meet or exceed the minimum annual royalty targets set forth on Schedule A hereto. Any provision in this Agreement to the contrary notwithstanding, in the event that CIMA has performed all of its obligations hereunder and Alamo fails to pay the minimum annual royalty amounts set forth on Schedule A hereto for any Year following the Year in which the Product is Launched, then the royalty rate which Alamo pays to CIMA for such Year shall be modified as noted in Schedule C. SECTION 3 PRODUCT DEVELOPMENT 3.1 Obligations of CIMA. CIMA shall be responsible for the successful performance of each of the development activities set forth on Schedule B within the respective time periods set forth on Schedule B. 3.2 Obligations of Alamo. Alamo shall upon execution hereof pay CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] which represents the sum of both [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the Phase I cost and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the Phase II cost as set forth on the Development Schedule included as Schedule B and Alamo shall, in a timely fashion following successful performance by CIMA of each Phase I and Phase II development activity set forth on Schedule B, pay CIMA the balance of the development fees set forth in -7- Schedule B with respect to such development activity for Phase II. Prior to the commencement of the development activities in each of Phases III, IV, V and VII, Alamo shall pay CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the development fees for such phase and shall, in a timely fashion following successful performance of the development activity or activities for each such phase, pay CIMA the balance of the development fees set forth in Schedule B with respect to such development activity or activities for such phase. Alamo shall also reimburse CIMA for CIMA's certified out-of-pocket costs plus [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] (net of any rebates, credits or refunds) for the acquisition of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] necessary for CIMA to perform the development activities described on Schedule B and the supply activities described in Sections 5.1 and 5.5. 3.3 Regulatory Matters. CIMA represents and warrants that all Product supplied to Alamo shall be produced under cGMP and in accordance with the Specifications. CIMA shall furnish Alamo with a Certificate of Analysis with a cGMP statement to demonstrate that each shipment of Product has been manufactured under cGMP and other FDA guidelines and that the Specifications have been met. In addition, Alamo may, at its own expense, audit the facilities 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 Alamo 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. Alamo's exercise or failure to exercise any of its rights to audit CIMA's facilities and/or records pursuant to this Section 3.3 shall in no way alter or affect CIMA's obligations under this Agreement. SECTION 4 ROYALTY AND MILESTONE PAYMENTS 4.1 Royalty, and Milestone Payments. (a) Subject to CIMA's supply of Product in accordance with Section 5 hereof, Alamo shall make royalty payments to CIMA in the amounts set forth on Schedule C. -8- (b) Alamo shall make milestone payments to CIMA as set forth on Schedule D upon successful completion of each milestone listed therein. (c) On the Effective Date, Alamo shall pay the License Payment set forth on Schedule D hereto, which License Payment shall be refundable on a pro-rata basis if Alamo terminates this Agreement prior to the second anniversary date hereof by reason of CIMA's failure to successfully complete any of the development activities for which it is responsible under the Development Schedule. In such event, Alamo shall be entitled to a refund of, and CIMA shall promptly pay to Alamo, an amount equal to the product obtained by multiplying the License Payment by a fraction, the numerator of which shall be the number of calendar days remaining between the date of termination and the second anniversary of this Agreement and the denominator of which shall be 730. 4.2 Records and Audit. Alamo and its Affiliates shall keep full, 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 of account shall be kept at Alamo's principal place of business or the principal place of business of the appropriate Affiliate of Alamo to which this Agreement relates. 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 Alamo, for the limited purpose of verifying Alamo's royalty statements; provided, however, that such examination shall not take place more often than once each Year, shall not cover more than the preceding two (2) Years, with no right to audit any period previously audited and shall not occur during the 90-day period following the end of Alamo's fiscal Year. 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, Alamo 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 deficiency payment is due), and shall reimburse CIMA for the reasonable fees and expenses paid to such accountants in connection with their inspection for such period. 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, Alamo 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 -9- annum (which interest shall accrue from the date any such deficiency payment is due). In the event that any such inspection reveals an overpayment, CIMA shall promptly pay Alamo the overpayment. 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. In any Year following Launch of the Product, Alamo shall, within sixty (60) days after the end of the first, second and third Quarter, deliver to CIMA reports, certified by an authorized official of Alamo, setting forth the Net Sales and total royalties due under Section 4.1(a) for such Quarter. Alamo shall pay such royalties within sixty-five (65) days after the end of each Quarter by wire transfer, at CIMA's cost, or such other method as CIMA may designate. In any Year following Launch of the Product, Alamo shall, within forty-five (45) days after the end of the fourth (4th) Quarter, deliver to CIMA reports, certified by an authorized official of Alamo, setting forth the Net Sales and total royalties due under Section 4.1(a). Alamo shall pay such royalties within sixty-five (65) days after the end of the fourth (4th) Quarter by wire transfer, at CIMA's cost, or such other method as CIMA may designate. If no royalties are due, Alamo shall so report. SECTION 5 SUPPLY OF PRODUCT 5.1 Supply of Product. (a) Subject to Section 5.7, for the term of this Agreement, Alamo agrees to purchase from CIMA and CIMA agrees to supply Alamo with all of Alamo's requirements for the Product, Product samples and Product placebos for their subsequent use, sale, offer for sale, lease or transfer by Alamo. [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] shall be responsible for procurement of all API necessary for the satisfaction of its obligations under this Agreement. (b) Alamo agrees to initiate purchases of the Product, Product samples and Product placebos hereunder by issuing CIMA binding purchase orders not less than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] prior to the required shipping date set forth therein. CIMA agrees to accept any order issued in accordance with this Section 5.1(b) and to meet the delivery dates specified therein. All purchase orders hereunder shall be on Alamo's standard purchase order form (a copy of which is attached as Schedule E hereto and which shall not, for purposes of this Agreement -10- only, be modified in any material respect without CIMA's prior written consent, such consent not to be unreasonably withheld or delayed) and shall be directed to CIMA at the address set forth below. The terms and conditions of purchase enumerated on the reverse side of such standard purchase order form shall prevail over any inconsistent or conflicting language as may exist on invoices, confirmation or order acknowledgment forms of CIMA, provided, however, that in the event any terms thereof are in conflict, or are inconsistent with any terms of this Agreement, the terms and conditions hereof shall prevail. No Product delivered by CIMA shall have a shelf life that is more than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] less than the maximum shelf life of such product; and, in any case, all Product delivered by CIMA shall have at least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of shelf life remaining upon delivery to Alamo (other than batches that were under investigation and batches for validation which shall have at least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of shelf life remaining upon delivery to Alamo). (c) Purchase order quantities shall be equivalent to the batch size of the Product, Product samples or Product placebos which shall be determined during the development activities, approximately [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] tablets for the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] dose, and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] tablets for the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] dose, in the aggregate for any single purchase order, unless otherwise mutually agreed by the parties. The delivery quantity of tablets for trade shall not exceed a total of 4 batches in any one calendar month, unless otherwise agreed to by the Parties. (d) Purchase orders shall clearly state that the order is for tablets for sale, tablets for samples or placebos, as well as the shipping destination and address. Alamo agrees that the maximum quantity of tablets for samples shall not exceed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] percent of the quantity of trade tablets in any year, unless otherwise agreed to by the Parties. 5.2 Identification. Alamo may market the Product under its name, with its packaging and logo; Alamo will, however, identify CIMA as the supplier in a fair manner, reasonably acceptable to CIMA. Alamo may use CIMA's name and derivations thereof in -11- promoting, marketing and selling the Product in the Territory; provided, however, that the particular formulation of any reference to CIMA's name in any promotional material shall be subject to CIMA's review and consent; and provided, further, that once the formulation of any such reference has been reviewed and consented to by CIMA, any subsequent reference to CIMA's name using such formulation shall not be subject to the further review or consent of CIMA. All samples shall be clearly marked "for sample use only" or some similar phrasing suggested by Alamo. CIMA shall design and develop labels for the bulk tablet containers and Alamo shall review and approve such labels. Such approval shall not be unreasonably withheld. 5.3 Trade and Sample Product Price. CIMA shall supply Product, Product samples and Product placebos to Alamo at the price set forth on Schedule G, subject to adjustment as set forth therein. 5.4 Forecasts, Delivery and Quality. (a) Alamo shall provide CIMA with 12-month non-binding forecasts within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] after the end of each Quarter. Such forecasts shall be revised and extended in each succeeding Quarter. (b) Delivery of the Product, Product samples and Product placebos shall be in accordance with the means of transportation, destination and dates set forth in Alamo's purchase order, and shipped in full batch sized quantities. CIMA shall arrange for the transportation and insurance of the Product, Product samples and Product placebos and shall ensure that the transporter maintains the Product, Product samples and Product placebos in accordance with the labeling of such Product, Product samples and Product placebos. Delivery shall be F.O.B. destination, freight prepaid (delivered) and insured and Alamo shall reimburse CIMA for the cost of transportation and insurance of the Product, Product samples and Product placebos. Title and risk of loss to all Product, Product samples or Product placebos shall pass to Alamo upon delivery of the Product, Product samples or Product placebos to Alamo or its designated agent. (c) All deliveries of the Product hereunder shall include a Certificate of Analysis provided by the quality assurance manager of CIMA attesting to the fact that the Product (i) has been manufactured by a process which complies with cGMP and (ii) are of quality which is in accordance with criteria established in the Specifications and all FDA requirements. (d) The Product, Product samples and Product placebos supplied hereunder shall have been manufactured by a process which complies with the Technical Agreement Addendum set forth on Schedule F. -12- 5.5 Rejection, Replacement and Arbitration. (a) In the event that Alamo determines that any Product, Product samples or Product placebos as manufactured and/or packaged by CIMA is Defective, then: i) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from shipment of Product, Product samples or Product placebos to Alamo or to Alamo's designated agent for final packaging; or ii) in the event that such Product, Product samples or Product placebos is Defective [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], Alamo shall provide to CIMA a written notice of rejection, specifying in reasonable detail the manner in which the Product is Defective (the "Notice of Rejection"). If no written Notice of Rejection is given to CIMA by Alamo within the period specified in clauses (i) and (ii), such Product, Product samples or Product placebos shall be deemed to have been accepted by Alamo, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]. (b) Upon receipt of a Notice of Rejection from Alamo and in order to minimize any hardship to Alamo's customers, CIMA shall use reasonable commercial efforts to promptly supply to Alamo a quantity of replacement Product, Product samples or Product placebos meeting the Specifications equal to the size of the lot which Alamo claims was Defective so that such replacement Product shall be received by Alamo within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] following CIMA's receipt of Alamo's Notice of Rejection. In the event that such Defective Product, Defective Product samples or Defective Product placebos are due to: i) faulty manufacture; faulty release; faulty primary packaging or labeling of the relevant batch(es) of the Product; or ii) improper shipping to Alamo's designated agent for final packaging, which fact shall be established on the basis of the corresponding sealed samples retained by CIMA and/or Alamo's designated agent for final packaging, utilizing an outside independent laboratory if necessary, the cost of which is borne by both parties and whose findings shall be binding or on the basis of process deviation documentation provided to Alamo, CIMA shall replace such batches free of charge, otherwise Alamo shall promptly pay CIMA for all such Product, Product samples or Product placebos, including any Defective Product. 5.6 Invoices and Payment. Upon CIMA's shipment to Alamo or its designated agent of any Product, Product samples, or Product placebos CIMA shall be entitled to submit an invoice to Alamo, and Alamo agrees to remit payment with respect to such invoice within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from -13- receipt of both such invoice and the shipment to which such invoice relates, unless within such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period Alamo sends notice of rejection to CIMA; provided, that payment of any invoice pursuant to this Section 5.6 shall not constitute or be deemed to constitute acceptance of any Product, Product samples or Product placebos or in any way limit Alamo's rights to inspect and/or reject any of the foregoing pursuant to Section 5.5 hereof . Within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of delivery of the Product, Product samples, or Product placebos Alamo or its designated agent shall acknowledge the delivery of Product, Product samples, or Product placebos and shall notify CIMA's shipping department of any obvious shipping damage; provided, that failure to provided any such notice shall not constitute a waiver or in any way limit Alamo's rights under Section 5.5 with respect to such shipment. There will be a [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], of invoice price, penalty per month, for each month a payment is past due. Such penalty shall not exceed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] per annum. 5.7 Supply Disruption; Alternate Manufacturing Site. (a) CIMA shall supply Alamo with the Product, Product samples and Product placebos in a timely manner in accordance with the orders and forecasts received by CIMA pursuant to Sections 5.1(b) and 5.4(a), respectively. In any consecutive [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period, should CIMA fail to supply Alamo with substantially all of the Product, Product samples or Product placebos ordered for such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period pursuant to Section 5.1(b), Alamo shall have the right to require CIMA to transfer the manufacture of the Product to another manufacturing facility designated by Alamo and approved by CIMA, such approval not to be unreasonably withheld, which manufacturing facility agrees to be bound by Section 9.4 hereof. CIMA will assume all costs of, take all actions and grant all rights (on a royalty-free, exclusive, worldwide basis with the right to grant sub-licenses) with respect to CIMA Technology as shall be necessary to effect such transfer. Should CIMA cure its failure to supply within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the end of such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period, CIMA shall have the right to resume the manufacture of the Product and Alamo and CIMA shall, at CIMA's expense, transfer the manufacture of the Product back to CIMA -14- within a commercially reasonable amount of time and all rights granted under the sublicense shall terminate. (b) If at any time following the Launch CIMA shall not have a second manufacturing facility, capable of supplying the Product in accordance with the terms of this Agreement, CIMA and Alamo shall, as soon as practicable following the date of Launch, qualify a manufacturing plant designated by Alamo as an alternate FDA approved manufacturing and packaging site for the Product. The costs of obtaining such approval shall be [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]. 5.8 CIMA's Obligation to Continue Manufacture. If this Agreement terminates or expires through no breach of Alamo, CIMA shall reasonably cooperate with Alamo in transferring the manufacture of the Product to Alamo, its Affiliate or a third-party appointed by Alamo (which manufacturing facility agrees to be bound by Section 9.4 hereof) and CIMA shall, if requested by Alamo, continue to supply the Product to Alamo pursuant to the terms of this Agreement until [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from the date this Agreement is terminated or expires pursuant to Section 11.1. 5.9 EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THE PRODUCT WILL BE SUPPLIED BY CIMA WITH NO WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. SECTION 6 [RESERVED] SECTION 7 REPRESENTATIONS AND WARRANTIES OF CIMA CIMA hereby represents and warrants to Alamo that: 7.1 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 Alamo pursuant hereto. -15- 7.2 Due Authority; No Breach. The execution, delivery and performance by CIMA of this Agreement and each agreement or instrument contemplated by this Agreement, and the performance of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action by CIMA. This Agreement is, and each agreement or instrument contemplated by this Agreement, when executed and delivered by CIMA in accordance with the provisions hereof, will be (assuming the due execution and delivery hereof and thereof by Alamo) the legal, valid and binding obligation of CIMA, in each case enforceable against CIMA in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization, or similar laws from time to time in effect which affect the enforcement of creditors' rights generally and by legal and equitable limitations on the availability of specific performance and other equitable remedies against CIMA. All persons who have executed this Agreement on behalf of CIMA, or who will execute on behalf of CIMA any agreement or instrument contemplated by this Agreement, have been duly authorized to do so by all necessary corporate action. Neither the execution and delivery of this Agreement or any such other agreement or instrument by CIMA, nor the performance of the obligations contemplated hereby and thereby, 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 or under any agreement or instrument contemplated hereby. 7.3 Intellectual Property. CIMA is the lawful owner of the Licensed Assets, CIMA can license the Licensed Assets without the consent of any third party, there is no pending or overtly threatened claim against CIMA asserting that any of the Licensed Assets infringes or violates the rights of third parties or that Alamo, 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 has not given any notice to any third parties asserting infringement by such third parties upon any of the Licensed Assets. CIMA is not aware of and has not received any communications challenging the ownership, validity, enforceability 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 Alamo pursuant to this Agreement. -16- 7.4 [RESERVED] 7.5 Litigation. There are no pending or, to the best of CIMA's knowledge, threatened judicial, administrative or arbitral actions, claims, suits or proceedings pending as of the date hereof 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, the Licensed Assets, or the ability of CIMA to perform its obligations under this Agreement or any agreement or instrument contemplated hereby. There are no pending, and CIMA does not presently contemplate bringing, any actions or suits relating to the Activities, or the Licensed Assets against others. 7.6 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, delivery and performance of this Agreement, or any agreement or instrument contemplated by this Agreement, by CIMA or the performance by CIMA of its obligations contemplated hereby and thereby. 7.7 Brokerage. No broker, finder or similar agent has been employed by or on behalf of CIMA, and no Person with which CIMA has had any dealings or communications of any kind is entitled to any brokerage commission, finder's fee or any similar compensation, in connection with this Agreement or the transactions contemplated hereby. SECTION 8 REPRESENTATIONS AND WARRANTIES OF ALAMO Alamo represents and warrants to CIMA that: 8.1 Organization, Power and Authority. Alamo is a limited liability company duly organized, validly existing and in good standing under the laws of the State of California . Alamo has all necessary power and authority to enter into, and be bound by the terms and conditions of, this Agreement and to license the Licensed Assets. 8.2 Due Authority; No Breach. The execution, delivery and performance by Alamo of this Agreement, and each agreement or instrument contemplated by this Agreement, and the performance of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action by Alamo. This Agreement is, and each agreement or instrument contemplated by this Agreement, when executed and delivered by Alamo in accordance with the provisions hereof, will be (assuming due execution and delivery hereof and thereof by CIMA) the legal, valid and binding obligation of Alamo, in each case enforceable against Alamo in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, -17- reorganization, or similar laws from time to time in effect which affect the enforcement of creditor's rights generally and by legal and equitable limitations on the availability of specific performance and other equitable remedies against Alamo. All persons who have executed this Agreement on behalf of Alamo, or who will execute on behalf of Alamo any agreement or instrument contemplated by this Agreement, have been duly authorized to do so by all necessary action. Neither the execution and delivery of this Agreement by Alamo, or any such other agreement or instrument by Alamo, nor the performance of the obligations contemplated hereby and thereby, 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 organization or other governing documents or any material contract or any other material obligation to which Alamo 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, Alamo or upon the securities, property or business of Alamo, or (iii) constitute a violation by Alamo of any applicable law or regulation of any jurisdiction as such law or regulation relates to Alamo or to the property or business of Alamo, except for such conflict, acceleration, default, breach or violation that is not reasonably likely to have a material adverse effect on Alamo's ability to perform its obligations under this Agreement or any agreement or instrument contemplated hereby. 8.3 Brokerage. No broker, finder or similar agent has been employed by or on behalf of Alamo and no Person with which Alamo has had any dealings or communications of any kind is entitled to any brokerage commission, finder's fee or any similar compensation, in connection with this Agreement or the transactions contemplated hereby. 8.4 Litigation. There are no pending or, to the best of Alamo's knowledge, threatened judicial, administrative or arbitral actions, claims, suits or proceedings pending as of the date hereof against Alamo which, either individually or together with any other, will have a material adverse effect on the ability of Alamo to perform its obligations under this Agreement or any agreement or instrument contemplated hereby. 8.5 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, delivery and performance of this Agreement, or any agreement or instrument contemplated by this Agreement, by Alamo or the performance by Alamo of its obligations contemplated hereby and thereby. SECTION 9 ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES 9.1 Governmental Filings. CIMA and Alamo each agree to prepare and file whatever filings, listings, requests or applications are required to be filed with any -18- governmental authority in connection with this Agreement or the Product and to cooperate with one another as reasonably necessary to accomplish the foregoing. 9.2 Compliance with Law. Alamo and CIMA shall each comply with all federal, state and local laws and regulations applicable to developing, approving, manufacturing, marketing and selling the Product in the Territory and the Licensed Assets or the performance of their respective obligations hereunder. CIMA and Alamo 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 Alamo each shall notify the other within forty-eight (48) hours of receipt of any notice or any other indication what so ever of any FDA or other governmental agency inspection, investigation or other inquiry, or other material notice or communication of any type, involving the Product. Alamo 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. Alamo 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 Alamo shall be responsible for deciding the appropriate form and content of any response with respect to any of its cited activities. 9.3 Recall. Alamo and CIMA shall consult with one another as to all decisions concerning recall or withdrawal of the Product from the market, including, but not limited to, determining whether or not to make any such recall or withdrawal, the timing and scope thereof, and the means of conducting any recall or withdrawal. The party requesting any recall or withdrawal must receive the prior written consent of the other party, such consent not to be unreasonably withheld, prior to initiating such recall or withdrawal. No consent shall be necessary if the recall or withdrawal is requested by the FDA or other governmental authority. CIMA shall bear the costs (including but not limited to, shipping and product credits) for any recall or withdrawal due to CIMA's failure to comply with this Agreement, including Product failure relating to CIMA's cGMP or CIMA's failure to meet the Specifications . The costs for any other recall or withdrawal shall be the responsibility of Alamo. 9.4 Confidentiality. Alamo shall treat as confidential the Licensed Assets and all other information of CIMA of which Alamo becomes aware in connection with this Agreement (collectively, "CIMA Proprietary Information"). Alamo 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 -19- other information of Alamo of which CIMA became aware of prior to the Effective Date or becomes aware in connection with this Agreement (collectively, "Alamo Proprietary Information"). CIMA shall neither disclose Alamo Proprietary Information to any third party nor use Alamo 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 to the Using Party by a third party who is not thereby in violation of a confidential relationship with the other party known to the Using Party; (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. Alamo 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 Alamo Proprietary Information except as set forth in this Agreement. 9.5 Expenses. CIMA and Alamo 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. 9.6 Reasonable Efforts. CIMA and Alamo each hereby agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done all things necessary or proper to make effective the transactions contemplated by this -20- Agreement, including such actions as may be reasonably necessary to obtain approvals and consents of governmental Persons and other Persons. 9.7 Publicity. Except as expressly contemplated hereby, 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, which consent shall not be unreasonably withheld or delayed, 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; provided, that the party making the release or announcement or otherwise disclosing this Agreement to any governmental agency in accordance with the foregoing exception shall use its best efforts to obtain confidential treatment of the terms hereof to the fullest extent permitted by applicable law. 9.8 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, provided that, for purposes of this provision, reasonable efforts to make available any employee shall be deemed to mean providing a party with reasonable access to any such employee at no cost for a period of time not to exceed 24 hours (e.g., three 8-hour business days). Thereafter, any such employee shall be made available for such time and upon such terms and conditions (including, but not limited to, compensation) as the parties may mutually agree. 9.9 Competition; No Sale for Resale. Neither Alamo nor any sub-licensee of Alamo shall knowingly sell any Product to anyone in the Territory for subsequent distribution or resale outside the Territory and each shall take all reasonable precautions to prevent such distribution or resale outside the Territory. Except as provided in 2.1(c), CIMA shall not knowingly sell any Product to anyone in the Territory or outside the Territory for subsequent distribution or resale in the Territory and CIMA shall take all reasonable precautions to prevent such distribution or resale in the Territory. 9.10 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 Alamo pursuant to this Agreement. -21- 9.11 Patent and Trademark Maintenance. (a) CIMA hereby represents and warrants that, to the best of its knowledge, the CIMA Technology, when used with the Active Pharmaceutical Ingredient, includes all the technology, patents, know-how, trade secrets and other intellectual property necessary to manufacture the Product. Any improvement (whether or not patentable) in the technology used in manufacturing the Product shall be owned by the Party who discovers or invents such improvement. (b) 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 Alamo hereunder. CIMA may, however, discontinue prosecuting or maintaining any CIMA Patent if (i) CIMA has a valid business reason to do so, and (ii) CIMA notifies Alamo of this decision in which event, Alamo shall have the right, but not the obligation, to prosecute or maintain any such patent, with the full cooperation of CIMA, in Alamo's name and at Alamo's expense. (c) 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, Alamo shall have no rights to use the CIMA Trademarks. Alamo 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 in use by CIMA to indicate the source and origin of the CIMA Technology as to be likely to cause deception or confusion. Alamo recognizes that CIMA is the owner of all CIMA Trademarks used in commerce to indicate the source of the CIMA Technology and agrees that the CIMA Trademarks shall remain vested in CIMA both during the term of this Agreement and thereafter. Alamo shall not contest the validity of the CIMA Trademarks or CIMA's ownership of the CIMA Trademarks. Use of the CIMA Trademarks by Alamo in conjunction with the manufacture, use, and sale 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. (d) Alamo shall be solely responsible for filing, prosecuting, and maintaining all trademarks it develops or owns for the Product (the "Alamo Trademarks"), and Alamo shall pay the costs associated therewith. All registrations, variations, logos, goodwill and other rights under or acquired through use of the Alamo Trademarks shall accrue and belong to Alamo. CIMA shall have no rights to use the Alamo 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 Alamo -22- Trademarks in use by Alamo in a manner that is likely to cause deception or confusion. CIMA recognizes that Alamo is the owner of all of the Alamo Trademarks used in commerce to indicate the source of the Product and agrees that the Alamo Trademarks shall remain vested in Alamo both during the term of this Agreement and thereafter. CIMA shall not contest the validity of the Alamo Trademarks or Alamo's ownership of the Alamo Trademarks. Use of the Alamo Trademarks by Alamo in conjunction with the manufacture, use, and sale of the Product and all goodwill related thereto shall inure to the benefit of Alamo for purposes of building the longevity and extent of use of the Alamo Trademarks. (e) Alamo and CIMA agree that, where applicable and appropriate, all packaging of the Product shall identify (i) the number of the CIMA Patents and CIMA as the owner thereof and (ii) Alamo as the owner of the Alamo Trademarks. (f) Any provisions in this Agreement to the contrary notwithstanding, Alamo acknowledges that, for all purposes, CIMA is the owner of the CIMA Technology. 9.12 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. (i) Within a reasonable time (not to exceed 30 days) following such notification, the parties shall meet to discuss a desirable response to such infringement and enter into good faith negotiations to determine an agreed upon course of action to end such infringement and the appropriate allocation of any costs or recoveries associated therewith. (ii) If the parties are unable to agree upon the course of action or the appropriate allocation of any costs associated therewith, CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] such alleged infringement and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] any infringement of such rights that materially affect Alamo's rights pursuant to this Agreement, including, but not limited to, bringing suit against such third party infringer. In the event that CIMA does not bring suit against such third party infringer, Alamo may bring suit against such third party infringer on CIMA's behalf and Alamo [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE -23- SECURITIES AND EXCHANGE COMMISSION.***] in bringing such suit [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] to CIMA under this agreement. (b) Procedures. No settlement, consent judgment or other voluntary final disposition of any suit contemplated by Section 9.12(a) may be entered into without the consent of each party, which consent shall not be unreasonably withheld or delayed. Unless otherwise agreed by the parties, to the extent that any suit contemplated by Section 9.12(a) is directly related to the Product, any recovery of Damages to the extent related to the Product (net of the respective out-of-pocket legal fees and associated costs) in any such suit shall be allocated among the parties hereto assuming that such Damages constitute Net Sales by Alamo hereunder. In the event of any infringement suit against a third party brought by either party pursuant to this Section 9.12, 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. 9.13 Referral of Orders and Inquiries. Except as provided in 2.1(c), CIMA shall refer all Persons sending orders or making inquiries regarding the Product within the Territory to Alamo and shall promptly notify Alamo of the name of each such Person and the nature of the inquiry of such Person. SECTION 10 INDEMNIFICATION 10.1 Indemnification. (a) CIMA shall indemnify, defend and hold Alamo (and its directors, officers, employees, and Affiliates) harmless from and against any and all Damages incurred or suffered by Alamo (and its directors, officers, employees, and Affiliates) as a consequence of: (i) any breach of any representation, warranty or covenant made by CIMA in this Agreement or any agreement, instrument or document delivered by CIMA pursuant to the terms of this Agreement; (ii) any failure to perform to perform duly and punctually any covenant, agreement or undertaking on the part of Alamo contained in this Agreement; or -24- (iii) any act or omission of CIMA with respect to the operation of CIMA's business, or handling, manufacturing, or use of the Product by CIMA; or (iv) any claim or demand that the manufacture, use, sale or offer for sale of the Product by reason of CIMA Technology infringes any United States or foreign patent. (b) Alamo 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: (i) any breach of any representation, warranty or covenant made by Alamo in this Agreement or any agreement, instrument or document delivered by Alamo pursuant to the terms of this Agreement; (ii) any failure to perform to perform duly and punctually any covenant, agreement or undertaking on the part of Alamo contained in this Agreement; or (iii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of Alamo with respect to the operation of Alamo's business or the handling, manufacturing, sale, consumption or use of the Product by Alamo. 10.2 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 10.1. 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, as incurred by the Indemnified Party. -25- 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. 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 10.2, (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). Upon the final determination of liability and the amount of the indemnification payment under this Section 10, the appropriate party shall pay to the other, as the case may be, within 10 business days after such determination, the amount of any claim for indemnification made hereunder. 10.3 Survival. The provisions of Section 10 shall survive any termination of this Agreement. Each Indemnified Party's rights under Section 10 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 this Agreement, unless such waiver expressly and in writing also waives any or all of the Indemnified Party's right under Section 10. 10.4 Insurance. Alamo shall maintain throughout the term of this Agreement comprehensive general liability insurance, including product liability insurance underwritten by an insurance company reasonably acceptable to CIMA. This insurance coverage shall provide protection of not less than ten ($10) million, combined single limit for personal injury and property damage (on a per occurrence basis) with CIMA named as an additional insured. Such liability insurance shall be maintained on an occurrence basis to provide such protection after expiration or termination of the policy itself and/or this Agreement. Alamo shall furnish to CIMA certificates issued by the insurance company setting forth the amount of the liability insurance and a provision that CIMA shall receive thirty (30) days written notice prior to termination, reduction or modification of coverage. -26- SECTION 11 TERMINATION 11.1 Termination. The term of this Agreement shall begin upon the Effective Date and, unless sooner terminated as hereinafter provided, shall end upon the expiration of the last CIMA Patent to expire or, if later, the expiration of any other patent resulting from the development process contemplated hereby. Upon expirationof this Agreement, CIMA will, if requested by Alamo, grant Alamo on a royalty free basis a license to continue to use the CIMA Intellectual Property formerly covered by the CIMA Patents for the manufacture of Product and, should Alamo desire to have CIMA continue the manufacture of Product beyond the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period provided for in Section 5.8, CIMA agrees to enter into good faith negotiations with Alamo to discuss terms of manufacture. Notwithstanding the foregoing, this Agreement may be terminated as follows: (a) Termination for Insolvency. If either Alamo 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. In addition to Alamo's rights under Section 4.1(c), Alamo 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 11.1(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. Notwithstanding the foregoing, if Alamo fails to pay any invoice for development fees payable pursuant to Section 3.2 above with respect to one of the development activities set forth on the Development Schedule within 45 days after receipt of such invoice following the successful completion of such development -27- activity, CIMA shall have the right to terminate this Agreement by delivering written notice of such election to terminate and this Agreement shall terminate on the thirtieth (30th) day following the receipt of such notice by Alamo, unless prior to such thirtieth (30th) day Alamo shall have cured such failure to pay or shall have delivered to CIMA written notice that it disputes that such development activity has been successfully completed. This Section 11.1(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. (c) 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 any ongoing obligations hereunder with respect to the remaining 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 9.3, 9.4, 9.6, 9.8, 10, 11.1(c) and 12 hereof, and such obligations shall survive any such termination. SECTION 12 MISCELLANEOUS 12.1 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 Alamo may assign any of its rights, duties or obligations hereunder without the prior written consent of the other, except that no prior written consent shall be required in the event that a third party acquires substantially all of the assets or outstanding shares of, or merges with, Alamo or CIMA, as the case may be. 12.2 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 -28- If to Alamo, as follows: Alamo Pharmaceuticals, LLC 8501 Wilshire Blvd., Suite 318 Beverly Hills, CA 90211 Facsimile: (310) 854-0739 Attention: Chief Financial Officer with a copy to: Milbank, Tweed, Hadley & McCloy LLP 601 S. Figueroa Street Los Angeles, CA 90017 Facsimile: (213) 629-5063 Attention: Kenneth J. Baronsky or in any case to such other address or addresses as hereafter shall be furnished as provided in this Section 12.2 by any party hereto to the other party. 12.3 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 Alamo 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 Alamo 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 privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. 12.4 Survival of Representations. Each of the representations and warranties made in this Agreement shall survive the term of this Agreement. 12.5 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, franchiser and franchisee, or of any association or relationship between the parties other than as expressly provided in this Agreement. Alamo acknowledges that it does not have, and Alamo shall not make representations to any third party, either directly or indirectly, indicating that Alamo 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 Alamo or to obligate Alamo in any way whatsoever. -29- 12.6 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements or understandings of the parties relating thereto. 12.7 Amendment. This Agreement may be modified or amended only by written agreement of the parties hereto. 12.8 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. 12.9 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. 12.10 Dispute Resolution. To the extent 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, 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. 12.11 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. 12.12 No Third-Party Rights. No provision of this Agreement shall be deemed or construed in any way to result in the creation of any rights or obligation in any Person not a party or not affiliated with a party to this Agreement. 12.13 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. 12.14 Attachments. All Schedules, Exhibits and other attachments to this Agreement are by this reference incorporated herein and made a part of this Agreement. -30- 12.15 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. -31- 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 --------------------------------- Name: John Siebert Ph.D. Title: President and CEO ALAMO PHARMACEUTICALS, LLC By: /s/ Robert L. Sevy --------------------------------- Name: Robert L. Sevy Title: Chief Financial Officer Schedule A to Development, License and Supply Agreement Minimum Annual Royalty Targets Pursuant to Section 4.1(c), Alamo shall endeavor to meet or exceed the minimum annual royalty targets set forth below. References to Years below are to full calendar years commencing at least six (6) months after the date on which the Product is launched. Minimum Annual Royalty Targets

- ---------------------------------------------------------------- YEAR MINIMUM ROYALTY TARGETS - ---------------------------------------------------------------- 1 $[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] - ---------------------------------------------------------------- 2 $[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] - ---------------------------------------------------------------- 3 $[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] - ---------------------------------------------------------------- 4 $[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] - ---------------------------------------------------------------- 5 $[***CONFIDENTIAL TREATMENT REQUESTED, and thereafter PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] - ----------------------------------------------------------------

Schedule B to Development, License and Supply Agreement Development Schedule

- ------------------------------------------------------- ACTIVITY DURATION COST Phase - -------------------------------------------------------

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] Schedule C to Development, License and Supply Agreement Royalty Rates Pursuant to Section 4.3, Alamo shall pay to CIMA a percentage of Annual Net Sales, if any, actually recorded during such Year, as indicated on the following schedule. If Alamo does not meet the Minimum Annual Royalty Target set forth in Schedule A for any Year, then the royalty rate paid for such Year shall be that rate noted in Tier 2

- -------------------------------------------------------------------- TIER ROYALTY RATE - -------------------------------------------------------------------- Tier 1 [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of Net Sales - -------------------------------------------------------------------- Tier 2 [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of Net Sales - --------------------------------------------------------------------

Schedule D to Development, License and Supply Agreement License and Milestone Payments Pursuant to Section 4.1, Alamo shall pay CIMA the License Payment of $[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] upon the Effective Date and the milestone payments set forth below (each a "Milestone Payment") within thirty (30) days of successful completion of each research and development milestones. MILESTONE ACTIVITY MILESTONE PAYMENT [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] Schedule E to Development, License and Supply Agreement Alamo Purchase Order [See Attached] Schedule F to Development, License and Supply Agreement Technical Agreement Addendum CIMA will be accountable for all aspects of the Product research and development and manufacturing other than (i) the design and conduct of clinical trials, (ii) the assembly and filing of the regulatory documents and (iii) the final packaging and sales of Product. Specifications will be mutually agreed by both parties on or prior to the final regulatory filing. To the extent that a more detailed allocation of pharmaceutical responsibility is required in connection with the final packaging and/or marketing of the product in any jurisdiction in the Territory, the Parties shall amend this Schedule F as necessary. Schedule G to Development, License and Supply Agreement Cost of Goods Pursuant to Sections 5.1, 5.3 and 5.6, Alamo shall pay to CIMA the amounts indicated on the following schedule in respect of CIMA's manufacturing obligations hereunder. TRADE and SAMPLES (cost per tablet)

- --------------------------------------------------------------- POTENCY TOTAL COST(1)(2)(3) PACKAGING - ---------------------------------------------------------------

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] 1) The cost per tablet does not include the cost of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], as noted in Section 3.2. 2) Per tablet costs may be reviewed annually. Any increase in cost will reflect documented increase in raw material(s) and be subject to Alamo's acceptance, but increases shall not exceed the PPI increase for that year. 3) Final cost per tablet will be determined upon completion of formulation development and shall not exceed the costs noted in this table PLACEBOS (cost per tablet)

- --------------------------------------------------------------- PLACEBO TOTAL COST* PACKAGING TYPE - ---------------------------------------------------------------

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

SCHEDULES Schedule A Minimum Annual Royalty Targets Schedule B Development Schedule Schedule C Royalty Rates Schedule D License and Milestone Payments Schedule E Alamo Purchase Order Schedule F Technical Agreement Addendum Schedule G Cost Of Goods

i AMENDMENT #1 TO DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT Whereas, CIMA LABS INC. (CIMA) and Alamo Pharmaceuticals Inc. (Alamo) have entered into a Development License and Supply Agreement dated March 2, 2001 (DLSA) regarding the development, licensing and supply of a pharmaceutical product containing [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] and CIMA's DuraSolv(TM) technology; Whereas, CIMA has been conducting research according to Schedule B of the DLSA and such research has indicated that CIMA's DuraSolv technology [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]; and Whereas, CIMA and Alamo have decided to utilize CIMA's OraSolv(R) technology to develop a pharmaceutical product containing [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] and that certain changes to the DLSA will therefore be required; Therefore, for good and valid consideration, the Parties agree as follows: 1) Schedule G of the DLSA is hereby replaced by Schedule G-1 of this Amendment; 2) Schedule B of the DLSA is hereby replaced by Schedule B-1 of this Amendment 3) Schedule D of the DLSA is hereby replaced by Schedule D-1 of this Amendment; 4) In the definition of "CIMA Patents" replace "United States Patent No. 6,024,981 (entitled "Rapidly Dissolving Robust Dosage Form")" with "United States Patent No. 5,178,878 (entitled "Effervescent Dosage Form with Microparticles")"; 5) In the definition of "CIMA Technology" replace "DuraSolv(TM)" with "OraSolv(R)"; 6) In the definition of "CIMA Trademarks" replace "DuraSolv(TM)" with "OraSolv(R)"; 7) In the definition of "DuraSolv(TM)" replace "DuraSolv(TM)" with "OraSolv(R)"; and 8) In the definition of "Product" replace "DuraSolv(TM)" with "OraSolv(R)". 9) In all other respects, the terms and conditions of the Development License and Supply Agreement dated March 2, 2001 shall remain in full force and effect. Capitalized terms in this Amendment shall have the same meaning as in the Development License and Supply Agreement. CIMA LABS INC. Alamo Pharmaceuticals, LLC By: /s/ John M. Siebert By: /s/ Greg Wichmann ------------------------------- ------------------------------- (Signature) (Signature) John M. Siebert Greg Wichmann ------------------------------- ------------------------------- (Print or Type Name) (Print or Type Name) Title: President & CEO Title: Director ------------------------ ------------------------ Date: 4 January 2002 Date: 15 January 2002 ------------------------- ------------------------- SCHEDULE B-1 Development Schedule

- --------------------------------------------------------------------------- ACTIVITY DURATION COST PHASE - ---------------------------------------------------------------------------

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] SCHEDULE G-1 TRADE AND SAMPLES (COST PER TABLET)

- ------------------------------------------------------------------------ POTENCY TOTAL COST(1)(2)(3) PACKAGING - ------------------------------------------------------------------------

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] (1) The cost per tablet does not include the cost of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], as noted in Section 3.2. (2) Per tablet costs may be reviewed annually. Any increase in cost will reflect documented increase in raw material(s) and be subject to Alamo's acceptance, but increases shall not exceed the PPI increase for that year. (3) Final cost per tablet will be determined upon completion of formulation development and shall not exceed the costs noted in this table. Placebos (cost per tablet)

- --------------------------------------------------------------- POTENCY TOTAL COST PACKAGING - ---------------------------------------------------------------

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] SCHEDULE D-1 Pursuant to Section 4.1, Alamo shall pay CIMA the License Payment of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] upon the Effective Date and the milestone payments set forth below (each a "Milestone Payment") with in thirty (30) days of successful completion of each research and development milestones. Milestone Activity Milestone Payment [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] * 1/10th scale batches will be manufactured using equipment that is identical in design and principle to full-scale equipment per regulatory requirements EX-10.30 5 c75663exv10w30.txt EX-10.30 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT EXHIBIT 10.30 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "First Amendment") is entered into as of December 31, 2002, by and between CIMA LABS INC., a Delaware corporation (the "Company"), and John Hontz, Ph.D., an individual resident of Minnesota ("Employee"). WHEREAS, the Company and Employee entered into an Employment Agreement dated effective as of August 23, 2000 (the "Original Agreement"); and WHEREAS, the Company and Employee desire to amend certain of the terms of the Original Agreement as set forth in this First Amendment. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties do hereby agree as follows: 1. Extension of Term of Original Agreement. As approved by the Company's Board of Directors on December 17, 2002, Section 1 of the Original Agreement will be amended in its entirety to read as follows: 1. EMPLOYMENT AND TERM. Subject to the terms and conditions herein provided, the Company hereby continues employment of the Employee, and the Employee hereby accepts continued employment by the Company, for a term beginning on September 1, 2000 and continuing thereafter for five (5) years until September 1, 2005, unless earlier terminated in accordance with Section 11. 2. Increase In Certain Payments Upon Termination of Employment. As approved by the Company's Board of Directors on December 17, 2002, Sections 12(c), 12(d) and 12(e) of the Original Agreement will be amended in their entirety to read as follows: 12. PAYMENTS ON TERMINATION. (c) Termination By the Company Without Cause. Upon termination by the Company during the term for any reason other than Cause (not including termination due to death, disability, or upon expiration of the term set forth in Section 1), the Company will continue to pay Employee at the rate of his then current annual Base Salary for a period of twenty-four (24) months after the Termination Date. (d) Other Terminations. Upon termination of Employee's employment by the Company for Cause, by the Employee for other than Good Reason, or upon expiration of the term as set forth in Section 1, the Company will pay Employee his Base Salary earned through the Termination Date. (e) Termination after Change in Control. In the event of termination of Employee's employment by the Company as a result of a Change in Control of the Company or by Employee for Good Reason, and in lieu of payment under any other provision of Section 12 of this Agreement, the Company will continue to pay Employee at the rate of his then current annual Base Salary for a period of twenty-four (24) months after the Termination Date. The amount of payment to be made by the Company to the Employee pursuant to this Section 12(e) shall be reduced by 50% of any gross compensation earned by the Employee in connection with any employment or self-employment of the Employee during the compensation period pursuant to this Section 12(e). Employee shall promptly notify the Company of any such employment or self-employment and disclose to the Company his gross earnings therefrom. Except as otherwise provided in the last sentence of this paragraph, if the payments owed to the Employee pursuant to this Section 12(e) and any other benefits to which the Employee shall become entitled, either alone or together with other payments or benefits in the nature of compensation to the Employee which would constitute a "parachute payment" as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), such payments or other benefits shall be reduced (but not below zero) to the largest aggregate amount as will result in no portion thereof being subject to the excise tax imposed under Section 4999 of the Code. The Employee in good faith shall determine the amount of any reduction to be made pursuant to this paragraph. Notwithstanding the foregoing, this Section 12(e) shall not apply (and no reduction shall be made to the payments or other benefits otherwise available to the Employee) if the Company determines that (i) the Employee's net after-tax position without the imposition of such reduction would be greater than (ii) the Employee's net after-tax position with the imposition of such reduction. 3. Miscellaneous. All capitalized terms not otherwise defined herein shall take the meanings ascribed to such terms in the Original Agreement. Other than as expressly amended in this First Amendment, the Original Agreement shall continue in full force and effect, as so amended by this First Amendment. IN WITNESS WHEREOF, the parties to this Agreement have executed and delivered this First Amendment on the date first above written. CIMA LABS INC. EMPLOYEE By: /s/ John M. Siebert /s/ John Hontz ----------------------- --------------------------- John M. Siebert, Ph.D. John Hontz, Ph.D. Its President and CEO 2 EX-10.31 6 c75663exv10w31.txt EX-10.31 LETTER AGREEMENT WITH DAVID FESTE EXHIBIT 10.31 February 27, 2003 David Feste 5145 Russell Ave S Minneapolis, MN 55410 Dear Dave: This letter will confirm our discussions and agreements regarding the transition and termination of your employment with CIMA LABS INC. (the "Company"). 1. Employment. Your employment with the Company will end by mutual agreement effective June 30, 2003 (the "Separation Date"). Your status as Chief Financial Officer of the Company ("CFO") will end effective March 31, 2003. You will continue to perform the responsibilities of CFO from now through March 31, 2003. Thereafter until the Separation Date, you will perform such transition duties consistent with your former position as CFO as may be requested by the Company. Such transition duties requested by the Company will not exceed eight days per month and will be performed by you at times mutually agreed upon with the Company. Between now and the Separation Date, the Company may terminate your employment only for "cause," as defined in the Employment Agreement between you and the Company, dated as of January 26, 2001 (the "Employment Agreement"). In the event of termination by the Company for "cause," the Company shall have no further obligation to you under this letter agreement except to pay your base salary and benefits accrued through the date of termination. 2. Compensation. While you are so employed by the Company, you will continue to receive base salary at your current annual rate of $203,970 and those benefits as set forth in Section 3(c), (d), (e), and (g) of the Employment Agreement. Except as provided in paragraph 3(c) of this letter agreement below, you will not be eligible for any incentive bonus for calendar year 2003. 3. Severance Pay. If you sign the enclosed Release By David Feste (the "Release") within 21 days following the Separation Date and do not rescind the Release within 15 days after signing it, and subject to your complying with all terms of this letter agreement, the Company will provide you with the following benefits: a. The Company will pay you severance pay equal to your final base salary at the annual rate of $203,970 for a period of six months. Thereafter, if you have not obtained other employment by December 31, 2003, then the Company will continue to pay you severance pay at the same rate until the earlier of (i) March 31, 2004 and (ii) the date you obtain other employment. Such severance pay will subject to normal tax withholdings and will be paid by the Company in accordance with its regular payroll schedule. You agree to diligently seek employment following the Separation Date and to promptly report any employment to the Company in writing within three (3) days of acceptance of such employment. b. If following the Separation Date you elect to continue your group medical and dental insurance in accordance with the terms of the applicable plans and laws, the Company will continue to pay its portion of the monthly premiums for such coverage up to nine (9) months following the Separation Date as if you were still employed by the Company. Your continued coverages will be at the same level as in effect as of the Separation Date and dependent coverages may be added in connection with a qualifying event in accordance with the applicable plans and laws. The portion of the premiums that shall be paid by the Company if dependent coverage is added will also be that portion that the Company would pay if you were still an employee of the Company. The Company's obligation to make such premium payments shall commence after the rescission period has expired and shall cease immediately if you become eligible for other health or dental (as applicable) insurance benefits through a new employer. The Company shall deduct your contributions for the monthly premiums from the severance pay described in paragraph 3(a) above of this letter agreement. You agree to notify the Company in writing within three (3) days of your acceptance of any employment that provides health or dental insurance benefits. c. The Company will pay you a prorated annual bonus for calendar year 2003, in the amount of $25,496.25, less normal tax withholdings. Such bonus payment will be paid at the same time as annual bonus payments are paid to other management employees of the Company for calendar year 2003, but in no event later than March 31, 2004. 4. Stock Options. You currently have options to purchase shares of the Common Stock of the Company in accordance with the following schedule, assuming your continued employment with the Company through the Separation Date:

Amount Date of Exercise Number of Exercisable as of Grant Price Shares Granted 6/30/03 - ----------- -------- -------------- ----------------- 2/28/00 $18.6875 50,000 25,000 5/16/00 $15.00 86,000 57,333 12/31/00 $66.00 75,000 50,000

You agree and acknowledge that all of your options to purchase the Company's Common Stock are listed above and will lapse and cease to be outstanding 90 days following the Separation Date, unless previously exercised in accordance with the terms of the applicable option agreement and the Equity Incentive Plan (and subject to adjustment if your employment terminates before the Separation Date). 5. Press Release. The Company will not issue a press release announcing your departure from the Company without your advance approval of the text of such release. Such approval will not be unreasonably withheld by you. 6. Your Obligations. You shall continue to be obligated to comply with each of the terms of Sections 5, 6, 7, and 8 of the Employment Agreement, provided, however, that the second sentence of Section 7 of the Employment Agreement shall be amended to state as follows: The Employee therefore agrees that for a period of one (1) year from the date of termination of his employment with the Company, the Employee -2- shall not operate, join, control, be employed by, or participate in ownership, management, operation, or control of, or be connected in any manner as an independent contractor, consultant, or otherwise, with any person or organization engaged in the design, development, manufacture, distribution, marketing or selling of pharmaceutical products using fast-dissolve drug delivery technologies within the United States. 7. Company Obligations. The sole obligations of the Company will be its obligations as set forth in this letter agreement, except as otherwise provided by law. This letter agreement represents the entire agreement between you and the Company and supersedes all prior negotiations, discussions, communications and agreements. 8. Governing Law. All matters relating to the interpretation, construction, application, validity and enforcement of this letter agreement shall be governed by the laws of the State of Minnesota. * * * * * This letter agreement is intended to state all the terms of the conclusion of your employment by the Company. Please indicate your acceptance of all such terms by signing both copies of this letter agreement and returning one copy to the undersigned. Sincerely, CIMA LABS INC. /s/Steven Ratoff Steven Ratoff Member, Board of Directors On this 27th day of February, 2003, I, David A. Feste, hereby accept and agree to the terms of the above letter agreement and further acknowledge that I have 21 days after the Separation Date to decide whether to sign the enclosed Release. I also hereby specifically confirm (a) that I am being advised by the Company to seek independent advice from legal counsel of my own selection in connection with this letter agreement and the Release (and that I have had adequate opportunity to do so); and (b) that I have not relied to any extent on any statement or other communication from any shareholder, director, officer, employee, attorney or agent of the Company in connection herewith. /s/David A. Feste 2/27/03 - ----------------------------------------- ------- David A. Feste Dated -3- RELEASE BY DAVID A. FESTE DEFINITIONS. I intend all words used in this Release to have their plain meanings in ordinary English. Specific terms that I use in this Release have the following meanings: A. I, me, and my include both me and anyone who has or obtains any legal rights or claims through me. B. CIMA means CIMA LABS INC., any company related to CIMA LABS INC. in the present or past (including without limitation, its predecessors, parents, subsidiaries, affiliates, joint venture partners, and divisions), and any successors of CIMA LABS INC. C. Company means CIMA; the present and past officers, directors, committees, shareholders, and employees of CIMA; any company providing insurance to CIMA in the present or past; the present and past fiduciaries of any employee benefit plan sponsored or maintained by CIMA (other than multiemployer plans); the attorneys for CIMA; and anyone who acted on behalf of CIMA or on instructions from CIMA. D. Letter Agreement means the letter agreement from CIMA dated February __, 2003 and accepted by me, including all of the documents attached to the Letter Agreement. E. My Claims mean all of my rights that I now have to any relief of any kind from the Company, including without limitation: 1. all claims arising out of or relating to my employment with CIMA or the termination of that employment; 2. all claims arising out of or relating to the statements, actions, or omissions of the Company; 3. all claims for any alleged unlawful discrimination, harassment, retaliation or reprisal, or other alleged unlawful practices arising under any federal, state, or local statute, ordinance, or regulation, including without limitation, claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, 42 U.S.C. ss. 1981, the Employee Retirement Income Security Act, the Equal Pay Act, the Worker Adjustment and Retraining Notification Act, the Minnesota Human Rights Act, the Fair Credit Reporting Act, and workers' compensation non-interference or non-retaliation statutes (such as Minn. Stat. Section 176.82); 4. all claims for alleged wrongful discharge; breach of contract; breach of implied contract; failure to keep any promise; breach of a covenant of -1- good faith and fair dealing; breach of fiduciary duty; estoppel; my activities, if any, as a "whistleblower"; defamation; infliction of emotional distress; fraud; misrepresentation; negligence; harassment; retaliation or reprisal; constructive discharge; assault; battery; false imprisonment; invasion of privacy; interference with contractual or business relationships; any other wrongful employment practices; and violation of any other principle of common law; 5. all claims for compensation of any kind, including without limitation, bonuses, commissions, stock-based compensation or stock options, vacation pay, and expense reimbursements; 6. all claims for back pay, front pay, reinstatement, other equitable relief, compensatory damages, damages for alleged personal injury, liquidated damages, and punitive damages; and 7. all claims for attorneys' fees, costs, and interest. However, My Claims do not include any claims that the law does not allow to be waived, any claims that may arise after the date on which I sign this Release, any claims for indemnification under the charter documents of the Company or under any applicable state or federal statute, or any claims for breach of the Letter Agreement. AGREEMENT TO RELEASE MY CLAIMS. I will receive consideration from CIMA as set forth in the Letter Agreement if I sign and do not rescind this Release as provided below. I understand and acknowledge that that consideration is in addition to anything of value that I would be entitled to receive from CIMA if I did not sign this Release or if I rescinded this Release. In exchange for that consideration I give up and release all of My Claims. I will not make any demands or claims against the Company for compensation or damages relating to My Claims. The consideration that I am receiving is a fair compromise for the release of My Claims. ADDITIONAL AGREEMENTS AND UNDERSTANDINGS. Even though CIMA will provide consideration for me to settle and release My Claims, the Company does not admit that it is responsible or legally obligated to me. In fact, the Company denies that it is responsible or legally obligated to me for My Claims, denies that it engaged in any unlawful or improper conduct toward me, and denies that it treated me unfairly. ADVICE TO CONSULT WITH AN ATTORNEY. I understand and acknowledge that I am hereby being advised by the Company to consult with an attorney prior to signing this Release and I have done so. My decision whether to sign this Release is my own voluntary decision made with full knowledge that the Company has advised me to consult with an attorney. PERIOD TO CONSIDER THE RELEASE. I understand that I have 21 days following my last day of employment with the Company to consider whether I wish to sign this -2- Release before the end of the 21-day period, it will be my voluntary decision to do so because I have decided that I do not need any additional time to decide whether to sign this Release. MY RIGHT TO RESCIND THIS RELEASE. I understand that I may rescind this Release at any time within 15 days after I sign it, not counting the day upon which I sign it. This Release will not become effective or enforceable unless and until the 15-day rescission period has expired without my rescinding it. PROCEDURE FOR ACCEPTING OR RESCINDING THE RELEASE. To accept the terms of this Release, I must deliver the Release, after I have signed and dated it, to CIMA by hand or by mail within the 21-day period that I have to consider this Release. To rescind my acceptance, I must deliver a written, signed statement that I rescind my acceptance to CIMA by hand or by mail within the 15-day rescission period. All deliveries must be made to CIMA at the following address: Ronald Gay CIMA LABS INC. 10000 Valley View Road Eden Prairie, MN 55344 If I choose to deliver my acceptance or the rescission of my acceptance by mail, it must be (1) postmarked within the period stated above; and (2) properly addressed to CIMA at the address stated above. INTERPRETATION OF THE RELEASE. This Release should be interpreted as broadly as possible to achieve my intention to resolve all of My Claims against the Company. If this Release is held by a court to be inadequate to release a particular claim encompassed within My Claims, this Release will remain in full force and effect with respect to all the rest of My Claims. MY REPRESENTATIONS. I am legally able and entitled to receive the consideration being provided to me in settlement of My Claims. I have not been involved in any personal bankruptcy or other insolvency proceedings at any time since I began my employment with CIMA. No child support orders, garnishment orders, or other orders requiring that money owed to me by CIMA be paid to any other person are now in effect. I have read this Release carefully. I understand all of its terms. In signing this Release, I have not relied on any statements or explanations made by the Company except as specifically set forth in the Letter Agreement. I am voluntarily releasing My Claims against the Company. I intend this Release and the Letter Agreement to be legally binding. Dated: _____________________________ _________________________________ David A. Feste -3- EX-10.32 7 c75663exv10w32.txt EX10.32 EMPLOYMENT AGREEMENT - JAMES C HAWLEY EXHIBIT 10.32 CIMA LABS INC. EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into on February 19, 2003 by and between Cima Labs Inc., a Delaware corporation (the "Company"), and James C. Hawley, a resident of Minnesota ("Executive"). A. The Company develops and manufactures prescription and over-the-counter pharmaceutical products using fast-dissolve drug delivery technologies for sale around the world. B. Executive is an experienced business manager. C. The Company desires to hire Executive as its Vice President, Chief Financial Officer and Secretary, and Executive desires to be employed by the Company, subject to the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the respective agreements of the Company and Executive set forth below, the Company and Executive, intending to be legally bound, agree as follows: 1. Employment. Effective as of March 17, 2003, the Company shall employ Executive, and Executive shall accept such employment and perform services for the Company, upon the terms and conditions set forth in this Agreement. 2. Term of Employment. The term of Executive's employment with the Company shall be for the period commencing on March 17, 2003 and continuing until terminated in accordance with Section 9 hereof. 3. Position and Duties. (a) Employment with the Company. During the term of Executive's employment with the Company, Executive shall report to the President and Chief Executive Officer of the Company and shall perform such duties and responsibilities as the Company shall assign to him from time to time consistent with his position. Effective as of April 1, 2003 and subject to approval of the Board of Directors of the Company (the "Board"), Executive shall be an executive officer of the Company and Executive's title shall be "Vice President, Chief Financial Officer and Secretary". (b) Performance of Duties and Responsibilities. Executive shall serve the Company faithfully and to the best of his ability and shall devote his full working time, attention and efforts to the business of the Company during his employment with the Company. Executive hereby represents and confirms that he is under no contractual or legal commitments that would prevent him from fulfilling his duties and responsibilities as set forth in this Agreement. During his employment with the Company, Executive may participate in charitable activities and personal investment activities to a reasonable extent, and, subject to prior Board approval, may serve on boards of directors of other companies, so long as such activities do not interfere with the performance of his duties and responsibilities hereunder. 4. Compensation. (a) Base Salary. While Executive is employed by the Company hereunder, the Company shall pay to Executive an annual base salary at the rate of $200,000, less deductions and withholdings, which base salary shall be paid in accordance with the Company's normal payroll policies and procedures. Annual performance and salary reviews will be conducted in accordance with Company policy and practice. (b) Incentive Bonus. For each full calendar year that Executive is employed by the Company hereunder, Executive shall be eligible for an incentive bonus award of up to 50% of Executive's base salary, based on achievement of objectives established by the Company. For calendar year 2003, Executive shall be eligible for an incentive bonus award of up to $100,000. (c) Stock Options. Subject to approval by the Board and the terms of a definitive stock option agreement to be entered into by the Company and Executive, the Company shall grant Executive a stock option to purchase 50,000 shares of common stock of the Company. (d) Employee Benefits. While Executive is employed by the Company hereunder, Executive shall be entitled to participate in all employee benefit plans and programs of the Company to the extent that Executive meets the eligibility requirements for each individual plan or program. The Company provides no assurance as to the adoption or continuance of any particular employee benefit plan or program, and Executive's participation in any such plan or program shall be subject to the provisions, rules and regulations applicable thereto. (e) Expenses. While Executive is employed by the Company hereunder, the Company shall reimburse Executive for all reasonable and necessary out-of-pocket business, travel and entertainment expenses incurred by him in the performance of his duties and responsibilities hereunder, subject to the Company's normal policies and procedures for expense verification and documentation. (f) Vacation/Paid Time Off. While Executive is employed by the Company hereunder, Executive shall accrue paid time off each year in accordance with the Company's policies and practices in effect from time to time; provided, however, that Executive shall accrue paid time off each pay period at a rate of four weeks per year. Paid time off shall be taken at such times so as not to unduly disrupt the operations of the Company. 2 5. Confidential Information. Except as permitted in writing by the Company's Board, during the term of Executive's employment with the Company and at all times thereafter, Executive shall not divulge, furnish or make accessible to anyone or use in any way other than in the ordinary course of the business of the Company, any confidential, proprietary or secret knowledge or information of the Company that Executive has acquired or shall acquire during his employment with the Company, whether developed by himself or by others, concerning (i) any trade secrets, (ii) any confidential, proprietary or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company, (iii) any customer or supplier lists of the Company, (iv) any confidential, proprietary or secret development or research work of the Company, (v) any strategic or other business, marketing or sales plans of the Company, (vi) any financial data or plans respecting the Company, or (vii) any other confidential or proprietary information or secret aspects of the business of the Company. Executive acknowledges that the above-described knowledge and information constitutes a unique and valuable asset of the Company and represents a substantial investment of time and expense by the Company, and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. During the term of Executive's employment with the Company, Executive shall refrain from any acts or omissions that would reduce the value of such knowledge or information to the Company. The foregoing obligations of confidentiality shall not apply to any knowledge or information that (i) is now or subsequently becomes generally publicly known in the form in which it was obtained from the Company, (ii) is independently made available to Executive in good faith by a third party who has not violated a confidential relationship with the Company, or (iii) is required to be disclosed by legal process, other than as a direct or indirect result of the breach of this Agreement by Executive. 6. Ventures. If, during the term of Executive's employment with the Company, Executive is engaged in or associated with the planning or implementing of any project, program or venture involving the Company and a third party or parties, all rights in such project, program or venture shall belong to the Company. Except as approved in writing by the Board, Executive shall not be entitled to any interest in any such project, program or venture or to any commission, finder's fee or other compensation in connection therewith, other than the compensation to be paid to Executive by the Company as provided herein. Executive shall have no interest, direct or indirect, in any customer or supplier that conducts business with the Company, unless such interest has been disclosed in writing to and approved by the Board before such customer or supplier seeks to do business with the Company. Ownership by Executive, as a passive investment, of less than 2.5% of the outstanding shares of capital stock of any corporation listed on a national securities exchange or publicly traded in the over-the-counter market shall not constitute a breach of this Section 6. 7. Noncompetition Covenant. (a) Agreement Not to Compete. During the term of Executive's employment with the Company and for a period of twelve (12) consecutive months from the date of the termination of such employment, whether such termination is with or without Cause (as defined 3 below), or whether such termination is at the instance of Executive or the Company, Executive shall not, directly or indirectly, throughout North America, engage in any business that the Company has engaged in during the term of Executive's employment with the Company, or any part of such business, including without limitation the design, development, manufacture, distribution, marketing or selling of pharmaceutical products using fast-dissolve drug delivery technologies, in any manner or capacity, including without limitation as a proprietor, principal, agent, partner, officer, director, stockholder, employee, member of any association, consultant or otherwise. Ownership by Executive, as a passive investment, of less than 2.5% of the outstanding shares of capital stock of any corporation listed on a national securities exchange or publicly traded in the over-the-counter market shall not constitute a breach of this Section 7(a). (b) Agreement Not to Hire. During the term of Executive's employment with the Company and for a period of twelve (12) consecutive months from the date of the termination of such employment, whether such termination is with or without Cause (as defined below), or whether such termination is at the instance of Executive or the Company, Executive shall not, directly or indirectly, hire, engage or solicit any person who is then an employee of the Company or who was an employee of the Company at the time of Executive's termination of employment, in any manner or capacity, including without limitation as a proprietor, principal, agent, partner, officer, director, stockholder, employee, member of any association, consultant or otherwise. (c) Agreement Not to Solicit. During the term of Executive's employment with the Company and for a period of twelve (12) consecutive months from the date of the termination of such employment, whether such termination is with or without Cause (as defined below), or whether such termination is at the instance of Executive or the Company, Executive shall not, directly or indirectly, solicit, request, advise or induce any current or potential customer, supplier or other business contact of the Company on behalf of any entity competing with the Company or to cancel, curtail or otherwise change its relationship with the Company, in any manner or capacity, including without limitation as a proprietor, principal, agent, partner, officer, director, stockholder, employee, member of any association, consultant or otherwise. A "current customer" is defined as a customer of the Company as of the Termination Date (as defined below). A "potential customer" is an entity with which the Company has had significant and substantive discussions within one year prior to, or is having significant and substantive discussions as of, the Termination Date. (d) Acknowledgment. Executive hereby acknowledges that the provisions of this Section 7 are reasonable and necessary to protect the legitimate interests of the Company and that any violation of this Section 7 by Executive shall cause substantial and irreparable harm to the Company to such an extent that monetary damages alone would be an inadequate remedy therefor. Therefore, in the event that Executive violates any provision of this Section 7, the Company shall be entitled to an injunction, in addition to all the other remedies it may have, restraining Executive from violating or continuing to violate such provision. (e) Blue Pencil Doctrine. If the duration of, the scope of or any business activity covered by any provision of this Section 7 is in excess of what is valid and enforceable under applicable law, such provision shall be construed to cover only that duration, scope or 4 activity that is valid and enforceable. Executive hereby acknowledges that this Section 7 shall be given the construction which renders its provisions valid and enforceable to the maximum extent, not exceeding its express terms, possible under applicable law. 8. Patents, Copyrights and Related Matters. (a) Disclosure and Assignment. Executive shall immediately disclose to the Company any and all improvements, inventions, ideas, and discoveries that Executive may conceive and/or reduce to practice individually or jointly or commonly with others while he is employed with the Company with respect to (i) any methods, processes or apparatus concerned with the development, use or production of any type of products, goods or services sold or used by the Company, and (ii) any type of products, goods or services sold or used by the Company. Executive also shall immediately assign, transfer and set over to the Company his entire right, title and interest in and to any and all of such inventions as are specified in this Section 8(a), and in and to any and all applications for letters patent that may be filed on such inventions, and in and to any and all letters patent that may issue, or be issued, upon such applications. In connection therewith and for no additional compensation therefor, but at no expense to Executive, Executive shall sign any and all instruments deemed necessary by the Company for: (i) the filing and prosecution of any applications for letters patent of the United States or of any foreign country that the Company may desire to file upon such inventions as are specified in this Section 8(a); (ii) the filing and prosecution of any divisional, continuation, continuation-in-part or reissue applications that the Company may desire to file upon such applications for letters patent; and (iii) the reviving, re-examining or renewing of any of such applications for letters patent. This Section 8(a) shall not apply to any invention for which no equipment, supplies, facilities, confidential, proprietary or secret knowledge or information, or other trade secret information of the Company was used and that was developed entirely on Executive's own time, and (i) that does not relate (A) directly to the business of the Company, or (B) to the Company's actual or demonstrably anticipated research or development, or (ii) that does not result from any work performed by Executive for the Company. (b) Copyrightable Material. All right, title and interest in all copyrightable material that Executive shall conceive or originate individually or jointly or commonly with others, and that arise during the term of his employment with the Company and out of the performance of his duties and responsibilities under this Agreement, shall be the property of the Company and are hereby assigned by Executive to the Company, along with ownership of any and all copyrights in the copyrightable material. Upon request and without further compensation 5 therefor, but at no expense to Executive, Executive shall execute any and all papers and perform all other acts necessary to assist the Company to obtain and register copyrights on such materials in any and all countries. Where applicable, works of authorship created by Executive for the Company in performing his duties and responsibilities hereunder shall be considered "works made for hire," as defined in the U.S. Copyright Act. (c) Know-How and Trade Secrets. All know-how and trade secret information conceived or originated by Executive that arises during the term of his employment with the Company and out of the performance of his duties and responsibilities hereunder or any related material or information shall be the property of the Company, and all rights therein are hereby assigned by Executive to the Company. 9. Termination of Employment. (a) The Executive's employment with the Company shall terminate immediately upon: (i) Executive's receipt of written notice from the Company of the termination of his employment; (ii) Executive's abandonment of his employment or his resignation; or (iii) Executive's death or Disability (as defined below). (b) The date upon which Executive's termination of employment with the Company occurs shall be the "Termination Date." 10. Payments upon Termination of Employment. (a) If Executive's employment with the Company is terminated by the Company for any reason other than for Cause (as defined below) or by Executive for Good Reason (as defined below): (i) (A) if the Termination Date occurs within the first six (6) months of Executive's employment with the Company, the Company shall pay to Executive as severance pay an amount equal to his current base salary for a period of six (6) consecutive months after the Termination Date; or (B) if the Termination Date occurs after six (6) months of Executive's employment with the Company, the Company shall pay to Executive as severance pay an amount equal to his current base salary for a period of twelve (12) consecutive months after the Termination Date; and 6 (ii) if Executive elects to continue his group health insurance coverage with the Company following the termination of his employment with the Company, and if Executive pays the remaining portion of the health insurance premium, the Company will continue to pay its portion of the monthly premiums as if Executive were still employed and at the same level of coverage that was in effect as of the Termination Date for the same period as Executive is receiving severance pay under Section 10(a)(i) above; and (iii) the Company shall pay to Executive a pro rata portion (based on the number of full calendar months of employment during the calendar year in which the Termination Date occurs) of any incentive bonus that would have been payable to him for such year pursuant to Section 4(b) hereof as if Executive had been in the employ of the Company for the full calendar year. Any amount payable to Executive as severance pay shall be subject to deductions and withholdings and shall be paid to Executive by the Company in accordance with the Company regular payroll schedule commencing on the first normal payroll date of the Company following the expiration of all applicable rescission provided by law and continuing thereafter. Any amount payable to Executive as incentive bonus hereunder shall be paid to Executive by the Company in the same manner and at the same time that incentive bonus payments are made to current employees of the Company, but no earlier than the first normal payroll date of the Company following the expiration of all applicable rescission periods provided by law. The Company shall be entitled to deduct from any severance pay otherwise payable to Executive hereunder any amount received by Executive after the Termination Date under any short-term or long-term disability insurance plan or program provided to him by the Company. In addition, the Company shall be entitled to cease making severance payments to Executive if Executive obtains other employment after the Termination Date and to cease making payments for the cost of the continuation of his group health insurance coverage with the Company after the Termination Date if Executive becomes eligible for comparable group health insurance coverage from any other employer. For purposes of mitigation and reduction of the Company's financial obligations to Executive under this Section 10(a), Executive shall within three days promptly and fully disclose to the Company in writing: (i) the fact of any employment with any other employer, (ii) the amount of any such disability insurance payments, or (iii) the fact that he has become eligible for comparable group health insurance coverage from any other employer, and Executive shall be liable to repay any amounts to the Company that should have been so mitigated or reduced but for Executive's failure or unwillingness to make such disclosures. (b) If Executive's employment with the Company is terminated by reason of: (i) Executive's resignation or abandonment of his employment, 7 (ii) termination of Executive's employment by the Company for Cause (as defined below), or (iii) Executive's death or Disability, the Company shall pay to Executive or his beneficiary or his estate, as the case may be, his base salary through the Termination Date. (c) "Cause" hereunder shall mean: (i) an act or acts of dishonesty undertaken by Executive and intended to result in substantial gain or substantial personal enrichment of Executive at the expense of the Company; (ii) unlawful conduct or gross misconduct that is willful and deliberate on Executive's part and that, in either event, is materially injurious to the Company; (iii) the conviction of Executive of a felony; (iv) material failure of Executive to perform his duties and responsibilities hereunder or to satisfy his obligations as an officer or employee of the Company, which failure has not been cured by Executive within 30 days after written notice thereof to Executive from the Company specifying such material failure; or (v) material breach of any terms and conditions of this Agreement by Executive not caused by the Company. (d) "Disability" hereunder shall mean the inability of Executive to perform on a full-time basis the duties and responsibilities of his employment with the Company by reason of his illness or other physical or mental impairment or condition, if such inability continues for an uninterrupted period of 90 calendar days or more during any 360-day period. A period of inability shall be "uninterrupted" unless and until Executive returns to full-time work for a continuous period of at least 30 days. (e) "Good Reason" hereunder shall mean (i) any action by the Company that results in a substantial diminution in Executive's responsibilities as Chief Financial Officer of the Company (after such appointment as contemplated by Section 3(a) of this Agreement), other than for Cause or on account of Disability; or (ii) a material reduction in Executive's base salary. 8 (f) In the event of termination of Executive's employment, the sole obligation of the Company shall be its obligation to make the payments called for by Section 10(a) or Section 10(b) hereof, as the case may be, and the Company shall have no other obligation to Executive or to his beneficiary or his estate, except as otherwise provided by law, under the terms of any other applicable agreement between Executive and the Company or under the terms of any employee benefit plans or programs then maintained by the Company in which Executive participates. (g) Notwithstanding the foregoing provisions of this Section 10, the Company shall not be obligated to make any payments to Executive under Section 10(a) hereof unless Executive shall have signed a release of claims in favor of the Company in a form to be prescribed by the Company, all applicable consideration periods and rescission periods provided by law shall have expired and Executive is in strict compliance with the terms of this Agreement as of the dates of the payments. 11. Return of Records and Property. Upon termination of his employment with the Company, Executive shall promptly deliver to the Company any and all Company records and any and all Company property in his possession or under his control, including without limitation manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts, computer disks, computer tapes, source codes, data, tables or calculations and all copies thereof, documents that in whole or in part contain any trade secrets or confidential, proprietary or other secret information of the Company and all copies thereof, and keys, access cards, access codes, passwords, credit cards, personal computers, telephones and other electronic equipment belonging to the Company. 12. Remedies. (a) Remedies. Executive acknowledges that it would be difficult to fully compensate the Company for monetary damages resulting from any breach by him of the provisions of Sections 5, 7, 8 and 11 hereof. Accordingly, in the event of any actual or threatened breach of any such provisions, the Company shall, in addition to any other remedies it may have, be entitled to injunctive and other equitable relief to enforce such provisions, and such relief may be granted without the necessity of proving actual monetary damages. (b) Arbitration. Except for disputes arising under Sections 5, 7 or 8 hereof, all disputes involving the interpretation, construction, application or alleged breach of this Agreement and all disputes relating to Executive's employment with the Company or the termination of such employment shall be submitted to final and binding arbitration in Minneapolis, Minnesota. The arbitrator shall be selected and the arbitration shall be conducted pursuant to the then most recent Employment Dispute Resolution Rules of the American Arbitration Association. The decision of the arbitrator shall be final and binding, and any court of competent jurisdiction may enter judgment upon the award. All fees and expenses of the arbitrator shall be paid by the Company. The arbitrator shall have jurisdiction and authority to interpret and apply the provisions of this Agreement and relevant federal, state and local laws, 9 rules and regulations insofar as necessary to the determination of the dispute and to remedy any breaches of the Agreement and/or violations of applicable laws, but shall not have jurisdiction or authority to alter in any way the provisions of this Agreement. The arbitrator shall have the authority to award attorneys' fees and costs to the prevailing party. The parties hereby agree that this arbitration provision shall be in lieu of any requirement that either party exhaust such party's administrative remedies under federal, state or local law. (c) Jurisdiction and Venue. Executive and the Company consent to jurisdiction of the courts of the State of Minnesota and/or the federal district courts, District of Minnesota, for the purpose of resolving all issues of law, equity, or fact arising out of or in connection with Sections 5, 7 or 8 of this Agreement. Any action involving claims of a breach of such Sections shall be brought in such courts. Each party consents to personal jurisdiction over such party in the state and/or federal courts of Minnesota and hereby waives any defense of lack of personal jurisdiction. Venue, for the purpose of all such suits, shall be in Hennepin County, State of Minnesota. 13. Miscellaneous. (a) Governing Law. All matters relating to the interpretation, construction, application, validity and enforcement of this Agreement shall be governed by the laws of the State of Minnesota without giving effect to any choice or conflict of law provision or rule, whether of the State of Minnesota or any other jurisdiction, that would cause the application of laws of any jurisdiction other than the State of Minnesota. (b) Entire Agreement. Except for the stock option agreement referred to in Section 4(c) hereof, this Agreement contains the entire agreement of the parties relating to the subject matter of this Agreement and supersedes all prior agreements and understandings with respect to such subject matter, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement that are not set forth herein. (c) Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by the parties hereto. (d) No Waiver. No term or condition of this Agreement shall be deemed to have been waived, except by a statement in writing signed by the party against whom enforcement of the waiver is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. (e) Assignment. This Agreement shall not be assignable, in whole or in party, by either party without the written consent of the other party, except that the Company may, without the consent of Executive, assign its rights and obligations under this Agreement to any corporation or other business entity (i) with which the Company may merge or consolidate, (ii) to which the Company may sell or transfer all or substantially all of its assets or capital stock, or 10 (iii) of which 50% or more of the capital stock or the voting control is owned, directly or indirectly, by the Company. After assignment by the Company under clause (i) or (ii) of the preceding sentence, the Company shall be discharged from all further liability hereunder and such assignee shall thereafter be deemed to be the "Company" for purposes of all terms and conditions of this Agreement, including this Section 13. (f) Counterparts. This Agreement may be executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. (g) Severability. Subject to Section 7(e) hereof, to the extent that any portion of any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect. (h) Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the date set forth in the first paragraph. CIMA LABS INC. By /s/Steven Ratoff ---------------- Its Member of the Board of Directors /s/James C. Hawley ------------------ JAMES C. HAWLEY 11 EX-23.1 8 c75663exv23w1.txt EX-23.1 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption, Selected Financial Data, and to the incorporation by reference in the Registration Statements (Form S-8 No. 333-42354, Form S-8 No. 333-32233, Form S-8 No. 333-05741, Form S-8 No. 333-59791, Form S-8 No. 333-82794, Form S-8 No. 333-82790, Form S-8 No. 333-62954 and Form S-8 No. 333-63026) pertaining to certain stock option and employee stock purchase plans of the Company, of our report dated February 14, 2003, with respect to the financial statements and schedule of CIMA LABS INC. included in the Annual Report (Form 10-K) for the year ended December 31, 2002. Minneapolis, Minnesota /s/ Ernst & Young LLP March 24, 2003 EX-24.1 9 c75663exv24w1.txt EX-24.1 POWERS OF ATTORNEY EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below hereby constitutes and appoints John M. Siebert, John Hontz and David A. Feste and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of CIMA LABS INC. for the twelve months ended December 31, 2002, and all amendments to such Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes he might or could do in person, hereby ratifying and confirming all said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.

Signature Date --------- ---- /s/John M. Siebert February 10, 2003 - ---------------------------------------------------- John M. Siebert President & Chief Executive Officer (Principal Executive Officer) and Director /s/John F. Chappell January 11, 2003 - ---------------------------------------------------- John F. Chappell Director /s/Steven D. Cosler January 11, 2003 - ---------------------------------------------------- Steven D. Cosler Director /s/Terrence W. Glarner January 11, 2003 - ---------------------------------------------------- Terrence W. Glarner Director /s/Steven B. Ratoff January 11, 2003 - ---------------------------------------------------- Steven B. Ratoff Director /s/Joseph R. Robinson January 13, 2003 - ---------------------------------------------------- Joseph R. Robinson Director

AA EX-99.1 10 c75663exv99w1.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 Annual Report of CIMA LABS INC. (the "Company") on Form 10-K for the period ending December 31, 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. ss. 1350, as adopted pursuant to ss. 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: 3/28/2003 /s/ John M. Siebert -------------------------------------- John M. Siebert, President and Chief Executive Officer (Principal Executive Officer) A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.2 11 c75663exv99w2.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 Annual Report of CIMA LABS INC. (the "Company") on Form 10-K for the period ending December 31, 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. ss. 1350, as adopted pursuant to ss. 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: 3/28/2003 /s/ David A. Feste ------------------------------- David A. Feste, Chief Financial Officer (Principal Financial Officer) A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.24

                                                                   EXHIBIT 10.24

                                                                  EXECUTION COPY

                MASTER DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

                                 by and between

                                 CIMA LABS INC.

                                       and

                              SCHWARZ PHARMA, INC.

                          dated as of December 18, 2001




                                TABLE OF CONTENTS



                                                                                  PAGE
                                                                               
SECTION 1         DEFINITIONS...................................................    1

SECTION 2         GRANT OF LICENSES; LICENSE OPTION.............................    5

    2.1       Grant of Licenses.................................................    5

    2.2       Sublicenses.......................................................    6

    2.3       Marketing, Distribution and Sale..................................    6

SECTION 3         PRODUCT DEVELOPMENT...........................................    6

    3.1       Obligations of CIMA...............................................    6

    3.2       Obligations of Schwarz............................................    7

    3.3       License of Schwarz Technology.....................................    7

    3.4       Additional Products...............................................    7

    3.5       Regulatory Matters................................................    7

SECTION 4         ROYALTY, COST OF GOODS AND MILESTONE PAYMENTS.................    7

    4.1       Royalty and Milestone Payments....................................    7

    4.2       Records and Audit.................................................    8

    4.3       Quarterly Reports of Royalties....................................    9

    4.4       Annual Reports of Costs of Goods..................................    9

    4.5       Sales and Marketing Estimates.....................................    9

SECTION 5         SUPPLY OF PRODUCT.............................................    9

    5.1       Supply of Product.................................................    9

    5.2       Identification....................................................   10

    5.3       Trade, Sample and Placebo Product Price...........................   11

    5.4       Forecasts, Delivery and Quality...................................   11

    5.5       Rejection and Replacement.........................................   11

    5.6       Invoice and Payment...............................................   12

    5.7       Supply Disruption; Alternate Manufacturing Site...................   12

    5.8       CIMA's Obligation to Continue Manufacture.........................   12

SECTION 6         CONDITIONS PRECEDENT TO THE CLOSING; CLOSING DATE.............   13

    6.1       Conditions Precedent to Schwarz's Obligations.....................   13

    6.2       Conditions Precedent to CIMA's Obligations........................   13

    6.3       Closing Date......................................................   14

SECTION 7         REPRESENTATIONS AND WARRANTIES OF CIMA........................   14

    7.1       Organization, Power and Authority.................................   14


                                     - i -



                                TABLE OF CONTENTS



                                                                                  PAGE
                                                                               
    7.2       Due Authority; No Breach..........................................   15

    7.3       Intellectual Property.............................................   15

    7.4       Technology Rights.................................................   15

    7.5       Litigation........................................................   16

    7.6       Governmental Approval.............................................   16

    7.7       Brokerage.........................................................   16

    7.8       Supply............................................................   16

SECTION 8         REPRESENTATIONS AND WARRANTIES OF SCHWARZ.....................   16

    8.1       Organization, Power and Authority.................................   16

    8.2       Due Authority; No Breach..........................................   16

    8.3       Brokerage.........................................................   17

    8.4       Litigation........................................................   17

    8.5       Governmental Approval.............................................   17

SECTION 9         ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES............   17

    9.1       Governmental Filings..............................................   17

    9.2       Compliance with Law...............................................   18

    9.3       Recall............................................................   18

    9.4       Confidentiality...................................................   18

    9.5       Expenses..........................................................   19

    9.6       Reasonable Efforts................................................   19

    9.7       Publicity.........................................................   19

    9.8       Cooperation.......................................................   19

    9.9       Competition; No Sale for Resale...................................   20

    9.10      Conflicting Rights................................................   20

    9.11      Patent and Trademark Maintenance..................................   20

    9.12      Infringement; Enforcement of Proprietary Rights...................   22

    9.13      Supply of Products................................................   22

    9.14      Liability Insurance...............................................   22

    9.15      Referral of Orders and Inquiries..................................   22

    9.16      Deemed Breach of Covenant.........................................   23

SECTION 10        INDEMNIFICATION...............................................   23


                                     - ii -




                                TABLE OF CONTENTS



                                                                                  PAGE
                                                                               
    10.1      Indemnification...................................................   23

    10.2      Notice and Opportunity To Defend..................................   23

    10.3      Indemnification Payment Obligation................................   24

    10.4      Indemnification Payment Adjustments...............................   24

    10.5      Indemnification Payment...........................................   25

    10.6      Survival..........................................................   25

SECTION 11        TERMINATION...................................................   25

    11.1      Termination.......................................................   25

SECTION 12        MISCELLANEOUS.................................................   27

    12.1      Successors and Assigns............................................   27

    12.2      Notices...........................................................   27

    12.3      Waiver; Remedies..................................................   28

    12.4      Survival of Representations.......................................   28

    12.5      Independent Contractors...........................................   28

    12.6      Entire Agreement..................................................   28

    12.7      Amendment.........................................................   28

    12.8      Counterparts......................................................   28

    12.9      Governing Law.....................................................   28

    12.10     Arbitration.......................................................   28

    12.11     Captions..........................................................   29

    12.12     No Third-Party Rights.............................................   29

    12.13     Severability......................................................   29

    12.14     Attachments.......................................................   29

    12.15     Force Majeure.....................................................   29

    12.16     Consents..........................................................   29


Schedule 3.1      Master Development Schedule
Schedule 4.1(a)   Royalty Rates
Schedule 4.1(b)   Development Fee and Milestone Payments
Schedule 5.1(b)   Schwarz Purchase Order
Schedule 5.3      Cost of Goods
Schedule 5.4(d)   Quality Assurance Addendum


                                    - iii -




                MASTER DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

         This MASTER DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT (this
"Agreement"), dated as of December 18, 2001, is by and between CIMA LABS INC., a
Delaware corporation ("CIMA"), and Schwarz Pharma, Inc., a Delaware corporation
("Schwarz").

                               W I T N E S S E T H

         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, Schwarz is engaged, among other things, in the business of
marketing and selling of pharmaceutical products;

         WHEREAS, subject to the terms and conditions set forth in this
Agreement, CIMA and Schwarz wish to collaborate in the development,
registration, marketing and sale of certain prescription products; and

         WHEREAS, subject to the terms and conditions set forth in this
Agreement, CIMA wishes to license to Schwarz and Schwarz wishes to license from
CIMA rights to CIMA's DuraSolv(TM), PakSolv(TM) and OraSolv(TM) technologies for
use with such prescription products.

         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, manufacturing, marketing,
selling and distributing of the Products in the Territory as contemplated by
this Agreement.

         "Affiliates" shall mean, with respect to any Person, any Persons
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.




         "API" for each Product shall mean the active ingredient specified on
Schedule 3.1 hereto with respect to such Product.

         "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, (i) the CIMA
Patents, (ii) the CIMA Technology, (iii) the CIMA Trademarks, and (iv) the CIMA
Marketing Materials.

         "CIMA Marketing and Market Research Data" shall mean, with respect to
the Products, all CIMA marketing data, studies, market research data and reports
that pertain to the Products, and any further market research data that pertains
to the Products whose disclosure to Schwarz is not prohibited by confidentiality
obligations under agreements, dated prior to the date hereof, between CIMA and
Persons who are not Affiliates of CIMA.

         "CIMA Marketing Materials" shall mean all labeling, marketing and
promotional materials and inserts currently used by CIMA that are useful in
connection with the Activities.

         "CIMA Patents" shall mean United States patent nos. 6,024,981 and
6,221,392 (Rapidly Dissolving Robust Dosage Form) and any patents and patent
applications resulting therefrom, including any extension, reissue, renewal,
reexamination or continuation-in-part of such patent or patent application. To
the extent that the OraSolv(R) and PakSolv(TM) technology is used with respect
to any Product pursuant to Schedule 3.1, the term "CIMA Patents" shall, with
respect to such Product, be deemed to include United States patent nos.
5,178,878, 6,155,423, 6,269,615 and 6,311,462 and any patents and patent
applications resulting therefrom, including any extension, reissue, renewal,
reexamination or continuation-in-part of such patent or patent application.

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

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

         "Closing Date" shall have the meaning given in Section 6.3 hereof.

         "Completion Date" shall mean, with respect to any Product, the date on
which Schwarz determines, in its reasonable discretion, such Product is ready
for submission to the FDA with three months stability data on the pilot scale
(equal to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***], whichever is greater).

         "Cost of Goods" shall have the meaning set forth on Schedule 5.3
hereto.

                                     - 2 -




         "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 excluding any punitive, exemplary or consequential
damages.

         "Defective" shall mean, as to the Product, the failure of such to
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] conform to the Specifications, this
Agreement and all applicable law, including, without limitation, the FFDCA and
the PDMA.

         "Development Schedule" shall mean the schedule of development
activities set forth on Schedule 3.1 hereto.

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

         "FFDCA" the United State Federal Food, Drug and Cosmetic Act, as
amended from time to time, together with any rules or regulations promulgated
thereunder.

         "Force Majeure" shall mean acts of God, explosion, fire, flood,
tornadoes, thunderstorms, earthquake or tremor, war whether declared or not,
terrorism, civil strife, riots, embargo, losses or shortages of power, labor
stoppage, substance shortages, damage to or loss of product in transit, 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.

         "GAAP" shall mean generally accepted accounting practices in the United
States as in effect from time to time.

         "Indemnified Party" shall have the meaning given in Section 10.2
hereof.

         "Indemnifying Party" shall have the meaning given in Section 10.2
hereof.

         "Latent Defect" shall mean a defect that results in a recall under
Section 9.3.

         "Launch or Launched" shall mean, with respect to each Product, the date
when such Product is first made commercially available by Schwarz

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

         "Net Sales" shall mean, with respect to the Products, the gross amount
invoiced to unrelated third parties for the Products in the Territory, less:

                  (a) trade and reasonable and customary cash discounts allowed;

                  (b) refunds, rebates, chargebacks, retroactive price
         adjustments and any other allowances which effectively reduce the net
         selling price;

                                     - 3 -




                  (c) returns, credits and allowances; and

                  (d) freight, taxes and insurance.

Such amounts shall be determined from books and records maintained in accordance
with GAAP, consistently applied.

         "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 any of the pharmaceutical products described on
Schedule 3.1, it being understood that additional products may be added to
Schedule 3.1 after the date hereof in accordance with Section 3.4.

         "Promotional Materials" shall mean any advertising and promotional
labeling bearing a name (trade name or generic name) used in the promotion of
any of the Products, including, without limitation, promotional materials
produced by or on behalf of Schwarz (examples include, but are not limited to,
journal ads, brochures, service items, managed care pull through sheets,
formulary presentations, price lists, monographs, Internet pages and telephone
or television advertisements) and materials produced by outside sources
(examples include, but are not limited to, medical reprints, textbooks and CME
materials) to the extent funded by, created in cooperation with, reviewed, or
distributed by Schwarz The definition of Promotional Materials shall also
include press releases and other releases of information to the media regarding
the Products.

         "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.

         "Satisfactory Completion" shall mean, with respect to any Development
Phase for any Product, the completion of such Development Phase in a manner that
is: (i) appropriate to support the commercialization of the Product; (ii)
appropriate for the completion of the development of such Product on, prior to,
or within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the target Completion Date
set forth in respect of such Product on Schedule 3.1; and (iii) consistent with
this Agreement.

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

         "Schwarz Technology" shall mean all of Schwarz's patents, trade
secrets, technology, know-how and all other information necessary to the
manufacture of the Products.

         "Schwarz Trademarks" shall have the meaning given in Section 9.11(c).

                                     - 4 -




         "Specifications" shall mean with respect to any Product, at any time,
the specifications for such Product that are included in the Quality Assurance
Addendum set forth on Schedule 5.4(d).

         "Territory" shall mean Canada, Mexico and the fifty (50) states, the
District of Columbia and the territories and possessions comprising the United
States of America, including Puerto Rico.

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

                                    SECTION 2

                        GRANT OF LICENSES; LICENSE OPTION

         2.1 Grant of Licenses.

                  (a) CIMA hereby grants to Schwarz an exclusive license for the
         term of this Agreement under the following assets to market, distribute
         and sell the Products, for all indications and for all agreed upon
         Product line extensions, in the Territory (such assets are referred to
         herein collectively as the "Licensed Assets"):

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

                           (ii) the CIMA Intellectual Property; and

                           (iii) the CIMA Marketing and Market Research Data.

                  (b) CIMA grants to Schwarz an exclusive, royalty bearing
         license to use the CIMA Trademarks to market, distribute and sell the
         Products, during the term of this Agreement, for all indications and
         for all agreed upon Product line extensions in the Territory.

                  (c) The license to Schwarz will be exclusive in that CIMA will
         not grant any licenses of the Licensed Assets or the CIMA Trademarks
         (i) in the Territory to any other Person with respect to the Products
         or any other products containing the same active ingredient
         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION.***] as any Product or (ii)
         anywhere in the world with respect to any products having an identical
         formulation as any Product, in each case, during the term of this
         Agreement

                  (d) In the event that a third party is interested in
         developing, manufacturing or marketing an equivalent formulation of a
         Product outside the Territory, CIMA and Schwarz agree as follows:

                                     - 5 -




         (i) CIMA shall be entitled to solicit interest and enter initial
             discussions with any third parties for making a product having a
             formulation equivalent to that of a Product commercially available
             in any country or countries outside the Territory;

         (ii) upon receiving a bona fide proposal from a third party for the
              development and/or license of a formulation equivalent to that of
              a Product, but prior to initiating development activities or
              granting a license to such third party for such equivalent
              formulation, CIMA shall provide Schwarz a notice (a "License
              Notice") of its intent to initiate development activities or grant
              such license in a specific country or countries which shall
              identify such country or countries and shall describe in detail
              the formulation proposed to be licensed; and

         (iii) Schwarz shall provide CIMA a notice within forty-five (45) days
               of its receipt of the License Notice that either: A) Schwarz does
               not intend to market the Product in such country or countries, in
               which case CIMA shall be free to initiate development activities
               and/or license the formulation described in the License Notice to
               a third party; or B) Schwarz does intend to market the Product in
               such country or countries, in which case this Agreement shall be
               amended to include such country or countries in the Territory and
               to allow CIMA to perform any necessary development work. Schwarz
               shall have one (1) year from the date of its notice to CIMA to
               demonstrate significant progress towards bringing the Product to
               market in such country or countries. If Schwarz fails to
               demonstrate significant progress within one (1) year or fails
               thereafter to demonstrate continued activities to market the
               Product in such country or countries, Schwarz's license to the
               Product in that country or countries will terminate in thirty
               (30) days after re-notification by CIMA that Schwarz is not in
               compliance with this Section 2.1(d)(iii).

         2.2 Sublicenses. Schwarz shall have the right to extend the licenses
granted pursuant to this Section 2 in whole or in part to any Affiliate of
Schwarz, provided that Schwarz 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 Schwarz, and the operations of the Affiliate
shall be deemed to be the operations of Schwarz and Schwarz shall account
therefor and be responsible for the performance of such Affiliate of all of its
obligations hereunder. In addition, Schwarz 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 Schwarz with the prior written consent of CIMA, which
consent shall not unreasonably be withheld or delayed.

         2.3 Marketing, Distribution and Sale. After each Launch, Schwarz shall
use its commercially reasonable efforts to market, distribute and sell the
launched 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.

                                     - 6 -



                                    SECTION 3

                               PRODUCT DEVELOPMENT

         3.1 Obligations of CIMA. CIMA shall be responsible for the satisfactory
performance of each of the development activities set forth on Schedule 3.1 at
least by the times set forth on Schedule 3.1.

         3.2 Obligations of Schwarz Schwarz shall, in a timely fashion, supply
CIMA or cause CIMA to be supplied with sufficient quantities of API for CIMA to
perform the development activities described on Schedule 3.1 and the supply
activities described in Sections 5.1 and 5.5.

         3.3 License of Schwarz Technology. Schwarz hereby grants to CIMA a
non-exclusive license under the Schwarz Technology so that CIMA may carry out
its obligations under Section 3.1. Such license may not be sublicensed without
the prior written consent of Schwarz

         3.4 Additional Products. Schwarz may, with the prior written consent of
CIMA, such consent not to be unreasonably withheld, supplement Schedule 3.1
after the date hereof by adding additional products thereto in order to increase
the number of Products subject to this Agreement or to replace any Product
previously terminated under Section 11.1 (c) or (d), in which case each such
additional product(s) shall be deemed a "Product" within the meaning hereof,
provided that any Product added pursuant to this Section 3.4 shall be subject to
terms, including development schedules, comparable to then existing Products.
This Agreement shall be amended as necessary to accommodate such additional or
replacement Products and terms related thereto.

         3.5 Regulatory Matters. All Product, other than Prototypes, supplied to
Schwarz shall be produced under cGMP and in accordance with the Specifications.
CIMA shall furnish Schwarz with a Certificate of Analysis with a cGMP statement
to demonstrate that each shipment of Product has been manufactured under cGMP
and other FDA guidelines and in accordance with the Specifications. In addition,
Schwarz 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 Schwarz to audit all manufacturing and processing operations
at reasonable times with a prior appointment. The right to audit shall commence
with the effective date of this Agreement. 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.

                                     - 7 -



                                    SECTION 4

                  ROYALTY, COST OF GOODS AND MILESTONE PAYMENTS

         4.1 Royalty and Milestone Payments.

         (a) Schwarz shall make royalty payments to CIMA, at the times, in the
amounts and subject to the conditions set forth on Schedule 4.1(a).

         (b) Schwarz shall make Milestone Payments and Development Fee Payments
to CIMA as set forth on Schedule 4.1(b).

         (c) In the event of (i) any patent infringement of the CIMA Technology
that has a materially adverse effect on any Product, and/or (ii) the occurrence
of an interruption in the supply of any Product for a period of [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] or more, then, in each case, the obligation of Schwarz
to make any payments pursuant to Sections 4.1(a) or 4.1(b) or Schedules 4.1(a)
or 4.1(b) shall, in each case, terminate with respect to such Product(s) and be
deemed waived by CIMA and shall be promptly renegotiated in good faith by
Schwarz and CIMA. Any renegotiated obligations pursuant to this Section 4.1(c)
shall be retroactively effective to the date the applicable event described
above occurred.

         4.2 Records and Audit.

         (a) Schwarz and its Affiliates shall keep full, 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 of account shall be
kept at Schwarz's principal place of business or the principal place of business
of the appropriate Affiliate of Schwarz to which this Agreement relates. 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 2 years after its
termination, to the inspection by a firm of certified public accountants
selected by CIMA and reasonably acceptable to Schwarz, for the limited purpose
of verifying Schwarz's 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 3 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, Schwarz 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, and shall reimburse
CIMA for the fees and expenses paid to such accountants in connection with their
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, Schwarz

                                     - 8 -



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. 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 3 Years.

         (b) CIMA shall keep full, true and accurate books and records that may
be necessary for the purpose of determining the actual Costs of Goods incurred
by CIMA as contemplated hereunder. Such books and records shall be kept at
CIMA's principal place of business. Such books and records and the supporting
data shall be open, at all reasonable times and upon reasonable notice during
the term of this Agreement and for 2 years after its termination, to inspection
by a firm of certified public accountants selected by Schwarz and reasonably
acceptable to CIMA, for the limited purpose of verifying CIMA's Costs of Goods;
provided, however, that such examination shall not take place more often than
once each Year and shall not cover more than the preceding 3 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 Schwarz In the
event that any such inspection reveals a discrepancy between CIMA's actual Costs
of Goods and that invoiced to Schwarz, in favor of CIMA, in excess of
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] of the reported Costs of Goods for the
period covered by the inspection, CIMA shall promptly pay Schwarz the amount of
such discrepancy, plus interest at the rate of [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] per annum, and shall reimburse Schwarz for the fees and expenses
paid to such accountants in connection with their inspection. In the event that
any such inspection reveals a discrepancy between CIMA's actual Costs of Goods
and that invoiced to Schwarz, in favor of CIMA, that is less than
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] of the reported Cost of Goods for the
period covered by the inspection, CIMA shall promptly pay Schwarz the amount of
such discrepancy, plus interest at the rate of [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] per annum. 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 3 Years.

         4.3 Quarterly Reports of Royalties. In any Year, Schwarz shall, within
sixty (60) days after the end of each Quarter, deliver to CIMA true and accurate
reports, certified by an authorized official of Schwarz, setting forth the
actual Annual Net Sales and total royalties due under Section 4.1(a) for such
Year. If no royalties are due, Schwarz shall so report.

         4.4 Annual Reports of Costs of Goods. CIMA shall, not later than 60
days prior to the Launch of each Product and, thereafter, not later than 60 days
after January 1 of each Year, deliver to Schwarz true and accurate reports,
certified by an authorized official of CIMA, setting forth in reasonable detail
the information necessary to calculate the Cost of Goods for each Product in
accordance with Schedule 5.3. Product delivered to Schwarz between January 1 and
February 28 each year shall be invoiced to Schwarz at the price applicable to
Product delivered

                                     - 9 -


to Schwarz during the immediately preceding calendar year. Then on or about
February 28 of each year CIMA shall transmit to Schwarz a corrected invoice for
Product delivered between January 1 and February 28 of each year taking into
account the final amount of any such price increase or decrease, and setting
forth the applicable additional charges or credits.

         4.5 Sales and Marketing Estimates. Schwarz shall provide CIMA with a
non-binding estimate of its Annual Net Sales by quarter for each Product
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] prior to the Launch of each Product.
Thereafter, prior to September 30th in any year following the Launch of such
Product, Schwarz shall provide CIMA with non-binding estimate of its Annual Net
Sales of such Product by quarter for the following year.

                                   SECTION 5

                                SUPPLY OF PRODUCT

         5.1 Supply of Product.

         (a) For the term of this Agreement, or for as long as CIMA manufactures
any of the Products hereunder, whichever is shorter, Schwarz agrees to purchase
from CIMA and CIMA agrees to supply Schwarz with all of Schwarz's requirements
for the Products, Product samples and Product placebos for their subsequent use,
sale, lease or transfer by Schwarz

         (b) Schwarz agrees to initiate purchases of the Products, Product
samples and Product placebos hereunder by issuing CIMA binding purchase orders
not less than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] prior to the
required shipping date set forth therein. CIMA agrees to accept any order issued
in accordance with this Section 5.1(b) and to meet the delivery dates specified
thereon. All purchase orders hereunder shall be on Schwarz's standard purchase
order form (a copy of which is attached as Schedule 5.1(b) hereto and which
shall not, for purposes of this Agreement only, be modified in any material
respect without CIMA's prior written consent, such consent not to be
unreasonably withheld or delayed) and shall be directed to CIMA at the address
set forth below. The terms and conditions of purchase enumerated on the reverse
side of such standard purchase order form shall prevail over any inconsistent or
conflicting language as may exist on invoices, confirmation or order
acknowledgment forms of CIMA, provided, however, that in the event any terms
thereof are in conflict, or are inconsistent with any terms of this Agreement,
the terms and conditions hereof shall prevail. No Product delivered by CIMA
shall have a shelf life that is more than [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] less than the maximum shelf life of such Product (other than
batches that were under investigation and batches for validation which shall
have not more than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND

                                     - 10 -



EXCHANGE COMMISSION.***] less than the maximum shelf life of such Product upon
delivery to Schwarz).

         (c) Purchase order quantities shall be in full batch sizes that are
mutually agreed by the parties.

         (d) Schwarz shall cause the amount of API that CIMA requires to perform
its obligations pursuant to Schedule 3.1 and Sections 5.1 and 5.5 to be provided
at no charge to CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] prior to date of
tablet manufacture, as well as [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of
safety stock. API must conform to Schwarz's then current raw materials
specifications. CIMA shall not be accountable for production or shipment delays
due to lack of API.

         (e) EXCEPT AS SPECIFICALLY PROVIDED HEREIN, INCLUDING, WITHOUT
LIMITATION, SECTION 7.8, THE PRODUCT WILL BE SUPPLIED BY CIMA WITH NO WARRANTIES
OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABLILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

         5.2 Identification. Schwarz may market the Products under its name,
with its packaging and logo; Schwarz will, however, identify CIMA as the
supplier in a fair manner, reasonably acceptable to CIMA. CIMA will bear all the
costs of labeling the Product so as to appropriately display the Schwarz name
provided Schwarz supplies all the appropriate graphics, designs, logos and
related and appropriate artwork at least a reasonable amount of time in advance
of any Product being manufactured. Schwarz shall reimburse CIMA for any
reasonable and documented costs incurred by CIMA in making changes to the
packaging required to manufacture the Products in accordance with changes to the
PDMA or other applicable law or changes required by Schwarz, including, but not
limited to plate and die charges due to label changes and product identification
requirements, and for any packaging components rendered obsolete by the changes.
In addition, CIMA shall pay for all initial one-time set-up charges incurred by
CIMA in respect of packaging each Product. Schwarz may use CIMA's name and
derivations thereof in promoting, marketing and selling the Products in the
Territory; provided, however, that the particular formulation of any reference
to CIMA's name in any Promotional Material shall be subject to CIMA's review and
consent; and provided, further, that once the formulation of any such reference
has been reviewed and consented to by CIMA, any subsequent reference to CIMA's
name using such formulation shall not be subject to the further review or
consent of CIMA. All samples shall be clearly marked "for sample use only" or
some similar phrasing suggested by Schwarz

         5.3 Trade, Sample and Placebo Product Price. CIMA shall supply
Products, Product samples and Product placebos to Schwarz at the price set forth
on Schedule 5.3.

                                     - 11 -



         5.4 Forecasts, Delivery and Quality.

         (a) Schwarz shall provide CIMA with 12-month non-binding forecasts
within 15 days after the end of each Quarter. Such forecasts shall be revised
and extended in each succeeding Quarter.

         (b) Delivery of the Products, Product samples and Product placebos
shall be in accordance with the means of transportation, destination and dates
set forth in Schwarz's purchase order. Delivery shall be EXW (Incoterms 2000)
CIMA and CIMA shall load Products on to collecting vehicle at CIMA's risk.

         (c) All deliveries of the Products hereunder shall include a
Certificate of Analysis provided by the quality control manager of CIMA
attesting to the fact that such Products (i) have been manufactured by a process
which complies with cGMP and (ii) are of quality which is in accordance with
criteria established in the Specifications and all FDA requirements.

         (d) The Products, Product samples and Product placebos supplied
hereunder shall have been manufactured by a process which complies with the
quality assurance addendum set forth on Schedule 5.4(d).

         5.5 Rejection and Replacement.

         (a) In the event Schwarz determines that any Products, Product samples
or Product placebos as manufactured and/or packaged by CIMA is Defective, then,
within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***] after delivery of such
Products, Product samples or Product placebos to Schwarz [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***], Schwarz shall provide to CIMA a written notice of
rejection, specifying in reasonable detail the manner in which the Products are
Defective (the "Notice of Rejection"). If no written Notice of Rejection is
given to CIMA by Schwarz within such [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] period, such Products, Product samples or Product placebos shall
be deemed to have been accepted by Schwarz, [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***].

         (b) Upon receipt of a Notice of Rejection from Schwarz and in order to
minimize any hardship to Schwarz's customers, CIMA shall use its reasonable best
efforts to promptly supply to Schwarz a quantity of replacement Products,
Product samples or Product placebos meeting the Specifications equal to the size
of the lot or lots which Schwarz claims was Defective so that such replacement
Products shall be received by Schwarz within 30 days following CIMA's receipt of
Schwarz's Notice of Rejection. If CIMA agrees with Schwarz that such Product is
Defective then CIMA shall either replace the Defective Product at no cost to
Schwarz, or refund or credit, as designated by Schwarz, the price paid for such
Product plus any applicable delivery charges, including, without limitation,
shipping, insurance and taxes, and any reasonable and

                                     - 12 -




documented out-of-pocket expense that Schwarz may have incurred, within thirty
(30) days after written notice from Schwarz If CIMA disagrees with Schwarz as to
whether such Product is Defective, the parties shall cooperate to have the
Product in dispute analyzed by an independent testing laboratory of recognized
repute jointly selected by Schwarz and CIMA. If the Product is determined by
such laboratory to meet the Specifications, then Schwarz shall bear the cost of
the independent laboratory testing and pay for the Product in accordance with
this Agreement. If the Licensed Product is determined not to have met the
Specifications at time of delivery, then CIMA shall bear the cost of the
independent laboratory testing. In addition, CIMA shall either replace the
Defective Product within thirty (30) days after the date of such determination,
at no cost to Schwarz, or refund or credit, as designated by Schwarz, the price
paid for such Product plus any applicable delivery charges, including, without
limitation, shipping, insurance and taxes, and any reasonable and documented
out-of-pocket expense that Schwarz may have incurred, within thirty (30) days
after written notice from Schwarz If CIMA is unable to replace any such Product
within thirty (30) days (or at any time that CIMA fails to deliver the
replacement Product at an agreed upon date), Schwarz shall have the right, at
its sole discretion, to extend the timeframe for delivery of replacement Product
to a mutually agreed upon date, or, in the alternative, to require CIMA to
reimburse Schwarz for the price paid for such Product plus any applicable
delivery charges, including, without limitation, shipping, insurance and taxes
and any reasonable and documented out-of-pocket expense Schwarz may have
incurred. Such reimbursement shall be made within thirty (30) days of such
notice.

         5.6 Invoice and Payment. Upon shipment of any Products, Product samples
or Product placebos, CIMA shall be entitled to submit invoices therefor to
Schwarz, and Schwarz agrees to remit payment within thirty (30) days from CIMA's
invoice date.

         5.7 Supply Disruption; Alternate Manufacturing Site.

                  (a) CIMA shall use its best efforts to supply Schwarz with the
         Products in a timely manner in accordance with the orders and forecasts
         received by CIMA pursuant to Sections 5.1(b) and 5.4(a), respectively.
         In any consecutive [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
         OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
         COMMISSION.***] period, should CIMA fail to supply Schwarz with a
         Product ordered for such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
         OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
         COMMISSION.***] period pursuant to Section 5.1(b) (other than for
         reason of Force Majeure), Schwarz shall have the right to require CIMA
         to transfer the manufacture of such Product(s) to Schwarz's Seymour
         facility or other designated Schwarz facility. Should CIMA cure its
         failure to supply any Product so transferred, CIMA shall have the right
         to resume the manufacture of such Product and Schwarz and CIMA shall
         transfer the manufacture of such Product back to CIMA within a
         commercially reasonable amount of time.

                  (b) CIMA shall, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
         OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
         COMMISSION.***] establish a second manufacturing plant as an alternate
         FDA-approved manufacturing site for the Products however, the second
         manufacturing plant is not required to contain a bottling capability

                                     - 13 -




         5.8 CIMA's Obligation to Continue Manufacture. If this Agreement
terminates or expires through no breach of Schwarz, CIMA shall reasonably
cooperate with Schwarz in transferring the manufacture of the Products to
Schwarz, its Affiliate or, subject to confidentiality obligations consistent
with Section 9.4, a third-party appointed by Schwarz, the parties shall develop
a timing and payment schedule for the transfer of the manufacture of the
Products and CIMA shall continue to supply the Products to Schwarz pursuant to
the terms of this Agreement until [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from
the date this Agreement is terminated or expires pursuant to Section 11.1.

                                   SECTION 6

                      CONDITIONS PRECEDENT TO THE CLOSING;
                                  CLOSING DATE

         6.1 Conditions Precedent to Schwarz's Obligations. Subject to waiver as
set forth in Section 12.3, all obligations of Schwarz to close the transactions
contemplated under this Agreement are subject to the fulfillment or satisfaction
of each of the following conditions precedent:

                  (a) Representations and Warranties True as of the Closing
         Date. The representations and warranties of CIMA contained in this
         Agreement or in any schedule, certificate or document delivered by CIMA
         to Schwarz pursuant to the provisions hereof shall have been true on
         the date hereof and shall be true on the Closing Date with the same
         effect as though such representations and warranties were made as of
         such date.

                  (b) Compliance with this Agreement. CIMA shall have performed
         and complied with all agreements and conditions required by this
         Agreement to be performed or complied with by it prior to or by the
         Closing Date.

                  (c) Closing Certificate. Schwarz shall have received a
         certificate from CIMA, executed by an officer of CIMA, certifying in
         such detail as Schwarz may reasonably request that the conditions
         specified in Sections 6.1(a) and 6.1(b), above, have been fulfilled and
         certifying that CIMA has obtained all consents and approvals required
         hereunder.

                  (d) No Threatened or Pending Litigation. On the Closing Date,
         no suit, action or other proceeding, or injunction or final judgment
         relating thereto, shall, to the best of CIMA's knowledge, be threatened
         or be pending before any court or governmental or regulatory official,
         body or authority in which it is sought to restrain or prohibit or to
         obtain damages or other relief in connection with this Agreement or the
         consummation of the transactions contemplated hereby, and no
         investigation that might result in any such suit, action or proceeding
         shall be pending or, to the best of CIMA's knowledge, threatened.

                                     - 14 -




         6.2 Conditions Precedent to CIMA's Obligations. Subject to waiver as
set forth in Section 12.3, all obligations of CIMA to close the transactions
contemplated under this Agreement are subject to the fulfillment or satisfaction
of each of the following conditions precedent:

                  (a) Representations and Warranties True as of the Closing
         Date. The representations and warranties of Schwarz contained in this
         Agreement or in any schedule, certificate or document delivered by
         Schwarz to CIMA pursuant to the provisions hereof shall have been true
         on the date hereof and shall be true on the Closing Date with the same
         effect as though such representations and warranties were made as of
         such date.

                  (b) Compliance with this Agreement. Schwarz shall have
         performed and complied with all agreements and conditions required by
         this Agreement to be performed or complied with by it prior to or by
         the Closing Date.

                  (c) Closing Certificate. CIMA shall have received a
         certificate from Schwarz, executed by an officer of Schwarz, certifying
         in such detail as CIMA may reasonably request that the conditions
         specified in Sections 6.2(a) and 6.2(b), above, have been fulfilled and
         certifying that Schwarz has obtained all consents and approvals
         required hereunder.

                  (d) No Threatened or Pending Litigation. On the Closing Date,
         no suit, action or other proceeding, or injunction or final judgment
         relating thereto, shall, to the best of Schwarz's knowledge, be
         threatened or be pending before any court or governmental or regulatory
         official, body or authority in which it is sought to restrain or
         prohibit or to obtain damages or other relief in connection with this
         Agreement or the consummation of the transactions contemplated hereby,
         and no investigation that might result in any such suit, action or
         proceeding shall be pending or, to the best of Schwarz's knowledge,
         threatened.

         6.3 Closing Date.

                  (a) Subject to Section 6.3(b), below, the closing of the
         transactions contemplated by this Agreement shall take place at 10:00
         a.m., local time, on December 18, 2001, or on such other date as may be
         mutually agreed upon in writing by the parties (the "Closing Date"), at
         the offices of Mayer, Brown & Platt, 1675 Broadway, New York, New York
         10019.

                  (b) Each party hereby agrees to use its best efforts to
         consummate the transactions contemplated herein, as modified, on or
         before December 18, 2001; provided, however, that if the parties are
         unable to close the transactions contemplated hereby by January 31,
         2002, or such later date as shall be mutually agreed to in writing by
         CIMA and Schwarz, then all of the rights and obligations of the parties
         under this Agreement shall terminate without liability.

                                     - 15 -



                                    SECTION 7

                     REPRESENTATIONS AND WARRANTIES OF CIMA

         CIMA hereby represents and warrants to Schwarz that:

         7.1 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 and
the CIMA Trademarks to Schwarz pursuant hereto.

         7.2 Due Authority; No Breach. The execution, delivery and performance
by CIMA of this Agreement and each agreement or instrument contemplated by this
Agreement, and the performance of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action by CIMA.
This Agreement is, and each agreement or instrument contemplated by this
Agreement, when executed and delivered by CIMA in accordance with the provisions
hereof, will be (assuming the due execution and delivery hereof and thereof by
Schwarz) the legal, valid and binding obligation of CIMA, in each case
enforceable against CIMA in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization, or similar laws from time to time in effect which affect the
enforcement of creditors' rights generally and by legal and equitable
limitations on the availability of specific performance and other equitable
remedies against CIMA. All persons who have executed this Agreement on behalf of
CIMA, or who will execute on behalf of CIMA any agreement or instrument
contemplated by this Agreement, have been duly authorized to do so by all
necessary corporate action. Neither the execution and delivery of this Agreement
or any such other agreement or instrument by CIMA, nor the performance of the
obligations contemplated hereby or thereby, 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 or under any agreement or instrument
contemplated hereby.

         7.3 Intellectual Property. CIMA is the lawful owner of the Licensed
Assets and CIMA Trademarks, CIMA can license the Licensed Assets and CIMA
Trademarks without the consent of any third party in the Territory, there is no
pending or overtly threatened claim against CIMA asserting that any of the
Licensed Assets or CIMA Trademarks infringes or violates the rights of third
parties in the Territory or that Schwarz, by practicing under the Licensed
Assets and CIMA Trademarks in performing the Activities, would violate any of
the intellectual property rights of any third party in the Territory, 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 and CIMA Trademarks
infringes or violates the right of third parties in the Territory. CIMA has not
given any notice to any third parties asserting infringement by such third
parties upon any of the Licensed Assets and

                                     - 16 -



CIMA Trademarks. CIMA is not aware of and has not received any communications
challenging the ownership, validity or effectiveness of any of the Licensed
Assets and CIMA Trademarks. 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 Schwarz pursuant to this Agreement.

         7.4 Technology Rights. The CIMA Technology, to the best of CIMA's
knowledge, when combined with the Schwarz Technology, includes all the
technology, patents, know-how, trade secrets and other intellectual property
necessary to manufacture the Products.

         7.5 Litigation. There are no pending or, to the best of CIMA's
knowledge, threatened judicial, administrative or arbitral actions, claims,
suits or proceedings pending as of the date hereof against CIMA relating to the
Activities, the Licensed Assets or the CIMA Trademarks which, either
individually or together with any other, would have a material adverse effect on
the Activities, the Licensed Assets, the CIMA Trademarks or the ability of CIMA
to perform its obligations under this Agreement or any agreement or instrument
contemplated hereby. There are no pending, and CIMA does not presently
contemplate bringing, any actions or suits relating to the Activities, the
Licensed Assets or the CIMA Trademarks against others.

         7.6 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, delivery and performance
of this Agreement, or any agreement or instrument contemplated by this
Agreement, by CIMA or the performance by CIMA of its obligations contemplated
hereby and thereby.

         7.7 Brokerage. No broker, finder or similar agent has been employed by
or on behalf of CIMA, and no Person with which CIMA has had any dealings or
communications of any kind is entitled to any brokerage commission, finder's fee
or any similar compensation, in connection with this Agreement or the
transactions contemplated hereby.

         7.8 Supply. All finished Products supplied by CIMA under Section 5
shall (i) have been manufactured by a process which complies with cGMP and the
Quality Assurance Addendum set forth on Schedule 5.4(d) and (ii) be of a quality
which is in accordance with criteria established by the specifications
established by the Specifications and all FDA requirements.

                                   SECTION 8

                    REPRESENTATIONS AND WARRANTIES OF SCHWARZ

         Schwarz represents and warrants to CIMA that:

         8.1 Organization, Power and Authority. Schwarz is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Schwarz has all

                                     - 17 -




necessary corporate power and authority to enter into, and be bound by the terms
and conditions of, this Agreement, to license the Licensed Assets, the Patents
and the CIMA Technology from CIMA, and to license the Schwarz Technology to CIMA
pursuant hereto.

         8.2 Due Authority; No Breach. The execution, delivery and performance
by Schwarz of this Agreement, and each agreement or instrument contemplated by
this Agreement, and the performance of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action by Schwarz
This Agreement is, and each agreement or instrument contemplated by this
Agreement, when executed and delivered by Schwarz in accordance with the
provisions hereof, will be (assuming due execution and delivery hereof and
thereof by CIMA) the legal, valid and binding obligation of Schwarz, in each
case enforceable against Schwarz in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization, or similar laws from time to time in effect which affect the
enforcement of creditors' rights generally and by legal and equitable
limitations on the availability of specific performance and other equitable
remedies against Schwarz All persons who have executed this Agreement on behalf
of Schwarz, or who will execute on behalf of Schwarz any agreement or instrument
contemplated by this Agreement, have been duly authorized to do so by all
necessary corporate action. Neither the execution and delivery of this Agreement
by Schwarz, or any such other agreement or instrument by Schwarz, nor the
performance of the obligations contemplated hereby and thereby, 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
Schwarz 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,
Schwarz or upon the securities, property or business of Schwarz, or (iii)
constitute a violation by Schwarz of any applicable law or regulation of any
jurisdiction as such law or regulation relates to Schwarz or to the property or
business of Schwarz, except for such conflict, acceleration, default, breach or
violation that is not reasonably likely to have a material adverse effect on
Schwarz's ability to perform its obligations under this Agreement or any
agreement or instrument contemplated hereby.

         8.3 Brokerage. No broker, finder or similar agent has been employed by
or on behalf of Schwarz and no Person with which Schwarz has had any dealings or
communications of any kind is entitled to any brokerage commission, finder's fee
or any similar compensation, in connection with this Agreement or the
transactions contemplated hereby.

         8.4 Litigation. There are no pending or, to the best of Schwarz's
knowledge, threatened judicial, administrative or arbitral actions, claims,
suits or proceedings pending as of the date hereof against Schwarz which, either
individually or together with any other, will have a material adverse effect on
the ability of Schwarz to perform its obligations under this Agreement or any
agreement or instrument contemplated hereby or affect adversely the grant to
CIMA of the non-exclusive license of the Schwarz Technology pursuant to Section
3.3.

         8.5 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, delivery and performance
of this Agreement, or any agreement or instrument

                                     - 18 -



contemplated by this Agreement, by Schwarz or the performance by Schwarz of its
obligations contemplated hereby and thereby.

                                   SECTION 9

               ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES

         9.1 Governmental Filings. CIMA and Schwarz 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
Products and to cooperate with one another as reasonably necessary to accomplish
the foregoing.

         9.2 Compliance with Law. Schwarz and CIMA shall each comply with all
federal, state and local laws and regulations applicable to developing,
approving, manufacturing, marketing and selling the Products in the Territory,
the Licensed Assets, the Patents and the Technology or the performance of their
respective obligations hereunder. CIMA and Schwarz 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 Schwarz
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 any Product. Schwarz 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.
Schwarz 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 Schwarz shall be responsible for deciding the
appropriate form and content of any response with respect to any of its cited
activities.

         9.3 Recall. Schwarz and CIMA shall consult with one another as to all
decisions concerning recall or withdrawal of any Product from the market,
including, but not limited to, determining whether or not to make any such
recall or withdrawal, the timing and scope thereof, and the means of conducting
any recall or withdrawal. The party requesting any recall or withdrawal must
receive the prior written consent of the other party, such consent not to be
unreasonably withheld, prior to initiating such recall or withdrawal. No consent
shall be necessary if the recall or withdrawal is requested by the FDA or other
governmental authority. CIMA shall bear the costs (including but not limited to,
shipping and product credits) for any recall or withdrawal primarily due to
CIMA's failure to comply with this Agreement. The costs for any other recall or
withdrawal shall be the responsibility of Schwarz.

                                     - 19 -



         9.4 Confidentiality. Schwarz shall treat as confidential the Licensed
Assets, the Patents, the CIMA Technology, and all other information of CIMA of
which Schwarz becomes aware in connection with this Agreement (collectively,
"CIMA Proprietary Information"). Schwarz 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 the Schwarz Technology and all other information of Schwarz of
which CIMA becomes aware in connection with this Agreement (collectively,
"Schwarz Proprietary Information"). CIMA shall neither disclose Schwarz
Proprietary Information to any third party nor use Schwarz 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;

              (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.

Nothing in the foregoing, however, shall prohibit a party from making such
disclosures to the extent deemed necessary under applicable federal or state
securities laws or any applicable rule or regulation of any nationally
recognized securities exchange including, without limitation, NASDAQ. In such
event, however, the disclosing party shall use good faith efforts to consult
with the other party prior to such disclosure and, where applicable, shall
request confidential treatment to the extent available. Schwarz 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 Schwarz Proprietary Information except as set forth in this Agreement.

         9.5 Expenses. CIMA and Schwarz 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.

                                     - 20 -




         9.6 Reasonable Efforts. CIMA and Schwarz each hereby agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done all things necessary or proper to make effective the
transactions contemplated by this Agreement, including such actions as may be
reasonably necessary to obtain approvals and consents of governmental Persons
and other Persons.

         9.7 Publicity. Each of the parties agrees 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, 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.

         9.8 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 Products or any of the
Licensed Assets, the Patents or the Technology, 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, provided that, for purposes of this provision,
reasonable efforts to make available any employee shall be deemed to mean
providing a party with reasonable access to any such employee at no cost for a
period of time not to exceed 24 hours (e.g., three 8-hour business days).
Thereafter, any such employee shall be made available for such time and upon
such terms and conditions (including, but not limited to, compensation) as the
parties may mutually agree.

         9.9 Competition; No Sale for Resale.

                  (a) CIMA agrees that, commencing on the Closing Date and
         continuing for the period ending [***CONFIDENTIAL TREATMENT REQUESTED,
         PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
         COMMISSION.***] after the term of this Agreement, it shall not directly
         or indirectly, develop or manufacture for sale within the Territory any
         Product described on Schedule 3.1 on the date hereof or engage in the
         marketing, selling or distributing of any such Product in the Territory
         except as contemplated by this Agreement. It is further understood that
         the remedies at law are inadequate in the case of any breach of this
         covenant and that Schwarz shall be entitled to equitable relief,
         including the remedy of specific performance, with respect to any
         breach of such covenant.

                  (b) Neither Schwarz nor any sublicensee of Schwarz shall
         knowingly directly or indirectly sell any Product to anyone in the
         Territory for subsequent distribution or resale outside the Territory
         and each shall take all reasonable precautions to prevent such
         distribution or resale outside the Territory. Neither CIMA nor any of
         its Affiliates shall knowingly directly or indirectly sell any Product
         to anyone in the Territory or outside the Territory for subsequent
         distribution or resale in the Territory and each shall take all
         reasonable precautions to prevent such distribution or resale in the
         Territory.

                                     - 21 -



         9.10 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 Schwarz pursuant to this Agreement.

         9.11 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 Schwarz 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 Schwarz, 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, Schwarz
         shall have no rights to use the CIMA Trademarks. Schwarz 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 in
         use by CIMA to indicate the source and origin of the CIMA Technology as
         to be likely to cause deception or confusion. Schwarz recognizes that
         CIMA is the owner of all CIMA Trademarks used in commerce to indicate
         the source of the CIMA Technology and agrees that the CIMA Trademarks
         shall remain vested in CIMA both during the term of this Agreement and
         thereafter. Schwarz shall not contest the validity of the CIMA
         Trademarks or CIMA's ownership of the CIMA Trademarks. Use of the CIMA
         Trademarks by Schwarz in conjunction with the manufacture, use, and
         sale 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) Schwarz shall be solely responsible for filing,
         prosecuting, and maintaining all trademarks it develops or owns for the
         Products (the "Schwarz Trademarks"), and Schwarz shall pay the costs
         associated therewith. All registrations, variations, logos, goodwill
         and other rights under or acquired through use of the Schwarz
         Trademarks shall accrue and belong to Schwarz CIMA shall have no rights
         to use the Schwarz Trademarks, including, without limitation, in
         connection with any product subsequently developed by CIMA. 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 Schwarz Trademarks
         in use by Schwarz in a manner that is likely to cause deception or
         confusion. CIMA recognizes that Schwarz is the owner of all of the
         Schwarz Trademarks used in commerce to indicate the source of the
         Product and agrees that the Schwarz Trademarks shall remain vested in
         Schwarz both during the term of this Agreement and thereafter. CIMA
         shall not contest the validity of the Schwarz Trademarks or Schwarz's
         ownership of the Schwarz Trademarks. Use of the Schwarz Trademarks by
         Schwarz in conjunction with the manufacture, use, and sale of the
         Product and all goodwill related thereto shall

                                     - 22 -



         inure to the benefit of Schwarz for purposes of building the longevity
         and extent of use of the Schwarz Trademarks.

                  (d) Schwarz and CIMA agree that, where applicable, all
         packaging of the Products shall identify (i) the number of the CIMA
         Patents and CIMA as the owner thereof and (ii) Schwarz as the owner of
         the Schwarz Trademarks.

                  (e) Any improvements to the CIMA Technology (whether or not
         patentable) shall be owned solely by CIMA.

                  (f) Any improvements to the Schwarz Technology (whether or not
         patentable) shall be owned solely by Schwarz

                  (g) Schwarz shall have full ownership rights to the Products
         with the exception of any improvements to the CIMA Technology as
         contemplated by Section 9.11(e).

                  (h) Any provisions in this Agreement to the contrary
         notwithstanding, Schwarz acknowledges that, for all purposes, CIMA is
         the owner of the CIMA Technology and CIMA acknowledges that, for all
         purposes, Schwarz is the owner of the Schwarz Technology.

         9.12 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 have the
         responsibility to investigate such alleged infringement and act
         diligently, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
         SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], to end any
         infringement of such rights that materially affect Schwarz's rights
         pursuant to this Agreement, including, but not limited to, bringing
         suit against such third party infringer. In the event that CIMA does
         not bring suit against such third party infringer, Schwarz 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 9.12(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 9.12, 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.

                  (c) Infringement of Third Party Rights. If, during the term of
         this Agreement, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
         FILED

                                     - 23 -



         SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] Schwarz's
         marketing or selling of the Product hereunder infringes on a third
         party patent based upon claims that dominate claims in the CIMA
         Patents, within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
         FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] after
         notice by Schwarz, CIMA shall use its reasonable best efforts to
         procure for Schwarz the right to exercise all rights licensed under
         this Agreement without any additional payment therefor by Schwarz

         9.13 Supply of Products. CIMA shall maintain sufficient capacity
throughout the term of this Agreement to meet the requirements of Schwarz for
the supply of Products hereunder.

         9.14 Liability Insurance. At and after each Launch, CIMA shall use its
best efforts to obtain and carry in full force and effect product liability
insurance in respect of the applicable Product in the amount of $1,000,000 per
occurrence and in the aggregate and policies of $10,000,000 of excess coverage
in the aggregate. At and after each Launch, Schwarz shall use its best efforts
to obtain and carry in full force and effect product liability insurance in
respect of the applicable Product in the amount of $1,000,000 per occurrence and
in the aggregate and policies of $10,000,000 of excess coverage in the
aggregate.

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

         9.16     Deemed Breach of Covenant. Neither CIMA nor Schwarz shall be
deemed to be in breach of any covenant contained in this Section 9 if such
party's deemed breach is the result of any action or inaction on the part of the
other party.

                                   SECTION 10

                                 INDEMNIFICATION

         10.1 Indemnification.

            (a) CIMA shall indemnify, defend and hold Schwarz (and its
directors, officers, employees, and Affiliates) harmless from and against any
and all Damages incurred or suffered by Schwarz (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 or any agreement, instrument or document delivered by
         CIMA pursuant to the terms of this Agreement;

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

                                     - 24 -



                 (iii) any act or omission of CIMA with respect to the operation
         of CIMA's business, or the handling, manufacturing or development of
         the Products by CIMA; or

                  (iv) the infringement of the Licensed Assets, the Patent or
         the Technology of any patent, trademark, copyright, trade secret or
         other intellectual property right of any person other than CIMA or
         Schwarz

         (b) Schwarz 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:

                  (i) any breach of any representation or warranty made by
                  Schwarz in this Agreement or any agreement, instrument or
                  document delivered by Schwarz pursuant to the terms of this
                  Agreement;

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

                  (iii) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                  FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] of Schwarz with respect to the operation of
                  Schwarz's business or the handling, marketing or sale of the
                  Products by Schwarz, including Schwarz's supply of API
                  hereunder.

         10.2 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 10.1. 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

                                     - 25 -



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 10.2, (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).

         10.3 Indemnification Payment Obligation. No Indemnifying Party will
have any obligations under Sections 10.1(a) or 10.1(b) until the cumulative
aggregate amount of Damages incurred or suffered by the Indemnified Party which
the Indemnifying Party is otherwise subject to under this Agreement exceeds
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] at which time the entire cumulative
aggregate amount of such Damages shall be covered. The provisions of this
Section 10.3 shall not limit or otherwise affect the obligations of any
Indemnifying Party under any other Section of this Agreement.

         10.4 Indemnification Payment Adjustments. The amount of any Damages for
which indemnification is provided under this Section 10 shall be reduced to take
account of any net tax benefit and shall be increased to take account of any net
tax detriment arising from the incurrence or payment of any such Damages or from
the receipt of any such indemnification payment and shall be reduced by the
insurance proceeds received and any other amount recovered, if any, by the
Indemnified Party with respect to any Damages; provided, however, that an
Indemnified Party shall not be subject to an obligation to pursue an insurance
claim relating to any Damages for which indemnification is sought hereunder. If
any Indemnified Party shall have received any payment pursuant to this Section
10 with respect to any Damages and shall subsequently have received insurance
proceeds or other amounts with respect to such Damages, then such Indemnified
Party shall pay to the Indemnifying Party an amount equal to the difference (if
any) between (i) the sum of the amount of those insurance proceeds or other
amounts received and the amount of the payment by such Indemnifying Party
pursuant to this Section 10 with respect to such Damages and (ii) the amount
necessary to fully and completely indemnify and hold harmless such Indemnified
Party from and against such Damages; provided, however, in no event will such
Indemnified Party have any obligation pursuant to this sentence to pay to such
Indemnifying Party an amount greater than the amount of the payment by such
Indemnifying Party pursuant to this Section 10 with respect to such Damages.

         10.5 Indemnification Payment. Upon the final determination of liability
and the amount of the indemnification payment under this Section 10, the
appropriate party shall pay to

                                     - 26 -



the other, as the case may be, within 10 business days after such determination,
the amount of any claim for indemnification made hereunder.

         10.6 Survival. The provisions of Section 10 shall survive any
termination of this Agreement. Each Indemnified Party's rights under Section 10
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 this Agreement, unless such
waiver expressly and in writing also waives any or all of the Indemnified
Party's right under Section 10.

                                   SECTION 11

                                   TERMINATION

         11.1 Termination. The term of this Agreement shall begin upon the
Closing Date and, unless sooner terminated as hereinafter provided, shall end
with respect to each Product upon the expiration of the last CIMA Patent
applicable to such Product to expire or, if later, the expiration of any other
patent resulting from the development process contemplated hereby.
Notwithstanding the foregoing, this Agreement may be terminated as follows:

                  (a) Termination for Insolvency. If either Schwarz 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. Schwarz 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 ninety (90) 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 11.1(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 ninety (90) days after receipt of notification, then such party
         immediately may terminate this Agreement. This Section 11.1(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.

                  (c) Unilateral Termination by Schwarz Prior to Launch. Prior
         to the Launch of any Product, Schwarz will have the right to
         unilaterally terminate this Agreement

                                     - 27 -



         either in its entirety or with respect to one or more specific Products
         at any time and in its sole discretion upon the delivery of written
         notice to CIMA. Any provision herein notwithstanding, in the event that
         Schwarz terminates this Agreement pursuant to this Section 11.1(c),
         Schwarz's sole obligation under this Agreement shall be to reimburse
         CIMA for the costs and expenses actually incurred by CIMA (i) in
         performing the development activities set forth on Schedule 4.1(b)
         hereto in respect of such terminated Product(s) prior to CIMA's receipt
         of such notice of termination and (ii) in connection with the orderly
         close out of such development activities; provided, however, that
         Schwarz's reimbursement obligations pursuant to this Section 11.1(c) in
         respect of any terminated Product(s) shall exclude the costs and
         expenses incurred by CIMA in connection with any Development Phase for
         which Schwarz has made a Development Fee Payment and shall in no event
         exceed the Development Fee Payment associated with the Development
         Phase on which CIMA is then working, as set forth on Schedule 4.1(b).

                  (d) Unilateral Termination by Schwarz After Launch. Following
         the Launch of any Product, Schwarz will have the right to unilaterally
         terminate this Agreement either in its entirety or with respect to one
         or more specific Products and in its sole discretion upon the delivery
         of written notice to CIMA. Termination of the Agreement either in its
         entirety or with respect to one or more specific Products will be
         effective with respect to such Product or Products one hundred eighty
         (180) days following such written notice to CIMA.

                  (e) Continuing Obligations. Termination of this Agreement for
         any reason shall not relieve the parties of any obligation accruing
         prior thereto with respect to any Product and any ongoing obligations
         hereunder with respect to the remaining Products 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 5.8,
         9.3, 9.4, 9.5, 9.7, 9.9(a), 10, 11.1(c), 11.1(d), 11.1(e) and 12
         hereof, and such obligations shall survive any such termination.

                                   SECTION 12

                                  MISCELLANEOUS

         12.1 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 Schwarz 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 in the event that a third
party acquires substantially all of the assets or outstanding shares of, or
merges with, Schwarz or CIMA, as the case may be.

                                     - 28 -



         12.2 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:  Chief Executive Officer

                             If to Schwarz, as follows:
                             Schwarz Pharma, Inc.
                             6140 West Executive Drive
                             Mequon, Wisconsin  53092
                             Facsimile:  262-242-1641
                             Attention:  General Counsel

                             with a copy to:

                             Mayer, Brown & Platt
                             1675 Broadway
                             New York, New York  10019
                             Facsimile:  212-262-1910
                             Attention:  Philip O. Brandes

or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Section 12.2 by any party hereto to the other
party.

         12.3 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 Schwarz 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 Schwarz 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 privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. The
indemnification provided in Section 10 shall be the sole remedy available for
any Damages arising out of or in connection with this Agreement except for any
rights or remedies which the parties hereto may otherwise have in equity.

         12.4 Survival of Representations. Each of the representations and
warranties made in this Agreement shall continue for the term of this Agreement
and shall thereafter be extinguished.

                                     - 29 -



         12.5 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. Schwarz acknowledges
that it does not have, and Schwarz shall not make representations to any third
party, either directly or indirectly, indicating that Schwarz 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 Schwarz or to obligate Schwarz in any way
whatsoever.

         12.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements including, without limitation the Feasibility Agreement entered
by CIMA and Schwarz on November 30, 2001, or understandings of the parties
relating thereto.

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

         12.8 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.

         12.9 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.

         12.10 Arbitration. Any dispute, controversy or claim arising out of or
in connection with this Agreement shall be determined and settled by arbitration
in New York, New York, pursuant to the Rules of Arbitration then in effect of
the American Arbitration Association. Any award rendered shall be final and
conclusive upon the parties and a judgment thereon may be entered in a court
having competent jurisdiction. Any arbitration hereunder shall be (i) submitted
to an arbitration tribunal comprised of three (3) independent members
knowledgeable in the pharmaceutical industry, one of whom shall be selected by
Schwarz, one of whom shall be selected by CIMA, and one of whom shall be
selected by the other two arbitrators; (ii) allow for the parties to request
discovery pursuant to the rules then in effect under the Federal Rules of Civil
Procedure for a period not to exceed 90 days; and (iii) require the award to be
accompanied by findings of fact and a statement of reasons for the decision.
Each party shall bear its own costs and expenses, including attorney's fees
incurred in any dispute which is determined and/or settled by arbitration
pursuant to this Section. 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. Arbitration shall not
prevent any party from seeking injunctive relief where such remedy is an
appropriate form of remedy under the circumstances.

         12.11 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

                                     - 30 -



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.

         12.12 No Third-Party Rights. No provision of this Agreement shall be
deemed or construed in any way to result in the creation of any rights or
obligation in any Person not a party or not affiliated with a party to this
Agreement.

         12.13 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.

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

         12.15 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.

         12.16 Consents. Where this Agreement requires the consent of any party
and specifies that such consent is not to be unreasonably withheld, the
determination of whether such consent may be withheld shall be based upon the
facts and circumstances of the business of the party whose consent is requested,
it being understood that it is reasonable to withhold the requested consent if
granting the requested consent would have an adverse impact on such party's
business activities.

                                     - 31 -



         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 Hontz
                                     -----------------------------------
                                        Name:  John Hontz
                                        Title: Chief Operating Officer

                                   SCHWARZ PHARMA, INC.
                                   By: /s/ Ron Stratton
                                     ------------------------------------

                                        Name:  Ron Stratton, Ph.D.
                                        Title: President and COO

                                     - 32 -

                                                                 Schedule 3.1 to
                                                              Master Development
                                                    License and Supply Agreement

                           Master Development Schedule

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


                                                              Schedule 4.1(a) to
                                                             Master Development,
                                                    License and Supply Agreement

                                  Royalty Rates

         In any Year, Schwarz shall pay to CIMA a royalty in the amount of
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] of the Annual Net Sales, if any,
actually recorded during such Year.

         Schwarz shall pay the royalty payment due in respect of any Quarter (a
"Quarterly Installment") by remitting a check, together with the report required
by Section 4.3, to CIMA within 60 days after the end of each Quarter during such
Year. For purposes of determining the royalty payment pursuant to this Schedule
4.1(a) the amount of each Quarterly Installment shall be calculated based on
actual Net Sales recorded during such Quarter.


                                                              Schedule 4.1(b) to
                                                             Master Development,
                                                    License and Supply Agreement

                     Development Fee And Milestone Payments

         (a) Subject to paragraph (b) of this Schedule 4.1(b), Schwarz shall pay
to CIMA any of the milestone payments set forth below (each a "Milestone
Payment") promptly after CIMA demonstrates the Satisfactory Completion (as
defined below) of the research and development phases (each a "Development
Phase") set forth opposite such Milestone Payment:

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

         (b) Promptly after the completion of each Development Phase, CIMA shall
notify Schwarz of such completion and shall provide Schwarz sufficient written
materials (a "Development Phase Notice") to allow Schwarz to evaluate whether or
not such Development Phase has been Satisfactorily Completed. [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]

         (c) In addition to the Milestone Payments described above, in
connection with each Product, Schwarz shall pay CIMA an amount equal to (i)
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] in the event the actual Completion Date
for such Product precedes the target Completion Date therefor set forth on
Schedule 3.1 by at least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] or (ii)
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] in the event the actual Completion Date
for such Product precedes the target Completion Date therefor set forth on
Schedule 3.1 by at least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***].

         (d) Schwarz shall also pay to CIMA the development fee payments set
forth below (each a "Development Fee Payment") within thirty (30) days of CIMA's
invoice for development work performed in accordance with this Agreement during
the applicable Quarter.

- --------------------------------------------------------------------------------
TIME PERIOD                                       DEVELOPMENT FEE
- --------------------------------------------------------------------------------
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]
- --------------------------------------------------------------------------------
Quarter ending  December 31, 2001                 $500,000
- --------------------------------------------------------------------------------


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


                                                              Schedule 5.1(b) to
                                                              Master Development
                                                    License and Supply Agreement

                             Schwarz Purchase Order

                                 [See Attached]




================================================================================

SCHWARZ        SCHWARZ PHARMA MANUFACTURING, INC.          PURCHASE ORDER NO.
PHARMA         1101 C AVENUE WEST                          PURCHASE ORDER DATE
               PO BOX 328
               SEYMOUR, IN 47274
               812-523-3457

                                                              PAGE

       ------------------------------             ------------------------------
VENDOR:                                   SHIP TO:

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



                                                                 ORIGINAL COPY
- --------------------------------------------------------------------------------

   SHIP VIA    TAXABLE   TERMS DESCRIPTION                    FOB DESCRIPTION

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

RESOURCE NUMBER    RESOURCE DESCRIPTION   QUANTITY    UM    UNIT PRICE   AMOUNT
                                                          
================================================================================


THE TERMS AND CONDITIONS ON THE REVERSE SIDE ARE PART OF THIS PURCHASE
ORDER.                                            BY:__________________________


                              TERMS AND CONDITIONS

1.   Definitions. (a) Buyer means Schwarz Pharma Manufacturing, Inc. (b) Seller
     means any person, firm, or corporation to whom this Purchase Order is
     directed.

2.   Terms: This Purchase Order constitutes any order to buy goods, equipment,
     material, supplies, or services according to the description and other
     terms set forth on its face and reverse side. No additional or different
     terms offered by the Seller shall be or become part of this order, nor
     shall this order be modified without the express written approval of Buyer.

3.   Shipping Instructions: All shipments must contain packing lists giving
     descriptions of material, quantity and purchase order number. If shipment
     is not made F.O.B. destination, the original bill of lading must be
     furnished with invoices. Buyer's count will be accepted as final on all
     shipments not accompanied by packing lists.

4.   Risk of Loss: The risk of loss from any casualty to the goods regardless of
     the cause, shall be on Seller until the goods have been received, inspected
     and accepted by the company.

5.   Delays in Delivery: Time is of the essence. If Seller for any reason does
     not comply with the buyer's delivery schedule, Buyer in addition to
     remedies provided by law, at its option may either approve and revise
     delivery schedule or, may terminate the order without liability on account
     thereof.

6.   Warranty: Seller expressly warrants that all goods, equipment, material,
     supplies or services covered by this order will conform to the
     specification, drawings, samples or other description furnished or
     specified by the Buyer, shall be of good material and workmanship and free
     from defects.

7.   Rejections: If any of the goods, equipment, material or supplies are found
     within a reasonable time after delivery to the Buyer to be defective in
     material or workmanship or otherwise not in conformity with the
     requirements of the order, Buyer, in addition to any other rights which it
     may have under warranties or otherwise, shall have the right to reject and
     return such goods at Seller's expense, such goods not to be replaced
     without suitable written authorization from Buyer.

8.   Patent Infringements: Seller shall pay costs and damages finally awarded in
     any suit against the Buyer or its vendees to the extent based upon a
     finding that the design or construction of articles as furnished infringes
     a United States Patent (except infringement occurring as a result of
     incorporating a design or modification at the request of Buyer); provided
     the Buyer promptly notifies Seller of any charge of such infringement and
     the Seller is given the right at its expense to settle such charge and to
     defend or control the defense of any suit based upon such charge, this
     paragraph sets forth the Seller's exclusive liability with respect to
     patents.

9.   Compliance with Laws: Seller shall comply with all applicable State,
     Federal and local laws, rules and regulations.

10a. Termination: The Buyer may terminate work on this order for its own
     convenience in whole or in part by written or telegraphic notice at any
     time. In the event, any claim arising out of such termination shall be
     settled by negotiation on the basis of the Seller's costs and commitments
     properly incurred or made, with due allowance for salvage value.

10b. If the Seller ceases to conduct its operations in the normal course of
     business including liability to meet its obligations as they mature of if
     any proceeding under the bankruptcy or insolvency laws is brought by or
     against the Seller, a receiver for the Seller is appointed or applied for
     or an assignment for the benefit of Creditors is made by the Seller, Buyer
     may terminate order without liability except for the deliveries previously
     made or for goods covered by the order then completed and subsequently
     delivered in accordance with the terms of the order.

11.  Nondiscrimination in Employment. Seller will not discriminate against any
     employee or applicant for employment because of race, religion, color, sex,
     age, or national origin.

12.  Non-Waiver. Any waiver of strict compliance with the provisions of this
     order shall not be deemed a waiver of the Buyer's rights to insist upon
     strict compliance thereafter.

13.  Subcontracting. In the event the Seller subcontracts all or any part of
     this order, Seller remains completely responsible for price, delivery and
     quality.


                                                                 Schedule 5.3 to
                                                             Master Development,
                                                    License and Supply Agreement

                                  Cost of Goods

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


                                                              Schedule 5.4(d) to
                                                              Master Development
                                                    License and Supply Agreement

                           Quality Assurance Addendum

                      [To be mutually agreed by parties on
                            or prior to each Launch]


                              SCHWARZ PHARMA, INC.
                            6140 West Executive Drive
                             Mequon, Wisconsin 53092

                                  March 1, 2002

CIMA LABS INC.
10000 Valley View Road
Eden Prairie, Minnesota  55344
Attention:  Chief Executive Officer

Ladies and Gentlemen:

         Reference is made to the Master Development, License and Supply
Agreement, dated as of December 18, 2001 (as amended, restated or otherwise
modified from time to time, the "License Agreement"), by and between CIMA LABS
INC., a Delaware corporation ("CIMA") and Schwarz Pharma, Inc., a Delaware
corporation ("Schwarz"). Capitalized terms that are used but not defined in this
letter agreement (this "Letter Agreement") shall have the meanings given them in
the License Agreement.

         For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, each of the undersigned hereby agrees to modify
the License Agreement as follows:

         1. In order to (i) memorialize the final agreement of the parties
regarding the Milestone Payments applicable to Product #3 ([***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]) and Product #2 ([***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***]) and (ii) replace certain of the Products, as contemplated by
Section 3.4 of the License Agreement,

(a) Schedule 3.1 of the License Agreement is hereby amended by replacing the
    Products numbered 5, 6 and 7 in the table therein with the following (the
    "Replacement Products") and by replacing the relevant portions of the table
    in Schedule 3.1 that relate to the Products numbered 5, 6 and 7 with the
    information set forth below:

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

          Schwarz and CIMA hereby agree that each of the Replacement Products
shall be deemed to be a Product under and as defined in the License Agreement.


(b) Schedule 4.1(b) of the License Agreement is hereby amended such that the
    table included in paragraph (a) therein shall be deleted in its entirety and
    replaced with the table set forth in Exhibit A hereto.

         2. Schwarz and CIMA further agree that, anything to the contrary herein
or in the License Agreement notwithstanding, with respect to Product #7
([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]) only, the date after which the
Development Phase relating to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], as
contemplated by paragraph (b) of Schedule 4.1(b) of the License Agreement, shall
be [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***] after deadline therefor. In
addition, should CIMA determine, in its reasonable discretion, that a
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] is not suitable and a [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] is required for the [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***], the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] referred to in this
paragraph 2 shall be extended to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***].

         3. Schwarz and CIMA further agree that, anything to the contrary herein
or in the License Agreement notwithstanding, Product #5 ([***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]) will be developed to be packaged in bottles and
blisters; provided, however, that if, for technical or stability reasons,
bottles are not suitable, such Product may be developed to be packaged in
blisters only.

         4. Schwarz and CIMA further agree that, anything to the contrary herein
or in the License Agreement notwithstanding, with respect to Product # 6
([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]) only, CIMA will perform an initial
formulation feasibility study ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]) and
provide a report its findings to Schwarz no later than [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]. At the time of such report, should either party not
want to proceed with the development of such Product, Schwarz will pay CIMA
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]. If such Product is canceled, Schwarz
may replace Product #6 with a new


                                      -2-

Product in accordance with the License Agreement. Any such replacement Product
will be assigned a Completion Date to be agreed upon by the parties.

         5. Section 12 of the License Agreement is hereby, mutatis mutandis,
incorporated by reference as though specifically set forth herein.

         6. This Letter Agreement is binding and enforceable against CIMA and
Schwarz notwithstanding any provision to the contrary in the License Agreement,
and, in the event of a conflict between this Letter Agreement and the License
Agreement, the terms of this Letter Agreement shall control.

         7. Each of the undersigned hereby ratifies the License Agreement, as
modified by this License Agreement, and agrees that the License Agreement, as
modified hereby, shall continue in full force and effect.

                             [Signatures next page]

                                      -3-


         IN WITNESS WHEREOF, this Agreement is entered into by the duly
authorized representatives of CIMA and Schwarz as of the date first set forth
above.

                                    SCHWARZ PHARMA, INC.
                                         By: /s/ Klaus Veitinger
                                             -----------------------------
                                                       Name: Klaus Veitinger
                                                                  Title: CEO

ACKNOWLEDGED AND AGREED:

                                    CIMA LABS INC.
By: /s/ John M. Siebert
    -----------------------------
    Name:  John M. Siebert
    Title: President & CEO

CC:    Mayer, Brown, Rowe & Maw
       1675 Broadway
       New York, New York  10019
       Attention:  Philip O. Brandes


                                      -4-


                                    EXHIBIT A

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



                              SCHWARZ PHARMA, INC.
                            6140 West Executive Drive
                             Mequon, Wisconsin 53092

                                October 24, 2002

CIMA LABS INC.
10000 Valley View Road
Eden Prairie, Minnesota  55344
Attention:  Chief Executive Officer

Ladies and Gentlemen:

         Reference is made to the Master Development, License and Supply
Agreement, dated as of December 18, 2001 (as amended, restated or otherwise
modified from time to time, the "License Agreement"), by and between CIMA LABS
INC., a Delaware corporation ("CIMA") and Schwarz Pharma, Inc., a Delaware
corporation ("Schwarz"). Capitalized terms that are used but not defined in this
letter agreement (this "Letter Agreement") shall have the meanings given them in
the License Agreement.

         For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, each of the undersigned hereby agrees to modify
the License Agreement as follows:

         3. In order to memorialize (a) the replacement of the Product numbered
7 with the pharmaceutical product [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] (the
"Replacement Product"), (b) the agreement of the parties regarding changes to
the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***] of the Products numbered 4 and 5,
and (c) the actual delivery dates of certain API, Schedule 3.1 of the License
Agreement is hereby deleted in its entirety and replaced with Exhibit A hereto.
Schwarz and CIMA agree that the Replacement Product shall be deemed to be a
Product under and within the meaning of the License Agreement.

         4. Schedule 4.1(b) to the License Agreement is hereby amended as
follows:

(a) In order to memorialize (i) the final agreement of the parties regarding the
    Milestone Payments applicable to Product #1 ([***CONFIDENTIAL TREATMENT
    REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
    COMMISSION.***]), Product #4 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION
    OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]),
    Product #5 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION



    OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***])
    and Product #6 ([***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
    SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]), (ii) the
    agreement of the parties regarding certain additional amounts that shall be
    payable to CIMA in respect of the Milestone [***CONFIDENTIAL TREATMENT
    REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
    COMMISSION.***], as set forth in the table included in paragraph (a) therein
    (the "Milestone Table") and (iii) the estimated Milestone Payments
    applicable to the Replacement Product, Schedule 4.1(b) to the License
    Agreement is amended such that the Milestone Table shall be deleted in its
    entirety and replaced with the table set forth in Exhibit B hereto.

(b) In order to memorialize the agreement of the parties regarding an increase
    in the Development Fee Payments in respect of the [***CONFIDENTIAL TREATMENT
    REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
    COMMISSION.***], Schedule 4.1(b) to the License Agreement is amended such
    that the table included in paragraph (d) therein shall be deleted in its
    entirety and replaced with the table set forth in Exhibit C hereto.

         5. Anything to the contrary herein or in the License Agreement
notwithstanding, the parties agree that the development activities described on
the Development Schedule and the payments to be made by Schwarz in respect of
such development activities contemplate CIMA conducting up to an aggregate total
of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***] stability study pulls (the "Expected
Stability Work"). In the event that such development activities require more
than the Expected Stability Work, the parties shall negotiate in good faith
additional compensation to be paid to CIMA on a per-pull basis.

         6. Anything to the contrary in the License Agreement notwithstanding,
Schwarz and CIMA hereby agree that Schwarz will pay CIMA the sum of
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] promptly upon receipt of CIMA's invoice
therefore, which amount shall satisfy in full Schwarz's obligations to CIMA in
respect of CIMA's development efforts in connection with the pharmaceutical
product [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***] pursuant to the License
Agreement.

         5. In order to memorialize certain agreements of the parties regarding
modifications to Schwarz's obligations to supply API, the License Agreement is
hereby amended as follows:

(a) Section 1 of the License Agreement is amended by adding the following
    defined term thereto:

            "'Provide' shall have the meaning given in Section 3.2 hereof."




 (b) Section 3.2 of the License Agreement is deleted in its entirety and
     replaced with the following:

                           "3.2 Supply of API.

                                    (a) The parties shall be responsible
                           for Providing API as follows:

                                         (i) CIMA shall be responsible for
                                    Providing all API consisting of
                                    [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] and
                                    all API that is classified as a "controlled
                                    substance" by the United States Drug
                                    Enforcement Agency ("DEA API"); provided,
                                    however, that CIMA shall notify Schwarz, at
                                    least forty-eight (48) hours prior to any
                                    order, of the quantity of such API that CIMA
                                    proposes to order. If Schwarz notifies CIMA
                                    within such forty-eight (48) hour period
                                    that Schwarz disagrees with the amount of
                                    API that CIMA proposes to order, CIMA shall
                                    postpone such order until such time as the
                                    parties shall agree upon the appropriate
                                    amount of such API.

                                         (ii) Schwarz shall be responsible for
                                    Providing all API not required to be
                                    provided by CIMA pursuant to clause (i),
                                    above.

                                    (b) The parties shall each be responsible
                           for the costs of Providing API incurred by them;
                           provided, however, that within thirty (30) days from
                           CIMA invoice date therefor, Schwarz shall, except as
                           set forth in Section 3.2(e), below,

                                         (i) reimburse CIMA for the purchase
                                    price (excluding any costs described in
                                    Section 3.2(b)(iv), below) of any API
                                    purchased by CIMA;

                                         (ii) pay CIMA a sourcing fee equal to
                                    [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] of
                                    the aggregate purchase price of any API
                                    consisting of [***CONFIDENTIAL TREATMENT
                                    REQUESTED, PORTION OMITTED FILED SEPARATELY
                                    WITH THE SECURITIES AND EXCHANGE
                                    COMMISSION.***] purchased by CIMA as
                                    contemplated hereby;

                                         (iii) pay CIMA a sourcing fee in
                                    respect of any DEA API equal to (A)
                                    [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] of
                                    the aggregate purchase price of such DEA
                                    API, until such aggregate purchase price
                                    reaches [***CONFIDENTIAL TREATMENT
                                    REQUESTED, PORTION OMITTED FILED SEPARATELY
                                    WITH THE SECURITIES


                                      -3-


                                    AND EXCHANGE COMMISSION.***] in any Year and
                                    (B) [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] of
                                    the aggregate purchase price of such DEA
                                    API, to the extent that such aggregate
                                    purchase price exceeds [***CONFIDENTIAL
                                    TREATMENT REQUESTED, PORTION OMITTED FILED
                                    SEPARATELY WITH THE SECURITIES AND EXCHANGE
                                    COMMISSION.***] in any Year; and

                                         (iv) reimburse CIMA for
                                    [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***]
                                    which CIMA incurs in connection with
                                    Providing API in accordance with Section
                                    3.2(a)(i).

                                    (c) As used herein, "Provide" means that the
                           applicable party shall be responsible, in respect of
                           the API which it is responsible for Providing, for
                           ordering, receiving and testing such API, paying
                           supplier invoices therefor, releasing such API for
                           use, auditing suppliers thereof for cGMP compliance
                           and keeping Schwarz's Regulatory Affairs department
                           apprised of the status of the Drug Master Files in
                           respect of such API.

                                    (d) CIMA shall, promptly following the end
                           of each Quarter, furnish to Schwarz a written report
                           of the total amount of each type of API in CIMA's
                           inventory as of the final day of such Quarter, as
                           reflected on CIMA's books and records.

                                    (e) Schwarz agrees and acknowledges that it
                           shall be responsible to CIMA for the amounts
                           described in this Section 3.2 that CIMA incurs in
                           respect of any API that is used, lost, destroyed or
                           otherwise consumed in connection with the development
                           activities described on the Development Schedule. In
                           the event, however, that any API is lost, stolen,
                           destroyed, or otherwise consumed at CIMA's facilities
                           other than in connection with such development
                           activities ("Lost API"), CIMA agrees to (i) file and
                           pursue a claim for the value of such Lost API under
                           its applicable insurance policy and (ii) promptly
                           remit to Schwarz any proceeds received from its
                           insurers in respect of such Lost API."

(c) Section 12.3 of the License Agreement is amended by deleting the last
    sentence thereof and replacing the same with the following:

                           "Except as set forth in Section 3.2(e), the
indemnification provided in Section 10 shall be the sole remedy available for
any Damages arising out of or in connection with this Agreement except for any
rights or remedies which the parties hereto may otherwise have in equity."

(d) Section 5.1(d) of the License Agreement is deleted in its entirety and
    replaced with the following:


                                      -4-



                                    "(d) The parties shall be responsible for
                           Providing, in accordance with Section 3.2 and with
                           Schwarz's forecasts provided in accordance with
                           Section 5.4, quantities of API sufficient for (i) for
                           CIMA to perform its obligations pursuant to Schedule
                           3.1 and Sections 5.1 and 5.5 at least
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] prior to the date of tablet
                           manufacture and (ii) [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] of safety
                           stock. All API not Provided by Schwarz must conform
                           to Schwarz's then current raw materials
                           specifications. CIMA shall not be accountable for any
                           production or shipment delays due to lack of any API
                           that Schwarz is required to Provide pursuant to
                           Section 3.2."

         6. The parties hereby agree that, anything to the contrary in the
License Agreement notwithstanding, any Products that are contemplated in the
License Agreement as being packaged using "CIMA Standard" packaging and/or "CIMA
Standard" tablet size, may, at Schwarz's sole option, be packaged using child
resistant packaging ("CR Packaging") and/or utilize non-standard tablet size
tooling ("Off-Size Tooling"). In accordance with such agreement, in the event
that Schwarz elects to have any Products packaged in CR Packaging and/or utilize
Off-Size Tooling, the parties further agree as follows:

                  (a) CIMA shall be solely responsible for the development of CR
Packaging and/or Off-Size Tooling for each applicable Product in accordance with
specifications to be provided by Schwarz; provided, however, that Schwarz shall
reimburse CIMA, on a Quarterly basis and, within thirty (30) days after receipt
of invoices from CIMA, for all costs incurred by CIMA in connection with any
design and testing activities in respect of the CR Packaging that are conducted
by third parties and which are approved in advance by Schwarz.

(b) CIMA shall be responsible, subject to Schwarz's approval, not to
    unreasonably be withheld, for the purchase of any equipment needed for CR
    Packaging and Off-Size Tooling that is not then owned or leased by CIMA. The
    aggregate purchase price (the "Equipment Costs") of the equipment to be
    purchased by CIMA in order to perform its obligations under this paragraph 6
    (the "Optional Equipment") [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
    OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***].
    Such Equipment Costs shall be included, [***CONFIDENTIAL TREATMENT
    REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
    COMMISSION.***] cost included in the calculation of the Cost of Goods of
    each Product in accordance with Schedule 5.3 of the License Agreement;
    provided, however, that the portion of the Equipment Cost allocable to
    Schwarz during any Year shall be determined [***CONFIDENTIAL TREATMENT
    REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
    COMMISSION.***] for the Product(s) requiring CR Packaging or Off-Size
    Tooling, as applicable, in accordance with [***CONFIDENTIAL TREATMENT
    REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND


                                      -5-



         EXCHANGE COMMISSION.***] for such Year and; provided further, that
         Schwarz shall not be responsible, during any Year, for any Equipment
         Costs to the extent that the Optional Equipment is used for products
         other than Products, determined [***CONFIDENTIAL TREATMENT REQUESTED,
         PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
         COMMISSION.***] in accordance with [***CONFIDENTIAL TREATMENT
         REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
         EXCHANGE COMMISSION.***] during such Year. In the event that Schwarz
         cancels all Products requiring CR Packaging or Off-Size Tooling in
         accordance with the terms of the License Agreement, within
         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the cancellation of
         the last such Product requiring such packaging, Schwarz shall pay to
         CIMA the amount of the Equipment Costs related to the CR Packaging or
         the Off-Size Tooling, as applicable, that have not theretofore been
         reimbursed by Schwarz or a third party.

         7. The parties hereby agree that Schwarz shall have the right,
exercisable by delivering written notice to CIMA at any time on or prior to the
date that is [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] after the date of
this Letter Agreement, to initiate negotiations with CIMA for the development
and supply of the pharmaceutical product [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] (the "Option Product") in accordance with this paragraph 7. Upon
Schwarz's exercise of such option, the parties shall negotiate in good faith the
specific terms applicable to the Option Product, which terms shall thereupon be
memorialized in a formal license and supply agreement (the "New Agreement");
provided, however that the terms of the New Agreement shall be similar to the
terms of the License Agreement. The foregoing notwithstanding, CIMA shall be
obligated to commence development of the Option Product no later than
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] from the later of (i) the effective date
of the New Agreement and (ii) CIMA's receipt of the active ingredient required
for the Option Product.

         8. Section 12 of the License Agreement is hereby, mutatis mutandis,
incorporated by reference as though specifically set forth herein.

         9. This Letter Agreement is binding and enforceable against CIMA and
Schwarz notwithstanding any provision to the contrary in the License Agreement,
and, in the event of a conflict between this Letter Agreement and the License
Agreement, the terms of this Letter Agreement shall control.

         10. Each of the undersigned hereby ratifies the License Agreement, as
modified by this Letter Agreement, and agrees that the License Agreement, as
modified hereby, shall continue in full force and effect.

                             [Signatures next page]

                                      -6-


         IN WITNESS WHEREOF, this Agreement is entered into by the duly
authorized representatives of CIMA and Schwarz as of the date first set forth
above.

                                 SCHWARZ PHARMA, INC.



                                      By: /s/ Klaus Veitinger
                                          --------------------------
                                                   Name: Klaus Veitinger
                                                              Title: CEO

ACKNOWLEDGED AND AGREED:

                                 CIMA LABS INC.



By: /s/ John M. Siebert
    ----------------------------
    Name: John M. Siebert
    Title: President & CEO

CC:      Mayer, Brown, Rowe & Maw
         1675 Broadway
         New York, New York  10019
         Attention: Philip O. Brandes

                                      -7-


Exhibit A

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




                                    EXHIBIT B

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




Exhibit C



- --------------------------------------------------------------------------------
TIME PERIOD                                                    DEVELOPMENT FEE
- --------------------------------------------------------------------------------
                                                            
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]
- --------------------------------------------------------------------------------
Quarter ending  December 31, 2001                                  $500,000
- --------------------------------------------------------------------------------
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]
- --------------------------------------------------------------------------------





                              SCHWARZ PHARMA, INC.
                            6140 West Executive Drive
                             Mequon, Wisconsin 53092

                                February 18, 2003
CIMA LABS INC.
10000 Valley View Road
Eden Prairie, Minnesota  55344
Attention:  Chief Executive Officer

Ladies and Gentlemen:

         Reference is made to the Master Development, License and Supply
Agreement, dated as of December 18, 2001 (as amended, restated or otherwise
modified from time to time, the "License Agreement"), by and between CIMA LABS
INC., a Delaware corporation ("CIMA") and Schwarz Pharma, Inc., a Delaware
corporation ("Schwarz"). Capitalized terms that are used but not defined in this
letter agreement (this "Letter Agreement") shall have the meanings given them in
the License Agreement.

         For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, each of the undersigned hereby agrees to modify
the License Agreement as follows:

         7. In order to memorialize the agreement of the parties regarding
changes to the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the Products
numbered 1, 4, 5 and 6 and the final determination of the [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] of Product number 7, the table set forth on Schedule
3.1 of the License Agreement is hereby deleted in its entirety and replaced with
Exhibit A hereto.

         8. In order to memorialize the agreement of the parties that
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***], Schedule 4.1(b) to the License
Agreement is hereby amended by deleting the definition of [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] and replacing such definition with the following:
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]

         9. The parties hereby agree that, anything to the contrary in the
License Agreement notwithstanding, in addition to blisters and [***CONFIDENTIAL
TREATMENT



REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] bottles, CIMA will develop Product # 5 ([***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]) for packaging in [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] bottles. In consideration of the costs associated with such
additional development work, Schwarz shall pay to CIMA a supplemental
development fee equal to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] upon execution
of this Letter Agreement.

         10. Whereas, the parties have mutually determined that the development
activities heretofore completed in respect of Product # 1 ([***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]) have been unsuccessful, the parties hereby agree that
such Product shall be redeveloped in accordance with the Master Development
Schedule contemplated therefore in the License Agreement; provided, however,
that anything to the contrary in the License Agreement notwithstanding, the
parties hereby agree that

                  (a) as part of the development activities in respect of the
New Formulation (as defined below), CIMA shall prepare two batches of each
strength of the New Formulation for filing with the FDA, each of which batches
shall be packaged in both CIMA standard blisters and [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] bottles,

(b) notwithstanding the Milestone Payments that Schwarz has heretofore made to
    CIMA pursuant to Schedule 4.1(b) of the License Agreement in respect of
    Product #1, but in lieu of any other Milestone Payments that Schwarz may be
    required to make in respect of Product #1 pursuant to the License Agreement,
    Schwarz shall make the following Milestone Payments to CIMA in accordance
    with the License Agreement and this Letter Agreement with respect to the
    development of the New Formulation:



- -----------------------------------------------------
                                            Milestone
Development Phase                           Payment
- -----------------------------------------------------
                                         
[***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***], and
- -----------------------------------------------------


(c) CIMA shall not be eligible to receive the payment referred to in Section
    (c)(ii) on Schedule 4.1(b) of the License Agreement in respect of the New
    Formulation.

                  For purposes hereof, Product #1 ([***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***]), redeveloped as contemplated in this paragraph 4 shall be
referred to herein as the "New Formulation". The parties agree and acknowledge
that the New


                                      -2-

Formulation shall for all purposes be Product # 1 and a Product within the
meaning of the License Agreement.

         11. Section 12 of the License Agreement is hereby, mutatis mutandis,
incorporated by reference as though specifically set forth herein.

         12. This Letter Agreement is binding and enforceable against CIMA and
Schwarz notwithstanding any provision to the contrary in the License Agreement,
and, in the event of a conflict between this Letter Agreement and the License
Agreement, the terms of this Letter Agreement shall control.

         13. Each of the undersigned hereby ratifies the License Agreement, as
modified by this Letter Agreement, and agrees that the License Agreement, as
modified hereby, shall continue in full force and effect.

                             [Signatures next page]

                                      -3-

         IN WITNESS WHEREOF, this Agreement is entered into by the duly
authorized representatives of CIMA and Schwarz as of the date first set forth
above.

                                 SCHWARZ PHARMA, INC.



                                     By: /s/ Ron Stratton
                                         ----------------------------------
                                                         Name: Ron Stratton
                                                     Title: President & COO

ACKNOWLEDGED AND AGREED:



                                 CIMA LABS INC.

By: /s/ John M. Siebert
    ------------------------------
    Name: John M. Siebert
    Title: President & CEO

CC:      Mayer, Brown, Rowe & Maw
         1675 Broadway
         New York, New York  10019
         Attention:  Philip O. Brandes

                                      -4-

Exhibit A

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

EX-10.29

                                                                   EXHIBIT 10.29

                    DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

                                 by and between

                                 CIMA LABS INC.

                                       and

                           ALAMO PHARMACEUTICALS, LLC

                            dated as of March 2, 2001


                    DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

         This DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT ("this Agreement"),
dated and effective as of March 2, 2001 (the "Effective Date"), is by and
between CIMA LABS INC., a Delaware corporation ("CIMA"), and ALAMO
PHARMACEUTICALS, LLC, a California Limited Liability Company ("Alamo").

                               W I T N E S S E T H

         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, Alamo is engaged, among other things, in the business of
developing, marketing and selling of pharmaceutical products;

         WHEREAS, subject to the terms and conditions set forth in this
Agreement, CIMA and Alamo wish to collaborate in the development, registration,
marketing and sale of a certain prescription product; and

         WHEREAS, subject to the terms and conditions set forth in this
Agreement, CIMA wishes to license to Alamo and Alamo wishes to license from CIMA
rights to CIMA's DuraSolv(TM) 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, manufacturing, marketing,
selling and distributing of the Product in the Territory as contemplated by this
Agreement.

         "Affiliates" shall mean, with respect to any Person, any Persons
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.

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

         "Alamo Trademarks" shall have the meaning given in Section 9.11(d).

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

         "Active Pharmaceutical Ingredient (API) "shall mean the active
ingredient [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***].

         "cGMP" shall mean the then-current standards for the manufacture of
pharmaceuticals, as set forth in the United States Federal Food, Drug and
Cosmetics Act and applicable regulations promulgated thereunder, as amended from
time to time, and such standards of good manufacturing practice as are required
by the European Union and other organizations and governmental agencies in
countries in which Product is intended to be sold, to the extent such standards
are not inconsistent with United States cGMP.

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

         "CIMA Intellectual Property" shall mean, collectively, 1) the CIMA
Patents, 2) the CIMA Technology and 3) the CIMA Trademarks.

         "CIMA Patents" shall mean United States Patent No. 6,024,981 (entitled
"Rapidly Dissolving Robust Dosage Form") and any patents, patent applications,
and foreign counterparts or equivalents relating thereto, including any
extension, reissue, renewal, reexamination, divisional, continuation or
continuation-in-part of such patents or patent applications.

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

         "CIMA Trademarks" shall mean the CIMA(R) (logo), CIMA LABS INC.(R),
DuraSolv(TM), and Meltabs(R) 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


                                      -2-

(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, Product samples or Product
placebos, as the case may be, the failure of such to strictly conform to the
Specifications, this Agreement and all applicable law, including, without
limitation, all FDA regulatory filings and regulations.

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

         "DuraSolv(TM)" shall mean CIMA's orally disintegrating tablet
formulations as described in the CIMA Patents

         "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 or embargo, or changes in applicable laws, regulations or
orders by any government, governmental agency or instrumentality, or other
similar circumstances beyond the control of each party, in each case having the
effect of preventing or prohibiting a party from performing its obligations
hereunder.

         "GAAP" shall mean generally accepted accounting principles in the
United States as in effect from time to time.

         "Indemnified Party" shall have the meaning given in Section 10.2
hereof.

         "Indemnifying Party" shall have the meaning given in Section 10.2
hereof.

         "Launch" shall mean the date of first commercial shipment of the
Product by Alamo or its sublicensees to any unaffiliated third party.

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

         "Net Sales" means the gross invoice price for Product sold by Alamo or
its sublicensees or subcontractors to a third party customer less the reasonable
and customary accrual-basis deductions from such gross amounts for: (i) normal
and customary trade, cash and other discounts, allowances and credits actually
allowed and taken directly with respect to sales of Product, (ii) credits of
allowances actually granted for damaged goods, returns or rejections of Product;
(iii) sales or similar taxes (including duties or other governmental charges
levied on, absorbed or otherwise imposed directly on the sales of Product,
including, without limitation, value added taxes or other governmental charges
otherwise measured by


                                      -3-

the billing amount) which are included in any billing amount, and excluding any
taxes imposed on or measured by the net income or profits of the selling party;
(iv) uncollectable accounts; (v) charge back payments and rebates granted to
managed health care organizations or to federal, state and local governments,
their agencies, and purchasers and reimbursers or to trade customers, including
but not limited to, wholesalers and chain and pharmacy buying groups; and (vi)
rebates (or equivalents thereof) that are granted to or charged by national,
state, provincial or local governmental authorities in countries other than the
United States. Such amounts shall be determined from the books and records of
Alamo and its sublicensees and subdistributors maintained in accordance with
U.S. GAAP consistently applied, and such amounts shall be calculated using the
same accounting principles used for other Alamo products. Sales between or among
Alamo, its Affiliates and its sublicensees and subdistributors shall be excluded
from the computation of Net Sales if such Affiliates or sublicensees and
subdistributors are not end-users, but Net Sales shall include the subsequent
final sales to third parties by any such Affiliates or sublicensees and
subdistributors. Where (i) Product is sold by Alamo, its Affiliates or their
respective sublicensees and subdistributors other than in an arms-length sale or
as one of a number of items without a separate invoiced price; or (ii)
consideration for Product shall include any non-cash element, the Net Sales
applicable to any such transaction shall be deemed to be Alamo's average Net
Sales price for the applicable quantity of to the Product at that time.

         "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 a pharmaceutical product containing
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] or such other amounts as may be
requested by Alamo, as the case may be, of [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] formulated in DuraSolv(TM).

         "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 included in the Technical Agreement Addendum set forth on
Schedule F.

         "Territory" shall mean the world.

         "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 Alamo an exclusive license for the term of
this Agreement under the following assets to market, distribute and sell the
Product in the Territory (such assets are referred to herein collectively as the
"Licensed Assets"):

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

                  (ii) the CIMA Intellectual Property.

         (b) The license to Alamo will be exclusive in that CIMA will not grant
any licenses of the Licensed Assets to any other Person with respect to the
Product during the term of this Agreement, except as provided in Section 2.1(c).

         (c) In the event that Product is not commercially available in any
country of the Territory [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from the date
of Launch of the Product in the United States, CIMA and Alamo agrees as follows:

                    (i) CIMA shall be entitled to solicit interest of third
                        parties in making the Product commercially available in
                        any such country or countries;

                   (ii) prior to granting a license to a third party for
                        Product, CIMA shall provide Alamo a notice of its intent
                        to grant such license ("License Notice") in a specific
                        country or countries and shall identify such country or
                        countries in the License Notice;

                  (iii) Subject to the provisions of clauses (iv) and (v) below,
                        Alamo shall provide CIMA a notice within forty-five (45)
                        days of the License Notice that either: A) Alamo does
                        not intend to market the Product in such country or
                        countries, in which case Alamo's license to that country
                        or countries shall terminate and CIMA shall be free to
                        license the Product to such third party; or B) Alamo
                        does intend to market the Product in such country or


                                      -5-

                       countries, in which case Alamo shall have
                       [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                       FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                       COMMISSION.***] from the date of its notice to CIMA to
                       demonstrate significant progress in developing the
                       Product to market in such country or countries. If Alamo
                       fails to demonstrate significant progress within
                       [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                       FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                       COMMISSION.***] or fails thereafter to demonstrate
                       continued active development in such country or
                       countries, Alamo's license to the Product in that country
                       or countries will terminate in 30 days after
                       re-notification by CIMA that they desire to solicit
                       interested third parties in such country or countries and
                       with written agreement by Alamo, such agreement shall not
                       be unreasonably withheld.

                  (iv) In the event that CIMA licenses the product to a third
                       party under this Section 2.1(c), Alamo shall be entitled
                       to receive reimbursement of [***CONFIDENTIAL TREATMENT
                       REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                       SECURITIES AND EXCHANGE COMMISSION.***] of its
                       out-of-pocket cost for developing the Product (as
                       determined in accordance with sub paragraph (v) below,
                       including amounts paid to CIMA) and [***CONFIDENTIAL
                       TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                       WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of any
                       royalties received by CIMA from sales of the Product
                       under such license to a third party, provided that Alamo
                       cooperates with CIMA and such third party in obtaining
                       regulatory approval for the Product, including providing
                       access to any clinical data available to Alamo and any
                       patent or other licenses necessary to commercialize the
                       Product in any country or countries covered under the
                       license from CIMA.

                   (v) CIMA and Alamo shall negotiate in good faith the total
                       amount of Alamo's out-of-pocket cost for developing the
                       Product and a schedule for reimbursement of such costs.
                       The reimbursement schedule shall be based on the scope of
                       the license or licenses granted by CIMA to the third
                       party or parties and the potential market for the Product
                       in the country or countries.


                                      -6-

         2.2 Sublicenses. Alamo shall have the right to extend the licenses
granted pursuant to this Section 2 in whole or in part to any Affiliate of
Alamo, provided that Alamo is not then in material 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 Alamo, and the operations of the
Affiliate shall be deemed to be the operations of Alamo. In addition, Alamo
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 Alamo with the prior
written consent of CIMA, such consent not to be unreasonably withheld or
delayed.

         2.3 Developments, Marketing, Distribution and Sale. After the Launch,
Alamo 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, in each case, as existing from time to time.

         2.4 Minimum Annual Royalties. Alamo shall endeavor to meet or exceed
the minimum annual royalty targets set forth on Schedule A hereto. Any provision
in this Agreement to the contrary notwithstanding, in the event that CIMA has
performed all of its obligations hereunder and Alamo fails to pay the minimum
annual royalty amounts set forth on Schedule A hereto for any Year following the
Year in which the Product is Launched, then the royalty rate which Alamo pays to
CIMA for such Year shall be modified as noted in Schedule C.

                                    SECTION 3

                               PRODUCT DEVELOPMENT

         3.1 Obligations of CIMA. CIMA shall be responsible for the successful
performance of each of the development activities set forth on Schedule B within
the respective time periods set forth on Schedule B.

         3.2 Obligations of Alamo. Alamo shall upon execution hereof pay CIMA
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] which represents the sum of both
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] of the Phase I cost and [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] of the Phase II cost as set forth on the Development
Schedule included as Schedule B and Alamo shall, in a timely fashion following
successful performance by CIMA of each Phase I and Phase II development activity
set forth on Schedule B, pay CIMA the balance of the development fees set forth
in


                                      -7-

Schedule B with respect to such development activity for Phase II. Prior to the
commencement of the development activities in each of Phases III, IV, V and VII,
Alamo shall pay CIMA [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of the development
fees for such phase and shall, in a timely fashion following successful
performance of the development activity or activities for each such phase, pay
CIMA the balance of the development fees set forth in Schedule B with respect to
such development activity or activities for such phase. Alamo shall also
reimburse CIMA for CIMA's certified out-of-pocket costs plus [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] (net of any rebates, credits or refunds) for the
acquisition of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] necessary for CIMA
to perform the development activities described on Schedule B and the supply
activities described in Sections 5.1 and 5.5.

         3.3 Regulatory Matters. CIMA represents and warrants that all Product
supplied to Alamo shall be produced under cGMP and in accordance with the
Specifications. CIMA shall furnish Alamo with a Certificate of Analysis with a
cGMP statement to demonstrate that each shipment of Product has been
manufactured under cGMP and other FDA guidelines and that the Specifications
have been met. In addition, Alamo may, at its own expense, audit the facilities
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 Alamo 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. Alamo's exercise or failure to exercise any of its rights to audit
CIMA's facilities and/or records pursuant to this Section 3.3 shall in no way
alter or affect CIMA's obligations under this Agreement.

                                    SECTION 4

                         ROYALTY AND MILESTONE PAYMENTS

         4.1 Royalty, and Milestone Payments.

         (a) Subject to CIMA's supply of Product in accordance with Section 5
             hereof, Alamo shall make royalty payments to CIMA in the amounts
             set forth on Schedule C.


                                      -8-

         (b) Alamo shall make milestone payments to CIMA as set forth on
             Schedule D upon successful completion of each milestone listed
             therein.

         (c) On the Effective Date, Alamo shall pay the License Payment set
             forth on Schedule D hereto, which License Payment shall be
             refundable on a pro-rata basis if Alamo terminates this Agreement
             prior to the second anniversary date hereof by reason of CIMA's
             failure to successfully complete any of the development activities
             for which it is responsible under the Development Schedule. In such
             event, Alamo shall be entitled to a refund of, and CIMA shall
             promptly pay to Alamo, an amount equal to the product obtained by
             multiplying the License Payment by a fraction, the numerator of
             which shall be the number of calendar days remaining between the
             date of termination and the second anniversary of this Agreement
             and the denominator of which shall be 730.

         4.2 Records and Audit. Alamo and its Affiliates shall keep full, 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 of
account shall be kept at Alamo's principal place of business or the principal
place of business of the appropriate Affiliate of Alamo to which this Agreement
relates. 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 Alamo, for the limited
purpose of verifying Alamo's royalty statements; provided, however, that such
examination shall not take place more often than once each Year, shall not cover
more than the preceding two (2) Years, with no right to audit any period
previously audited and shall not occur during the 90-day period following the
end of Alamo's fiscal Year. 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, Alamo 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 deficiency payment is due), and shall reimburse
CIMA for the reasonable fees and expenses paid to such accountants in connection
with their inspection for such period. 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, Alamo 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

                                      -9-



annum (which interest shall accrue from the date any such deficiency payment is
due). In the event that any such inspection reveals an overpayment, CIMA shall
promptly pay Alamo the overpayment. 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. In any Year following
Launch of the Product, Alamo shall, within sixty (60) days after the end of the
first, second and third Quarter, deliver to CIMA reports, certified by an
authorized official of Alamo, setting forth the Net Sales and total royalties
due under Section 4.1(a) for such Quarter. Alamo shall pay such royalties within
sixty-five (65) days after the end of each Quarter by wire transfer, at CIMA's
cost, or such other method as CIMA may designate. In any Year following Launch
of the Product, Alamo shall, within forty-five (45) days after the end of the
fourth (4th) Quarter, deliver to CIMA reports, certified by an authorized
official of Alamo, setting forth the Net Sales and total royalties due under
Section 4.1(a). Alamo shall pay such royalties within sixty-five (65) days
after the end of the fourth (4th) Quarter by wire transfer, at CIMA's cost, or
such other method as CIMA may designate. If no royalties are due, Alamo shall so
report.

                                    SECTION 5

                                SUPPLY OF PRODUCT

         5.1 Supply of Product.

         (a) Subject to Section 5.7, for the term of this Agreement, Alamo
agrees to purchase from CIMA and CIMA agrees to supply Alamo with all of Alamo's
requirements for the Product, Product samples and Product placebos for their
subsequent use, sale, offer for sale, lease or transfer by Alamo.
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] shall be responsible for procurement of
all API necessary for the satisfaction of its obligations under this Agreement.

         (b) Alamo agrees to initiate purchases of the Product, Product samples
and Product placebos hereunder by issuing CIMA binding purchase orders not less
than [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***] prior to the required shipping date
set forth therein. CIMA agrees to accept any order issued in accordance with
this Section 5.1(b) and to meet the delivery dates specified therein. All
purchase orders hereunder shall be on Alamo's standard purchase order form (a
copy of which is attached as Schedule E hereto and which shall not, for purposes
of this Agreement

                                      -10-


only, be modified in any material respect without CIMA's prior written consent,
such consent not to be unreasonably withheld or delayed) and shall be directed
to CIMA at the address set forth below. The terms and conditions of purchase
enumerated on the reverse side of such standard purchase order form shall
prevail over any inconsistent or conflicting language as may exist on invoices,
confirmation or order acknowledgment forms of CIMA, provided, however, that in
the event any terms thereof are in conflict, or are inconsistent with any terms
of this Agreement, the terms and conditions hereof shall prevail. No Product
delivered by CIMA shall have a shelf life that is more than [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] less than the maximum shelf life of such product; and,
in any case, all Product delivered by CIMA shall have at least [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] of shelf life remaining upon delivery to Alamo (other
than batches that were under investigation and batches for validation which
shall have at least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of shelf life
remaining upon delivery to Alamo).

         (c) Purchase order quantities shall be equivalent to the batch size of
the Product, Product samples or Product placebos which shall be determined
during the development activities, approximately [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] tablets for the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] dose,
and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***] tablets for the [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***] dose, in the aggregate for any single purchase order,
unless otherwise mutually agreed by the parties. The delivery quantity of
tablets for trade shall not exceed a total of 4 batches in any one calendar
month, unless otherwise agreed to by the Parties.

         (d) Purchase orders shall clearly state that the order is for tablets
for sale, tablets for samples or placebos, as well as the shipping destination
and address. Alamo agrees that the maximum quantity of tablets for samples shall
not exceed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] percent of the
quantity of trade tablets in any year, unless otherwise agreed to by the
Parties.

         5.2 Identification. Alamo may market the Product under its name, with
its packaging and logo; Alamo will, however, identify CIMA as the supplier in a
fair manner, reasonably acceptable to CIMA. Alamo may use CIMA's name and
derivations thereof in

                                      -11-




promoting, marketing and selling the Product in the Territory; provided,
however, that the particular formulation of any reference to CIMA's name in any
promotional material shall be subject to CIMA's review and consent; and
provided, further, that once the formulation of any such reference has been
reviewed and consented to by CIMA, any subsequent reference to CIMA's name using
such formulation shall not be subject to the further review or consent of CIMA.
All samples shall be clearly marked "for sample use only" or some similar
phrasing suggested by Alamo. CIMA shall design and develop labels for the bulk
tablet containers and Alamo shall review and approve such labels. Such approval
shall not be unreasonably withheld.

         5.3 Trade and Sample Product Price. CIMA shall supply Product, Product
samples and Product placebos to Alamo at the price set forth on Schedule G,
subject to adjustment as set forth therein.

         5.4 Forecasts, Delivery and Quality.

         (a) Alamo shall provide CIMA with 12-month non-binding forecasts within
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] after the end of each Quarter. Such
forecasts shall be revised and extended in each succeeding Quarter.

         (b) Delivery of the Product, Product samples and Product placebos shall
be in accordance with the means of transportation, destination and dates set
forth in Alamo's purchase order, and shipped in full batch sized quantities.
CIMA shall arrange for the transportation and insurance of the Product, Product
samples and Product placebos and shall ensure that the transporter maintains the
Product, Product samples and Product placebos in accordance with the labeling of
such Product, Product samples and Product placebos. Delivery shall be F.O.B.
destination, freight prepaid (delivered) and insured and Alamo shall reimburse
CIMA for the cost of transportation and insurance of the Product, Product
samples and Product placebos. Title and risk of loss to all Product, Product
samples or Product placebos shall pass to Alamo upon delivery of the Product,
Product samples or Product placebos to Alamo or its designated agent.

         (c) All deliveries of the Product hereunder shall include a Certificate
of Analysis provided by the quality assurance manager of CIMA attesting to the
fact that the Product (i) has been manufactured by a process which complies with
cGMP and (ii) are of quality which is in accordance with criteria established in
the Specifications and all FDA requirements.

         (d) The Product, Product samples and Product placebos supplied
hereunder shall have been manufactured by a process which complies with the
Technical Agreement Addendum set forth on Schedule F.

                                      -12-


         5.5 Rejection, Replacement and Arbitration.

         (a) In the event that Alamo determines that any Product, Product
samples or Product placebos as manufactured and/or packaged by CIMA is
Defective, then: i) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from shipment of
Product, Product samples or Product placebos to Alamo or to Alamo's designated
agent for final packaging; or ii) in the event that such Product, Product
samples or Product placebos is Defective [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***], Alamo shall provide to CIMA a written notice of rejection,
specifying in reasonable detail the manner in which the Product is Defective
(the "Notice of Rejection"). If no written Notice of Rejection is given to CIMA
by Alamo within the period specified in clauses (i) and (ii), such Product,
Product samples or Product placebos shall be deemed to have been accepted by
Alamo, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***].

         (b) Upon receipt of a Notice of Rejection from Alamo and in order to
minimize any hardship to Alamo's customers, CIMA shall use reasonable commercial
efforts to promptly supply to Alamo a quantity of replacement Product, Product
samples or Product placebos meeting the Specifications equal to the size of the
lot which Alamo claims was Defective so that such replacement Product shall be
received by Alamo within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] following
CIMA's receipt of Alamo's Notice of Rejection. In the event that such Defective
Product, Defective Product samples or Defective Product placebos are due to: i)
faulty manufacture; faulty release; faulty primary packaging or labeling of the
relevant batch(es) of the Product; or ii) improper shipping to Alamo's
designated agent for final packaging, which fact shall be established on the
basis of the corresponding sealed samples retained by CIMA and/or Alamo's
designated agent for final packaging, utilizing an outside independent
laboratory if necessary, the cost of which is borne by both parties and whose
findings shall be binding or on the basis of process deviation documentation
provided to Alamo, CIMA shall replace such batches free of charge, otherwise
Alamo shall promptly pay CIMA for all such Product, Product samples or Product
placebos, including any Defective Product.

         5.6 Invoices and Payment. Upon CIMA's shipment to Alamo or its
designated agent of any Product, Product samples, or Product placebos CIMA shall
be entitled to submit an invoice to Alamo, and Alamo agrees to remit payment
with respect to such invoice within [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] from

                                      -13-

receipt of both such invoice and the shipment to which such invoice relates,
unless within such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period Alamo sends
notice of rejection to CIMA; provided, that payment of any invoice pursuant to
this Section 5.6 shall not constitute or be deemed to constitute acceptance of
any Product, Product samples or Product placebos or in any way limit Alamo's
rights to inspect and/or reject any of the foregoing pursuant to Section 5.5
hereof . Within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of delivery of the
Product, Product samples, or Product placebos Alamo or its designated agent
shall acknowledge the delivery of Product, Product samples, or Product placebos
and shall notify CIMA's shipping department of any obvious shipping damage;
provided, that failure to provided any such notice shall not constitute a waiver
or in any way limit Alamo's rights under Section 5.5 with respect to such
shipment. There will be a [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], of invoice
price, penalty per month, for each month a payment is past due. Such penalty
shall not exceed [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] per annum.

         5.7 Supply Disruption; Alternate Manufacturing Site.

         (a) CIMA shall supply Alamo with the Product, Product samples and
Product placebos in a timely manner in accordance with the orders and forecasts
received by CIMA pursuant to Sections 5.1(b) and 5.4(a), respectively. In any
consecutive [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period, should CIMA
fail to supply Alamo with substantially all of the Product, Product samples or
Product placebos ordered for such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period
pursuant to Section 5.1(b), Alamo shall have the right to require CIMA to
transfer the manufacture of the Product to another manufacturing facility
designated by Alamo and approved by CIMA, such approval not to be unreasonably
withheld, which manufacturing facility agrees to be bound by Section 9.4 hereof.
CIMA will assume all costs of, take all actions and grant all rights (on a
royalty-free, exclusive, worldwide basis with the right to grant sub-licenses)
with respect to CIMA Technology as shall be necessary to effect such transfer.
Should CIMA cure its failure to supply within [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] of the end of such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
period, CIMA shall have the right to resume the manufacture of the Product and
Alamo and CIMA shall, at CIMA's expense, transfer the manufacture of the Product
back to CIMA

                                      -14-

within a commercially reasonable amount of time and all rights granted under the
sublicense shall terminate.

         (b) If at any time following the Launch CIMA shall not have a second
manufacturing facility, capable of supplying the Product in accordance with the
terms of this Agreement, CIMA and Alamo shall, as soon as practicable following
the date of Launch, qualify a manufacturing plant designated by Alamo as an
alternate FDA approved manufacturing and packaging site for the Product. The
costs of obtaining such approval shall be [***CONFIDENTIAL TREATMENT REQUESTED,
PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***].

         5.8 CIMA's Obligation to Continue Manufacture. If this Agreement
terminates or expires through no breach of Alamo, CIMA shall reasonably
cooperate with Alamo in transferring the manufacture of the Product to Alamo,
its Affiliate or a third-party appointed by Alamo (which manufacturing facility
agrees to be bound by Section 9.4 hereof) and CIMA shall, if requested by Alamo,
continue to supply the Product to Alamo pursuant to the terms of this Agreement
until [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***] from the date this Agreement is
terminated or expires pursuant to Section 11.1.

         5.9 EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THE PRODUCT WILL BE
SUPPLIED BY CIMA WITH NO WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

                                    SECTION 6

                                   [RESERVED]

                                    SECTION 7

                     REPRESENTATIONS AND WARRANTIES OF CIMA

         CIMA hereby represents and warrants to Alamo that:

         7.1 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
Alamo pursuant hereto.

                                      -15-


         7.2 Due Authority; No Breach. The execution, delivery and performance
by CIMA of this Agreement and each agreement or instrument contemplated by this
Agreement, and the performance of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action by CIMA.
This Agreement is, and each agreement or instrument contemplated by this
Agreement, when executed and delivered by CIMA in accordance with the provisions
hereof, will be (assuming the due execution and delivery hereof and thereof by
Alamo) the legal, valid and binding obligation of CIMA, in each case enforceable
against CIMA in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization, or
similar laws from time to time in effect which affect the enforcement of
creditors' rights generally and by legal and equitable limitations on the
availability of specific performance and other equitable remedies against CIMA.
All persons who have executed this Agreement on behalf of CIMA, or who will
execute on behalf of CIMA any agreement or instrument contemplated by this
Agreement, have been duly authorized to do so by all necessary corporate action.
Neither the execution and delivery of this Agreement or any such other agreement
or instrument by CIMA, nor the performance of the obligations contemplated
hereby and thereby, 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
or under any agreement or instrument contemplated hereby.

         7.3 Intellectual Property. CIMA is the lawful owner of the Licensed
Assets, CIMA can license the Licensed Assets without the consent of any third
party, there is no pending or overtly threatened claim against CIMA asserting
that any of the Licensed Assets infringes or violates the rights of third
parties or that Alamo, 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 has not given any notice to any third
parties asserting infringement by such third parties upon any of the Licensed
Assets. CIMA is not aware of and has not received any communications challenging
the ownership, validity, enforceability 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 Alamo pursuant to this Agreement.

                                      -16-


         7.4 [RESERVED]

         7.5 Litigation. There are no pending or, to the best of CIMA's
knowledge, threatened judicial, administrative or arbitral actions, claims,
suits or proceedings pending as of the date hereof 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, the Licensed
Assets, or the ability of CIMA to perform its obligations under this Agreement
or any agreement or instrument contemplated hereby. There are no pending, and
CIMA does not presently contemplate bringing, any actions or suits relating to
the Activities, or the Licensed Assets against others.

         7.6 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, delivery and performance
of this Agreement, or any agreement or instrument contemplated by this
Agreement, by CIMA or the performance by CIMA of its obligations contemplated
hereby and thereby.

         7.7 Brokerage. No broker, finder or similar agent has been employed by
or on behalf of CIMA, and no Person with which CIMA has had any dealings or
communications of any kind is entitled to any brokerage commission, finder's fee
or any similar compensation, in connection with this Agreement or the
transactions contemplated hereby.

                                    SECTION 8

                     REPRESENTATIONS AND WARRANTIES OF ALAMO

         Alamo represents and warrants to CIMA that:

         8.1 Organization, Power and Authority. Alamo is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of California . Alamo has all necessary power and authority to enter
into, and be bound by the terms and conditions of, this Agreement and to license
the Licensed Assets.

         8.2 Due Authority; No Breach. The execution, delivery and performance
by Alamo of this Agreement, and each agreement or instrument contemplated by
this Agreement, and the performance of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary action by Alamo. This
Agreement is, and each agreement or instrument contemplated by this Agreement,
when executed and delivered by Alamo in accordance with the provisions hereof,
will be (assuming due execution and delivery hereof and thereof by CIMA) the
legal, valid and binding obligation of Alamo, in each case enforceable against
Alamo in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, moratorium,

                                      -17-

reorganization, or similar laws from time to time in effect which affect the
enforcement of creditor's rights generally and by legal and equitable
limitations on the availability of specific performance and other equitable
remedies against Alamo. All persons who have executed this Agreement on behalf
of Alamo, or who will execute on behalf of Alamo any agreement or instrument
contemplated by this Agreement, have been duly authorized to do so by all
necessary action. Neither the execution and delivery of this Agreement by Alamo,
or any such other agreement or instrument by Alamo, nor the performance of the
obligations contemplated hereby and thereby, 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 organization or other governing documents
or any material contract or any other material obligation to which Alamo 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, Alamo or upon the
securities, property or business of Alamo, or (iii) constitute a violation by
Alamo of any applicable law or regulation of any jurisdiction as such law or
regulation relates to Alamo or to the property or business of Alamo, except for
such conflict, acceleration, default, breach or violation that is not reasonably
likely to have a material adverse effect on Alamo's ability to perform its
obligations under this Agreement or any agreement or instrument contemplated
hereby.

         8.3 Brokerage. No broker, finder or similar agent has been
employed by or on behalf of Alamo and no Person with which Alamo has had any
dealings or communications of any kind is entitled to any brokerage commission,
finder's fee or any similar compensation, in connection with this Agreement or
the transactions contemplated hereby.

         8.4 Litigation. There are no pending or, to the best of Alamo's
knowledge, threatened judicial, administrative or arbitral actions, claims,
suits or proceedings pending as of the date hereof against Alamo which, either
individually or together with any other, will have a material adverse effect on
the ability of Alamo to perform its obligations under this Agreement or any
agreement or instrument contemplated hereby.

         8.5 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, delivery and performance
of this Agreement, or any agreement or instrument contemplated by this
Agreement, by Alamo or the performance by Alamo of its obligations contemplated
hereby and thereby.

                                    SECTION 9

               ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES

         9.1 Governmental Filings. CIMA and Alamo each agree to prepare and file
whatever filings, listings, requests or applications are required to be filed
with any

                                      -18-


governmental authority in connection with this Agreement or the Product and to
cooperate with one another as reasonably necessary to accomplish the foregoing.

         9.2 Compliance with Law. Alamo and CIMA shall each comply with all
federal, state and local laws and regulations applicable to developing,
approving, manufacturing, marketing and selling the Product in the Territory and
the Licensed Assets or the performance of their respective obligations
hereunder. CIMA and Alamo 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 Alamo each shall notify the
other within forty-eight (48) hours of receipt of any notice or any other
indication what so ever of any FDA or other governmental agency inspection,
investigation or other inquiry, or other material notice or communication of any
type, involving the Product. Alamo 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. Alamo 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
Alamo shall be responsible for deciding the appropriate form and content of any
response with respect to any of its cited activities.

         9.3 Recall. Alamo and CIMA shall consult with one another as to all
decisions concerning recall or withdrawal of the Product from the market,
including, but not limited to, determining whether or not to make any such
recall or withdrawal, the timing and scope thereof, and the means of conducting
any recall or withdrawal. The party requesting any recall or withdrawal must
receive the prior written consent of the other party, such consent not to be
unreasonably withheld, prior to initiating such recall or withdrawal. No consent
shall be necessary if the recall or withdrawal is requested by the FDA or other
governmental authority. CIMA shall bear the costs (including but not limited to,
shipping and product credits) for any recall or withdrawal due to CIMA's failure
to comply with this Agreement, including Product failure relating to CIMA's cGMP
or CIMA's failure to meet the Specifications . The costs for any other recall or
withdrawal shall be the responsibility of Alamo.

         9.4 Confidentiality. Alamo shall treat as confidential the Licensed
Assets and all other information of CIMA of which Alamo becomes aware in
connection with this Agreement (collectively, "CIMA Proprietary Information").
Alamo 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

                                      -19-


other information of Alamo of which CIMA became aware of prior to the Effective
Date or becomes aware in connection with this Agreement (collectively, "Alamo
Proprietary Information"). CIMA shall neither disclose Alamo Proprietary
Information to any third party nor use Alamo 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 to the Using Party by a
         third party who is not thereby in violation of a confidential
         relationship with the other party known to the Using Party;

                  (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.

Alamo 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 Alamo Proprietary Information except as set forth
in this Agreement.

         9.5 Expenses. CIMA and Alamo 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.

         9.6 Reasonable Efforts. CIMA and Alamo each hereby agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done all things necessary or proper to make effective the
transactions contemplated by this

                                      -20-





Agreement, including such actions as may be reasonably necessary to obtain
approvals and consents of governmental Persons and other Persons.

         9.7 Publicity. Except as expressly contemplated hereby, 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, which consent shall not be unreasonably withheld or delayed, 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;
provided, that the party making the release or announcement or otherwise
disclosing this Agreement to any governmental agency in accordance with the
foregoing exception shall use its best efforts to obtain confidential treatment
of the terms hereof to the fullest extent permitted by applicable law.

         9.8 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, provided that, for purposes of this provision, reasonable efforts to
make available any employee shall be deemed to mean providing a party with
reasonable access to any such employee at no cost for a period of time not to
exceed 24 hours (e.g., three 8-hour business days). Thereafter, any such
employee shall be made available for such time and upon such terms and
conditions (including, but not limited to, compensation) as the parties may
mutually agree.

         9.9 Competition; No Sale for Resale. Neither Alamo nor any sub-licensee
of Alamo shall knowingly sell any Product to anyone in the Territory for
subsequent distribution or resale outside the Territory and each shall take all
reasonable precautions to prevent such distribution or resale outside the
Territory. Except as provided in 2.1(c), CIMA shall not knowingly sell any
Product to anyone in the Territory or outside the Territory for subsequent
distribution or resale in the Territory and CIMA shall take all reasonable
precautions to prevent such distribution or resale in the Territory.

         9.10 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 Alamo pursuant to this Agreement.

                                      -21-




         9.11 Patent and Trademark Maintenance.

                  (a) CIMA hereby represents and warrants that, to the best of
         its knowledge, the CIMA Technology, when used with the Active
         Pharmaceutical Ingredient, includes all the technology, patents,
         know-how, trade secrets and other intellectual property necessary to
         manufacture the Product. Any improvement (whether or not patentable) in
         the technology used in manufacturing the Product shall be owned by the
         Party who discovers or invents such improvement.

                  (b) 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 Alamo hereunder. CIMA may, however, discontinue prosecuting or
         maintaining any CIMA Patent if (i) CIMA has a valid business reason to
         do so, and (ii) CIMA notifies Alamo of this decision in which event,
         Alamo shall have the right, but not the obligation, to prosecute or
         maintain any such patent, with the full cooperation of CIMA, in Alamo's
         name and at Alamo's expense.

                  (c) 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, Alamo shall
         have no rights to use the CIMA Trademarks. Alamo 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 in use by
         CIMA to indicate the source and origin of the CIMA Technology as to be
         likely to cause deception or confusion. Alamo recognizes that CIMA is
         the owner of all CIMA Trademarks used in commerce to indicate the
         source of the CIMA Technology and agrees that the CIMA Trademarks shall
         remain vested in CIMA both during the term of this Agreement and
         thereafter. Alamo shall not contest the validity of the CIMA Trademarks
         or CIMA's ownership of the CIMA Trademarks. Use of the CIMA Trademarks
         by Alamo in conjunction with the manufacture, use, and sale 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.

                  (d) Alamo shall be solely responsible for filing, prosecuting,
         and maintaining all trademarks it develops or owns for the Product (the
         "Alamo Trademarks"), and Alamo shall pay the costs associated
         therewith. All registrations, variations, logos, goodwill and other
         rights under or acquired through use of the Alamo Trademarks shall
         accrue and belong to Alamo. CIMA shall have no rights to use the Alamo
         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 Alamo

                                      -22-




         Trademarks in use by Alamo in a manner that is likely to cause
         deception or confusion. CIMA recognizes that Alamo is the owner of all
         of the Alamo Trademarks used in commerce to indicate the source of the
         Product and agrees that the Alamo Trademarks shall remain vested in
         Alamo both during the term of this Agreement and thereafter. CIMA shall
         not contest the validity of the Alamo Trademarks or Alamo's ownership
         of the Alamo Trademarks. Use of the Alamo Trademarks by Alamo in
         conjunction with the manufacture, use, and sale of the Product and all
         goodwill related thereto shall inure to the benefit of Alamo for
         purposes of building the longevity and extent of use of the Alamo
         Trademarks.

                  (e) Alamo and CIMA agree that, where applicable and
         appropriate, all packaging of the Product shall identify (i) the number
         of the CIMA Patents and CIMA as the owner thereof and (ii) Alamo as the
         owner of the Alamo Trademarks.

                  (f) Any provisions in this Agreement to the contrary
         notwithstanding, Alamo acknowledges that, for all purposes, CIMA is the
         owner of the CIMA Technology.

         9.12 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.

                           (i) Within a reasonable time (not to exceed 30 days)
                  following such notification, the parties shall meet to discuss
                  a desirable response to such infringement and enter into good
                  faith negotiations to determine an agreed upon course of
                  action to end such infringement and the appropriate allocation
                  of any costs or recoveries associated therewith.

                           (ii) If the parties are unable to agree upon the
                  course of action or the appropriate allocation of any costs
                  associated therewith, CIMA [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] such alleged
                  infringement and [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] any infringement of such rights that
                  materially affect Alamo's rights pursuant to this Agreement,
                  including, but not limited to, bringing suit against such
                  third party infringer. In the event that CIMA does not bring
                  suit against such third party infringer, Alamo may bring suit
                  against such third party infringer on CIMA's behalf and Alamo
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE

                                      -23-




                  SECURITIES AND EXCHANGE COMMISSION.***] in bringing such suit
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] to
                  CIMA under this agreement.

                  (b) Procedures. No settlement, consent judgment or other
         voluntary final disposition of any suit contemplated by Section 9.12(a)
         may be entered into without the consent of each party, which consent
         shall not be unreasonably withheld or delayed. Unless otherwise agreed
         by the parties, to the extent that any suit contemplated by Section
         9.12(a) is directly related to the Product, any recovery of Damages to
         the extent related to the Product (net of the respective out-of-pocket
         legal fees and associated costs) in any such suit shall be allocated
         among the parties hereto assuming that such Damages constitute Net
         Sales by Alamo hereunder. In the event of any infringement suit against
         a third party brought by either party pursuant to this Section 9.12,
         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.

         9.13 Referral of Orders and Inquiries. Except as provided in 2.1(c),
CIMA shall refer all Persons sending orders or making inquiries regarding the
Product within the Territory to Alamo and shall promptly notify Alamo of the
name of each such Person and the nature of the inquiry of such Person.

                                   SECTION 10

                                 INDEMNIFICATION

         10.1 Indemnification.

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

                           (i) any breach of any representation, warranty
                  or covenant made by CIMA in this Agreement or any agreement,
                  instrument or document delivered by CIMA pursuant to the terms
                  of this Agreement;

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


                                      -24-




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

                           (iv) any claim or demand that the manufacture,
                           use, sale or offer for sale of the Product by reason
                           of CIMA Technology infringes any United States or
                           foreign patent.

         (b) Alamo 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:

                           (i) any breach of any representation, warranty
                  or covenant made by Alamo in this Agreement or any agreement,
                  instrument or document delivered by Alamo pursuant to the
                  terms of this Agreement;

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

                           (iii) [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] of Alamo with respect to the
                  operation of Alamo's business or the handling, manufacturing,
                  sale, consumption or use of the Product by Alamo.

         10.2 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 10.1. 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, as incurred by the Indemnified Party.

                                      -25-





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

         10.3 Survival. The provisions of Section 10 shall survive any
termination of this Agreement. Each Indemnified Party's rights under Section 10
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 this Agreement, unless such
waiver expressly and in writing also waives any or all of the Indemnified
Party's right under Section 10.

         10.4 Insurance. Alamo shall maintain throughout the term of this
Agreement comprehensive general liability insurance, including product liability
insurance underwritten by an insurance company reasonably acceptable to CIMA.
This insurance coverage shall provide protection of not less than ten ($10)
million, combined single limit for personal injury and property damage (on a per
occurrence basis) with CIMA named as an additional insured. Such liability
insurance shall be maintained on an occurrence basis to provide such protection
after expiration or termination of the policy itself and/or this Agreement.
Alamo shall furnish to CIMA certificates issued by the insurance company setting
forth the amount of the liability insurance and a provision that CIMA shall
receive thirty (30) days written notice prior to termination, reduction or
modification of coverage.

                                      -26-






                                   SECTION 11

                                   TERMINATION

         11.1 Termination. The term of this Agreement shall begin upon the
Effective Date and, unless sooner terminated as hereinafter provided, shall end
upon the expiration of the last CIMA Patent to expire or, if later, the
expiration of any other patent resulting from the development process
contemplated hereby. Upon expirationof this Agreement, CIMA will, if requested
by Alamo, grant Alamo on a royalty free basis a license to continue to use the
CIMA Intellectual Property formerly covered by the CIMA Patents for the
manufacture of Product and, should Alamo desire to have CIMA continue the
manufacture of Product beyond the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] period
provided for in Section 5.8, CIMA agrees to enter into good faith negotiations
with Alamo to discuss terms of manufacture. Notwithstanding the foregoing, this
Agreement may be terminated as follows:

                  (a) Termination for Insolvency. If either Alamo 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. In addition to Alamo's rights
         under Section 4.1(c), Alamo 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 11.1(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.
         Notwithstanding the foregoing, if Alamo fails to pay any invoice for
         development fees payable pursuant to Section 3.2 above with respect to
         one of the development activities set forth on the Development Schedule
         within 45 days after receipt of such invoice following the successful
         completion of such development

                                      -27-




         activity, CIMA shall have the right to terminate this Agreement by
         delivering written notice of such election to terminate and this
         Agreement shall terminate on the thirtieth (30th) day following the
         receipt of such notice by Alamo, unless prior to such thirtieth (30th)
         day Alamo shall have cured such failure to pay or shall have delivered
         to CIMA written notice that it disputes that such development activity
         has been successfully completed. This Section 11.1(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.

                  (c) 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 any ongoing obligations
         hereunder with respect to the remaining 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 9.3,
         9.4, 9.6, 9.8, 10, 11.1(c) and 12 hereof, and such obligations shall
         survive any such termination.

                                   SECTION 12

                                  MISCELLANEOUS

         12.1 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 Alamo
may assign any of its rights, duties or obligations hereunder without the prior
written consent of the other, except that no prior written consent shall be
required in the event that a third party acquires substantially all of the
assets or outstanding shares of, or merges with, Alamo or CIMA, as the case may
be.

         12.2 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


                                      -28-




         If to Alamo, as follows:

                  Alamo Pharmaceuticals, LLC
                  8501 Wilshire Blvd.,
                  Suite 318
                  Beverly Hills, CA  90211
                  Facsimile:  (310) 854-0739
                  Attention:  Chief Financial Officer

         with a copy to:

                  Milbank, Tweed, Hadley & McCloy LLP
                  601 S. Figueroa Street
                  Los Angeles, CA  90017
                  Facsimile:  (213) 629-5063
                  Attention:  Kenneth J. Baronsky

or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Section 12.2 by any party hereto to the other
party.

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

         12.4 Survival of Representations. Each of the representations and
warranties made in this Agreement shall survive the term of this Agreement.

         12.5 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,
franchiser and franchisee, or of any association or relationship between the
parties other than as expressly provided in this Agreement. Alamo acknowledges
that it does not have, and Alamo shall not make representations to any third
party, either directly or indirectly, indicating that Alamo 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 Alamo or to obligate Alamo in any way
whatsoever.

                                      -29-

         12.6 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings of the parties relating
thereto.

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

         12.8 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.

         12.9 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.

         12.10 Dispute Resolution. To the extent 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, 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.

         12.11 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.

         12.12 No Third-Party Rights. No provision of this Agreement shall be
deemed or construed in any way to result in the creation of any rights or
obligation in any Person not a party or not affiliated with a party to this
Agreement.

         12.13 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.

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

                                      -30-


         12.15 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.

                                      -31-


         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
                                               ---------------------------------
                                               Name:  John Siebert Ph.D.
                                               Title: President and CEO

                                           ALAMO PHARMACEUTICALS, LLC


                                           By: /s/ Robert L. Sevy
                                               ---------------------------------
                                               Name:  Robert L. Sevy
                                               Title: Chief Financial Officer


                                                                      Schedule A
                                                         to Development, License
                                                            and Supply Agreement

                         Minimum Annual Royalty Targets

Pursuant to Section 4.1(c), Alamo shall endeavor to meet or exceed the minimum
annual royalty targets set forth below. References to Years below are to full
calendar years commencing at least six (6) months after the date on which the
Product is launched.

         Minimum Annual Royalty Targets



- ----------------------------------------------------------------
      YEAR                    MINIMUM ROYALTY TARGETS
- ----------------------------------------------------------------
                  
       1             $[***CONFIDENTIAL TREATMENT REQUESTED,
                     PORTION OMITTED FILED SEPARATELY WITH THE
                     SECURITIES AND EXCHANGE COMMISSION.***]

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

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

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

- ----------------------------------------------------------------
       5             $[***CONFIDENTIAL TREATMENT REQUESTED,
 and thereafter      PORTION OMITTED FILED SEPARATELY WITH
                     THE SECURITIES AND EXCHANGE COMMISSION.***]

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



                                                                      Schedule B
                                                         to Development, License
                                                            and Supply Agreement
                      Development Schedule



- -------------------------------------------------------
                   ACTIVITY       DURATION       COST
                                        
Phase
- -------------------------------------------------------


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


                                                                      Schedule C
                                                         to Development, License
                                                            and Supply Agreement

                                  Royalty Rates

         Pursuant to Section 4.3, Alamo shall pay to CIMA a percentage of Annual
Net Sales, if any, actually recorded during such Year, as indicated on the
following schedule. If Alamo does not meet the Minimum Annual Royalty Target set
forth in Schedule A for any Year, then the royalty rate paid for such Year shall
be that rate noted in Tier 2



- --------------------------------------------------------------------
  TIER                             ROYALTY RATE
- --------------------------------------------------------------------
                
 Tier 1            [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                   OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                   EXCHANGE COMMISSION.***] of Net Sales
- --------------------------------------------------------------------
 Tier 2            [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                   OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                   EXCHANGE COMMISSION.***] of Net Sales
- --------------------------------------------------------------------



                                                                      Schedule D
                                                         to Development, License
                                                            and Supply Agreement

                         License and Milestone Payments

Pursuant to Section 4.1, Alamo shall pay CIMA the License Payment of
$[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] upon the Effective Date and the
milestone payments set forth below (each a "Milestone Payment") within thirty
(30) days of successful completion of each research and development milestones.

MILESTONE ACTIVITY                                             MILESTONE PAYMENT

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


                                                                      Schedule E
                                                         to Development, License
                                                            and Supply Agreement

                              Alamo Purchase Order

                                 [See Attached]


                                                                      Schedule F
                                                         to Development, License
                                                            and Supply Agreement

                          Technical Agreement Addendum

         CIMA will be accountable for all aspects of the Product research and
development and manufacturing other than (i) the design and conduct of clinical
trials, (ii) the assembly and filing of the regulatory documents and (iii) the
final packaging and sales of Product. Specifications will be mutually agreed by
both parties on or prior to the final regulatory filing. To the extent that a
more detailed allocation of pharmaceutical responsibility is required in
connection with the final packaging and/or marketing of the product in any
jurisdiction in the Territory, the Parties shall amend this Schedule F as
necessary.


                                                                      Schedule G
                                                         to Development, License
                                                            and Supply Agreement

                                  Cost of Goods

         Pursuant to Sections 5.1, 5.3 and 5.6, Alamo shall pay to CIMA the
amounts indicated on the following schedule in respect of CIMA's manufacturing
obligations hereunder.

         TRADE and SAMPLES (cost per tablet)



- ---------------------------------------------------------------
POTENCY          TOTAL COST(1)(2)(3)          PACKAGING
- ---------------------------------------------------------------
                                        


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

         1) The cost per tablet does not include the cost of [***CONFIDENTIAL
         TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
         SECURITIES AND EXCHANGE COMMISSION.***], as noted in Section 3.2.

         2) Per tablet costs may be reviewed annually. Any increase in cost will
         reflect documented increase in raw material(s) and be subject to
         Alamo's acceptance, but increases shall not exceed the PPI increase for
         that year.

         3) Final cost per tablet will be determined upon completion of
         formulation development and shall not exceed the costs noted in this
         table

         PLACEBOS (cost per tablet)



- ---------------------------------------------------------------
PLACEBO          TOTAL COST*               PACKAGING
 TYPE
- ---------------------------------------------------------------
                                     


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



                                TABLE OF CONTENTS



SCHEDULES
                        
Schedule A                 Minimum Annual Royalty Targets
Schedule B                 Development Schedule
Schedule C                 Royalty Rates
Schedule D                 License and Milestone Payments
Schedule E                 Alamo Purchase Order
Schedule F                 Technical Agreement Addendum
Schedule G                 Cost Of Goods




                                       i



            AMENDMENT #1 TO DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

Whereas, CIMA LABS INC. (CIMA) and Alamo Pharmaceuticals Inc. (Alamo) have
entered into a Development License and Supply Agreement dated March 2, 2001
(DLSA) regarding the development, licensing and supply of a pharmaceutical
product containing [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] and CIMA's
DuraSolv(TM) technology;

Whereas, CIMA has been conducting research according to Schedule B of the DLSA
and such research has indicated that CIMA's DuraSolv technology [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]; and

Whereas, CIMA and Alamo have decided to utilize CIMA's OraSolv(R) technology to
develop a pharmaceutical product containing [***CONFIDENTIAL TREATMENT
REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***] and that certain changes to the DLSA will therefore be required;

Therefore, for good and valid consideration, the Parties agree as follows:

     1) Schedule G of the DLSA is hereby replaced by Schedule G-1 of this
        Amendment;

     2) Schedule B of the DLSA is hereby replaced by Schedule B-1 of this
        Amendment

     3) Schedule D of the DLSA is hereby replaced by Schedule D-1 of this
        Amendment;

     4) In the definition of "CIMA Patents" replace "United States Patent No.
        6,024,981 (entitled "Rapidly Dissolving Robust Dosage Form")" with
        "United States Patent No. 5,178,878 (entitled "Effervescent Dosage
        Form with Microparticles")";

     5) In the definition of "CIMA Technology" replace "DuraSolv(TM)" with
        "OraSolv(R)";

     6) In the definition of "CIMA Trademarks" replace "DuraSolv(TM)" with
        "OraSolv(R)";

     7) In the definition of "DuraSolv(TM)" replace "DuraSolv(TM)" with
        "OraSolv(R)"; and

     8) In the definition of "Product" replace "DuraSolv(TM)" with
        "OraSolv(R)".



     9) In all other respects, the terms and conditions of the Development
        License and Supply Agreement dated March 2, 2001 shall remain in full
        force and effect. Capitalized terms in this Amendment shall have the
        same meaning as in the Development License and Supply Agreement.

     CIMA LABS INC.                         Alamo Pharmaceuticals, LLC


     By: /s/ John M. Siebert                By: /s/ Greg Wichmann
         -------------------------------        -------------------------------
         (Signature)                            (Signature)

         John M. Siebert                        Greg Wichmann
         -------------------------------        -------------------------------
         (Print or Type Name)                   (Print or Type Name)

     Title: President & CEO                     Title: Director
            ------------------------                   ------------------------

     Date: 4 January 2002                       Date: 15 January 2002
           -------------------------                  -------------------------


                                                                    SCHEDULE B-1

                              Development Schedule



- ---------------------------------------------------------------------------
                        ACTIVITY             DURATION            COST
                                                        
PHASE
- ---------------------------------------------------------------------------


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



                                                                    SCHEDULE G-1

TRADE AND SAMPLES (COST PER TABLET)



- ------------------------------------------------------------------------
POTENCY                 TOTAL COST(1)(2)(3)              PACKAGING
- ------------------------------------------------------------------------
                                                   


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

     (1)  The cost per tablet does not include the cost of [***CONFIDENTIAL
          TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
          SECURITIES AND EXCHANGE COMMISSION.***], as noted in Section 3.2.

     (2)  Per tablet costs may be reviewed annually. Any increase in cost will
          reflect documented increase in raw material(s) and be subject to
          Alamo's acceptance, but increases shall not exceed the PPI increase
          for that year.

     (3)  Final cost per tablet will be determined upon completion of
          formulation development and shall not exceed the costs noted in this
          table.

          Placebos (cost per tablet)



- ---------------------------------------------------------------
POTENCY                 TOTAL COST                 PACKAGING
- ---------------------------------------------------------------
                                             


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



                                                                    SCHEDULE D-1

Pursuant to Section 4.1, Alamo shall pay CIMA the License Payment of
[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***] upon the Effective Date and the
milestone payments set forth below (each a "Milestone Payment") with in thirty
(30) days of successful completion of each research and development milestones.

                  Milestone Activity                           Milestone
                  Payment

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

* 1/10th scale batches will be manufactured using equipment that is identical in
design and principle to full-scale equipment per regulatory requirements

EX-10.30

                                                                   EXHIBIT 10.30

                     FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

         THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "First Amendment")
is entered into as of December 31, 2002, by and between CIMA LABS INC., a
Delaware corporation (the "Company"), and John Hontz, Ph.D., an individual
resident of Minnesota ("Employee").

         WHEREAS, the Company and Employee entered into an Employment Agreement
dated effective as of August 23, 2000 (the "Original Agreement"); and

         WHEREAS, the Company and Employee desire to amend certain of the terms
of the Original Agreement as set forth in this First Amendment.

         NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties do hereby agree as
follows:

         1. Extension of Term of Original Agreement.

         As approved by the Company's Board of Directors on December 17, 2002,
Section 1 of the Original Agreement will be amended in its entirety to read as
follows:

                  1. EMPLOYMENT AND TERM. Subject to the terms and conditions
         herein provided, the Company hereby continues employment of the
         Employee, and the Employee hereby accepts continued employment by the
         Company, for a term beginning on September 1, 2000 and continuing
         thereafter for five (5) years until September 1, 2005, unless earlier
         terminated in accordance with Section 11.

         2. Increase In Certain Payments Upon Termination of Employment.

         As approved by the Company's Board of Directors on December 17, 2002,
Sections 12(c), 12(d) and 12(e) of the Original Agreement will be amended in
their entirety to read as follows:

                  12. PAYMENTS ON TERMINATION.

                  (c) Termination By the Company Without Cause. Upon termination
         by the Company during the term for any reason other than Cause (not
         including termination due to death, disability, or upon expiration of
         the term set forth in Section 1), the Company will continue to pay
         Employee at the rate of his then current annual Base Salary for a
         period of twenty-four (24) months after the Termination Date.

                  (d) Other Terminations. Upon termination of Employee's
         employment by the Company for Cause, by the Employee for other than
         Good Reason, or upon expiration of the term as set forth in Section 1,
         the Company will pay Employee his Base Salary earned through the
         Termination Date.



                  (e) Termination after Change in Control. In the event of
         termination of Employee's employment by the Company as a result of a
         Change in Control of the Company or by Employee for Good Reason, and in
         lieu of payment under any other provision of Section 12 of this
         Agreement, the Company will continue to pay Employee at the rate of his
         then current annual Base Salary for a period of twenty-four (24) months
         after the Termination Date. The amount of payment to be made by the
         Company to the Employee pursuant to this Section 12(e) shall be reduced
         by 50% of any gross compensation earned by the Employee in connection
         with any employment or self-employment of the Employee during the
         compensation period pursuant to this Section 12(e). Employee shall
         promptly notify the Company of any such employment or self-employment
         and disclose to the Company his gross earnings therefrom.

                  Except as otherwise provided in the last sentence of this
         paragraph, if the payments owed to the Employee pursuant to this
         Section 12(e) and any other benefits to which the Employee shall become
         entitled, either alone or together with other payments or benefits in
         the nature of compensation to the Employee which would constitute a
         "parachute payment" as defined in Section 280G of the Internal Revenue
         Code of 1986, as amended (the "Code"), such payments or other benefits
         shall be reduced (but not below zero) to the largest aggregate amount
         as will result in no portion thereof being subject to the excise tax
         imposed under Section 4999 of the Code. The Employee in good faith
         shall determine the amount of any reduction to be made pursuant to this
         paragraph. Notwithstanding the foregoing, this Section 12(e) shall not
         apply (and no reduction shall be made to the payments or other benefits
         otherwise available to the Employee) if the Company determines that (i)
         the Employee's net after-tax position without the imposition of such
         reduction would be greater than (ii) the Employee's net after-tax
         position with the imposition of such reduction.

         3. Miscellaneous. All capitalized terms not otherwise defined
herein shall take the meanings ascribed to such terms in the Original Agreement.
Other than as expressly amended in this First Amendment, the Original Agreement
shall continue in full force and effect, as so amended by this First Amendment.

         IN WITNESS WHEREOF, the parties to this Agreement have executed and
delivered this First Amendment on the date first above written.

CIMA LABS INC.                                        EMPLOYEE


By: /s/ John M. Siebert                               /s/ John Hontz
   -----------------------                           ---------------------------
      John M. Siebert, Ph.D.                          John Hontz, Ph.D.
      Its President and CEO

                                       2

EX-10.31

                                                                   EXHIBIT 10.31

February 27, 2003

David Feste
5145 Russell Ave S
Minneapolis, MN 55410

Dear Dave:

         This letter will confirm our discussions and agreements regarding the
transition and termination of your employment with CIMA LABS INC. (the
"Company").

         1. Employment. Your employment with the Company will end by mutual
agreement effective June 30, 2003 (the "Separation Date"). Your status as Chief
Financial Officer of the Company ("CFO") will end effective March 31, 2003. You
will continue to perform the responsibilities of CFO from now through March 31,
2003. Thereafter until the Separation Date, you will perform such transition
duties consistent with your former position as CFO as may be requested by the
Company. Such transition duties requested by the Company will not exceed eight
days per month and will be performed by you at times mutually agreed upon with
the Company. Between now and the Separation Date, the Company may terminate your
employment only for "cause," as defined in the Employment Agreement between you
and the Company, dated as of January 26, 2001 (the "Employment Agreement"). In
the event of termination by the Company for "cause," the Company shall have no
further obligation to you under this letter agreement except to pay your base
salary and benefits accrued through the date of termination.

         2. Compensation. While you are so employed by the Company, you will
continue to receive base salary at your current annual rate of $203,970 and
those benefits as set forth in Section 3(c), (d), (e), and (g) of the Employment
Agreement. Except as provided in paragraph 3(c) of this letter agreement below,
you will not be eligible for any incentive bonus for calendar year 2003.

         3. Severance Pay. If you sign the enclosed Release By David Feste (the
"Release") within 21 days following the Separation Date and do not rescind the
Release within 15 days after signing it, and subject to your complying with all
terms of this letter agreement, the Company will provide you with the following
benefits:

                  a. The Company will pay you severance pay equal to your final
base salary at the annual rate of $203,970 for a period of six months.
Thereafter, if you have not obtained other employment by December 31, 2003, then
the Company will continue to pay you severance pay at the same rate until the
earlier of (i) March 31, 2004 and (ii) the date you obtain other employment.
Such severance pay will subject to normal tax withholdings and will be paid by
the Company in accordance with its regular payroll schedule. You agree to
diligently seek employment following the Separation Date and to promptly report
any employment to the Company in writing within three (3) days of acceptance of
such employment.

                  b. If following the Separation Date you elect to continue your
group medical and dental insurance in accordance with the terms of the
applicable plans and laws, the Company



will continue to pay its portion of the monthly premiums for such coverage up to
nine (9) months following the Separation Date as if you were still employed by
the Company. Your continued coverages will be at the same level as in effect as
of the Separation Date and dependent coverages may be added in connection with a
qualifying event in accordance with the applicable plans and laws. The portion
of the premiums that shall be paid by the Company if dependent coverage is added
will also be that portion that the Company would pay if you were still an
employee of the Company. The Company's obligation to make such premium payments
shall commence after the rescission period has expired and shall cease
immediately if you become eligible for other health or dental (as applicable)
insurance benefits through a new employer. The Company shall deduct your
contributions for the monthly premiums from the severance pay described in
paragraph 3(a) above of this letter agreement. You agree to notify the Company
in writing within three (3) days of your acceptance of any employment that
provides health or dental insurance benefits.

                  c. The Company will pay you a prorated annual bonus for
calendar year 2003, in the amount of $25,496.25, less normal tax withholdings.
Such bonus payment will be paid at the same time as annual bonus payments are
paid to other management employees of the Company for calendar year 2003, but in
no event later than March 31, 2004.

         4. Stock Options. You currently have options to purchase shares
of the Common Stock of the Company in accordance with the following schedule,
assuming your continued employment with the Company through the Separation Date:



                                                         Amount
  Date of          Exercise          Number of      Exercisable as of
   Grant            Price         Shares Granted         6/30/03
- -----------        --------       --------------    -----------------
                                           
  2/28/00          $18.6875           50,000             25,000
  5/16/00            $15.00           86,000             57,333
 12/31/00            $66.00           75,000             50,000


You agree and acknowledge that all of your options to purchase the Company's
Common Stock are listed above and will lapse and cease to be outstanding 90 days
following the Separation Date, unless previously exercised in accordance with
the terms of the applicable option agreement and the Equity Incentive Plan (and
subject to adjustment if your employment terminates before the Separation Date).

         5. Press Release. The Company will not issue a press release announcing
your departure from the Company without your advance approval of the text of
such release. Such approval will not be unreasonably withheld by you.

         6. Your Obligations. You shall continue to be obligated to comply with
each of the terms of Sections 5, 6, 7, and 8 of the Employment Agreement,
provided, however, that the second sentence of Section 7 of the Employment
Agreement shall be amended to state as follows:

                  The Employee therefore agrees that for a period of one (1)
                  year from the date of termination of his employment with the
                  Company, the Employee


                                      -2-




                  shall not operate, join, control, be employed by, or
                  participate in ownership, management, operation, or control
                  of, or be connected in any manner as an independent
                  contractor, consultant, or otherwise, with any person or
                  organization engaged in the design, development, manufacture,
                  distribution, marketing or selling of pharmaceutical products
                  using fast-dissolve drug delivery technologies within the
                  United States.

         7. Company Obligations. The sole obligations of the Company will
be its obligations as set forth in this letter agreement, except as otherwise
provided by law. This letter agreement represents the entire agreement between
you and the Company and supersedes all prior negotiations, discussions,
communications and agreements.

         8. Governing Law. All matters relating to the interpretation,
construction, application, validity and enforcement of this letter agreement
shall be governed by the laws of the State of Minnesota.

                                    * * * * *

         This letter agreement is intended to state all the terms of the
conclusion of your employment by the Company. Please indicate your acceptance of
all such terms by signing both copies of this letter agreement and returning one
copy to the undersigned.

                                            Sincerely,

                                            CIMA LABS INC.

                                            /s/Steven Ratoff
                                            Steven Ratoff
                                            Member, Board of Directors

On this 27th day of February, 2003, I, David A. Feste, hereby accept and agree
to the terms of the above letter agreement and further acknowledge that I have
21 days after the Separation Date to decide whether to sign the enclosed
Release. I also hereby specifically confirm (a) that I am being advised by the
Company to seek independent advice from legal counsel of my own selection in
connection with this letter agreement and the Release (and that I have had
adequate opportunity to do so); and (b) that I have not relied to any extent on
any statement or other communication from any shareholder, director, officer,
employee, attorney or agent of the Company in connection herewith.

/s/David A. Feste                                                   2/27/03
- -----------------------------------------                           -------
David A. Feste                                                      Dated



                                      -3-



                            RELEASE BY DAVID A. FESTE

DEFINITIONS. I intend all words used in this Release to have their plain
meanings in ordinary English. Specific terms that I use in this Release have the
following meanings:

         A. I, me, and my include both me and anyone who has or obtains any
            legal rights or claims through me.

         B. CIMA means CIMA LABS INC., any company related to CIMA LABS INC. in
            the present or past (including without limitation, its predecessors,
            parents, subsidiaries, affiliates, joint venture partners, and
            divisions), and any successors of CIMA LABS INC.

         C. Company means CIMA; the present and past officers, directors,
            committees, shareholders, and employees of CIMA; any company
            providing insurance to CIMA in the present or past; the present and
            past fiduciaries of any employee benefit plan sponsored or
            maintained by CIMA (other than multiemployer plans); the attorneys
            for CIMA; and anyone who acted on behalf of CIMA or on instructions
            from CIMA.

         D. Letter Agreement means the letter agreement from CIMA dated February
            __, 2003 and accepted by me, including all of the documents attached
            to the Letter Agreement.

         E. My Claims mean all of my rights that I now have to any relief of any
            kind from the Company, including without limitation:

                  1. all claims arising out of or relating to my employment with
                     CIMA or the termination of that employment;

                  2. all claims arising out of or relating to the statements,
                     actions, or omissions of the Company;

                  3. all claims for any alleged unlawful discrimination,
                     harassment, retaliation or reprisal, or other alleged
                     unlawful practices arising under any federal, state, or
                     local statute, ordinance, or regulation, including without
                     limitation, claims under Title VII of the Civil Rights Act
                     of 1964, the Age Discrimination in Employment Act, the
                     Americans with Disabilities Act, 42 U.S.C. ss. 1981, the
                     Employee Retirement Income Security Act, the Equal Pay Act,
                     the Worker Adjustment and Retraining Notification Act, the
                     Minnesota Human Rights Act, the Fair Credit Reporting Act,
                     and workers' compensation non-interference or
                     non-retaliation statutes (such as Minn. Stat. Section
                     176.82);

                  4. all claims for alleged wrongful discharge; breach of
                     contract; breach of implied contract; failure to keep any
                     promise; breach of a covenant of

                                      -1-


                     good faith and fair dealing; breach of fiduciary duty;
                     estoppel; my activities, if any, as a "whistleblower";
                     defamation; infliction of emotional distress; fraud;
                     misrepresentation; negligence; harassment; retaliation or
                     reprisal; constructive discharge; assault; battery; false
                     imprisonment; invasion of privacy; interference with
                     contractual or business relationships; any other wrongful
                     employment practices; and violation of any other principle
                     of common law;

                  5. all claims for compensation of any kind, including without
                     limitation, bonuses, commissions, stock-based compensation
                     or stock options, vacation pay, and expense reimbursements;

                  6. all claims for back pay, front pay, reinstatement, other
                     equitable relief, compensatory damages, damages for alleged
                     personal injury, liquidated damages, and punitive damages;
                     and

                  7. all claims for attorneys' fees, costs, and interest.

                  However, My Claims do not include any claims that the law does
                  not allow to be waived, any claims that may arise after the
                  date on which I sign this Release, any claims for
                  indemnification under the charter documents of the Company or
                  under any applicable state or federal statute, or any claims
                  for breach of the Letter Agreement.

AGREEMENT TO RELEASE MY CLAIMS. I will receive consideration from CIMA as set
forth in the Letter Agreement if I sign and do not rescind this Release as
provided below. I understand and acknowledge that that consideration is in
addition to anything of value that I would be entitled to receive from CIMA if I
did not sign this Release or if I rescinded this Release. In exchange for that
consideration I give up and release all of My Claims. I will not make any
demands or claims against the Company for compensation or damages relating to My
Claims. The consideration that I am receiving is a fair compromise for the
release of My Claims.

ADDITIONAL AGREEMENTS AND UNDERSTANDINGS. Even though CIMA will provide
consideration for me to settle and release My Claims, the Company does not admit
that it is responsible or legally obligated to me. In fact, the Company denies
that it is responsible or legally obligated to me for My Claims, denies that it
engaged in any unlawful or improper conduct toward me, and denies that it
treated me unfairly.

ADVICE TO CONSULT WITH AN ATTORNEY. I understand and acknowledge that I am
hereby being advised by the Company to consult with an attorney prior to signing
this Release and I have done so. My decision whether to sign this Release is my
own voluntary decision made with full knowledge that the Company has advised me
to consult with an attorney.

PERIOD TO CONSIDER THE RELEASE. I understand that I have 21 days following my
last day of employment with the Company to consider whether I wish to sign this

                                      -2-


 Release before the end of the 21-day period, it will be my voluntary decision
to do so because I have decided that I do not need any additional time to decide
whether to sign this Release.

MY RIGHT TO RESCIND THIS RELEASE. I understand that I may rescind this Release
at any time within 15 days after I sign it, not counting the day upon which I
sign it. This Release will not become effective or enforceable unless and until
the 15-day rescission period has expired without my rescinding it.

PROCEDURE FOR ACCEPTING OR RESCINDING THE RELEASE. To accept the terms of this
Release, I must deliver the Release, after I have signed and dated it, to CIMA
by hand or by mail within the 21-day period that I have to consider this
Release. To rescind my acceptance, I must deliver a written, signed statement
that I rescind my acceptance to CIMA by hand or by mail within the 15-day
rescission period. All deliveries must be made to CIMA at the following address:

                                    Ronald Gay
                                    CIMA LABS INC.
                                    10000 Valley View Road
                                    Eden Prairie, MN 55344

If I choose to deliver my acceptance or the rescission of my acceptance by mail,
it must be (1) postmarked within the period stated above; and (2) properly
addressed to CIMA at the address stated above.

INTERPRETATION OF THE RELEASE. This Release should be interpreted as broadly as
possible to achieve my intention to resolve all of My Claims against the
Company. If this Release is held by a court to be inadequate to release a
particular claim encompassed within My Claims, this Release will remain in full
force and effect with respect to all the rest of My Claims.

MY REPRESENTATIONS. I am legally able and entitled to receive the consideration
being provided to me in settlement of My Claims. I have not been involved in any
personal bankruptcy or other insolvency proceedings at any time since I began my
employment with CIMA. No child support orders, garnishment orders, or other
orders requiring that money owed to me by CIMA be paid to any other person are
now in effect.

I have read this Release carefully. I understand all of its terms. In signing
this Release, I have not relied on any statements or explanations made by the
Company except as specifically set forth in the Letter Agreement. I am
voluntarily releasing My Claims against the Company. I intend this Release and
the Letter Agreement to be legally binding.

Dated: _____________________________           _________________________________
                                               David A. Feste

                                      -3-

EX-10.32

                                                                   EXHIBIT 10.32

                                 CIMA LABS INC.
                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into on
February 19, 2003 by and between Cima Labs Inc., a Delaware corporation (the
"Company"), and James C. Hawley, a resident of Minnesota ("Executive").

         A. The Company develops and manufactures prescription and
over-the-counter pharmaceutical products using fast-dissolve drug delivery
technologies for sale around the world.

         B. Executive is an experienced business manager.

         C. The Company desires to hire Executive as its Vice President, Chief
Financial Officer and Secretary, and Executive desires to be employed by the
Company, subject to the terms and conditions set forth in this Agreement.

         NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements of the Company and Executive set forth below, the Company
and Executive, intending to be legally bound, agree as follows:

         1. Employment. Effective as of March 17, 2003, the Company shall employ
            Executive, and Executive shall accept such employment and perform
            services for the Company, upon the terms and conditions set forth in
            this Agreement.

         2. Term of Employment. The term of Executive's employment with the
            Company shall be for the period commencing on March 17, 2003 and
            continuing until terminated in accordance with Section 9 hereof.

         3. Position and Duties.

         (a) Employment with the Company. During the term of Executive's
employment with the Company, Executive shall report to the President and Chief
Executive Officer of the Company and shall perform such duties and
responsibilities as the Company shall assign to him from time to time consistent
with his position. Effective as of April 1, 2003 and subject to approval of the
Board of Directors of the Company (the "Board"), Executive shall be an executive
officer of the Company and Executive's title shall be "Vice President, Chief
Financial Officer and Secretary".

         (b) Performance of Duties and Responsibilities. Executive shall
serve the Company faithfully and to the best of his ability and shall devote his
full working time, attention and efforts to the business of the Company during
his employment with the Company. Executive hereby represents and confirms that
he is under no contractual or legal commitments that would prevent him from
fulfilling his duties and responsibilities as set forth in this Agreement.
During





his employment with the Company, Executive may participate in charitable
activities and personal investment activities to a reasonable extent, and,
subject to prior Board approval, may serve on boards of directors of other
companies, so long as such activities do not interfere with the performance of
his duties and responsibilities hereunder.

         4. Compensation.

         (a) Base Salary. While Executive is employed by the Company
hereunder, the Company shall pay to Executive an annual base salary at the rate
of $200,000, less deductions and withholdings, which base salary shall be paid
in accordance with the Company's normal payroll policies and procedures. Annual
performance and salary reviews will be conducted in accordance with Company
policy and practice.

         (b) Incentive Bonus. For each full calendar year that Executive is
employed by the Company hereunder, Executive shall be eligible for an incentive
bonus award of up to 50% of Executive's base salary, based on achievement of
objectives established by the Company. For calendar year 2003, Executive shall
be eligible for an incentive bonus award of up to $100,000.

         (c) Stock Options. Subject to approval by the Board and the terms
of a definitive stock option agreement to be entered into by the Company and
Executive, the Company shall grant Executive a stock option to purchase 50,000
shares of common stock of the Company.

         (d) Employee Benefits. While Executive is employed by the Company
hereunder, Executive shall be entitled to participate in all employee benefit
plans and programs of the Company to the extent that Executive meets the
eligibility requirements for each individual plan or program. The Company
provides no assurance as to the adoption or continuance of any particular
employee benefit plan or program, and Executive's participation in any such plan
or program shall be subject to the provisions, rules and regulations applicable
thereto.

         (e) Expenses. While Executive is employed by the Company
hereunder, the Company shall reimburse Executive for all reasonable and
necessary out-of-pocket business, travel and entertainment expenses incurred by
him in the performance of his duties and responsibilities hereunder, subject to
the Company's normal policies and procedures for expense verification and
documentation.

         (f) Vacation/Paid Time Off. While Executive is employed by the
Company hereunder, Executive shall accrue paid time off each year in accordance
with the Company's policies and practices in effect from time to time; provided,
however, that Executive shall accrue paid time off each pay period at a rate of
four weeks per year. Paid time off shall be taken at such times so as not to
unduly disrupt the operations of the Company.

                                       2




         5. Confidential Information. Except as permitted in writing by the
Company's Board, during the term of Executive's employment with the Company and
at all times thereafter, Executive shall not divulge, furnish or make accessible
to anyone or use in any way other than in the ordinary course of the business of
the Company, any confidential, proprietary or secret knowledge or information of
the Company that Executive has acquired or shall acquire during his employment
with the Company, whether developed by himself or by others, concerning (i) any
trade secrets, (ii) any confidential, proprietary or secret designs, processes,
formulae, plans, devices or material (whether or not patented or patentable)
directly or indirectly useful in any aspect of the business of the Company,
(iii) any customer or supplier lists of the Company, (iv) any confidential,
proprietary or secret development or research work of the Company, (v) any
strategic or other business, marketing or sales plans of the Company, (vi) any
financial data or plans respecting the Company, or (vii) any other confidential
or proprietary information or secret aspects of the business of the Company.
Executive acknowledges that the above-described knowledge and information
constitutes a unique and valuable asset of the Company and represents a
substantial investment of time and expense by the Company, and that any
disclosure or other use of such knowledge or information other than for the sole
benefit of the Company would be wrongful and would cause irreparable harm to the
Company. During the term of Executive's employment with the Company, Executive
shall refrain from any acts or omissions that would reduce the value of such
knowledge or information to the Company. The foregoing obligations of
confidentiality shall not apply to any knowledge or information that (i) is now
or subsequently becomes generally publicly known in the form in which it was
obtained from the Company, (ii) is independently made available to Executive in
good faith by a third party who has not violated a confidential relationship
with the Company, or (iii) is required to be disclosed by legal process, other
than as a direct or indirect result of the breach of this Agreement by
Executive.

         6. Ventures. If, during the term of Executive's employment with the
Company, Executive is engaged in or associated with the planning or implementing
of any project, program or venture involving the Company and a third party or
parties, all rights in such project, program or venture shall belong to the
Company. Except as approved in writing by the Board, Executive shall not be
entitled to any interest in any such project, program or venture or to any
commission, finder's fee or other compensation in connection therewith, other
than the compensation to be paid to Executive by the Company as provided herein.
Executive shall have no interest, direct or indirect, in any customer or
supplier that conducts business with the Company, unless such interest has been
disclosed in writing to and approved by the Board before such customer or
supplier seeks to do business with the Company. Ownership by Executive, as a
passive investment, of less than 2.5% of the outstanding shares of capital stock
of any corporation listed on a national securities exchange or publicly traded
in the over-the-counter market shall not constitute a breach of this Section 6.

         7. Noncompetition Covenant.

         (a) Agreement Not to Compete. During the term of Executive's
employment with the Company and for a period of twelve (12) consecutive months
from the date of the termination of such employment, whether such termination is
with or without Cause (as defined

                                       3





below), or whether such termination is at the instance of Executive or the
Company, Executive shall not, directly or indirectly, throughout North America,
engage in any business that the Company has engaged in during the term of
Executive's employment with the Company, or any part of such business, including
without limitation the design, development, manufacture, distribution, marketing
or selling of pharmaceutical products using fast-dissolve drug delivery
technologies, in any manner or capacity, including without limitation as a
proprietor, principal, agent, partner, officer, director, stockholder, employee,
member of any association, consultant or otherwise. Ownership by Executive, as a
passive investment, of less than 2.5% of the outstanding shares of capital stock
of any corporation listed on a national securities exchange or publicly traded
in the over-the-counter market shall not constitute a breach of this Section
7(a).

         (b) Agreement Not to Hire. During the term of Executive's employment
with the Company and for a period of twelve (12) consecutive months from the
date of the termination of such employment, whether such termination is with or
without Cause (as defined below), or whether such termination is at the instance
of Executive or the Company, Executive shall not, directly or indirectly, hire,
engage or solicit any person who is then an employee of the Company or who was
an employee of the Company at the time of Executive's termination of employment,
in any manner or capacity, including without limitation as a proprietor,
principal, agent, partner, officer, director, stockholder, employee, member of
any association, consultant or otherwise.

         (c) Agreement Not to Solicit. During the term of Executive's employment
with the Company and for a period of twelve (12) consecutive months from the
date of the termination of such employment, whether such termination is with or
without Cause (as defined below), or whether such termination is at the instance
of Executive or the Company, Executive shall not, directly or indirectly,
solicit, request, advise or induce any current or potential customer, supplier
or other business contact of the Company on behalf of any entity competing with
the Company or to cancel, curtail or otherwise change its relationship with the
Company, in any manner or capacity, including without limitation as a
proprietor, principal, agent, partner, officer, director, stockholder, employee,
member of any association, consultant or otherwise. A "current customer" is
defined as a customer of the Company as of the Termination Date (as defined
below). A "potential customer" is an entity with which the Company has had
significant and substantive discussions within one year prior to, or is having
significant and substantive discussions as of, the Termination Date.

         (d) Acknowledgment. Executive hereby acknowledges that the provisions
of this Section 7 are reasonable and necessary to protect the legitimate
interests of the Company and that any violation of this Section 7 by Executive
shall cause substantial and irreparable harm to the Company to such an extent
that monetary damages alone would be an inadequate remedy therefor. Therefore,
in the event that Executive violates any provision of this Section 7, the
Company shall be entitled to an injunction, in addition to all the other
remedies it may have, restraining Executive from violating or continuing to
violate such provision.

         (e) Blue Pencil Doctrine. If the duration of, the scope of or any
business activity covered by any provision of this Section 7 is in excess of
what is valid and enforceable under applicable law, such provision shall be
construed to cover only that duration, scope or

                                       4





activity that is valid and enforceable. Executive hereby acknowledges that this
Section 7 shall be given the construction which renders its provisions valid and
enforceable to the maximum extent, not exceeding its express terms, possible
under applicable law.

         8. Patents, Copyrights and Related Matters.

         (a) Disclosure and Assignment. Executive shall immediately
disclose to the Company any and all improvements, inventions, ideas, and
discoveries that Executive may conceive and/or reduce to practice individually
or jointly or commonly with others while he is employed with the Company with
respect to (i) any methods, processes or apparatus concerned with the
development, use or production of any type of products, goods or services sold
or used by the Company, and (ii) any type of products, goods or services sold or
used by the Company. Executive also shall immediately assign, transfer and set
over to the Company his entire right, title and interest in and to any and all
of such inventions as are specified in this Section 8(a), and in and to any and
all applications for letters patent that may be filed on such inventions, and in
and to any and all letters patent that may issue, or be issued, upon such
applications. In connection therewith and for no additional compensation
therefor, but at no expense to Executive, Executive shall sign any and all
instruments deemed necessary by the Company for:

                  (i)   the filing and prosecution of any applications for
                        letters patent of the United States or of any foreign
                        country that the Company may desire to file upon such
                        inventions as are specified in this Section 8(a);

                  (ii)  the filing and prosecution of any divisional,
                        continuation, continuation-in-part or reissue
                        applications that the Company may desire to file upon
                        such applications for letters patent; and

                  (iii) the reviving, re-examining or renewing of any of such
                        applications for letters patent.

This Section 8(a) shall not apply to any invention for which no equipment,
supplies, facilities, confidential, proprietary or secret knowledge or
information, or other trade secret information of the Company was used and that
was developed entirely on Executive's own time, and (i) that does not relate (A)
directly to the business of the Company, or (B) to the Company's actual or
demonstrably anticipated research or development, or (ii) that does not result
from any work performed by Executive for the Company.

         (b) Copyrightable Material. All right, title and interest in all
copyrightable material that Executive shall conceive or originate individually
or jointly or commonly with others, and that arise during the term of his
employment with the Company and out of the performance of his duties and
responsibilities under this Agreement, shall be the property of the Company and
are hereby assigned by Executive to the Company, along with ownership of any and
all copyrights in the copyrightable material. Upon request and without further
compensation

                                       5





therefor, but at no expense to Executive, Executive shall execute any and all
papers and perform all other acts necessary to assist the Company to obtain and
register copyrights on such materials in any and all countries. Where
applicable, works of authorship created by Executive for the Company in
performing his duties and responsibilities hereunder shall be considered "works
made for hire," as defined in the U.S. Copyright Act.

         (c) Know-How and Trade Secrets. All know-how and trade secret
information conceived or originated by Executive that arises during the term of
his employment with the Company and out of the performance of his duties and
responsibilities hereunder or any related material or information shall be the
property of the Company, and all rights therein are hereby assigned by Executive
to the Company.

         9. Termination of Employment.

         (a) The Executive's employment with the Company shall terminate
immediately upon:

                    (i) Executive's receipt of written notice from the
                        Company of the termination of his employment;

                   (ii) Executive's abandonment of his employment or his
                        resignation; or

                  (iii) Executive's death or Disability (as defined below).

         (b) The date upon which Executive's termination of employment with
the Company occurs shall be the "Termination Date."

         10. Payments upon Termination of Employment.

         (a) If Executive's employment with the Company is terminated by
the Company for any reason other than for Cause (as defined below) or by
Executive for Good Reason (as defined below):

                  (i) (A) if the Termination Date occurs within the first six
                          (6) months of Executive's employment with the Company,
                          the Company shall pay to Executive as severance pay an
                          amount equal to his current base salary for a period
                          of six (6) consecutive months after the Termination
                          Date; or

                      (B) if the Termination Date occurs after six (6) months of
                          Executive's employment with the Company, the Company
                          shall pay to Executive as severance pay an amount
                          equal to his current base salary for a period of
                          twelve (12) consecutive months after the Termination
                          Date; and

                                       6





                   (ii) if Executive elects to continue his group health
                        insurance coverage with the Company following the
                        termination of his employment with the Company, and if
                        Executive pays the remaining portion of the health
                        insurance premium, the Company will continue to pay its
                        portion of the monthly premiums as if Executive were
                        still employed and at the same level of coverage that
                        was in effect as of the Termination Date for the same
                        period as Executive is receiving severance pay under
                        Section 10(a)(i) above; and

                  (iii) the Company shall pay to Executive a pro rata portion
                        (based on the number of full calendar months of
                        employment during the calendar year in which the
                        Termination Date occurs) of any incentive bonus that
                        would have been payable to him for such year pursuant to
                        Section 4(b) hereof as if Executive had been in the
                        employ of the Company for the full calendar year.

Any amount payable to Executive as severance pay shall be subject to deductions
and withholdings and shall be paid to Executive by the Company in accordance
with the Company regular payroll schedule commencing on the first normal payroll
date of the Company following the expiration of all applicable rescission
provided by law and continuing thereafter. Any amount payable to Executive as
incentive bonus hereunder shall be paid to Executive by the Company in the same
manner and at the same time that incentive bonus payments are made to current
employees of the Company, but no earlier than the first normal payroll date of
the Company following the expiration of all applicable rescission periods
provided by law.

The Company shall be entitled to deduct from any severance pay otherwise payable
to Executive hereunder any amount received by Executive after the Termination
Date under any short-term or long-term disability insurance plan or program
provided to him by the Company. In addition, the Company shall be entitled to
cease making severance payments to Executive if Executive obtains other
employment after the Termination Date and to cease making payments for the cost
of the continuation of his group health insurance coverage with the Company
after the Termination Date if Executive becomes eligible for comparable group
health insurance coverage from any other employer. For purposes of mitigation
and reduction of the Company's financial obligations to Executive under this
Section 10(a), Executive shall within three days promptly and fully disclose to
the Company in writing: (i) the fact of any employment with any other employer,
(ii) the amount of any such disability insurance payments, or (iii) the fact
that he has become eligible for comparable group health insurance coverage from
any other employer, and Executive shall be liable to repay any amounts to the
Company that should have been so mitigated or reduced but for Executive's
failure or unwillingness to make such disclosures.

         (b) If Executive's employment with the Company is terminated by reason
of:

                  (i) Executive's resignation or abandonment of his
                      employment,

                                       7




                   (ii) termination of Executive's employment by the Company
                        for Cause (as defined below), or

                  (iii) Executive's death or Disability,

the Company shall pay to Executive or his beneficiary or his estate, as the case
may be, his base salary through the Termination Date.

         (c) "Cause" hereunder shall mean:

                    (i) an act or acts of dishonesty undertaken by Executive and
                        intended to result in substantial gain or substantial
                        personal enrichment of Executive at the expense of the
                        Company;

                   (ii) unlawful conduct or gross misconduct that is willful and
                        deliberate on Executive's part and that, in either
                        event, is materially injurious to the Company;

                  (iii) the conviction of Executive of a felony;

                   (iv) material failure of Executive to perform his duties and
                        responsibilities hereunder or to satisfy his obligations
                        as an officer or employee of the Company, which failure
                        has not been cured by Executive within 30 days after
                        written notice thereof to Executive from the Company
                        specifying such material failure; or

                    (v) material breach of any terms and conditions of this
                        Agreement by Executive not caused by the Company.

         (d) "Disability" hereunder shall mean the inability of Executive to
perform on a full-time basis the duties and responsibilities of his employment
with the Company by reason of his illness or other physical or mental impairment
or condition, if such inability continues for an uninterrupted period of 90
calendar days or more during any 360-day period. A period of inability shall be
"uninterrupted" unless and until Executive returns to full-time work for a
continuous period of at least 30 days.

         (e) "Good Reason" hereunder shall mean

                   (i) any action by the Company that results in a substantial
                       diminution in Executive's responsibilities as Chief
                       Financial Officer of the Company (after such appointment
                       as contemplated by Section 3(a) of this Agreement), other
                       than for Cause or on account of Disability; or

                  (ii) a material reduction in Executive's base salary.

                                       8




         (f) In the event of termination of Executive's employment, the
sole obligation of the Company shall be its obligation to make the payments
called for by Section 10(a) or Section 10(b) hereof, as the case may be, and the
Company shall have no other obligation to Executive or to his beneficiary or his
estate, except as otherwise provided by law, under the terms of any other
applicable agreement between Executive and the Company or under the terms of any
employee benefit plans or programs then maintained by the Company in which
Executive participates.

         (g) Notwithstanding the foregoing provisions of this Section 10,
the Company shall not be obligated to make any payments to Executive under
Section 10(a) hereof unless Executive shall have signed a release of claims in
favor of the Company in a form to be prescribed by the Company, all applicable
consideration periods and rescission periods provided by law shall have expired
and Executive is in strict compliance with the terms of this Agreement as of the
dates of the payments.

         11. Return of Records and Property. Upon termination of his
employment with the Company, Executive shall promptly deliver to the Company any
and all Company records and any and all Company property in his possession or
under his control, including without limitation manuals, books, blank forms,
documents, letters, memoranda, notes, notebooks, reports, printouts, computer
disks, computer tapes, source codes, data, tables or calculations and all copies
thereof, documents that in whole or in part contain any trade secrets or
confidential, proprietary or other secret information of the Company and all
copies thereof, and keys, access cards, access codes, passwords, credit cards,
personal computers, telephones and other electronic equipment belonging to the
Company.

         12. Remedies.

         (a) Remedies. Executive acknowledges that it would be difficult to
fully compensate the Company for monetary damages resulting from any breach by
him of the provisions of Sections 5, 7, 8 and 11 hereof. Accordingly, in the
event of any actual or threatened breach of any such provisions, the Company
shall, in addition to any other remedies it may have, be entitled to injunctive
and other equitable relief to enforce such provisions, and such relief may be
granted without the necessity of proving actual monetary damages.

         (b) Arbitration. Except for disputes arising under Sections 5, 7
or 8 hereof, all disputes involving the interpretation, construction,
application or alleged breach of this Agreement and all disputes relating to
Executive's employment with the Company or the termination of such employment
shall be submitted to final and binding arbitration in Minneapolis, Minnesota.
The arbitrator shall be selected and the arbitration shall be conducted pursuant
to the then most recent Employment Dispute Resolution Rules of the American
Arbitration Association. The decision of the arbitrator shall be final and
binding, and any court of competent jurisdiction may enter judgment upon the
award. All fees and expenses of the arbitrator shall be paid by the Company. The
arbitrator shall have jurisdiction and authority to interpret and apply the
provisions of this Agreement and relevant federal, state and local laws,

                                       9





rules and regulations insofar as necessary to the determination of the dispute
and to remedy any breaches of the Agreement and/or violations of applicable
laws, but shall not have jurisdiction or authority to alter in any way the
provisions of this Agreement. The arbitrator shall have the authority to award
attorneys' fees and costs to the prevailing party. The parties hereby agree that
this arbitration provision shall be in lieu of any requirement that either party
exhaust such party's administrative remedies under federal, state or local law.

         (c) Jurisdiction and Venue. Executive and the Company consent to
jurisdiction of the courts of the State of Minnesota and/or the federal district
courts, District of Minnesota, for the purpose of resolving all issues of law,
equity, or fact arising out of or in connection with Sections 5, 7 or 8 of this
Agreement. Any action involving claims of a breach of such Sections shall be
brought in such courts. Each party consents to personal jurisdiction over such
party in the state and/or federal courts of Minnesota and hereby waives any
defense of lack of personal jurisdiction. Venue, for the purpose of all such
suits, shall be in Hennepin County, State of Minnesota.

         13. Miscellaneous.

         (a) Governing Law. All matters relating to the interpretation,
construction, application, validity and enforcement of this Agreement shall be
governed by the laws of the State of Minnesota without giving effect to any
choice or conflict of law provision or rule, whether of the State of Minnesota
or any other jurisdiction, that would cause the application of laws of any
jurisdiction other than the State of Minnesota.

         (b) Entire Agreement. Except for the stock option agreement
referred to in Section 4(c) hereof, this Agreement contains the entire agreement
of the parties relating to the subject matter of this Agreement and supersedes
all prior agreements and understandings with respect to such subject matter, and
the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement that are not set forth herein.

         (c) Amendments. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by the parties
hereto.

         (d) No Waiver. No term or condition of this Agreement shall be
deemed to have been waived, except by a statement in writing signed by the party
against whom enforcement of the waiver is sought. Any written waiver shall not
be deemed a continuing waiver unless specifically stated, shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.

         (e) Assignment. This Agreement shall not be assignable, in whole
or in party, by either party without the written consent of the other party,
except that the Company may, without the consent of Executive, assign its rights
and obligations under this Agreement to any corporation or other business entity
(i) with which the Company may merge or consolidate, (ii) to which the Company
may sell or transfer all or substantially all of its assets or capital stock, or

                                       10





(iii) of which 50% or more of the capital stock or the voting control is owned,
directly or indirectly, by the Company. After assignment by the Company under
clause (i) or (ii) of the preceding sentence, the Company shall be discharged
from all further liability hereunder and such assignee shall thereafter be
deemed to be the "Company" for purposes of all terms and conditions of this
Agreement, including this Section 13.

         (f) Counterparts. This Agreement may be executed in any number of
counterparts, and such counterparts executed and delivered, each as an original,
shall constitute but one and the same instrument.

         (g) Severability. Subject to Section 7(e) hereof, to the extent
that any portion of any provision of this Agreement shall be invalid or
unenforceable, it shall be considered deleted herefrom and the remainder of such
provision and of this Agreement shall be unaffected and shall continue in full
force and effect.

         (h) Captions and Headings. The captions and paragraph headings
used in this Agreement are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.

         IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of the date set forth in the first paragraph.

                                            CIMA LABS INC.


                                            By /s/Steven Ratoff
                                               ----------------

                                            Its Member of the Board of Directors


                                            /s/James C. Hawley
                                            ------------------
                                            JAMES C. HAWLEY

                                       11

EX-23.1

                                                                    EXHIBIT 23.1

                         Consent of Independent Auditors

We consent to the reference to our firm under the caption, Selected Financial
Data, and to the incorporation by reference in the Registration Statements (Form
S-8 No. 333-42354, Form S-8 No. 333-32233, Form S-8 No. 333-05741, Form S-8 No.
333-59791, Form S-8 No. 333-82794, Form S-8 No. 333-82790, Form S-8 No.
333-62954 and Form S-8 No. 333-63026) pertaining to certain stock option and
employee stock purchase plans of the Company, of our report dated February 14,
2003, with respect to the financial statements and schedule of CIMA LABS INC.
included in the Annual Report (Form 10-K) for the year ended December 31, 2002.

Minneapolis, Minnesota                            /s/ Ernst & Young LLP
March 24, 2003

EX-24.1

                                                                    EXHIBIT 24.1

                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature
appears below hereby constitutes and appoints John M. Siebert, John Hontz and
David A. Feste and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of CIMA LABS INC. for the twelve months ended December 31, 2002, and
all amendments to such Annual Report on Form 10-K and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes he might or could do in person, hereby
ratifying and confirming all said attorneys-in-fact and agents or any of them,
or their or his substitutes, may lawfully do or cause to be done by virtue
hereof.



                    Signature                                        Date
                    ---------                                        ----
                                                            
/s/John M. Siebert                                             February 10, 2003
- ----------------------------------------------------
John M. Siebert
 President & Chief Executive Officer
 (Principal Executive Officer) and Director

/s/John F. Chappell                                            January 11, 2003
- ----------------------------------------------------
John F. Chappell
 Director

/s/Steven D. Cosler                                            January 11, 2003
- ----------------------------------------------------
Steven D. Cosler
 Director

/s/Terrence W. Glarner                                         January 11, 2003
- ----------------------------------------------------
Terrence W. Glarner
 Director

/s/Steven B. Ratoff                                            January 11, 2003
- ----------------------------------------------------
Steven B. Ratoff
 Director

/s/Joseph R. Robinson                                          January 13, 2003
- ----------------------------------------------------
Joseph R. Robinson
 Director

AA

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 Annual Report of CIMA LABS INC. (the "Company")
on Form 10-K for the period ending December 31, 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. ss. 1350, as adopted pursuant to ss. 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: 3/28/2003                             /s/ John M. Siebert
                                          --------------------------------------
                                          John M. Siebert,
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)


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

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 Annual Report of CIMA LABS INC. (the "Company")
on Form 10-K for the period ending December 31, 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.
ss. 1350, as adopted pursuant to ss. 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: 3/28/2003                                    /s/ David A. Feste
                                                 -------------------------------
                                                 David A. Feste,
                                                 Chief Financial Officer
                                                 (Principal Financial Officer)


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